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CNN INSIDE POLITICS

President Declares Fire Zone a Federal Disaster Area; Big Money Campaign Donations Raise Eyebrows; Does the Bush Mideast Plan Stand a Chance of Success?

Aired June 25, 2002 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: I'm Judy Woodruff in Washington. President Bush gets a firsthand look at Arizona on fire. And we'll ask agriculture secretary Ann Veneman if westerners are doing enough to prevent blazes in their own backyards.

CHARLES MOLINEAUX, CNN CORRESPONDENT: I'm Charles Molineaux in Show Low, Arizona, where the debate is just heating up. A real firestorm is brewing over whether the midwestern fires could have been prevented.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: I'm Bill Schneider in Washington. Will the insider trading allegations against Martha Stewart prove to be a good thing for Democrats?

WOODRUFF: Also ahead, it's a tough job, but someone has to do it. We'll find out how the nation's lieutenant governors are spending their time in the tropics.

Thank you for joining us. We begin with President Bush offering aid and comfort to Arizonans whose lives and homes have been threatened by wildfires. Mr. Bush urged some of the 30,000 people forced out of their homes in east-central Arizona to -- quote -- "hang in there." And he declaring the region a disaster area, making it eligible for federal aid and low cost loans.

More than 2,300 firefighters are struggling to contain Arizona's largest wildfire. One fire official told Mr. Bush that because of dry conditions there is not a lot that they can do. The president took an aerial tour of the 50-mile wide wall of fire.

It has charred at least 351,000 acres in Arizona in this summer of fierce western wildfires, including another major fire, the Hayman wildfire, outside of Denver. CNN's Charles Molineaux is near the fire zone in Show Low, Arizona.

Charles, let me first ask you, are people satisfied right now with the way the forest service has responded to the fires?

MOLINEAUX: Oh, yes. The response by the forest service is getting very high marks all around. People are upset about having to be evacuated, but very understanding. We were in the middle of the evacuation of Show Low, Arizona a couple nights ago. And a lot of people beforehand were saying, we're ready to go if it comes to that. And then when it happened, they said, well, we're listening. And the highways were jammed as people paid attention and got out without a hitch.

Actually, it was a matter of considerable pride for the forest service. There was only one minor fender bender in the evacuation of some 25,000 people, in a very short time for the area. So the forest service itself, as far as handling the fire now that it has broken out, is getting very high marks.

WOODRUFF: What about the criticism that there weren't control burns in the period leading up to these fires?

MOLINEAUX: Well, that's when you step into a real firestorm. And the forest service is certainly one of the participants in that and will probably be dishing out a good bit of criticism of its own.

You mentioned forest management. Environmentalists conjure up images of timber companies running through and clear-cutting forests down to nothing. But the forest service will tell that you that that is really an attempt to duplicate natural processes and maintain a balance in the forest.

The concern has been that over the past 40 or 50 years, there has been a real desire not to let forest fires burn as they have for tens of thousands of years, as these forests have developed. And what has happened is that there has been undergrowth that has developed.

And as the forest service has decided that some of that has to be either cleared out or burned out, using control burns, it has met fierce opposition -- and not just from environmentalists, but also from people who were concerned about it spoiling their landscape, that they may have spent a lot of money to escape to, or from people who say they don't like the smell, to people who say they have breathing problems.

And as the forest service puts it, this debate over forest management and the thinning and clearing of forests to prevent forest fires is going to go at high volume. And they say, crank this one up to shrill over the next couple of months, as the debate over what the forest service should have been doing and should be doing in the future really picks up.

WOODRUFF: All right, Charles Molineaux joining us from Arizona. Thank you very much. With us now on the telephone from Arizona, fire history expert Stephen Pyne. He's a professor at Arizona State University.

Professor Pyne, could these fires have been prevented?

STEPHEN PYNE, FIRE HISTORIAN: Well, there is an immediate question and a long-term one. The fires were not inevitable. They were started by people under the worst possible circumstances. Certainly, the potential has built up. But you still need a catalyst. Drought, I feel, don't spontaneously combust. So in that sense, they were not inevitable. The fire in most of the western states is inevitable. It's going to come, and the choice is what kind of fires you want.

WOODRUFF: What do you believe is the best federal policy?

PYNE: I don't think that the policies are out of line. The federal agencies, for almost 30 years now, have been trying to correct their mistakes at the beginning of the century, and to produce a better balance between -- in our whole fire system, to better control wildfires, but to introduce benevolent, ecologically useful fires.

And the interesting question is why, despite the policy, have we had such difficulty getting it on the ground? I think there are a lot of...

(CROSSTALK)

PYNE: Excuse me.

WOODRUFF: And, just finish the thought, if you would.

PYNE: Sure. Well, I think that there are a lot of reasons. If you're really serious about getting this fire right, fire synthesizes its surroundings. So you've got to get the context right. We can't put fire back in, as it did -- as it existed before. It's like introducing a lost species. You've got to create a habitat for it.

And at that point -- what's really been lost out of the western landscapes are grasses. You're really talking -- it's not about trees. It's really about getting grass back in, (UNINTELLIGIBLE) so you can get the right kinds of good fires and better control of the bad ones.

But at that point, you have the potential to alienate every possible constituency of the public land from westerners. You get the smoke, escape fires, wildlife raising -- take your pick.

WOODRUFF: All right. Well, we are going to leave it there for today. Stephen Pyne with Arizona State University, we thank you very much.

And with us now here in our Washington studio, the U.S. secretary of agriculture, Ann Veneman. Of course, agriculture oversees the forest service. You're hearing now both from our reporter on the scene and from a fire historian, this controversy over what is the right policy for dealing with fires.

What is the federal policy right now for preventing forest fires?

ANN VENEMAN, AGRICULTURE SECRETARY: Well, as was mentioned, this is a very difficult year because of the drought, and because of the fuels built up in the forest. This has been a long-term issue. That is, the fuels have been building up in the forest for a number of years.

The policy of this government is to actively manage the forest to reduce the fuels build-up. But again, that's going to take time. I've been visiting some of the fires. I have seen the difference in how forests burn when there has been active management, when fuels -- the load he been reduced, versus when they fly.

WOODRUFF: Including controlled burns?

VENEMAN: Including controlled burns, including thinning the forest, including removing the underbrush by mechanical means. There is a variety of ways that we can manage these forests in an ecologically beneficial way so that these fires won't burn the way they've been burning in Arizona.

WOODRUFF: Why has that management been carried out, though, in some places and not in others?

VENEMAN: Well, I think it's to some extent, it's been stopped by opponents in the courts. There have been prohibitions, as was indicated by the previous guest. There have been people who have opposed active management for one reason or another.

But I think that the fires we're seeing now, coupled -- the fuels build-up coupled with the drought -- show the need to actively manage forests. That is the policy of the administration. And the president personally feels very strongly about this. And I think he feels even more strongly, having visited the fires today.

WOODRUFF: We're looking at pictures that are coming in, we're told. They've just come into us from Arizona, from the Show Low area, that we were reporting on.

I'm sorry I interrupted you. You were saying the president feels very strongly that what?

VENEMAN: We need the active management of the forest. We need to reduce the fuels build-up. And we've been working actively to do that with the Department of Agriculture, with the Department of Interior and the western governors, on a bipartisan basis.

We last year signed a joint national fire plan. And just a couple of months ago, Gale Norton and I were with the western governors and signed the implementation plan. So we're working to get all of these policies more actively engaged and continue to reduce fuels build-up on a priority basis as well.

WOODRUFF: Are you saying that controlled burns and these other management policies work everywhere, and they should be engaged? The should be tried everywhere -- is that what you're saying?

VENEMAN: Well, one of the things that we're trying to do through this interagency process and working with the states, is to determine where are the priority areas to reduce fuel build-up. And...

WOODRUFF: That are most susceptible to the large fires. VENEMAN: Most susceptible, most closely associated with buildings, with communities, where people are being put at risk. We've got to prioritize based on a variety of those factors. So we've been in the process of doing that.

The programs are ongoing but some have not been aggressively pursued as they could have been, both because they've been stopped by legal action and other problems.

WOODRUFF: Well, as you know, some environmentalists argue that thinning the forests to reduce the chances of these huge wildfires, in their words helps, the logging company just as much as it helps the forest.

VENEMAN: Well, there will be some product that needs to be taken out of the forest. And that gives an opportunity for either the logging industry to some extent. But some of these places where they're complaining about that, there aren't even sawmills near this.

I think it really is the question of are we going to actively manage our forests and protect people and communities and our public lands? Or are we going to allow what we have seen happen in Arizona continue to happen all over the country?

WOODRUFF: All right, Secretary of Agriculture Ann Veneman, thank you very much for joining us. I know one thing, these fires have certainly gotten people's attention, in terms of those policy debates that you're describing.

VENEMAN: That's true.

WOODRUFF: Thanks very much.

VENEMAN: Thank you.

WOODRUFF: Good to see you. Well, after seeing the Arizona wildfire, President Bush is now on his way to Canada for the G-8 summit that begins tomorrow at a resort in the Canadian Rocky Mountains.

As Mr. Bush prepares to discuss the war on terror and other matters with world leaders, our new poll shows more than a third of Americans believe the U.S. should use military force without support from western allies. More than half say the United States should not act alone militarily.

Here in the U.S. many people now are riveted by a different kind of battle: Martha Stewart's fight to preserve her image and her fortune amid allegations of insider trading. Today the slumping stock price of the domestic doyen's firm, Martha Stewart Living OmniMedia, rose slightly. It closed at 13.6.

Our Bill Schneider is here with the recipe for making Stewart's problems a political matter -- Bill.

SCHNEIDER: Well, Judy, Enron has been a big disappointment for Democrats. Not much political mileage in attacking Ken Lay. But Martha Stewart could do what Enron didn't: personalize the wave of business scandals sweeping the country.

(BEGIN VIDEOTAPE)

(voice-over): Did Martha Stewart, the champion of creative housekeeping, mix a little creative bookkeeping in with her business? That's what Congress is looking into. Specifically, a committee chaired by Billy Tauzin. Oh, look, here's Congressman Tauzin on Martha Stewart's TV show.

Ms. Stewart is dismissive of the allegations. Or rather, preoccupied with herself.

MARTHA STEWART, CHMN & CEO, MARTHA STEWART LIVING: I have nothing to say on the matter. I'm really not at liberty to say. And as I said, I think this will all be resolved in the very near future and I will be exonerated of this ridiculousness.

SCHNEIDER: The country has seen a string of business scandals this year. As "Doonesbury" has noticed, the business section does look like a crime page these days.

The rogues gallery includes Joseph Berardino of Arthur Andersen, John Rigas of Adelphia and Bernard Ebbers of WorldCom -- bad boys, but not household names. Martha Stewart is a household name. The household is her business. And it's having a big impact on the nation's economy.

Investor confidence has been plunging. Martha Stewart's stock price has taken a big hit. Overall, declining stock prices have erased billions of dollars of wealth. And that's meaningful to more and more Americans.

Just in the past five years, the percentage of people invested in the stock market has jumped from 41 to 63 percent. It's their wealth that's disappearing. Here's how President Bush has tried to blunt the impact of the business scandals.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And there are some bad apples. And the business world must clean up its act.

SCHNEIDER: A few bad apples? Big business and Wall Street now rank near the bottom of the list when Americans are asked about confidence in 16 institutions -- below organized labor, just above HMOs.

(END VIDEOTAPE)

Call it the Martha Stewart effect. Americans resent wealthy and prominent people who don't seem to play by the rules. Now, as it happens, we found out that Ms. Stewart is a registered Democrat in her me state of Connecticut. But the Republican Party is seen as much closer to big business, particularly when it's led by two former CEOs -- Judy.

WOODRUFF: All right, Bill Schneider, thanks very much.

And we will talk to the newest target of campaign finance watch dogs. When we return, find out why he is causing such a stir in the world of political fund-raising.

Also ahead...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Welcome to the (UNINTELLIGIBLE), people, where every seat in the house is a dry seat, including this one. Hello, hello.

(END VIDEO CLIP)

WOODRUFF: We'll check out a movie spoof designed to score with Democrats.

And we'll get a live update from an island paradise, where some prominent public officials are toiling away. That is, when they're not seeing the sights or playing golf.

(COMMERCIAL BREAK)

WOODRUFF: Well, you know you've arrived in Washington's political circle when a watchdog group calls a news conference to rail against big money and you're the headline. That dubious distinction belongs to a man many of you have probably never heard of. We don't even have video of him, but his money is speaking volumes.

(BEGIN VIDEOTAPE)

(voice-over): Meet Steve Kirsch, dot-com billionaire, noted philanthropist, and the No. 1 contender for the heavyweight crown of political donors. According to the Center for Public Integrity, Kirsch donated at least $3 million to Democratic candidates and campaign committees in the 2000 election cycle.

The undisputed title still belongs to Mighty Morphin Power Rangers creator Haim Saban, who gave a whopping $7 million single contribution to the Democratic National Committee in March.

But what has impressed campaign watchdog groups about Kirsch is that he came out of nowhere. He barely even registered in 1996 or '98.

CHARLES LEWIS, CENTER FOR RESPONSIVE POLITICS: Most political reporters never heard of Steve Kirsch. And here's a guy who gave $3 million at the state and federal level. That's 50 percent more than Clement Stone gave Nixon in Watergate.

WOODRUFF: Watchdog groups say the software tycoon has also cracked the code for skirting the new McCain-Feingold restrictions by giving more than $2 million to state, party and candidate committees, which may become the most important repository for soft money when the reforms kick in. And Kirsch really came up big when it counted most, during the Florida recount battle, giving half a million dollars to the Democrats to staff and equip war rooms in the key counties. Kirsch made his money in the dot-com boom, selling search Infoseek to the Disney corporation in 1999 for a reported $2.5 billion in stock. He then founded Propel, an Internet software firm.

As for his political views, well, they're not hard to find. Just point your browser to www.skirsch.com and click on political home page. How do you keep terrorists out? Iris scans at the borders. How do you stop hijackings? Kirsch has a few ideas -- 17 to be exact -- including an air marshal on every flight, guns for pilots and pepper spray in the oxygen mask compartment.

(END VIDEOTAPE)

And we check in with Steve Kirsch right now. He's with us from San Jose, California. Mr. Kirsch, how do you feel about all this attention you're getting?

STEVE KIRSCH, POLITICAL ACTIVIST: Well, I think it's bringing up to the surface that we need to get the money out of politics. And the only reason that I contributed is because I'm just trying to balance the money into the system. There's a lot of money going in from special interests, and I'm trying to help the rest of us.

WOODRUFF: You gave about $3 million in the 2000 election cycle. Now, we understand you've already given a million for this year, the '02 election cycle already. How much do you think you'll end up giving by the end of this year?

KIRSCH: Oh, probably another million or so, before November.

WOODRUFF: To different state candidates, state parties, or how will you do that?

KIRSCH: A lot of it will go to the DSCC and the DCCC and the DNC. And I'll let them spread it to candidates as they see fit.

WOODRUFF: Now, you have described yourself as a Republican, but you're only giving to Democrats. How is that? Why is that?

KIRSCH: In the past I've been registered as a Republican. But more recently, especially with the 2000 election, I changed my party affiliation to be a Democrat. You know, I find that there are things that are valid in both parties' platforms. To me, registering as one or the other was immaterial.

WOODRUFF: Yes, I saw one interview where you said the code name for a foundation you were setting up in Washington might be the vast left wing conspiracy. What are you trying to put together there?

KIRSCH: Well, it turns out that the money that's on conservative right wing causes is just huge. And the amount of money for progressive causes, for people who believe in a better future for America, rather than a particular ideology, is actually rather small. So it's really to help balance out that money so we have a fair airing of policies, rather than it being dominated by who's got the most money.

WOODRUFF: You know, you've been quoted as saying the campaign finance system -- and I'm just going to read a quick quote. "The current system sucks," in your words. You said, "It allows wealthy people like me to get special access and influence public policy. It shouldn't be that way."

But if that's the case, you're giving money. Aren't you undermining the system by doing so?

KIRSCH: Well, actually, I'm probably one of the largest contributors to campaign finance reform in the country. And until that actually takes place, where we actually have public financing of elections -- like we do in several states where it's working extremely well -- until we have that on a national level, then you have to essentially play by the rules that are in effect. And the only way to balance out the views is for people like me to step up and give causes for -- to support the people of America, and not support the special interests.

WOODRUFF: A lot of people have said that the McCain-Feingold campaign finance reform legislation is going to make a big difference. It's going to get rid of a lot of the soft money contributions. And yet there now appears to be a way that people will continue to give. The FEC is apparently letting stand gifts to state parties. Do you see that as a big opening for you and others?

KIRSCH: I don't look at it as an opening. I think that both parties are going to take advantage of whatever loopholes they can. And that's just going to equalize it. So, what really should be the goal is to have complete public financing of elections and get the money out of politics, like we have in several states. And we've got to do that on a national level.

McCain-Feingold was the first step in that direction. But it's not closed until we actually pass clean money elections for Congress.

WOODRUFF: Are you saying there's going to be just as much soft money given now, but through a different route?

KIRSCH: Yes, I think that the soft money that's flowing into the system now will seek a different route. It's going to go into issue, it's going into various organizations -- not party organizations, but it will go to particular groups that are going after specific issues. And so that same money is just going to be funneled in a different way.

WOODRUFF: If I could just ask you, finally, do you think you're having influence, with all of the money you're giving?

KIRSCH: I think I'm making an impact. You know, if we can help to elect one or two or three more people who believe in what's best for America, then I would have considered my money well spent. WOODRUFF: All right, Steve Kirsch with us from San Jose, California. He says he's already given a million, may give up to $2 million this year. Thanks very much, Mr. Kirsch.

KIRSCH: Thank you.

WOODRUFF: Just ahead, James Carville and Ron Kaufman will lock horns over some of the big issues of the day. And we will update some of today's stories, including President Bush's tour of the wildfire devastation in Arizona.

(COMMERCIAL BREAK)

WOODRUFF: Checking our INSIDE POLITICS "Newscycle," President Bush flew west today to get a firsthand look at the damage from some huge wildfires. As they were arriving in east-central Arizona, Mr. Bush declared that region a federal disaster area. The massive wildfire near Show Low, Arizona, has charred more than 350,000 acres.

Police in Salt Lake City, Utah, are asking for the public's help in the case of missing teenager Elizabeth Smart. They're trying to determine a timeline for the whereabouts of Richard Albert Ricci, a handyman who is being investigated in connection with Smart's disappearance. Ricci, who had done some work at the girl's home, is in jail on unrelated charges.

In Northern Virginia, a federal judge today entered a plea of not guilty for an argumentative Zacarias Moussaoui, who is charged with conspiracy in the September 11 attacks. The suspected terrorist was called back to court to answer a slightly revised indictment. References to Moussaoui's inquiring about crop-dusting planes have been dropped.

We'll have more INSIDE POLITICS right after this.

(COMMERCIAL BREAK)

WOODRUFF: In Massachusetts, a state board ruled today that Republican Mitt Romney is eligible to run for governor. The board unanimously rejected some Democrats' claims that the time Romney spent in Utah overseeing the Salt Lake Olympics disqualified him as a Massachusetts resident. A short while ago, Romney commented on the decision.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), MASSACHUSETTS GUBERNATORIAL CANDIDATE: I'm clearly very gratified with the decision of the commission. I'm pleased that this campaign can go back to focusing on the things the people of Massachusetts really care about: great schools, affordable health care, a clean environment.

I'm also pleased that the people of the entire commonwealth, who recognize that this is a campaign about those issues, agree with the people in Belmont: that I'm a citizen of Massachusetts and that this campaign is going to roll forward with even greater strength and greater vigor than ever before.

(END VIDEO CLIP)

WOODRUFF: Romney is the only Republican in the race, along with five Democrats.

On a lighter note from Massachusetts, members of the Democratic National Committee got a good laugh while checking out Boston as a possible 2004 convention site.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Welcome to comfort, baby. Boston's got lots of hotel rooms. I'm not going to lie to you. They're all fitted to reach your budget. Trust me. I've been in most of them. Oh, behave.

(END VIDEO CLIP)

WOODRUFF: Spoofing the popular movie series, Boston officials showed DNC members a video tour of the city yesterday, hosted by a groovy guide named Boston Powers.

Well, move over Karenna Gore Schiff. There's speculation that another daughter of a well-known political figure is trying to be a player like you.

(BEGIN VIDEO CLIP, PATAKI CAMPAIGN AD)

EMILY PATAKI, DAUGHTER OF GEORGE PATAKI: The man you call governor is the man I call dad.

(END VIDEO CLIP)

WOODRUFF: New York Governor George Pataki's oldest daughter, Emily, is featured in a new ad running across the state today. In it, she praises her father as a caring leader in tough times. And she urges New Yorkers to join his campaign -- the campaign for his reelection.

Meantime, in the Tennessee Senate race, former governor and presidential candidate Lamar Alexander's penchant for plaid is the target of a new ad featuring one of his Republican primary opponents, Congressman Ed Bryant.

(BEGIN VIDEO CLIP, BRYANT CAMPAIGN AD)

REP. ED BRYANT (R), TENNESSEE: I'm Ed Bryant, the other Republican running for Senate, you know, the one without the plaid shirt.

NARRATOR: Don't be plaid. Be solid for Bryant, solid conservative for Tennessee.

(END VIDEO CLIP)

WOODRUFF: Bryant and Alexander will meet in Tennessee's primary on August the 1st.

With us now are Ron Kaufman, who was the White House political director under the first President Bush, and James Carville, who is a co-host of CNN's "CROSSFIRE."

Gentlemen, let's ask you quickly about the president's move, announcement yesterday about his plan for the Middle East.

James, to you first. Does this mean that the president, by this move, is making the Republican Party much closer to Jewish voters and in a much stronger position to win the Jewish vote in '04?

JAMES CARVILLE, CO-HOST, "CROSSFIRE": Well, first of all, this is the president that decided the United States didn't have a strategic interest in the Middle East and didn't do anything until the violence escalated out of hand.

I'm like any other American, Jewish-American. I have an office in Israel myself. I hope that something works. But this is the result of, by and large, a neglect on this administration. And I hope what they do works. I hope that we can get something going and stop the violence.

I wish they would have started doing this from the day they took office instead of now, though. And I think Jewish voters, like any other voters, are going to look at the entire record. And I think they are going to realize that the Democrats have always been good, not just for Israel, but on a whole host of other issues that Jewish voters care desperately about. But I hope the president, I hope this works for him. I want people to stop dying over there as fast as possible.

WOODRUFF: Ron, does this help the president and help Republicans with Jewish voters in particular?

RON KAUFMAN, FORMER BUSH WHITE HOUSE POLITICAL DIRECTOR: Well, it's bigger than that, Judy.

And I agree with one thing James said. I hope this works. Unfortunately, the last administration got involved too much too early. You can't solve the problems here. They have got to be solved there. It needs our leadership, but the time has to be right.

I think the president said it best yesterday. The time is right now for both sides to make some compromises. It's a tragedy to see folks dying in the streets needlessly on both sides, Judy. And this will work, I think. And it is the right thing to do. If it helps Republicans, it helps Democrats, it doesn't make a difference. It helps the country and it helps the world.

WOODRUFF: Let me change the subject now to the U.S. economy. Today, we know the stock markets closed within the hour. And, right now, we're told it is the lowest it has been since it hit a three-year low last September the 21st, right after the 9/11 terror attacks.

With this loss of confidence in a lot of companies, loss of confidence in the markets, which, if either, political party stands to benefit or be hurt by this, James?

CARVILLE: Well, first of all, if the president hadn't gotten his economic plan -- it was tax breaks for the wealthy and capital-gains taxes -- boy, this market really took off.

What party? One party led this country, took office, had a $270 billion deficit, left office with a $5.6 trillion surplus that these clowns have already eaten up. Do you think anybody thinks this guy at the SEC is serious about getting anybody? He was an industry gopher before he went there. Let's get real here. They don't even have an economic plan.

And the markets are expressing a lack of confidence in this administration, in administration policy. Look what's happened in Latin America. This administration did nothing as the situation in Latin America deteriorated. And what you are seeing now is people saying these guys are not capable of enforcing laws. They're trying to fight. You have Republicans in the House saying: Well, these guys shouldn't be enforcing state laws. We need to do this.

They don't have a plan for Latin America. They don't have a plan beyond cutting taxes and running the deficit up. And of course they're going to pay for it, because people remember the prosperity of the Clinton era.

WOODRUFF: Ron?

(LAUGHTER)

KAUFMAN: Judy, it is about confidence. As Martha Stewart found this week, confidence is very important in the market and Americans who invest in the market. And they have great faith in the president.

The reason this was a short-lived recession -- a Bill Clinton recession, I might add -- is because the president had the courage, even though it wasn't popular, to pass a very strong tax cut. That's limited the downside. And, listen, as confidence comes back, we are going to have a very strong market going into 2004. And it's going to help the president and the country.

WOODRUFF: James, are you going to let that...

CARVILLE: I'm kind of stunned.

KAUFMAN: Well, that's OK.

(CROSSTALK)

CARVILLE: It was the shortest recession ever. I don't know how to say this, but we had the longest expansion we ever had under Bill Clinton. We turned $270-billion-a-year deficit into a $5.6-trillion, 10-year surplus.

But I think people know, people know that these guys suck up to power at every time they get it. If it's something for Peabody Coal or anybody else, they're all for it. And people know that they didn't do anything in Latin America. And they don't have a plan. The plan that they had didn't work. It didn't work. The unemployment rate is not where it should be. The markets are tanking. People's confidence is down.

We need somebody that can take charge and take charge by leading this country and not just sucking up and giving power everything that it asks for at every juncture. And that is what this administration does. That was their policy. That is their policy.

(CROSSTALK)

WOODRUFF: And, Ron, are you saying, whether this president is vulnerable on this or not, that the Republicans are going to suffer one way or another because of what we're seeing the markets do right now?

KAUFMAN: Oh, no, I don't think so at all, Judy. I think the polls are very accurate, that the American public do not blame the president or the party for what's going on in the market right now, that we have a lot of confidence in the market. We have a lot of confidence in the president and a lot of confidence in the economy.

Yes, it is down now and not where we want it to be. But it's going to get better. Economies go up and down. And we're going to be in the up cycle. And what counts is how the market is in November of 2002 and 2004. And we have great confidence it's going to be fine.

WOODRUFF: All right, we're going to leave it there.

CARVILLE: All right, thank you.

Thank you, Ron.

KAUFMAN: Thank you, James.

WOODRUFF: Ron Kauffman, James Carville, gentlemen, good to see you. Thanks very much.

KAUFMAN: Thank you.

WOODRUFF: When we return, we will hear what Palestinian leader Yasser Arafat has to say about President Bush's framework for peace in the Middle East.

(COMMERCIAL BREAK)

WOODRUFF: The State Department says world reaction to President Bush's Middle East speech has been positive so far. Yesterday, Mr. Bush laid out his blueprint for peace in the region.

Among other things, he called for the replacement of Palestinian leader Yasser Arafat as one of the key steps toward Palestinian statehood. Today, reaction from Arafat: He called Mr. Bush's speech important. But he says Palestinians will choose their own leaders. The Palestinian Authority president says elections for his job and for the Palestinian legislature will be held in January and local elections in March.

As Arafat spoke, Israeli forces were seizing control of a seventh West Bank city, Hebron. They arrested the head of Palestinian security and they engaged in a gunfight with Palestinian forces.

With me now to talk about President Bush's speech on the Middle East is Ron Brownstein of "The Los Angeles Times."

Ron, I know that you believe the president -- yes, he laid out a blueprint, but he left a lot of unanswered questions.

RON BROWNSTEIN, CNN POLITICAL ANALYST: He did.

And the biggest question, really, is what the U.S. is willing to do to make all of the things that he talked about a reality. He really set down a very ambitious agenda of reform for the Palestinian Authority before they could move on to the substantive issues that divide them from the Israelis.

And we're talking about an independent judiciary, free elections, reform of government finances, a new constitution, and a reconstruction of the security force. Now, in other cases, Judy, where the world has tried to implement that level of reconstruction of a government -- East Timor, Kosovo -- the U.N., in some cases, have come in and run the country almost as a trusteeship in a transition to allowing local power to then emerge. That's obviously not feasible here.

So, what it's probably going to take is an intense U.S. and international intervention, with their sleeves rolled up, of both carrots and sticks, pressure and aid, to try to make these things happen, if they are going to happen.

WOODRUFF: That's a lot left to happen, though, is what you're saying.

BROWNSTEIN: Absolutely. There's a lot. He really put a very ambitious agenda on the table. And I think a critical question is going to be: To what extent are they committed to following it up and trying to make that a reality?

WOODRUFF: Now, in doing so, clearly, there's -- people who watch politics and watch what this means, this aligns the president very closely with his conservative base.

BROWNSTEIN: This has really brought him back in tune with the conservatives. Really, for the last few months, as the president has oscillated between condemning Arafat and at times calling for restraint from Ariel Sharon, there has been a lot of restiveness among different points on the conservative movement. But the overwhelming reaction to the speech from, really, the full conservative spectrum has been extremely positive.

Religious conservatives like Pat Robertson, the neoconservatives like Bill Kristol and "The Weekly Standard," and just straight down the line, they all agree with the president's sequence, his argument that reform of the Palestinians must precede substantive negotiations with Israel. That's what Sharon wanted. That's what the conservatives wanted. And that's what he came out for.

WOODRUFF: And, basically, they weren't convinced that he was with them before this, right?

BROWNSTEIN: He was moving back and forth.

Now, the problem with the Middle East, of course, is that it's very hard to stay to any course once you have set it, because events are constantly blowing you off course. What does the president do if, in fact, in a few months -- the election in January -- if the Palestinians reelect Yasser Arafat, who would have a very -- it seems like a very reasonable chance of winning a national election?

These are the kinds of questions. What does he do if there is more terror? Is he willing to stay involved in reconstructing the Palestinian government if there's more terror? There are going to be a lot of difficult questions. And it's hard to pick one course and stick to it. But, for right now, he has got the conservatives here behind him very strongly.

WOODRUFF: Or even those who are more hard-line to the Palestinian legislature.

BROWNSTEIN: That's right.

WOODRUFF: All right, Ron Brownstein, thanks very much.

Well, it is a getaway to paradise. Just ahead, we'll tell you where the nation's lieutenant governors are holding their national conference.

(COMMERCIAL BREAK)

WOODRUFF: Two big election 2002 primary runoffs are featured on today's "Campaign News Daily": In Alabama, Congressman Earl Hilliard is trying to fend off a stiff challenge from fellow Democrat Artur Davis, the first black congressman elected from Alabama since Reconstruction. Hilliard's race against Davis is ending much as it began, with bitter accusations. In the closing hours, the two accused each other of being ready to break election laws to win.

And after two weeks of intense campaigning South Carolina, two Republicans are in a runoff today to face Democratic Governor Jim Hodges. Lieutenant Governor Bob Peeler is facing off against former Congressman Mark Sanford. Sanford had a narrow lead over Peeler in the first round of voting. With the two relatively big names on the ballot, turnout is reported higher than usual in some precincts.

Well, Gary Sherrer, is the lieutenant governor of Kansas, but he is not there today. Sherrer and his peers are in St. Croix in the U.S. Virgin Islands for the annual meeting of the National Conference of Lieutenant Governors. The conference runs through Sunday. It's being held at the Divi Carina Bay resort. And a check of the group's Web site shows a full agenda, with some fun mixed in with the serious matters.

Among the extracurricular activities: an event Thursday at the site where Christopher Columbus landed. Friday features, among other things, a tour of a rum distillery. And Saturday, a round of golf is one option.

But, in all seriousness, some important matters are on the agenda, including symposiums on education, insurance and the economy of the U.S. Virgin Islands. The lieutenant governors also will get a briefing from a White House official on homeland security.

On the telephone now from St. Croix is the lieutenant governor of Kansas, Gary Sherrer. He is the chairman of the group.

Mr. Sherrer, why St. Croix? You know how this looks to some people watching all of this.

LT. GOV. GARY SHERRER (R), KANSAS: Well, certainly, in this business, you become quite aware of people who are more interested in form than substance.

But the answer is really simple. The U.S. Virgin Islands are a member of our association, along with four other U.S. territories. And the last few years, we've had meetings in Rhode Island, Kentucky, Oklahoma, and New Mexico. Next year, it will be in Arkansas. And we don't think it is out of the ordinary that we take an invitation from one of our members. And it is the U.S. Virgin Islands. So, we're very comfortable that we'll do substantive things in really a beautiful place.

WOODRUFF: Well, I mentioned your agenda mentions the tour of a rum distillery. It mentions golf, a farewell dinner with casual dress, and so forth. How much work are you all getting done?

SHERRER: Well, there's plenty of work.

Most of those events -- the tour is part of just kind of an introduction to the industries and some of the things that go on in the Virgin Islands, who are really, because of 9/11, struggling because of the tourism. But almost all the other events are evening events. During the day, we're fully engaged in all of our meetings and a lot of meetings with just lieutenant governors. There are a number of issues that we could really help each other out on.

We're kind of leading on a home-safe program to put gun locks into homes. And we've committed to get a million of them out. And a number of us have started. And so we'll be talking about how the rest can join in and help out. So, we'll have a lot of time on some, what I think are pretty substantive issues.

WOODRUFF: I hear you. At the same time, we know that most states around the country right now are facing budget crunches. They're looking at cutting programs. They're possibly looking at new taxes. At a time like this, do you think it sends a good signal for you all to be in a resort? SHERRER: Well, it says that we keep our commitments. I mean, the Virgin Islands have had enough problems after 9/11. Their economy is suffering terrifically because of lack of tourism.

And so we, as elected officials, made a commitment to them. They spent a lot of time and energy and effort and some local money preparing for it. And it may have been nice symbolism for us to turn our back on them, but we didn't think it made much sense. And the reality is, I am going to be in D.C. in a couple of weeks and it's going to cost -- my airfare and my hotel will cost a great deal more than what my airfare and hotel here came.

So, I think thoughtful people will understand that we're simply keeping a commitment we made over a year ago to some people who have invested a lot of time and money in it. And it is a small way to say to the U.S. Virgin Islands that, "You are part of the U.S. and we're going to support you." And I think each lieutenant governor made the decision on their own whether they were keeping faith with their own constituencies or not.

And I'm come very comfortable with what I have done. And I think most of my colleagues who will be here are also. Admittedly, there are some who aren't here who maybe didn't want to be the subject of this discussion. But we each have to make our own decisions of what we think is right.

WOODRUFF: All right, Gary Sherrer, we thank you for talking with us and answering our questions.

He is the lieutenant governor of Kansas. And he is chairman of the Lieutenant Governors Conference under way right now in St. Croix.

This programming note: Tonight, Connie Chung sits down with the great tenor Luciano Pavarotti. For the first time, Pavarotti tells the world whether he will retire and when. "CONNIE CHUNG TONIGHT" begins at 8:00 p.m. Eastern right here on CNN.

And there's much more INSIDE POLITICS ahead, but first let's go to Wolf in Jerusalem for a look at what's coming up on "WOLF BLITZER REPORTS" -- hi, Wolf.

WOLF BLITZER, "WOLF BLITZER REPORTS": Thank you very much, Judy.

There's been some intense reaction to President Bush's call for the Palestinians to change their leadership. We'll have all those details coming up. Also, President Bush is on the front lines in that massive, monster fire in Arizona. We'll tell you what he had to say and what he's doing to help. And will Martha Stewart's Wall Street transactions land her in legal trouble? She spoke out about it today. We'll speak to a congressman who wants to investigate her.

All that coming up right after INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: We lied. We have no more. That's it for INSIDE POLITICS today. "WOLF BLITZER REPORTS" is next. Thanks for joining us.

I'm Judy Woodruff.

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