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Growth in Jobless Rate Sends Jitters Through Washington

Aired September 7, 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.
JOHN KING, CNN ANCHOR: This is INSIDE POLITICS. I'm John King in Washington. More later on new economic news today and the political reaction, but we go now to New York where James P. Hoffa, president of the International Brotherhood of Teamsters, is discussing possible new evidence in the mysterious disappearance of his father, Jimmy Hoffa, more than 25 years ago.

(JOINED IN PROGRESS)

JAMES P. HOFFA, JIMMY HOFFA'S SON: We've always wondered what happened. Today, there's been a startling development and the FBI has announced that new DNA technology has detected his presence in a car that was involved in the disappearance. This is startling news. And the good news is that they are projecting that there's going to be a prosecution in the disappearance of James R. Hoffa. We're heartened by this, because the families seeks closure on this important issue, which has torn our family apart. So hopefully, the federal government can follow through with this.

And I'm urging them that they have our full cooperation with regard to this prosecution, and we shouldn't wait 30 months. We should bring to justice those people who are responsible for my father's disappearance. So we're happy that we can have closure on this important issue, but we're urging that we move ahead quickly to make sure these people are prosecuted so that we can have the nation know what happened.

QUESTION: By these people, do you mean Mr. O'Brien or other suspects whose names they've recorded over and over again throughout the years?

HOFFA: Those names have been in -- O'Brien and a number of names mentioned, how they fit into this. You'll have to look at the record of the case. But the question is: Who was driving that car? Was O'Brien that day?

QUESTION: Mr. Hoffa, obviously, authorities have identified potential suspects through the last 26 years. No charges, of course. What would you say to some of those people who have been identified by authorities as possible suspects who are still alive and who may even be watching you right now?

HOFFA: Come forward. Come forward right now. This is the time. We've always thought there would be a death-bed confession, that somebody somewhere on their death bed would say, "I was involved." It hasn't happened yet. And you wonder, with all of the people and all of the room bugs and all of the people who are informants over the years that the federal government has that we haven't had news about this case. And hopefully, through the new technology of DNA that we have a breakthrough that's going to bring a meaningful conclusion to this great concern.

QUESTION: Do you have any suspicions of particular people yourself?

HOFFA: I do, but I'm not going to say their names today. One of the things that's happened in this case, so many people have died who we suspect would be involved. So as the time goes by 26 years, a number of people that were suspects have died just through the period of time of natural attrition.

QUESTION: When was the last time you were in contact with Chuckie O'Brien?

HOFFA: I haven't talked Chuckie O'Brien in 36 years, and I don't intend to talk to him.

QUESTION: "The Detroit News" says that you confronted Chuckie O'Brien about your father's disappearance. What was that like?

HOFFA: Well, I mean, his actions were so suspicious on this day, he couldn't account for where he was on this important day. Obviously, it brought suspicion on him. This was on the very day that my father disappeared or the next day. And I had a major confrontation to him to say, "Where were you? Explain yourself." And his reaction was to run out of the room, and I haven't seen him since. And certainly disgusted with him. I have no intention of talking to him.

QUESTION: Over the course of 26 years, there have been other bits of information, evidence I'm sure that's come across your path. How does this rank in relation to all of those? Are you very optimistic about this situation now?

HOFFA: I think one of the things -- remember that the FBI did a lot of work at the time. They did a lot of gathering of evidence. They have a number of eyewitnesses. They have a number of people that fit into this that were identified in the article today. So a lot of the work has been done in this case, but there wasn't any evidence to actually put people together, any scientific evidence that could be produced in court. And I think that is the breakthrough that we have during the day. And hopefully, this will lead to a speedy prosecution.

There is a lot of evidence. Eyewitnesses have been identified, and some of those people were talked about today in the article.

QUESTION: Mr. Hoffa, how do you account for the fact that it's been that long? Your father was such a widely known figure that it could be this long and still be a mystery as to what happened to him and who did it? HOFFA: Well, that's a very good question. It's almost impossible to imagine that a man who is perhaps one of the most famous people of the time in the United States or of the century could just disappear. And that is something that has mystified everybody that has certainly been very hard on our family, a person who was so famous who was a very loving father, a man that we loved and respected just to disappear off the face of the earth is difficult to imagine. And that's probably another reason, probably the main reason why we have to have a speedy conclusion to this great mystery.

QUESTION: And were there enemies that he had that you are aware of that would point to them, people that specifically wanted your father out of the way?

HOFFA: Yes. I think it's clear that my father wanted to come back in the union, and people did not want my father coming back. I think these were people that were in the union at the time, in leagues with people in organized crime. And we have fought a battle against organized crime ever since to keep those people in that element out of our union. We have rid the union of those people, but I think that is what happened, and all the evidence points that way.

QUESTION: You were so stoic...

KING: That's James P. Hoffa, president of the International Brotherhood of Teamsters in New York today discussing possible new evidence in the mysterious disappearance of his father, Teamsters president, Jimmy Hoffa, 26 years ago.

Now to our top story here on INSIDE POLITICS. One economic analyst calls today's jobless report brutal, and the same might be said for the stock market's reaction. The Dow Jones industrial average closed down 234 points a little more than an hour ago. That sell-off came after the Labor Department reported the nation's unemployment rate swelled to 4.9 percent in August, its highest level in four years. Here in Washington, President Bush summoned Republican leaders to a meeting in the Oval Office, and he tried to reassure Americans that he's not only concerned about the economy, but that he's doing something about it.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The unemployment numbers today are evidence that I've seen firsthand as I travel the country. And that is too many people are losing their jobs as a result of a slowdown that began when Dick and I were campaigning across our country last summer. The slowdown is real and it's affecting too many lives, and we're concerned about it. I want the American people to know we're deeply concerned about the unemployment rates, and we intend to do something about it.

(END VIDEO CLIP)

KING: Now while the president suggested again that he inherited a slowing economy, the House minority leader, Dick Gephardt, emerged from the White House meeting with the president and made clear Democrats blame Mr. Bush.

(BEGIN VIDEO CLIP)

REP. DICK GEPHARDT (D-MO), MINORITY LEADER: I think the real slowdown has begun in the last six months. I think the economy has reacted to the president's budget plan. I don't think it's been a positive reaction. And I think, again, if we can get a more balanced budget based on lowering deficits, paying down back debt, you'd keep long-term interest rates down at lower levels and you would help stimulate this economy moving in the right direction.

(END VIDEO CLIP)

KING: Now for more on the state of the economy and the impact on the budget battle, let's bring in our White House correspondent, Major Garrett, and our congressional correspondent, Jonathan Karl.

Jonathan, first to you on Capitol Hill. We understand some of the president's top aides were up on Capitol Hill today, and what you're hearing is they told Republicans something those Republicans didn't want to hear.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Yeah, really an alarming meeting here at 9:00 this morning over in the office of the speaker of the House, Dennis Hastert. Mitch Daniels, the White House budget director, CNN has learned from multiple sources up here on Capitol Hill, Mitch Daniels came into that meeting with some disappointing news for Republicans. That news is that this Congress will be dipping into the Social Security surplus to the tune of around $10 billion for the current fiscal year which ends on September 30th, possibly as high as $15 billion unless measures are made to do something about that, some fiscal maneuvers that they could possibly do.

This set off a series of alarm bells, a furious round of meetings on Capitol Hill, and ultimately, that appearance you saw at the White House with the two top congressional leaders for the Republicans and the president. This is a very significant point for the Republicans up here because they have all promised over and over again for the past two years that they would not dip into that Social Security surplus. And in fact, estimates from the White House just a few weeks ago had showed that they would not dip into in. This worst news, we're told, because of the lower, the bad economic news. This means less revenue coming into the Congress, and less revenue coming into the Treasury. And that means a lower surplus and possibly spending that ever so crucial Social Security surplus.

KING: OK, Jonathan, stand by just one second. We'll come back to you.

Major Garrett at the White House, how does that mesh what the president's aides are telling Republicans on Capitol Hill with what we've heard from Senator Lott, Speaker Hastert and even the Democratic leaders that they've emerged in recent days for meetings with the president saying he has promised not to touch that Social Security surplus? MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: Well, the first thing, John, is to get the years straight. This fiscal year was written by Bill Clinton. It was approved by the last Congress, and this Bush White House has been pretty clear, at least internally, and to a certain degree externally saying, "There's not much we can do about the 20001 fiscal year, which, as Jonathan Karl points out, ends at the end of this month.

What they're talking about and what these agreements you've talked to me about in 2002 is this budget they're now writing, the 13 appropriations bills that are now making their way through Congress. And President Bush will, in fact, have to sign. It will be his first budget in the year 2002.

Now, as Jonathan pointed out, the alarm bells have gone off on Capitol Hill. And they did rush up here, Mr. Lott and Mr. Hastert, seeking some relief, some sense from the White House about what they would do about that 2002 budget, because there is a strong sense on Capitol Hill that what Mr. Daniels said has already happened this fiscal year will happen next fiscal year. That is to say Social Security surplus dollars will be spent. So members of Capitol Hill came up to the president and said, "Look, why don't we have across- the-board spending cuts next year to make sure that does not happen?"

The White House is not prepared to go there yet. The word from the White House is: "Relax, calm down. The economy will turn around. And when it does, we're going to have room to spend what we need to spend, but we're not going to commit ourselves to across-the-board spending cuts yet. That would be political, if not suicide, at least a tremendous political concession that the Bush tax cut and the Bush economic plan has not worked as predicted."

KING: Well, Jonathan Karl on Capitol Hill, it might be easy for the president to say, "Calm Down." Many of those Republicans, of course, on the ballot next year. They face the voters before the president does. They want a capital gains tax cut, some other emphasis, some other program that shows they're trying to stimulate this economy. What is their reaction? The president obviously cool to that plan.

KARL: Well, they were happy the president did come out and express some sense of urgency today, but they are not ready to calm down. They are not ready even to talk about the argument that this is Bill Clinton's budget, because remember, it was the Republicans up here last year that promised that they would keep from spending the Social Security surplus. So they want to see something done about this year's budget even if that means taking money from next year's budget to make sure this year's budget does not balance, does not dip into that Social Security surplus. And they know that this is a hot political issue.

As a matter of fact, John, the Democratic National Committee is already working on ads that will accuse the president and hence all Republicans up here of breaking a promising not to spend the Social Security surplus. I have been read a transcript of one ad that has been kicked around among -- at the Democratic Party that shows a clip of George W. Bush saying, "A promise made is a promise kept." They play that clip three times and they talk about how George Bush promised to strengthen the economy and to not spend the Social Security surplus. The ad -- and again, it's only in draft form from the Democratic Party closes by saying, "Tell George W. Bush to keep his promise."

So up here, especially on the House, where you have members of Congress getting ready for an election next year, an election where the control of the House of Representatives is at stake, they are very concerned and they're not ready to wait around to see if the economy will some time next year rebound. They want to see action now.

KING: All right, Jonathan Karl on Capitol Hill; Major Garrett at the White House, thank you very much.

Let's continue this discussion now with one of the president's top advisers, White House communication director, Dan Bartlett.

Let's start where Jonathan Karl ended. The Democrats breaking -- preparing an ad saying the president is breaking his promises, and he's going to tap into the Social Security surplus.

DAN BARTLETT, WHITE HOUSE COMMUNICATIONS DIRECTOR: Well, I think it's first important for us to talk about what the president talked about today. There's some troubling news on unemployment here in America. As you know, the president spent the month of August traveling across America, talking to working families, realizing firsthand the type of squeeze the weak economy is putting on working families. He felt it was very important to come back and speak to the point that we need to get working, the Congress needs to get working on a pro-growth agenda. They worked well together to pass tax relief.

Now it's time for the Congress to act on trade promotion authority, to open up markets to our farmers and American products. It's important that we work now to pass an energy package that will create jobs and stabilize the market when it comes to our energy needs; therefore, lowering prices for our American families.

It's very important that the Congress live up to its commitment it made last spring when it committed to a budget to hold down spending. The one thing we can't do now is: (a) raise taxes, which it's displeasing to see some on the Capitol Hill may be suggesting; or to let spending go out at check and break the promise they made this spring.

President Bush has been very firm on saying that he's going to protect Social Security, he's going to make education his number one priority, and he's going to get this economy going by getting tax relief in the pockets of Americans, promoting trade, and promoting a sound energy policy that will help this economy get going again.

KING: This is a president who seems very sensitive to the lessons of this father's administration when fairly or unfairly, in your view, the voters punished former President Bush. They didn't believe he was activist when the economy was going down. On Labor Day, the president out with union workers, blue-collar workers saying, "I'm trying to help you. The tax cut was the first installment." But many Republicans on Capitol Hill think we need another immediate installment, but the president seems pretty cool to the idea of any more tax cuts right now.

BARTLETT: Well, the president thinks we ought to focus on the fact that this current tax relief package that was passed has not been fully implemented. The tax rebates that are going out are just about halfway done. We had a rate reduction in June of this year. We got another rate reduction coming in January as well as some of the tax credits for child -- children and other things are coming into play. It's important that we get that going.

Now, the president obviously didn't close the door on any future tax relief, but he thinks we ought to focus on getting that tax relief done and just as importantly, focus in on the other parts of this pro- growth agenda, which is trade and energy policy. So he's going to keep his focus on that, but he's not going to close the door on future tax relief.

KING: A lot of finger pointing right now, and we're early in the budget battle. We don't know what the economy will look like weeks, never mind months, down the road. But the president says he inherited the slowdown. The Democrats say, "Oh, no, it's gotten worst in the last six months." Can't be any doubt in your mind as the senior communications adviser to the president that if the economy stays down, he's in charge, whether it's his fault or not. Will he not be held accountable?

BARTLETT: Well, the minority leader, Gephardt, seeing some of his comments today was kind of puzzling because any economists will tell that you that this slowdown started last summer, over a year ago. And also, every economist, both in the academia world and up in Wall Street will tell you that this tax relief came at a very, very timely fashion, that getting money in the hands of consumers probably is one of the things that helped bottom out this economy and kind of keep it from maybe going into a recession. So it was very timely for this to happen.

The president's going to continue to be focused on that. Those in Congress, and particularly Democrats, haven't offered any solution besides finger pointing as opposed to maybe reining in spending and getting these appropriations bills passed under budget.

KING: You could, in a matter of weeks, face a very difficult choice. Some Republicans say if it appears you will dip into the Social Security trust fund, let's have across-the-board spending cuts. But many economists, even Republican economists would tell you government spending cuts absolutely the worst thing to do when the economy is slowing. How would the president deal with that?

BARTLETT: Well, again, I think people need to focus on the fact that we have a budget in place that was agreed to in the spring that increases spending in critical priority areas such as education, defense, Medicare funding and the like. The president's budget also protects Social Security. He has not changed his position. He will protect Social Security, and he will provide tax relief. Those that are suggesting changes to across-the-board spending cuts must be under the illusion they want to spend more money than is available. To do that would jeopardize Social Security. Those folks, the president's outlined a budget. The Congress approved it and adhered to it this spring and very well this summer. It's important that they stick to that budget this fall.

KING: All right, this debate will continue in the weeks and months ahead. Dan Bartlett, White House communications director, thank you very much for joining us today.

And now to Congressman Gary Condit's political future. The speculation about whether he'll run for reelection reached a fever pitch today. So much so that his office felt the need to issue a statement. Our congressional correspondent, Kate Snow, has the latest on that -- Kate.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: John, Gary Condit's top aides tell CNN that he indeed has not made a decision about whether or not he will run for reelection. Also, sources telling CNN today that Condit has not discussed the matter with other House members here on Capitol Hill. He simply hasn't had discussions about whether to run or whether to not run. There had been earlier media reports elsewhere indicating that Mr. Condit had come to a decision. Here's the statement that his office has now put out. That statement reads: "Media reports today stating that Congressman Condit has reached a decision regarding his 2002 campaign are inaccurate. No such decision has been made."

And John, we're told by sources close to Gary Condit that he is indeed weighing a decision, that is talking with family, with confidantes. And indeed family members have told CNN as much, but that no decision again has been made -- John.

KING: Well, Kate, the Congress back in town, but Congressman Condit keeping a deliberately low profile. What do we know about his activities?

SNOW: We know that he returned here on Wednesday, that he's had a busy few days. I'm told by a source close to Gary Condit that he's been working rather hard. He's been working on letters to constituents, answering many of their letters. He's also working on trying to find funding for some key projects in his home district in California. One involves a river walk project in Modesto; another involves getting money for UC Merced, the University of California out there.

Also, yesterday, he spent about four hours in a briefing for House Intelligence Committee members. So he's been trying to get back to business as usual, although this source admits that's fairly hard for Gary Condit to do in this climate -- John.

KING: Very hard in this climate as he debates whether to seek reelection. Kate Snow on Capitol Hill, thank you very much.

Stay with us. This is INSIDE POLITICS.

ANNOUNCER: Former L.A. mayor, Richard Riordan, reveals a medical secret. CNN's Frank Buckley questions Riordan about his health and his political future. Also ahead:

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: If I'm mayor, I'll bring good weather to New York City. That's my campaign promise.

(END VIDEO CLIP)

ANNOUNCER: The outlook four days before the New York mayoral primary and how it's clouded by a political force named Rudy. And stay tuned for scenes from the political play of the week. Live from Washington. There's more of INSIDE POLITICS with Judy Woodruff straight ahead.

(COMMERCIAL BREAK)

KING: Out West, former Los Angeles mayor Richard Riordan has made no secret of his interest in a run for California governor. But Riordan kept quiet about a recent battle with prostate cancer until it was made public in today's "Los Angeles Times." The mayor underwent 44 days of radiation treatments which ended May 1st. CNN's Frank Buckley spoke with Riordan earlier today.

(BEGIN VIDEOTAPE)

FRANK BUCKLEY, CNN CORRESPONDENT: We learned today that you are a prostate cancer survivor. You were diagnosed and treated while you were still the mayor. Why did you decide to keep this a private matter when you were in a public position?

RICHARD RIORDAN (R), FORMER LOS ANGELES MAYOR: Because I thought it would be a major distraction of me doing my job as mayor. As long as the treatments didn't interfere with my job -- and they didn't at all -- I felt to get it out there would make some people feel sorry more me. And I wouldn't want to feel sorry for myself. And I figured I can do the job as well. I didn't miss a day at it. And I would do the job better by not going public with it.

BUCKLEY: Others like New York City mayor, Rudy Giuliani, decided to make their diagnoses very public while they were in that public position. Do you believe that people in public positions should reveal these kinds of conditions when they come up while you're in office?

RIORDAN: My doctor, Senator Feinstein, a lot of other people have complimented me not bridging it up because it did not have an effect on my doing my job as mayor. If I had brought it up, it would have been a major distraction. Obviously, since I'd be running for governor, if I make that decision, people do have a right to know it so they can put it into the equation in deciding whether to vote for Dick Riordan. BUCKLEY: You are revealing this information as speculation continues to swirl about whether or not you will run for governor of California. I spoke to your good friend today, Ed Jagels, the current county district attorney. He said that you wouldn't be revealing this if you didn't intend to run. Here's what he said.

(BEGIN VIDEO CLIP)

ED JAGELS, RIORDAN SUPPORTER: There would be no point whatever in him letting the world know that he's had this problem and that it's under control and that he's cured. There'd be no point at all in his doing so unless he intended to run for governor.

(END VIDEO CLIP)

BUCKLEY: Is Ed Jagels right?

RIORDAN: Well, you know, he's almost right. I certainly want to get everything out there. I'm going to be going up and down the state talking to people, getting their input as to whether they think I'm the leader that this state needs for the future, and this is, I believe, a small part of the equation.

BUCKLEY: Today, you tell the "Los Angeles Times" that you are revealing the prostate cancer diagnoses, because, quote, "I'm running for office, and I think the voters have a right to know about it."

(LAUGHTER)

RIORDAN: I have to take my foot out of my mouth. Clearly, as I mentioned, this is a piece of the puzzle. You should get all the information out there, get the reaction of the grass roots throughout the state on this. I'm obviously very serious; I wouldn't be going through all the hard work I'm going through. But I definitely will not make up my mind for about another month.

(END VIDEOTAPE)

KING: Riordan left office in June after two terms as Los Angeles mayor. National Republicans, including President Bush, consider him a strong potential opponent to the Democratic incumbent, Gray Davis.

Now as we head into the final weekend before New York mayoral primary, a new Marist poll shows two Democrats in a virtual dead heat: Bronx borough president, Fernando Ferrer, and public advocate, Mark Green, are running well ahead of two other Democratic candidates. If no candidate gets 40 percent of the primary vote, the two top finishers meet in a runoff September 25th.

CNN's Maria Hinojosa has more on the campaign and the seemingly lackluster response from New York voters.

(BEGIN VIDEOTAPE)

MARIA HINOJOSA, CNN CORRESPONDENT (voice-over): In New York City, you've got to have chutzpah... ED KOCH, FORMER NEW YORK CITY MAYOR: Traffic is working very well.

HINOJOSA: ... charisma...

DAVID DINKINS, FORMER NEW YORK CITY MAYOR: All right, thank you.

HINOJOSA: ... and a big personality to make it as mayor. It's been called the most important job second only to the president, which is why this time around for next Tuesday's primary with four nondescript Democrats and two former Democrats who want the Republican nomination, voters just aren't hot on this race.

(on camera): So you're not enthused by this mayoral primary.

UNIDENTIFIED MALE: No, not at all; 100 percent not enthused.

HINOJOSA (voice-over): It doesn't help matters much...

MAYOR RUDY GIULIANI (R), NEW YORK: It's champagne time.

HINOJOSA: ... when the guy they're out to replace...

(on camera): So you would want Rudy to run again?

UNIDENTIFIED FEMALE: Of course, without a doubt.

HINOJOSA: ... gets more attention than the candidates.

ANDREA BERNSTEIN, WNYC POLITICAL REPORTER: There's the phenomenon of Mayor Giuliani, who is an extraordinary, larger-than- life personality. And the people who are running to fill his shoes have a large mountain to climb to sort of get where he is and to convince people that they can fill the stage as he did.

HINOJOSA: The Democratic front-runners have tried, campaigning with former Mayor David Dinkins. Public advocate Mark Green touted his "New York Times" endorsement -- sort of.

MARK GREEN (D), NEW YORK MAYORAL CANDIDATE: It's like chicken soup. It can't hurt. Look, I am proud, humbled and gratified that "The New York Times" has endorsed me.

HINOJOSA: And Bronx borough president Fernando Ferrer, who wants to be the city's first Latino mayor, showed off his political prize: an endorsement from the reverend Al Sharpton for a black-Latino coalition.

REV. AL SHARPTON, NATIONAL ACTION NETWORK: After eight years of polarization, we need a man that will to bring us together with compassion.

ANNOUNCER: Rudy's at it again.

HINOJOSA: Comptroller Alan Hevesi has raised his profile by trading ethics accusations with Giuliani. ALAN HEVESI (D), NEW YORK MAYORAL CANDIDATE: This election is far from over, and I think we have as good a shot as anybody else.

HINOJOSA: Trailing in the polls, City Council speaker Peter Vallone has a plan.

PETER VALLONE (D), NEW YORK MAYORAL CANDIDATE: What we're going to do is shake as many hands as we can.

HINOJOSA: On the Republican side, former Democratic congressman Herman Badillo is considered a long shot next to billionaire Mike Bloomberg, who has raised eyebrows spending over $17 million of his own money. He's also raised eyebrows shooting from the hip.

MICHAEL BLOOMBERG (R), NEW YORK MAYORAL CANDIDATE: If I'm mayor, I'll bring good weather to New York City. That's the campaign promise.

HINOJOSA: It's already being called the big city election that almost wasn't. Every indicator suggests turnout next Tuesday will be low, especially with the so many voters undecided.

BERNSTEIN: Those people are not likely to make up their minds and pick a candidate and run to the polls. They're likely just to not vote. So what that means is the race does become a wildcard.

(END VIDEOTAPE)

HINOJOSA: And there's another thing that makes this race unpredictable. There are more than likely to be a runoff between the two top Democrats that come out of this primary. One of them will more than likely end up facing the biggest personality to come out of this race so far: Mike Bloomberg -- John.

KING: Maria Hinojosa on the streets of New York City. I'm sure we'll be checking in next week. Thank you very much.

Now when a politician decides to call it quits, everyone always wonders: Why is he really retiring? Up next, I'll ask Vermont governor, Howard Dean, about his announcement this week that he will not seek reelection.

(COMMERCIAL BREAK)

KING: Texas Republican Senator Phil Gramm is denying a report he will resign his seat so that Governor Rick Perry can appoint a Hispanic Republican in his place. Gramm announced this week he will not run for re-election. Today, the "Brownsville Herald" quotes a source who said Gramm may step aside early to give his successor the advantages of an incumbent.

But Gramm told CNN whoever came up with that idea, the one that he should leave early, is, quote, "dumb." The senator noted no one has been appointed in Texas in the last 100 years has gone on to win the seat. On a related note, CNN has learned that Texas Attorney General John Cornin will make an announcement about his intentions for the Gramm seat next Wednesday. No word on what he plans to announce.

Vermont's Democratic governor, Howard Dean, is also not running for reelection. Earlier I spoke with the governor about his decade in office, and I asked him if the fallout over his support for a law of granting marriage rights to same-sex couples had any role in his decision to leave.

(BEGIN VIDEO CLIP)

GOV. HOWARD DEAN (D), VERMONT: I have pretty much won by margins greater than 12 points in every single race that I have had. I just -- you know, I am the longest-serving Democratic governor in the country and I think that there comes a time where the office becomes much more important than the individual. And I thought it was time to pass the baton. We're in the best financial shape we've ever been, we're going to get through this downturn in good financial shape. Our bond rating has gone from the lowest in New England to the highest. And I just figured I would be able to turn over the keys to the statehouse to somebody and leave Vermont in much better is shape than I found it.

KING: Some say perhaps Howard Dean has higher ambitions than a governor who has had some success to putting health care benefits to the residents of state, looks at Washington, the debate over the Patients' Bill of Rights and other health care access and things. Maybe I should run for president. Is that in your future?

DEAN: John, I made my mark in Vermont as a fiscal conservative and a social liberal. We have -- as I talked about in the fiscal record, cutting taxes, we're going to -- I am going to leave office with $100 million in the bank in the state. But we've also supplied health insurance to everybody under the age of 18 in the state and put aside thousands of acres of conservation land and farmland, which will never be developed. So those are the kinds of things I want to continue to pursue. I don't have any idea how I'm going to pursue them right now. I'm going to look around at all of the options. I just made this decision a couple of days ago and I'm going to take a couple of months and figure out where I want to go next.

KING: As you look around, and as you mentioned, you are the longest- serving governor right now. Are you comfortable with the message -- the national message of the Democratic party? Do you think the party even has one now that there is a Republican in the White House?

DEAN: I am not going to speak about what the Democratic message is. What I believe is that the principles that have guided Vermont while I have been governor over the last little more than 10 years, ought to be the principles that we adopt in the nation.

I was very, very disappointed to see the president in his first few months of office cause the surplus to disappear, eat into the Social Security fund, which everybody promised they wouldn't do. I believe in social progressivism, but I also believe that you can't make social progress unless you watch the bottom line. We have done extraordinary things in Vermont, but we've done them by never exceeding the rate of growth of the state GDP in the budget. That's what I think should be done nationally. I think we have to be very careful about the bottom line. But my priorities are different than president Bush's. I believe that we ought to the have universal health care, we ought to start with children. We ought to have a prescription benefit for Medicare. We can't do those things if you have the enormous tax cuts that are really too big to justify to stimulate the economy, especially if they are concentrated on the upper one percent of the income groups.

DEAN: I was reading the local press up there, seeing the reaction to your decision not to seek another term. Republicans and Democrats, most of them being quite favorable. One quote stood out from the "Burlington Free Press." This is from Garrison Nelson, a political science professor at the University of Vermont. He says, "He will discover the harsh truth. The phone calls will stop. It is real cold turkey for a person who has been at the center of the universe." True?

DEAN: Well, Gary's always had a way with words. Not for me. Being governor is not my persona. I am who I am. Being governor as a wonderful job and governor of this state has been a particularly wonderful job. But I am not tied into that. You know, I sneak away from security and go to soccer and hockey games all the time, and go shopping and take my kids driving so they can get their permits. I'm a dad just like everybody else. And that's the great thing about Vermont, you can be governor and do those things. So when the lights go out in the office, I will enjoy my privacy for a little while.

KING: Howard Dean. Time constraints force us to stop there for today but we hope that you will revisit us on INSIDE POLITICS and give us a call if you decide to head south and, say, cross the border into New Hampshire.

DEAN: Thank, John.

(END VIDEOTAPE)

KING: First Lady Laura Bush is taking an expanded public role. Up next, a look at the first lady's approach to the spotlight and to public policy.

(COMMERCIAL BREAK)

KING: First Lady Laura Bush will host the first National Book Festival tomorrow at the Library of Congress. The event is modeled after a similar event Mrs. Bush started in Texas to raise money for libraries. CNN White House correspondent Kelly Wallace reports the festival is the latest chance for the first lady to define her public role.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT (voice-over): Laura Bush doesn't love the spotlight, but she seems comfortable enough in it right now, whether it is hosting her first state dinner or giving reporters a playful account of the night she planned.

LAURA BUSH, FIRST LADY OF THE UNITED STATES: I am wearing a really very festive red dress. I made it myself. No really.

WALLACE: Her profile is about to get even higher, kicking off her National Book Festival and heading to Capitol Hill next week to talk about early childhood development. But that visit won't exactly be like this, when her predecessor Hillary Clinton testified about national health care. It's almost cliche by now. Laura Bush is the anti-Hillary, and observers believe that's just the way the American people want it.

GIL TROY, PRESIDENTIAL HISTORIAN: I think that Laura Bush has kind of mastered the zen of the first ladyship, which is, if you don't overdo it, if you have kind of minimal public actions, you can sometimes have maximal public effect and affection.

L. BUSH: And the voice of the horn calls out as loud as it plays.

WALLACE: The first months, the first lady was hardly seen, making just a few appearances on education. But nearly two-thirds of Americans like what they see so far, according to a summer poll. And "People" magazine called her one of its 50 most beautiful people.

SARAH SKOLNICK, "PEOPLE" MAGAZINE: I think that Americans find her sort of soothing. She's -- she's very pleasant, she's not confrontational. The issues that she supports are easy to be enthusiastic about.

WALLACE: There is still much we don't know about the shy former teacher and librarian, but we do know her impact on the president cannot be overstated.

SALLY QUINN, "THE WASHINGTON POST": There's a serenity about her when you meet her, a calmness and a sense of security. I can see how people talk about how he really needs that from her, and that she gives him a sense of security and solidness and a base.

(END VIDEO CLIP)

WALLACE: The president, aides say, is always at his best when Mrs. Bush is by his side.

(on camera): So she will keep hitting the road with her husband, but also branching out more on her own, talking not just about education but other causes, such as historic preservation and breast cancer research.

Kelly Wallace, CNN, the White House.

(END VIDEOTAPE)

KING: We'll have more on the debate about the budget and the slowing economy, and the very difficult issue of immigration reform in our weekly reporter's roundtable just ahead. Stay with us. This is "INSIDE POLITICS."

(COMMERCIAL BREAK)

KING: Two of Washington's best join us now for our regular Friday reporter's roundtable: Ron Brownstein from the "Los Angeles Times" and Dan Balz of the "Washington Post." Gentlemen, thank you for joining us. Let's start with the question of the day. And Dan, we'll start with you first. Whose economy is it?

DAN BALZ, "THE WASHINGTON POST": It's clearly George Bush's. The tax cut that he promoted so hard in the spring and got Congress to go along with -- late spring is clearly now the fiscal policy of the United States, and I think it's now Bush's economy for better or worse. And right now it doesn't look terribly good.

KING: Ron, Republicans don't like that. The president is so cool to their proposal for a capital gains tax cut.

RON BROWNSTEIN, "LOS ANGELES TIMES": He is sort of caught between a rock and a hard place, John, because both parties have promised not to tap into the Social Security trust fund to pay for other government programs. And White House, I think, is understandably leery about renouncing that promise. And there really is no money left after the tax cut -- the refunds the Democrats insisted on raised the bill in the short time. And at same time, the economy slowed down.

So they really don't have the money to go ahead unless they are willing to break that Social Security promise which I think both parties have to think long and hard before doing. It may have a political bite.

KING: Dan Balz, besides criticizing the president and besides trying to make the case that this slowdown has gotten a lot worse since he took office, do the Democrats have a game plan here?

BALZ: They don't particularly have a game plan, and I'm not sure either side has a real game plan at this point. I think that one of the interesting things is that almost every sort of side in this debate is arguing -- using the economy right now to argue for things that they have long wanted to do.

The president is using the new economic numbers and the new budget forecast to say we can't spend any more money. We have to show spending restraint. He's been talking about that for a long time. The Congressional Republicans, particularly those in the house, want to cut taxes more. They have always wanted to do that. Now they say they have a reason to do it.

The Democrats say that probably one of the things they will go after is the president's national missile defense. They've never liked that, they now have an excuse to do it. But I don't think that anybody has came up with a sort of comprehensive look at where we are and what really we need to do to go forward.

KING: Ron Brownstein, do you see, though, in George W. Bush the 43rd president lessons learned from George Bush, the 41st president? This president at least is out talking about the economy almost every day. His dad was quite silent when he was president, often saying things are fine.

BROWNSTEIN: I think that we will see, John, in the weeks ahead how much he has learned. I suppose someone in the White House is tacking up on their wall "It's the economy, stupid." Because, you know, presidents do rise and fall with the sense of general optimism about the country's direction. That right track indicator is a powerful predictor of how presidents fare, and it can't help but be hurt by what is going on in the economy. The stock market is falling. The unemployment rising.

You know, today Tom Daschle was out there linking the budget to the unemployment news. As Dan said, they don't really have the second act here for the Democrats. They want to criticize Bush, but they're very reluctant to talk about rolling back future installments of the tax cut and without -- unless they go in that direction eventually, they're going to be hemmed in. Because there isn't money there, really, to produce an economic alternative to what Bush has put on the table.

KING: Immigration reform, gentlemen. Another very emotional, very difficult issue, all more so in times when the economy is slowing down. Dan Balz, President Vicente Fox heads home to Mexico. He does not carry with him the immigration agreement he had hoped to strike with President Bush at this summit this week in Washington. One of the reasons? The president said so himself yesterday. They have to have a deal that is acceptable to the Congress. The president's problem on this issue in Congress not the Democrats, is it.

BALZ: No, that's exactly right. I think what this show this week is that even a very powerful personal relationship can't get you through some of the problems like an issue like this brings. We have seen this issue over the years cause a lot of divisions in this country. As you noted, in a time of economic problems, the immigration issue trying to -- trying to give some sort of legal status to people who have come here illegally is a very difficult issue.

For Bush at this point, it is the conservative Republicans. Bush has been much different than most of his party or part of his party on this issue. He's talked compassionately about immigration. But putting together something as complicated as this is really going to test him.

KING: And given the conservative angst on this issue, Ron Brownstein, and given the fact that President fox has gone home. So the momentum is slipping some and we are getting closer and closer to a Congressional election year. Will this president, in your view, really go to the mat and fight for this?

BROWNSTEIN: There are some engines, though, John, pushing it forward. One is that the business community -- which is important in the Republican party -- want a guestworker program to bring in Mexican workers to work on a temporary basis in low-wage service industries. And the business community, by and large, accepts the equation that they can't get a guestworker program through Congress unless they pay the toll of some kind of legalization for Mexicans and perhaps others who are already here illegally. And I think that the White House -- if they go with nothing -- disappoint many in the business community who need something.

Secondly, Bush has raised expectations in the Latino community. I mean, his political advisers had hoped this would help him move from the third of the Latino vote that he won in 2000 closer to 40% in 2004. If he backs off and does not come forward with a legalization plan of some sort, I think that he takes the risk that he may be worse off than if he had done nothing in the first place. And just quickly, finally.

Yesterday he crossed an important threshold when he did talk about allowing people who are here on a temporary basis -- at least some of them -- to earn a green card and become permanent residents. That is what Democrats, what Mexico, what unions are going to demand for a guestworker program. And his comments suggest to me the White House has crossed the Rubicon and understands that it has to do that, even if that means some confrontation with the conservatives, especially in the house.

KING: We need to end it there. Thank you both. Dan Balz of the "Washington Post." Ron Brownstein from the "L.A. Times." have a good weekend, gentlemen.

BROWNSTEIN: Thanks, John.

BALZ: Thank you, John.

KING: Our Bill Schneider has been talking politics with a man who famously flirted with a presidential bid. Could be a play of the week there? Find out next.

(COMMERCIAL BREAK)

KING: This was the first week back on the job for President Bush and members of the Congress after their August break. But at times, they were upstaged by other political figures who had announcements and opinions to share. Here with an opinion of his own, our senior political analyst Bill Schneider.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: John, a sluggish economy, a plunging stock market, a deadlocked budget, and of course, this summer's big political story, a disgraced politician. Despite all that, serious people still want to be political players, and this week many of them made their move. New players in a new political play of the week.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Who's in? Janet Reno for governor of Florida. She's been state's attorney, the first woman attorney general, a figure of controversy. She has health problems. Why does she need this? JANET RENO, CANDIDATE FOR GOVERNOR OF FLORIDA: I was born and raised here, and I love this state.

In, Tony Sanchez for governor of Texas. A wealthy oil man. Why does he need this? It's no small thing to become the first Hispanic governor of Texas.

In: Alex Sanders for senator from South Carolina. Sanders left politics in 1992 to become a college president. Now he's going back. Why does he need this? Well, in Sanders' words, "I've still got gas in my tank."

Who's out? Phil Gramm, third-term senator from Texas. Leaving in frustration? No.

PHIL GRAMM, SENATOR: Remarkably, the things I came to Washington to do are done.

SCHNEIDER: Out: Howard Dean, popular five-term governor of Vermont. He's not leaving in frustration either.

Out: Rumors are swirling about this guy. Would he be leaving in frustration? Absolutely. Another player shows up in Washington this week. Warren Beatty is stumping for Progressive Majority, a new grassroots movement to raise money for liberal candidates. Unabashedly liberal candidates.

WARREN BEATTY, ACTOR: I have been an active Democrat for about 35 years or so. I have never seen the Democratic Party, if you will excuse me, in a more confused state.

SCHNEIDER: A liberal comeback. Is he kidding? No.

BEATTY: The Gore vote together with the Nader vote, you have a majority. You have a healthy majority.

SCHNEIDER: If the progressive majority is there, why don't we know about it? One word: money. His new organization is out to change that.

BEATTY: With a small donation, they can -- they can counter the effects of this huge amounts of money that come from -- from from the rich.

SCHNEIDER: Wait a minute. Are we going to see Senator Bulworth? President Bulworth? Beatty is a maturing actor with 15 Academy Award nominations and four kids. Why does he need it?

BEATTY: I have a got a great gig. I'm an actor. I don't have to raise money. I am not running for anything.

SCHNEIDER: He's out as the candidate. But he's in as a player trying to bring the left back to life. Despite everything: discouraging odds, daunting problems, politics in disrepute, these people still want to play. Well, good for them! And the play of the week for them, too. (END VIDEOTAPE)

SCHNEIDER: I asked Mr. Beatty how the left could avoid making the mistake of the past. And he told me, you just try not to make the same mistakes again. That's why the players keep playing. By the way, John, Annette Bening was there. Big fan.

KING: Big fan.

SCHNEIDER: Big fan.

KING: You've got a good gig too. We'll be right back.

(COMMERCIAL BREAK)

KING: That's all for this edition of "INSIDE POLITICS." I'm John King in Washington. Thanks for joining us.

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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