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President Paying Political Price for Handling of Economic Problems; HHS Secretary Discusses International AIDS Conference

Aired July 12, 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. We have new evidence that President Bush may be starting to pay a political price for the way he has responded to the nation's economic problems. Our poll shows 54 percent of Americans say Mr. Bush is doing a good job in his handling of the economy. That's down from 62 percent in April.

When asked how much Mr. Bush's plan to crack down on corporate criminals will restore investor confidence, 6 percent said a great deal, 40 percent said somewhat, 27 percent, not very much. And 10 percent said the president's policies would not restore investor confidence at all.

Let's bring in our White House correspondent, Kelly Wallace. Kelly, what are they saying there about these poll numbers?

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Judy, the president's aides like to say that George W. Bush is not driven by polls, but his advisers are certainly looking at the numbers. And they seem to be downplaying them a bit.

They are saying the majority of the American people still support the president when it comes to his handling of the economy. And they look at that second poll and they say that the American people are saying they don't believe the federal government can single-handedly turn the economy and the markets around.

Still though, White House aides definitely want to make sure that a majority of the American people still back what the president is doing on the economy. So we will see him talk about that next week when he travels to Alabama.

Today, the president was going about his normal business, talking with some kids, some disabled children, at a camp not too far from the presidential retreat at Camp David, Maryland. So there the president enjoying a few light moments where, Judy, his aides here were fielding some questions and were a bit defensive about the fact that the president spoke on Wall Street on Tuesday and that the markets continued to tumble.

Their message: no one should expect one speech again to turn the markets around. That all depends on the fundamentals of the American economy -- something the president will continue to work on and work with Congress about -- Judy.

WOODRUFF: Well, Kelly, we know the president also today had his first meeting with the so-called corporate fraud task force that he's created. Now, are they preparing for more bad news in the coming days?

WALLACE: Well, the corporate fraud task force, part of that was a symbolic meeting. Having the meeting today at the Justice Department and then coming over here to meet with President Bush to, again, show what this administration is doing to stop corporate abuse. The goal of this new task force is to go after any corporate criminals and make sure that those engaging in wrongdoing pay a price and even possibly go to jail.

At the same time, though, Judy, the White House dealing with some potentially bleak economic numbers. The new projected federal budget deficit from this White House this year expected to be $165 billion. That is up from a projection of $100 billion earlier the year. The White House blaming the war on terror, homeland security and also a fall-off of revenues from capital gains due to the stock market.

Democrats, though, Judy, are blaming the president's tax cut and are also accusing the White House of engaging in rosy projections -- cooking the books -- not unlike other corporations have been accused of doing -- Judy.

WOODRUFF: All right, Kelly Wallace reporting for us from the White House.

Well, our Bill Schneider has more on the president on economic politics and our new poll -- Bill.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, Judy, our new CNN-"TIME" poll found that the scandals are having an effect on people's confidence in the nation's economy. A year ago, when the country was in recession, only 30 percent felt the economy would get better in the next 12 months.

By March of this year, most Americans did think the economy would improve. And now the optimism is gone. We're right back where we were a year ago. Only 30 percent expect the economy to get better. This poll points to a big danger: that the stock market could drag the economy down.

WOODRUFF: And what is the public saying about the president's speech on Wall Street Tuesday?

SCHNEIDER: That it didn't go far enough. By nearly 2 to 1, the public says the policy changes recommended by President Bush do not go far enough to ensure that corporate executives behave responsibly. The poll finds solid majorities of 70 percent or more in favor of some restrictions that are being considered by Congress, like barring executives from getting personal loans from the companies they work for, and barring executives from selling company stock while they're still on the job. WOODRUFF: Well, if that's the president's situation, Bill, what about the Democrats? Are they getting any political traction out of this?

SCHNEIDER: Well, not exactly. We asked people whether they trusted President Bush or the Democrats in Congress more to deal with the problem. And the result, you can see, nearly a tie. People don't want to make this partisan. They want the president and the Democrats to work together.

Democrats are not likely to get very far by trying to blame President Bush. We asked, who do you think is more responsible for the business scandals, George W. Bush because of his close ties to big business, or Bill Clinton because of his moral failings and the climate he set while he was in office? The answer: Forty percent blame Clinton; just 33 percent blame Bush. Message to Democrats: don't play the blame game.

WOODRUFF: Bill Schneider, thanks.

Well, Democrats have been trying to draw political connections between corporate scandals and the Republicans, as we've noted. And now they have a variation on the theme, pegged to the plunge in the stock market. As our Jonathan Karl explains, it's enough to make some politicians want their mommies.

(BEGIN VIDEOTAPE)

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: You know it's the political high season when politicians start dragging their mothers into the debate. First, Democrat Dick Gephardt.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: My mother is 94 years old. She's doing great and she tells me every time I see her, I could not be here without Social Security and Medicare.

KARL: Not to be outdone, Republican Trent Lott.

SEN. TRENT LOTT (R-MS), MINORITY LEADER: I have a mother, who doesn't want me to say how old she is, but she's getting up there in years. And she does depend on Social Security and it makes her nervous when this talk begins.

KARL: Believe it or not, all this talk about dear old mom is really about the politics of corporate accounting scandals. Democrats, previewing a theme for the fall campaign, use the scandals and the stock market tumble they have helped cause to attack Republican plans for Social Security.

REP. ROBERT MATSUI (D), CALIFORNIA: It's obvious that the Republicans have a secret plan to privatize Social Security.

KARL: Republicans say they have no such plan, just a proposal to allow younger workers to invest some Social Security money in the market. And even that plan is going nowhere. LOTT: The Democrats just scare old people and have nothing to suggest. We're not going to act in this area this year. They know it, we know it. And hopefully, the senior citizens know it.

GEPHARDT: I understand what they say, but the truth is, what they do scares seniors. Not what we say. We're trying to describe to the public what they're trying to do. And you bet it scares seniors. It should scare all of us.

(END VIDEOTAPE)

KARL: This is the kind of rhetoric we usually see in the heat of the fall campaign, oh, say, about October or so. Judy, it's a sign of just how intense the battle will be this year for the midterm elections, with so much at stake here in Congress, that the fall campaign appears to be starting in July -- Judy.

WOODRUFF: So that heat we're feeling is not just the summer weather. All right. Thanks a lot, Jon Karl.

Well, is it a tidal wave or just a ripple? No one knows how the corporate crime wave will play by this fall. But it's clearly having an early impact. We're tracking that wave which today hit California. "The Wall Street Journal" reports that the IRS has named Republican gubernatorial candidate Bill Simon as one of several business people who avoided paying taxes by sheltering their money in suspect accounts.

Simon's name came up in an IRS lawsuit against the accounting firm KPMG, which helps clients find tax shelters. Simon's brother, who runs the family business, acknowledged using KPMG. But he said -- quote -- "the matter at hand is between the IRS and KPMG."

Democratic Governor Gray Davis' campaign said -- quote -- "Now we know why Bill Simon is refusing to release his income tax returns. It also explains why Simon gets grouchy whenever anyone asks him if he's paid his fair share of taxes," end quote.

One more Democrat trying to whip up the wave, Minnesota Senator Paul Wellstone is hoping that President Bush's corporate issues will rub off on his GOP opponent, Norm Coleman. Bush held a fund raiser for Coleman yesterday. Wellstone said the Senate race may now boil down to a central question: who will Minnesota trust to be a watchdog for investors and consumers?

Question: how does it feel to be booed in front of a global audience? I'll ask Health Secretary Tommy Thompson about the protests he faced at the International AIDS conference, and claims that the U.S. is neglecting people with HIV.

Also ahead...

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: I'm Kate Snow on Capitol Hill with a story of an attempted political payoff that almost had the greens seeing green. JEFF GREENFIELD, CNN SR. ANALYST: I'm Jeff Greenfield in New York. If there really has been a resurgence of patriotism and civic connection after September 11th, how come the voting booths are still so empty?

SCHNEIDER: I'm Bill Schneider in Washington. Stick around and we'll play pin the tail on the political play of the week.

(COMMERCIAL BREAK)

WOODRUFF: Fifteen-thousand scientists and activists today wrapped up the world conference on AIDS. The meetings in Barcelona included both dire warnings as well as stories of hope, and calls for action by two former world leaders. We get more now from CNN medical correspondent, Dr. Sanjay Gupta.

(BEGIN VIDEOTAPE)

SANJAY GUPTA, CNN MEDICAL CORRESPONDENT (voice-over): Two former presidents, one whose country has more people infected with HIV than anywhere else in the world, with very few on treatment.

NELSON MANDELA, FMR. SOUTH AFRICAN PRES.: AIDS is killing more people than were killed by all the past wars in history and natural disasters put together. AIDS is a war against humanity.

GUPTA: And the other, whose country was able to turn its AIDS problem around with the help of expensive medicines.

BILL CLINTON, FMR. PRESIDENT OF THE UNITED STATES: The world is being consumed by a disease that is preventable, with drugs that turn a death sentence into a chronic illness and prevent mother-to-child transmission, with example after example of nations that have reversed the infection. How could we explain that to someone who had not lived through it?

GUPTA: At the closing ceremony for the international AIDS conference in Barcelona, they both brought one message to world leaders.

MANDELA: Is it acceptable that these dying parents have no hope of access to treatment? The simple answer is no.

GUPTA: In the United States and Western Europe, half a million people are receiving HIV treatment. Last year, 25,000 died from AIDS. Compare that now to Africa, where 30,000 are receiving treatment. And last year there were 2.2 million deaths.

Getting those life-saving medicines for prevention and treatment, as well as addressing the health care needs of developing countries, will take $10 billion every year, according to the United Nations. The current debate: who pays? Clinton says the burden is on the wealthy.

CLINTON: It means developing plans for care and prevention based on what is working in other countries. And then, when that is done, developing countries have to determine how much they can pay, and send the rest of us the bill for the difference.

GUPTA: In the post-9/11 world, another great concern of President Clinton is, as AIDS kills off the working populations of developing countries, it could create global security issues.

CLINTON: A hundred-million AIDS cases means more terror, more mercenaries, more war, destruction, and the failure of fragile democracies.

GUPTA: The messages have been heard before. The question is, will governments rise to the challenge? If not, the U.N. estimates 70 million people will die of AIDS in the next 20 years. And it will take entire economies and societies with it. Dr. Sanjay Gupta, CNN, Barcelona, Spain.

(END VIDEOTAPE)

WOODRUFF: And with me now to talk more about the U.S. role in the fight against AIDS is health and human services secretary, Tommy Thompson.

Mr. Secretary, it was now you personally, but it was your message that they were booing when you spoke at this AIDS conference this week. How did that feel?

TOMMY THOMPSON, HHS SECRETARY: I don't think it was my message or me personally. I think it was the fact that they were anti- American, and that they wanted to make sure that they created a spectacle. And so many of those individuals, after the event, came up and apologized. And said, you know, we had to create a disruption for disruption's sake alone.

And to me that was sad, because they did not wait to hear my message. And my message was very positive, because the president and myself feel very strongly about this fight. And we're doing a lot more than any other country in the world.

In fact, 44 percent of all the money in the world that's being spent on international AIDS comes from the United States of America, Judy. And a lot of that is because of the leadership of President Bush.

WOODRUFF: Well, as you know, they're asking for the U.S. to do more. Right now the U.S. is talking about $500 million over a couple of years. They point out, though, that that is 5/1,000 of a percent of the U.S. gross domestic product, whereas a small European country like Italy, giving 200 million, that's 2/10 of 1 percent. In other words, the U.S. proportionately is not giving as much as it could give.

THOMPSON: That's not true, Judy, because you're only taking one portion. When you take a look at the total amount of money, we're going up from $14 billion in fiscal year 2002 to $16 billion, a $2 billion...

WOODRUFF: Over what period of time? THOMPSON: One year. Two billion for fiscal year 2002 to fiscal year 2003. And on top of the $500 million that we put in the global fund, we're adding another $500 million on a direct fund to stop the mother-to-child transmission of HIV through the use of breast milk. And this is a whole new program. And that, as Kofi Annan has indicated, should be added to our totals.

So you're only looking at one figure. You know, I sort of was amazed that former President Clinton had the audacity to say what he said. Because when he was in office the last year, he spent over $728 million on international AIDS fight. This year alone, 18 months later, Bush has doubled that to $1,300,000,000.

And we were the only country that's been -- the only country that's put in a second installment on AIDS. Why? Because we have to. America has to lead this fight and we are leading this fight. And we should get more credit for what we are doing.

WOODRUFF: Let me quickly ask you about, you mentioned President Clinton. He acknowledged that he should have done more. He also said that the U.S. should up its contribution to $2.5 billion. I'm going to quote what he said. He said, "If we don't, we will be spending far more than that to clean up this mess."

THOMPSON: Well, we are also doing the $500 million over and above the global fund, Judy. In 12 countries in Africa and two countries in the Caribbean, to stem the mother-to-child transmission. This is where we really are putting our emphasis at the Department of Health and Human Services.

In those countries, we can prevent up to 40 percent of those children, that are going to come into this world, by being infected from HIV-AIDS if our program works. It's direct, it's accountable and it's deliverable. And that's what the president wants. That's what I want. And that's what we're going to do.

WOODRUFF: Bipartisan bill comes out of the Senate today, the Carrie Frist bill, that would increase AIDS funding to more than 4 billion over the next two years. Is the administration going to go along with that?

THOMPSON: If it gets to the president's desk, we'll have to see. But I'm fairly confident that when you look at...

(CROSSTALK)

WOODRUFF: This is more than what the administration is saying now.

THOMPSON: The president has also said that, as long as we're showing results, as long as it's accountable, we will be putting more money into it. The president has led in this effort. And the Department has led in this effort. and we are showing the world. It would be nice...

WOODRUFF: Well, how do you explain the anger that these -- I know you said that they did it to make a point. But how do you explain the anger and constant criticism of the U.S.?

THOMPSON: They also tore down several booths of the pharmaceutical companies. Several booths of the Department of State. You know, they were on a rampage to disrupt and destroy. And they did not want to hear the message.

After I got done and after they had demonstrated against me, they came up to me and apologized. Several of them did. Several wanted to meet with me and said, you know, we really like your passion. We like your program, the mother-to-children transmission.

In fact, we had 12 health ministers meet with me the night before my speech in Barcelona, thanking me, thanking America, thanking the president for our program. They said, this is the first program that's really going to show results in Africa and in the Caribbean. And so we're doing a lot and I only wish we could get partial credit for all that we're doing.

We're going to continue to do more. The president says as long as the programs work, we will put more money into it in the future. And that's what we're going to do.

WOODRUFF: I hope this audience is hearing you right now.

THOMPSON: I know it.

WOODRUFF: Secretary Tommy Thompson, maybe with a little jet lag, we really appreciate you showing up...

THOMPSON: Thank you.

WOODRUFF: ... right after coming back. Thanks so much.

THOMPSON: Thank you.

WOODRUFF: Good to see you.

And to this story now. The president, the polls and the economy. We size up the political impact ahead, in our "Taking Issue" segment.

Also, more fallout from that California arrest caught on tape. Protesters are demanding justice, next in the "Newscycle."

(COMMERCIAL BREAK)

WOODRUFF: Among the stories in our "Newscycle," the White House today estimated the nation's budget deficit will reach $165 billion this fiscal year. That's a $59 billion increase from estimates released back in February.

A federal appeals court panel today overturned a lower court ruling that an American-born man suspected of fighting with the Taliban should have access to lawyers. The panel ruled the lower court did not adequately consider the government argument that Yasser Hamdi is an enemy combatant. In California, protesters rallied outside Inglewood police headquarters. The demonstrators called for the firing of officers involved in last week's controversial videotaped arrest of a teenager. The teen and his father have filed civil rights lawsuits. One officer, seen punching the teen, is on paid leave.

With us now, former Gore campaign manager, Donna Brazile, and Ramesh Ponnuru of "The National Review." Well, a lot of what we're talking about this week clearly is corporate accountability, corporate responsibility. The president made that speech on Tuesday. But as we've been talking about during this show, we've done a poll this week.

Americans are not sure that the president is doing enough right now. Let me just quickly cite to you. When you ask if the president's policies are going to restore investor confidence, 6 percent say a great deal, 40 percent somewhat, 27 not very much, 10 not at all.

Ramesh, should the president be concerned he didn't get out front soon enough on this?

RAMESH PONNURU, "NATIONAL REVIEW": Well, I think that if the White House was replaying this tape, they probably would have gotten involved a little earlier. And there is a sense that the issue has sort of gotten away from them.

But in this climate. I'm not sure what, you know, anything anybody does isn't enough. Now John McCain is saying Paul Sarbanes isn't going far enough. There seems to be a real race where people have to prove they're really tough on corporations.

DONNA BRAZILE, FMR. GORE CAMPAIGN MANAGER: Well, I believe that the late-life conversion that the president is now experiencing, as well as his campaign-style rhetoric, will not calm the markets, will not restore investors' confidence.

It's time that he embraced the Sarbanes bill. It has broad bipartisan support now. Doesn't go as far as John McCain's proposal, but the business roundtable likes it. I also think that he needs to take a bold stance on Harvey Pitt. And perhaps the last thing he needs to do is to come clean on Harken and Halliburton. And maybe that will restore some confidence.

WOODRUFF: Speaking of Harken, there was another part of this poll. You asked people, would you describe the president's sale of stock when he was on the board of direct stores of this oil company in the late '80s as proper? Twenty-three percent said proper, 43 percent improper but not illegal, 15 percent illegal.

Ramesh, can the president get this behind him? Does it hurt his credibility?

PONNURU: I think that this is not going to be a story that lasts longer than one or two weeks. Although, of course, you could make the argument that this is a story so far that's lasted ten years, since it's come out a couple times in a couple of cycles.

BRAZILE: Well, the story won't go away as long as new questions keep arising, as well as the White House keeps putting out different stories. I mean, first they said he lost the papers. The clerk lost it and blamed it on the bureaucrats. Now they're blaming it on lawyers. Next week we'll learn that the dog really ate it.

WOODRUFF: And also, at the same time, when you ask people whether they think President Bush is more responsible for these corporate misdeeds or President Clinton, because he was president at a time when the economy was roaring. Thirty-three percent say President Bush, 40 percent say Bill Clinton.

So, I mean, Donna, what are we to think? Nobody escapes blame, here.

BRAZILE: Absolutely not. The books might have -- they probably started cooking the books back in the '90s. But when the two ships came into the White House -- that's two corporate CEOs -- I think that's when the pot started boiling. And now the investors are concerned about it.

PONNURU: But, of course, a lot of the fraud that we're talking about here is stuff that happened in the '90s. And I think the question shouldn't be, "Which president is to blame?" because it is just not the case that presidents cause these things to happen or can cause them not to happen. The question is what we should do now.

BRAZILE: I agree.

WOODRUFF: All right. We don't want too much agreement here. We're going to cut this off right now.

BRAZILE: It's Friday. We can agree on Friday.

WOODRUFF: Great to see you both.

BRAZILE: Thank you.

WOODRUFF: Donna Brazile, Ramesh Ponnuru, have a good weekend.

BRAZILE: Same to you.

WOODRUFF: Thanks.

And we will get a reality check next on a Senate race that D.C. pundits see one way, but, as our Candy Crowley will explain, local voters are more interested in talking about the weather.

(COMMERCIAL BREAK)

WOODRUFF: New Mexico has one of the strongest branches of the Green Party in the United States. There have been a number of races there in which Green candidates were seen as spoilers, drawing votes more often than not from Democrats, which helps explain the story of a proposed political payoff. Here is our congressional correspondent Kate Snow -- Kate.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Well, Judy, New Mexico's Republican chairman approached the co-chair of the Green Party out there and said he could offer him six figures if the Greens would just run congressional candidates in two congressional districts.

One is the 1st District of New Mexico. That's Heather Wilson's seat. She now is in that position. Democrat Richard Romero is running against her. When Wilson ran in 1998, a Green candidate took 10 percent of the vote. The other district, New Mexico's 2nd District, is an open seat. The Green's co-chair says they had been thinking about getting into that race anyhow.

Republican Chairman John Dendahl in New Mexico says a Republican operative here in Washington approached him about this, offered up what he says was more than $100,000, what the Greens remember as being $250,000. Dendahl says that person thought that it would make a difference in keeping Republican control of the House, although he says he personally disagreed the plan would work.

Here's what Dendahl said to me: "I wouldn't have walked across the street to recruit a Green candidate. I wouldn't have even done that. But I'm not the be-all and end-all of political knowledge. And when somebody in Washington says to me, 'We want to give a bundle of money to the Greens,' I'll deliver the message."

Now, the Green Party co-chairman told me that he did briefly consider taking this money. They thought they could use it to build up their party's strength, particularly in Southern New Mexico. But he was overruled last weekend by his party at their statewide convention.

They released this statement saying: "The Green Party will not be used as a support group for the Democratic Party nor as a battering ram for the Republican Party. We disavow and condemn any attempts to manipulate or use New Mexico voters as pawns in the game of politics as usual."

Judy, the Green Party, of course, is loving all the attention that they're getting over this. Chairman Dendahl, the Republican, told me that he thinks they're -- quote -- "preening" about how principled they are and how clean they are -- the Democrats, meantime, Judy, calling for Dendahl's resignation in New Mexico. The Democratic chairman out there tells me that he thinks that this whole thing, this whole story, is giving both major parties a black eye -- Judy.

WOODRUFF: Kate, just quickly, who is it who was behind all of this on the Republican side?

SNOW: Well, he doesn't name exactly who it was. Chairman Dendahl says, had the money gone through, had the deal gone through, then certainly it would have been public record, this donation. But since it didn't actually happen, he's not going to release the name. He says only that is a Republican operative based here in Washington representing many other people, an "interest group" is the word he put to me, that would give this money, as he said, more than $100,000, to the Greens.

WOODRUFF: Somebody will be doing some reporting on that.

All right, Kate Snow, thanks.

Well, when you get outside the Washington Beltway and out into, for instance, the parched Plains, the hot sun can affect the way you think about politics, which brings us to the South Dakota Senate race and our senior political correspondent, Candy Crowley.

(BEGIN VIDEOTAPE)

REP. JOHN THUNE (R), SOUTH DAKOTA: I'm running for the United States Senate. I'm in Congress right now. I'm John Thune.

UNIDENTIFIED FEMALE: You're in Congress right now?

THUNE: Yes, ma'am.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT (voice-over): Republican Congressman John Thune was personally courted by President Bush to run for the Senate.

SEN. TIM JOHNSON (D), SOUTH DAKOTA: Hi, I am Tim Johnson. How you doing? Good to see you. I like the hat. I like the hat.

CROWLEY: He faces incumbent Tim Johnson in South Dakota, home state of the country's top Democrat.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: Let me turn the microphone now over to the junior senator, I'll emphasize. I like to say junior senator.

CROWLEY: Johnson and Thune have both won statewide elections for different offices in the same year.

UNIDENTIFIED MALE: That is just the way the state is. They vote for the person, not the party maybe.

CROWLEY: They call it prairie populism, political code for "hard to figure." The state elected George Bush by 60 percent, Tom Daschle by 62.

UNIDENTIFIED MALE: I don't vote for no party. I vote for the man. And that is it.

CROWLEY: Inside the Beltway, this looks like a real Western showdown, mano a mano: Bush vs. Daschle, to which South Dakotans reply, "Huh?"

UNIDENTIFIED MALE: We are so far from Washington, it doesn't matter.

CROWLEY: Here, where they trust the land more than they trust the government the Black Hills, laden with fallen, dried timber, crackle with fire. And across thousands of rolling acres, much of the green is where water used to be. What water there is, is often rancid. The land has turned hard with drought.

So, when South Dakota's one and only congressman comes to call, the conversation is not about George Bush.

THUNE: Much of the wheat crop has been a bust. And the row crops are looking pretty struggling. There's not much hay out there this year. And so it has been tough. And we know that.

CROWLEY: And when both South Dakota senators show up for a meeting, ranchers don't much care who controls the Senate. They want to know how they will feed their herds.

JOHNSON: But this is literally life and death for a lot of producers across South Dakota. We just came from Fort Pierre. This is a grim situation.

CROWLEY: Water and fire have begun to permeate the politics of the South Dakota Senate race.

JOHNSON: You didn't have a foot to spare up there.

UNIDENTIFIED MALE: No, we were...

CROWLEY: As the Black Hills burned and tourists fled the historic town of Deadwood, Thune went up with an ad.

(BEGIN VIDEO CLIP, THUNE CAMPAIGN AD)

ANNOUNCER: Tim Johnson fighting Thune's plan to clear dead timber; Johnson siding with extreme environmental groups.

(END VIDEO CLIP)

CROWLEY: And as creek beds turned to mud and ranchers began to sell off their herds in 'round-the-clock auctions, Johnson decided to call a bluff.

JOHNSON: Well, obviously, a lot of John's campaign is premised on his influence with the White House and how he can help in that way. So far, the White House has threatened a veto on drought relief. I hope that John has some influence on the White House and can bring them around on this issue.

CROWLEY: No, they don't talk much about Bush vs. Daschle here.

(on camera): What do you think will settle your mind on this race, what issue? Because the drought is clearly over.

(LAUGHTER)

UNIDENTIFIED MALE: That is a great one. Thank you.

CROWLEY: What do you think will decide it for you? UNIDENTIFIED MALE: I don't know. I really haven't given it very much thought, to be honest with you.

CROWLEY (voice-over): Here, they talk about them vs. Mother Nature.

UNIDENTIFIED MALE: We thank you for the little rain that we are getting in the hope that some more rain will come, Lord.

CROWLEY: Candy Crowley, CNN, Huron, South Dakota.

(END VIDEOTAPE)

WOODRUFF: Checking the headlines now in our "Campaign News Daily": In Massachusetts, former DNC Chairman Steve Grossman quoted singer Kenny Rogers today, as he announced he is dropping out of the race for governor. Grossman received campaign help from former President Clinton, but he struggled for support with five Democrats vying to face Mitt Romney. In Grossman's words -- quote -- "You have got to know when to fold them."

Al Gore plans attend the Firestone 200 later this month at the Nashville Superspeedway. Gore will join race for the Indy car race after campaigning in Tennessee's 4th district with congressional candidate Lincoln Davis. An aide tells CNN some people blame two factors for Gore losing Tennessee in 2000: his stance on guns and the fact that he never attended any automobile races.

Patriotism has been very much in since September 11. But up next: Are Americans who have embraced the stars and stripes flagging in their civic duty?

(COMMERCIAL BREAK)

WOODRUFF: The attacks last September 11 have had a large effect on many of our lives.

But in today's "Bite of the Apple," Jeff Greenfield says that is not true in one very important area of public life.

(BEGIN VIDEOTAPE)

JEFF GREENFIELD, CNN SR. ANALYST (voice-over): Think back to that morning 10 months ago when Lower Manhattan was enveloped in a cloud of smoke and dust and death.

(on camera): Remember all the talk about a renewed sense of civic engagement, an end to the idea that public life no longer mattered? Well, some of that spirit is still with us, but there is one area in which our public life really hasn't changed much at all: in the empty voting booth.

(voice-over): The trappings of love of country are everywhere. Sales of American flags are way up. Last week's birthday celebrations for America, the first since the attacks of last September, carried with them something extra. But when it comes to the simplest concrete expression civic engagement, the vote, the trend this year continues downward. According to the Committee for the Study of the American Electorate, America may well set a record this year: an all-time low for midterm primary elections.

In fact, of the 16 states which have held statewide primaries in both major parties, nine of them -- Alabama, Arkansas, California, Iowa, Montana, Nebraska, New Mexico, Ohio, and West Virginia -- had record-low turnouts. In the nation's most populous state, California, even a spirited, well-financed, strongly contested Republican primary for governor didn't change the picture. Turnout set an all-time low.

The picture is even more dramatic over time. Turnout this year is barely half of what it was back in 1966, when primary voting hit an all-time high. It is true for Democrats and Republicans, for every level of education and income, for every age group except the elderly.

(on camera): So, what's going on here? Well, for one thing, terrorism is not really a political or partisan issue. The country is essentially united.

For another, terrorism is not something that, say, a congressman or senator or governor can do very much about. It is not an issue that drives people to the polls like, say, taxes or abortion. And, since Americans haven't really been asked to do anything specific, except to go on about our lives, maybe it is not surprising that Americans are still doing what we have been doing more and more of: staying away from the polls.

Jeff Greenfield, CNN, New York.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

WOODRUFF: We're talking with the House majority leader, Dick Armey.

Thank you for talking with us.

REP. DICK ARMEY (R-TX), MAJORITY LEADER: Well, Judy, it is a pleasure.

WOODRUFF: You are the chairman of a very important committee. It's a special panel put together to pull all these agencies together to make this Homeland Security Department a reality. But right now, a number of Republican-run House committees have defied the president. You've got them saying: We don't want FEMA, we don't want the Coast Guard, we don't want the Immigration and Naturalization Service, among others, to go into this department."

What are you going to do? ARMEY: Well, actually, we have done very well in terms of the president's model. And the committees, by the way, are doing almost what we predicted.

But we've got, from our various committee marks, just about all the elements we need to put together. The focus is on protecting American security. And that will be the focus that guides the select committee as we look at the -- for example, the Governmental Operations Committee did move FEMA and did move the Coast Guard. We can take these pieces and put them together. We will have a good bill that accomplishes the president's objectives.

WOODRUFF: But a number of these committee chairs, who are your colleagues -- they're Republicans -- they are saying this undermines the fundamental mission of agencies like INS and FEMA, and, frankly, these agencies are going to get lost in this huge department that is dedicated to fighting terrorism.

ARMEY: Well, it is a natural concern and, quite frankly, a laudable concern for our chairmen. And those people that are concerned with what, historically, the Coast Guard has done in the lives of so many people in America should have that concern. And we do want to preserve everything they do, from maintaining navigational guides to sea rescue, but, in addition to that, to make this focused on keeping America safer from terrorism.

WOODRUFF: So, are you going to override your Republican colleagues as committee chairman? What are you going to do?

ARMEY: No, we wouldn't override anybody. We want to appreciate their good works and put it all together in a mark that makes all the pieces fit in a manner that works for all the American people.

WOODRUFF: Are the committees going to prevail or is your broader vision going to prevail?

ARMEY: No, I think our vision, that is shared by the committees in general. Keep America safe by having one agency that effectively uses all these resources and keeps them focused on the security of this nation. It will come to the floor and it will receive widespread support across the Congress on both sides of the aisle. With respect to all committee jurisdictions, they're going to vote for the larger American objective.

WOODRUFF: So, some of these chairmen will lose, is what you're saying?

ARMEY: Well, you know, that's the nature of the process. I won't get everything the way I want it. And Ms. Pelosi won't get everything the way she wants it. The president won't get everything the way he wants it.

WOODRUFF: Corporate responsibility: Your good friend, Speaker Dennis Hastert, has now gone on board, come on board with a number of Democrats to endorse some tough penalties against people guilty of corporate wrongdoing: a bill in the Senate that would call for new criminal sanctions, among other things.

Are the Republicans, frankly, in the Congress getting way out in front of the president in terms of how to deal with these corporate wrongdoers?

ARMEY: No, I don't think so.

I thought the president's speech was very strong. We are all very angry and disappointed in these corporate wrongdoers. We want tough penalties. The House acted on this three months ago on the 24th of April to have even stronger penalties, something we can work with. But we have got to take now the House product that has been sitting there for three months, waiting upon the Senate, work the two out as quickly as possible, and get tough with these guys, and say America won't tolerate this.

WOODRUFF: But the president's proposals now appear more modest than what even Speaker Hastert is endorsing that's coming out of the Senate. How do you reconcile this?

ARMEY: I don't think the president's proposals, in so far as he's talking about tough restrictions and penalties and sanctions against wrongdoers, I don't think that is understated relative to the Congress.

Where the president has used more reserve and caution is in terms of extending the management of the government into the affairs of commerce. I think he has been correct in that restraint, saying: Set up a set of rules. And then, if you don't play by the rules, we'll stick it to you hard.

WOODRUFF: Do you agree with the speaker on this particular Senate language on criminal sanctions and expanded prison terms?

ARMEY: I'm fine with that.

What I want to be careful, though, is that we rush headlong into a situation where government thinks they can set managerial principles and standards for corporate enterprise. I think that's going too far. When the standards are there, when the principles are there, people invest on the basis of, "This is our understanding of what the rules of the game are," then they must be held to compliance with those rules.

WOODRUFF: All right, House Majority Leader Dick Armey, the chairman of the special panel on homeland security, thanks so much for talking to us.

ARMEY: Thank you, Judy.

(END VIDEOTAPE)

WOODRUFF: And Bill Schneider will bring out the animal in the "Political Play of the Week." That's next.

(COMMERCIAL BREAK) WOODRUFF: Bill Schneider is back with his own version of beauty and the beast -- Bill.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, you know, this week, a federal design panel released an $800 million plan to beautify the security barriers that have taken over Washington, D.C., since September 11; replace them with fountains and planters and low stone walls that match the monuments in the capital.

Good idea, but too late for this week's "Political Play of the Week."

(BEGIN VIDEOTAPE)

(voice-over): Who needs to spend $800 million? The city's Commission on the Arts and Humanities has already brightened the nation's capital for $500,000. How? By commissioning 200 decorated party animals.

BYRON BLOCH, ARTIST: We wanted it to be whimsical, but honor the tradition of Washington, D.C., our nation's capital.

SCHNEIDER: Ever see a donkey in a tutu? How about an elephant bride? Talk about patriotism. We've got Uncle Sam and Captain America. The figures are just in town for a while as tourists, although some have joined the media circus. People love them.

BLOCH: We've become so attached to our donkey and elephant that we have given them nicknames. So, the donkey is -- this is Stars and then this is Stripes. And we hope they will always be here together in D.C.: Stars and Stripes forever.

SCHNEIDER: But one keen observer noticed something strange.

CAROL KEEFER, D.C. RESIDENT: I was driving by this very one and I said to my son, "Why is there a decorated mule on K Street?" But I was quickly told that it was actually a donkey, and there were elephants and donkeys. So then I thought, "Well, that's odd." So I looked at lots of so-called donkeys and every single of one them has a mule's tails.

SCHNEIDER: There's a big difference, as anyone who has ever played pin the tail on the donkey would know.

KEEFER: Well, a donkey has a cow's tail, which is sort of skin and fur and a fluffy bit at the bottom. And a mule has a horse's tail.

SCHNEIDER: Take a look for yourself: donkey's tail, mule's tail. You think someone was making a political statement?

KEEFER: I am hoping what they are not trying to say is that the Democratic Party are impotent, as mules are sterile.

SCHNEIDER: Actually, it was an artistic statement. The city says the mule's tail provided a smoother canvas for the artists: art over politics. The party animals beat the Federal Planning Commission to the punch at a fraction of the cost.

Party on, guys. You've won the "Political Play of the Week."

(END VIDEOTAPE)

SCHNEIDER: Washington is full of political jackasses, but these are the only ones that have ever amused and beautified the city.

(LAUGHTER)

WOODRUFF: I can't even talk.

SCHNEIDER: Do you know "The Donkey Serenade"?

(LAUGHTER)

WOODRUFF: The Democrats are going to want equal time here.

SCHNEIDER: Right.

(LAUGHTER)

WOODRUFF: That's it for INSIDE POLITICS. "WOLF BLITZER REPORTS" is next. I'm Judy Woodruff.

(LAUGHTER)

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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