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CNN INSIDE POLITICS

Pitt's Request for Cabinet Level Status SEC Outrages Congress

Aired July 24, 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: Hi, I'm Judy Woodruff in Washington. SEC Chairman Harvey Pitt lands in more hot water, prompting renewed calls for Pitt to resign.

SUZANNE MALVEAUX, CNN CORRESPONDENT: I'm Suzanne Malveaux at the White House. And despite the latest flap over Harvey Pitt, I will tell you why the administration actually says it's a good day for the SEC.

BROOKS JACKSON, CNN CORRESPONDENT: I'm Brooks Jackson in Washington. I'll show you attack ads that accused governors of two of our largest states of selling favors and access for special interest money. If those ads are false, I'll zap them.

BILL SCHNEIDER, CNN CORRESPONDENT: I'm Bill Schneider. Why is "Playboy" magazine's Miss July here on Capitol Hill? It's not what it looks like. I'm here to investigate.

WOODRUFF: Thank you for joining us. Members of the House and Senate today reached a deal on legislation to fight corporate fraud. But word of progress on the Hill was met by a new controversy surrounding SEC Chairman Harvey Pitt and his request that his agency be given cabinet level status.

At the White House, President Bush did not address the Pitt issue specifically but he pointed to the arrest of executives at Adelphia Communications as signs that the government is cracking down on corporate fraud.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This government, this government will investigate, will arrest and will prosecute corporate executives who break the law. And the Justice Department took action today.

(END VIDEO CLIP)

WOODRUFF: For more we turn to Suzanne Malveaux standing by at the White House -- Suzanne.

MALVEAUX: Hello, Judy. The administration today called this latest flap simply a distraction to all this. They are trying to focus on the positive, specifically the administration talking about the corporate responsibility legislation that is moving quickly now through Congress.

(BEGIN VIDEOTAPE)

MALVEAUX: President Bush says it's a good day for his embattled Securities and Exchange Commission. He points to the arrest of five corporate executives charged with fraud as evidence of its success.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The arrest today of five former corporate executives on charges of securities fraud, wire fraud and bank fraud is a clear sign of this administration's commitment to enforce the law so justice can be done.

MALVEAUX: But the SEC's head, Harvey Pitt, is in another political pickle. His recommendation to Congress to elevate his agency to cabinet level status is falling on deaf ears.

FLEISCHER: They have the status that they need to enforce the laws.

MALVEAUX: Pitt's office says he was asked by lawmakers on ways to strengthen the current debated legislation. Pitt offered five recommendations, one of which was to upgrade the agency to a cabinet level position. But Democratic lawmakers seized on Pitt's request as just another reason for his ouster.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: This is further proof and a clear illustration of why it is many of us feel the time has come for a change in that position. I'm surprised and saddened by the insensitivity of Mr. Pitt.

MALVEAUX: Now Treasury Secretary Paul O'Neill has also been asked to step down by his critics, his critics saying that he's been distracted by trips overseas and that he has been largely silent on the economy and the state of the stock market. We have heard from O'Neill's office earlier today. They say that he is postponing a trip to Latin America for about a week until the pending legislation is all straightened out -- Judy.

WOODRUFF: All right, thanks, Suzanne and we know Paul O'Neill will be a guest on "Moneyline" coming up at 6:00 p.m. on CNN. Meantime at the Capitol, members of the House and Senate announced that they had bridged the gaps between their bills designed to fight corporate misconduct. But as our Jonathan Karl reports, the agreement does not signal the end to partisan bickering over the economy.

JONATHAN KARL, CNN CORRESPONDENT: Even as the House and Senate struck a deal on corporate responsibility, a top House Republican opened up a new front in the political war over the economy.

REP. TOM DELAY (R-TX), MAJORITY WHIP: Democrat leaders have talked down the market. They have slow walked legislation to hold crooked CEOs accountable. And they have dragged their feet on legislation to protect Americans' retirement security. And they have opposed real economic growth legislation.

KARL: Presenting a chart entitled Democrats versus the Dow, Delay put the blame for the stock market slide squarely on Democrats for playing politics with the economy.

DELAY: One thing I do know, the markets don't lie. And since the president has made his call for action back in March, the market has gone down by 2,600 points. And it is not from the lack of action by the House. It's from a lack of action by Tom Daschle and the Senate Democrats and it as lack of action based upon partisan politics.

SEN. BYRON DORGAN (D), NORTH CAROLINA: That's totally absurd. The fact is, this stock market collapse hurts all Americans, and the last thing we want for this country is a sick economy. We want this economy to be well again. We want to restore confidence and economic health. But again, Mr. Delay's comments don't help in that regard. We need a little more bipartisanship and a lot less partisanship of the type he displayed today.

KARL: The flare up came despite a bipartisan agreement on a corporate responsibility bill that increases the maximum prison term for mail or wire fraud to 20 years, defines corporate fraud as a crime punishable by 25 years in prison, requires immediate disclosure of stock sales for top executives and uses corporate fines to start a fund for defrauded investors.

(on-camera): Perhaps it was unfortunate timing but Mr. Delay's comments came on a day when the Dow was actually up nearly 500 points. They also came on a day when House Republicans got their most pessimistic portrayal yet of the mid term elections.

Pollster Frank Luntz at a private meeting of House Republicans this morning warned them point blank they are in danger of losing their majority because of current trends. He listed several reasons, but Judy, one major reason he said is he warned of a possible meltdown and signs of a meltdown among and support among voters age 50 to 64. That's that group that's hit most severely by losses to their retirement accounts because they are nearing retirement and they're seeing the funds they were counting on disappearing as the stock market goes down -- Judy.

WOODRUFF: All right, thank you, Jon. And for more now on the fight against corporate misconduct and other issues I am joined by the House Minority Leader, Dick Gephardt. Representative Gephardt, as we know the market is up today almost 500 points. But Tom Delay is saying that you and the other Democrats were responsible for an enormous drop in the market over the last few weeks.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: Well, that's humorous at best. You know what happened today is that we finally got action, not just words on the issue of corporate accountability. The Sarbanes bill, which passed the Senate 97-0 was finally accepted by House Republicans after dragging their feet for weeks and weeks, months and months. And when the markets saw that the Congress was finally going to take action to make the accounting information valid, I think that's what had the major impact on this market.

WOODRUFF: Do you know Congressman Delay is saying the Democrats have been foot-dragging on this. He said that you, he reminded us of something you said a few days ago, that you claimed it would take two months to reach an agreement to hold corporations responsible. This happened much more quickly than that.

GEPHARDT: Well, Judy, I'm ready to take some credit for finally forcing the Republicans to take action. Let's remember that last April, they voted almost to a person, there was only one Republican who didn't vote with them, against a bill like the Sarbanes bill in the House. And they passed a bill that was weak.

It was really an enshrinement of what has already been the status quo. They waited from April until now to finally move after all these business failures to pass the Sarbanes bill. And they were even fighting against it two days ago. So if there was foot dragging, it was on the Republican side. And let's also remember that Tom Delay and Newt Gingrich, when they game in to the majority in 1995 said that the main reason for contract with America was to get rid of all regulation of American business and that's what they did.

WOODRUFF: Let's move on to the comment that one of your Democratic front colleagues in the House said that you made at a House Democratic caucus meeting last week in which you said your party stood to gain as many as 40 seats in the House. Now you have since back tracked on that. But in reality, is there any chance the Democrats are going to pick up anything close to that?

GEPHARDT: Well, I would wish for that and obviously we're working hard to do that. But the truth is, the comment I made was that there are 40 winnable seats in the House. And I do believe that. Now, if we win all of them, then obviously we would have a 40-seat gain.

But we only need 6 to win back a majority in the House. I predict that we will win back a majority because I think that people now see the real consequences of the main purposes and goals that the Republicans announced when they took the majority in the House and what they've done since.

WOODRUFF: Well what do you mean 40 winnable seats? You mean it's possible that the Democrats could pick up 40 seats. Is that what you're saying?

GEPHARDT: There are 40 seats out there that are in contest where we have a great candidate. They're running a great campaign and we can win a seat back from the Republicans, which would put us back in the majority.

WOODRUFF: So are you going on record with that?

GEPHARDT: I hope for 40. I'm predicting at least 6.

WOODRUFF: All right, hoping for 40, but saying that 40 are winnable. all right.

GEPHARDT: 40 are winnable.

WOODRUFF: Dick Gephardt, the House minority leader. Thanks very much.

GEPHARDT: Thank you. WOODRUFF: Outside Washington, the corporate responsibility issue is resonating at the state level or at least some candidates are hoping that it will. Our Brooks Jackson looks at campaigns in two states featuring ads which accuse candidates of selling out to big business.

(BEGIN VIDEOTAPE)

JACKSON (voice-over): Democratic challenger is doing it in Texas and the Republican is doing it in California, accusing sitting governors of selling out for money. It's risky politics.

Texas challenger Tony Sanchez ran this parity of a well known credit card commercial slamming the Republican incumbent.

SANCHEZ CAMPAIGN AD: Allowing the highest insurance rates in the country, $1 million. There are some things money can't buy. For vetoes and other favors, there's Rick Perry.

JACKSON: It's a risky strategy. Texas home insurance rates are the nation's highest according to the Insurance Information Institute and campaign records do show Governor Perry has taken lots of insurance donations. But the ad's claim of a connection is unproven at best and may be unprovable.

(on-camera): Some of those tough Sanchez ads are too tough. Here is one that aired last May.

SANCHEZ CAMPAIGN AD: $500,000 from power companies, no wonder Rick Perry's done nothing about skyrocketing electric rates.

JACKSON: Skyrocketing? In fact Texas electric rates are down since January 1st. Consumers will pay $1 billion less according to state regulators. To call that skyrocketing is just wrong. In California, it's Democratic Governor Gray Davis being accused by a Republican challenger of selling out.

SIMON CAMPAIGN AD: Hello, I'm a teacher here to see Governor Davis.

I'm sorry, you haven't given enough money to see Governor Davis.

JACKSON: Republican Bill Simon's ads are softer, leavened (ph) with humor to make them less strident.

SIMON CAMPAIGN AD: Oh, you go right in. The governor will definitely want to see you.

JACKSON: But sometimes even these Simon ads are over the top.

SIMON CAMPAIGN AD: Court testimony shows Governor Gray Davis spends up to 12 hours a day fund-raising for his campaign.

JACKSON: That's just false. The testimony doesn't show that at all. What Davis political adviser Gary South did testify was that some days Davis would range from eight to 12 hours trying to raise money, but only get this, from June to December of 1997, more than four years ago. Davis was not governor. Strict donation limits were in effect, making fund-raising more difficult limits that ended in 1998. South says Davis has never spent such long hours fund-raising since.

(on-camera): It's not yet clear whether these sometimes exaggerated attacks are working. But with the stock market plunging and corporate scandals proliferating, some candidates are testing whether voters will buy the idea that incumbents have literally sold them out. Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Later today, the colorful and controversial James Traficant could be expelled from Congress by his fellow House members. Debate gets underway a little while from now. Our Kate Snow is standing by with the latest. Hi, Kate.

KATE SNOW, CNN CORRESPONDENT: Hi, Judy. One new wrinkle tonight which is that Congressman Traficant's good friend, a fellow Congressman from Ohio, Steve LaTourette, is going to offer a motion to try to push off the vote. He'll do that up front tonight to try to delay the vote until after the August recess, but we're told both by Republican and Democratic aides to leadership on both sides don't expect that attempt to delay the vote to succeed ultimately.

But there may a few members who we see coming out tonight in support of Traficant and saying there is a need to wait. The issue that they're raising, a juror over the weekend who served on the jury that convicted Jim Traficant back in Cleveland said that he might have made a different decision knowing what he knows now. That's created a lot of buzz back at home in Ohio where many are still standing by their Congressman.

(BEGIN VIDEOTAPE)

(voice-over): Lunch time at the Hub in downtown Youngstown, the town that made Jim Traficant. Owner Jim Jacco (ph) echoes a lot of Traficant supporters. The congressman, he says, didn't get a fair shake.

UNIDENTIFIED MALE: For one thing in general, I think it's a raw deal from start to finish. It started in Cleveland and it's ended up in Washington.

SNOW: The sentiment on this day heard frequently around town. Washington just doesn't understand the rebel congressman who represents the little guy.

UNIDENTIFIED FEMALE: I feel that we voted him in and we should be the ones to vote to take him out.

SNOW: But the Constitution says it's up to the House to police its own. Traficant is a convicted felon. The Ethics Committee wants him out. Some in Youngstown agree. They say they've lost faith in Jim Traficant. Robert Vaclav has voted for Traficant in all nine elections.

UNIDENTIFIED MALE: I think he is a hell of a man. I think he represented the community very well. But I think with the 10 charges against him, I don't know how Congress can do anything else but expel him. And I feel terrible about it. I feel sorry for his wife and family.

SNOW: Traficant's friend, Representative LaTourette, told me yesterday that he is saddened that people seem to make a big joke out of all of this. They laugh at Traficant's expense. He says undoubtedly there will be some humor tonight in what Traficant has to say, Judy, but this is no joke. He is only the second congressman to be kicked out of the House since the Civil War, Judy.

WOODRUFF: No joke at all. Kate, thank you.

Conversations with Homeland Security Director Tom Ridge and Congresswoman Jane Harman on the record after the break.

Also ahead, the president's planned vacation, is now a good time to take time off?

No White House staff stays together forever, including the staff on television's "West Wing." And later...

JEFF GREENFIELD, CNN CORRESPONDENT: I'm Jeff Greenfield in New York. I'll tell you why if you're a Bush adviser these days, no news is good news.

(COMMERCIAL BREAK)

WOODRUFF: With me now Governor Tom Ridge, the head of the Office of Homeland Security. Governor, as you head to final passage on legislation to create this big department, you're running into trouble from Democrats who say that Republicans, and I'm quoting now Ohio Democrat Sherrod Brown. He said they are loading up this bill with their entire corporate agenda, tort reform, anti-union stuff that has nothing to do with our national security.

TOM RIDGE, HOMELAND SECURITY DIRECTOR: I would be curious to see what portion of the bill he has read to draw that conclusion. The president has said all along that the men and women that are part of this new department are patriots. They work hard. About one-third of them are unionized. He's gone out of his way to reiterate the need and his belief that they should retain their collective bargaining rights, the whistle-blower protection, the civil rights protection, veteran's preference. The only thing the president has said is that he'd like this new agency to have some management flexibility.

WOODRUFF: Well, it's not just Democrats, Governor. It's also some Republicans like Connie Morella who are worried that the president would be given the power to cut back on civil service protections and some union negotiated agreements for about 170,000 employees. These are protections that every other federal employee has.

RIDGE: Judy, I had the pleasure of serving with Connie Morella for several years when I was member of the House. The fact of the matter is that she is attempting to take discretion away, presidential discretion, that began with President Carter, that existed through President Reagan and President Bush, that President Clinton had and now they're using this vehicle to take that limited discretion away from the president of the United States.

WOODRUFF: The Democrats are also upset, Governor Ridge, about limits on the ability to sue the makers of anti-terrorism devices, everything from vaccines to cockpit doors, when these devices turn out to be defective. Don't they have a point here?

RIDGE: Well, it's a very complicated issue, Judy. And I do think that as we look toward enhancing the security of this country and protecting Americans, we are going to have to take a look at the science and technology community of this country and the whole question of liability and indemnification is a very difficult and challenging one. But I also believe there are times and places where these kinds of very complicated and complex issues can be and should be resolved. Remember, there's a timetable that they have set, many of them set for themselves on September 11th. We are going to do everything we can to resolve these differences by that time. But it may require a little additional time in order to get it done.

WOODRUFF: Finally, Governor, the word on the Hill today, one word is that the president may be planning to name Defense Secretary Donald Rumsfeld to be the head of this new homeland security department and move Deputy Secretary Paul Wolfowitz up to run the Pentagon. Any truth to that?

RIDGE: I haven't heard it, but as you well know, Secretary Rumsfeld has done an extraordinary job in the Department of Defense. Frankly, he's done an extraordinary job wherever he has gone. And certainly any configuration that the president thinks is in the best interests of the national security and homeland secure is the way we ought to go.

WOODRUFF: All right. I figured you're not going to tell us if you knew. Tom Ridge, thanks very much.

With me now, Representative Jane Harman, who is the ranking Democrat on the Intelligence Committee subcommittee on terrorism and homeland security. Congresswoman Harman, some of your Democratic colleagues are quite serious about opposing this bill that creates the new department.

REP. JANE HARMAN (D), CALIFORNIA: Well, that's what they are saying now -- 97 amendments have been filed to the bill and in a few minutes, the speaker of the House and the minority leader are meeting before the Rules Committee to decide how open the process will be. If it's an open process, meaning that we can debate and vote up or down on a lot of these amendments, I predict that many Democrats will be there. I know that some will be there anyway. But what I'm looking for is 350-vote out of 435 members victory here because I think the American people want us to be bipartisan and want this bill to pass.

WOODRUFF: Are you saying it doesn't matter whether Democrats lose on some of the amendments. It's just a matter of whether the process is open.

HARMAN: I think that's very important, Judy. This is a democracy with a little "D" and we've had some closed debates on things like trade, which ended up being very partisan. This is a time for this White House, and I believe they are planning to do this, to insist on an open process. Some of these amendments will help make this bill better and we should vote up or down and I think those who had a fair debate, even if they lose, will be more inclined to support the bill because it's had a fair debate.

WOODRUFF: Well, I just interviewed Homeland Security Director Tom Ridge, who among other things says there is no give on the president's part when it comes to civil service protection. The president, he says, wants maximum flexibility to move people around, promote them, and do whatever he wants.

HARMAN: I'm surprised he said that. I just saw Tom Ridge in the White House with the president an hour ago, and what the president said is we are not changing existing law. We are putting 22 departments together. But many of the departments now give him some flexibility in times of national security emergencies.

So I hope that's what he means. That's certainly what he said and I hope his team takes that tone because if they don't, this will become again very partisan unnecessarily.

WOODRUFF: Well, are you saying then that you expect there to be some flexibility on this issue?

HARMAN: There is flexibility -- well, let me say with respect to civil service rules now, there is flexibility. I expect that present law will not be degraded, but I expect that present law should apply to this new department. And after all it is a -- it deals with national security the way the Transportation Security Administration does, the Defense department does and the rules shouldn't be stricter here than they are there. They should be the same.

WOODRUFF: How important is it that the president gets a large majority on this vote?

HARMAN: I think it matters a lot. I've been saying that the terrorists don't check our party registration before they blow us up. The American public does not want squabbling on this bill. This is a big bold change in government, the biggest in 50 years. But the point of it is to make Americans safer. And they're going to be watching this to be sure we're focused on them, not on where the deck chairs are and how much turf we have.

WOODRUFF: All right, Representative Jane Harman, good to see you. Thanks for talking with us.

HARMAN: Good to see you, Judy.

WOODRUFF: Coming up, with everything that's going on in Washington, should President Bush be going on vacation for a month? We'll discuss Mr. Bush's vacation plans when we come back. (COMMERCIAL BREAK)

WOODRUFF: Well, after days of watching the financial markets go down, down, down, they were up today. In fact, the Dow was up at its almost -- at its second highest jump in history.

CNN's Myron Kandel from the Financial News Desk joins us now.

Myron, does this mean that all the concerns about corporate responsibility and accounting have all dissipated?

MYRON KANDEL, CNN CORRESPONDENT: Well, not exactly, Judy.

But, you know, after one of the sharpest losing streaks in Wall Street history, a dramatic turnaround today: as you indicated, the Dow Jones industrial average up 488 points. And for a while it looked like it might be the biggest point gain ever. That was 499 points, the Dow finishing with a gain of about 6.5 percent of its value. And it was a broad-based gain on Wall Street: the Nasdaq composite up 60 points. And that's nearly 5 percent of its value -- so that dramatic turnaround after all of those down, down days.

The question is, will the market be able to continue that gain? A word of caution: The last big gain by the Dow was on a holiday- shortened day July 5. It went up 324 points. And then it was followed by seven consecutive losing sessions. But today, the Dow is up for only the second time out of the last 13 sessions, an incredible turnaround. Wall Street is really enjoying it, Judy.

WOODRUFF: And, Myron, is it possible to say in a few words why?

KANDEL: Well, most of the analysts say the market was badly oversold.

Now, that means that there were bargain-hunters waiting. The big question, however, is: Was this the turnaround that many people on Wall Street have been waiting for? We won't know that for a few more days. We have to see what's going to happen in the market. But, obviously, investors, whose confidence in corporate America had been badly shaken by all the recent scandals, were investing today and they were in a buying mood, Judy.

WOODRUFF: All right, Myron Kandel, from the CNN Financial News Desk, thanks.

With us now: Jennifer Palmieri -- she's press secretary for the Democratic National Committee -- and Mindy Tucker, communications director for the Republican National Committee.

Jennifer, today, we learned that the SEC chair, Harvey Pitt, is not only asking for a raise. He's asking for the SEC to be elevated to Cabinet-level. Is this a good idea right now?

JENNIFER PALMIERI, DNC PRESS SECRETARY: Well, I don't think that a raise and a promotion is what the American people had in mind for Harvey Pitt right now. I think a change in title or a change in rank isn't going to make that much of a difference. I think that the SEC needs corporate reform, which it looks like we're going to get now that we have an agreement on the Sarbanes deal, which is really great. And they probably need more money to increase enforcement, not for Harvey Pitt's salary, but to hire more enforcers. And I think we'll get that as part of the Sarbanes bill, too, which is great.

But what the market needs, I think, to keep this confidence that we had today going is a commissioner who has the confidence of markets. And I think the problem with Harvey Pitt is how many times he's had to recuse himself. I don't know that he can truly be effective.

WOODRUFF: Mindy, what about the timing of this? Even if you're for the idea in theory, was this the right time to ask for all of this?

MINDY TUCKER, RNC COMMUNICATIONS DIRECTOR: Well, what the White House has basically said today is that this is not their focus. They don't want this kind of amendment. What they want is effective common-sense legislation. They want it to be sent to the president's desk so he can sign it. The real question I think people want to ask here is: Is he doing a good job? Is Harvey Pitt doing a good job? The answer is, absolutely.

He's received bipartisan praise, especially from Arthur Levitt, who was Clinton's SEC chairman. Just this week, he took enforcement actions against two companies for wrongdoing and cooking the books, as they say. So I think everybody should have full faith in this person as chairman and we should move forward with reform legislation, instead of doing what the Democrats have been doing, which is politicizing the misfortune of these people.

WOODRUFF: Well, so despite Republican John McCain, among others, calling for Harvey Pitt to step down, you're saying he should stay where he is?

TUCKER: I think so. He's done a great job. If you look to this week, others, he's been praised for keeping wrongdoers off corporate boards, for making sure that people who took money based on wrong, phony filings returned their money. He's done a great job.

And I think what we need to look at is the overall job performance. We need to look at the Democrats who support him for the position. And we need to focus on reforming and not on politicizing these issues.

PALMIERI: We do need to focus on reform.

But I the problem for Harvey Pitt is, he has already had to recuse himself 29 times because he had a conflict of interests, because he had -- he represented the big five accounting when they were trying to stop this rule from going into effect that would have prohibited auditing and consulting like we saw with Enron. And he has said now he's going to stop recusing himself from that. And I think that just raises a lot of questions about: Is he the best guy? Can't we do a little bit better than that?

WOODRUFF: Quickly, let me talk ask you about a comment from Maryland Governor Parris Glendening. He is the head of the Democratic Governors Association. He went after President Bush today for going to Crawford, Texas, for a month.

He said: "In times of financial crisis and international crisis, the public looks for hands-on, confident leadership. What we're going to see is every-other-day photo ops from the ranch."

What do you say, Mindy Tucker?

TUCKER: First of all, I think it is good we finally have a president who has a home outside of Washington, D.C., and wants to go there more than be here. I think that's a positive thing.

I wonder about the hypocrisy of Government Glendening. He himself has been criticized many times in the past for going on vacation, especially during a crisis.

PALMIERI: But isn't vacation OK?

TUCKER: There was a racial crisis during his vacation as county commissioner. I just -- I think the hypocrisy there needs to be addressed.

But if you ask the reporters who traveled on the president's trip to Crawford, Texas, last year, they will tell you it was all work. He did stem cells. This year, he's going to do 25 days, 12 cities. I have traveled with this guy before and he doesn't stop working. And I don't think the president ever really gets a vacation.

WOODRUFF: We are going to have to leave it there, except for one word from you, Jennifer.

PALMIERI: I'm not worried about the vacation he's taking. I'm more worried about the job he's doing on the economy.

WOODRUFF: Jennifer Palmieri, Mindy Tucker, good to see you both.

TUCKER: Thank you, Judy.

WOODRUFF: Thanks very much.

And just ahead on INSIDE POLITICS: Election 2004 is more than two years away, but already some possible candidates are getting a lot of media attention -- the "Inside Buzz" when we return.

(COMMERCIAL BREAK)

WOODRUFF: When you run for president, the first job is to make sure your name is known. Well, for Vermont Governor Howard Dean, that is especially important, since, outside of his home state, very few people know who he is. But thanks to the news media, Dean is making progress.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I'd like you to meet and greet Governor Dean.

(END VIDEO CLIP)

WOODRUFF: He's the Bruce Babbitt of campaign 2004, a politician whose campaign is based almost entirely on ideas rather than endorsements, organization or money. And that has made Vermont Governor Howard Dean something of a media darling.

(BEGIN VIDEO CLIP, "MEET THE PRESS")

TIM RUSSERT, HOST: You now are saying you are for universal health care. How much would that cost?

GOV. HOWARD DEAN (D), VERMONT: It would cost about half of the cost of the president's tax cut, which I think should be pretty much repealed.

(END VIDEO CLIP)

WOODRUFF: His recent appearance on NBC's "Meet the Press" -- a crucible for aspiring candidates -- was well-received, in contrast to a hesitant showing by another media darling, Senator John Edwards of North Carolina. Like Edwards, Dean has enjoyed media coverage out of proportion to a low standing in the 2004 match-ups. This "New Republic" cover story acknowledges that no one knows who he is, and then likens him to John McCain.

His appeal lies in what "Washington Post" columnist David Broder described as his eclectic mix of issues. Some are liberal. He opposes fast-track trade authority. Others are conservative. He supports gun rights -- a relatively obscure politician who is getting a lot of mainstream attention.

WOODRUFF: With me now: Howard Kurtz of CNN's "RELIABLE SOURCES."

Howard, how does a candidate like Howard Dean get, suddenly, this kind of media attention?

HOWARD KURTZ, "RELIABLE SOURCES": I was hoping that "Howard Who?" banner didn't apply to me.

(LAUGHTER)

KURTZ: But, look, Judy, every four years, the press falls in love with a candid contrarian -- Bruce Babbitt in '88, Paul Tsongas in '92 -- who has very little chance of winning his party's nomination.

Now, Howard Dean is at 1 percent in the Democratic polls. But he's an interesting guy. He's a doctor. He brags about have passed the nation's toughest or most sweeping gay-rights law. And he is openly running for president. All these other guys, we know they're running, but when you ask them, they say, "Well, I'm weighing my options in early '03." And so he needs coverage and reporters need a good story. And right now, he is a good story.

WOODRUFF: But what's the history of these media darlings? How seriously should we be taking Howard Dean?

KURTZ: At this point, it is mostly for entertainment purposes. I don't mean to say that the governor of Vermont is not a serious politician. But, clearly, he has a long way to go. But ever since an obscure former one-term governor of Georgia came out of nowhere in 1976...

WOODRUFF: I remember him well.

KURTZ: ... to win the presidency, Jimmy Carter, everyone reporter wants to discover the next Jimmy Carter. And they do it by going along on -- reporters love retail campaigning. And when you are Howard Dean and you haven't got a big staff and you haven't got a lot of money, you go out and meet the voters, because you're not drawing big crowds. That makes for a good story.

Now, obviously, if he can put a lot of this together, the media attention, the media primary, so to speak, can lead to a serious political candidacy. But that hasn't happened yet.

WOODRUFF: But could it happen? That's the question. Clearly, the people around Howard Dean, Howard Dean himself, would love to think that this kind of attention they're getting from the press could eventually translate into what you're talking about.

KURTZ: Their role model, undoubtedly, must be John McCain.

There was a time when John McCain was at 3 percent in the polls, one of many Republican candidates. He let reporters travel around with him on the bus. He benefited from great media attention. That turned him or help catapult him into a serious candidate against George W. Bush. So, yes, it could happen, but first he has got to get past Al Gore, Joe Lieberman, John Kerry, John Edwards, you name it.

WOODRUFF: It is irresponsible for the press to be doing this?

KURTZ: It would be irresponsible if the press were touting Howard Dean as the next John McCain, because that hasn't happened yet. But to let the American people know who some of these contenders are -- he is a serious politician; he has been elected several times in his home state -- I think that is OK. It is summer fling. We'll see what happens when fall and winter rolls around.

WOODRUFF: All right, Howard, thanks very much.

KURTZ: Thank you.

WOODRUFF: Appreciate it.

Well, time now for a governor's-race edition of "Campaign News Daily": The Florida Republican Party is trying to help incumbent Jeb Bush with a new ad targeting Democratic candidates Janet Reno and Bill McBride. The ads mocks the Democrats as offering voters nothing but a song and dance on the issues. Reno's campaign manager dismissed the ad. And McBride's spokesman called the spot -- quote -- "lame."

A new "Baltimore Sun" poll finds a tightening race for Maryland governor. Democrat Kathleen Kennedy Townsend leads Republican Bob Ehrlich by three points. Back in January, Townsend had a 15-point lead. The poll also found that Townsend's unfavorable rating has almost doubled in the last 18 months. Ehrlich showed improved support among African-American voters. And his unfavorable rating stands at just 14 percent.

Alaska Democratic candidate Fran Ulmer recently took a break from campaigning for governor to buy a new gun. Ulmer says she needs the gun because her current one is too big to carry with her when she campaigns. She says she expects to travel alone at times during the campaign and the gun serves as -- quote -- "a little extra insurance."

Coming up next: Jeff Greenfield puts himself in the place of a Bush political aide reading the newspapers. It isn't a place he wants to stay in very long. We'll find out why.

(COMMERCIAL BREAK)

WOODRUFF: The humorist Will Rogers used to say, "All I know is what I read in the papers."

Well, in his "Bite of the Apple," our Jeff Greenfield doubts that anyone at the White House saw much humor in the papers this morning.

(BEGIN VIDEOTAPE)

JEFF GREENFIELD, CNN SR. ANALYST: Imagine for a moment that you are a political adviser to President Bush. You're in your West wing office this morning. You pick up today's "New York Times," the paper of record, the one that is read by every politician and reporter and campaign contributor. What do you do next? You reach for the Maalox.

(voice-over): Now, the front page has the kind of bad news we have grown used to: more trouble in the Middle East. The markets are down again. Turn to the business page and now it's the big investment banks that are in the crosshairs.

But now, back on the front page, you see this story about SEC Chairman Harvey Pitt and his apparent desire to see his position become one of Cabinet rank. This is, to put it mildly, a story with a highly negative spin, all about how it would mean a pay raise at a time when the agency is strapped for money and another paragraph about how it might mean more social status for Mr. Pitt, more invitations to A-list events.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Creating a single permanent department.

GREENFIELD: Nobody ever writes that kind of stuff about elevating Homeland Security into the Cabinet. Now here is another front-page headache. Conservatives, "The Times" reports, have begun to turn on their favorite Cabinet member, Attorney General John Ashcroft. They fear, it says, he is looking to expand government power. Turn the page and you find another story that takes a critical view of Ashcroft's, this time for his position on gun rights.

Well, you tell yourself: "What can you expect from 'The Times'? Everybody knows it's a liberal paper." So pick up "The Wall Street Journal." What do you find? A new poll. On the front page, it shows the same sharp increase in pessimism, a belief that things in the nation are headed on the wrong track, as other recent polls have shown. And inside? Voters now think the president is more concerned with corporations than with average Americans and thinks that is far more true of Republicans than of Democrats.

So enough with the daily papers. You put up that copy of "Newsweek" you haven't read yet and there on the cover: "Like Father, Like Son?" just the kind of tempting parallel journalists cannot resist, one that suggests this president might be as threatened by economic news as his father was.

(on camera): So, what does our hypothetical Bush aide tell himself or herself? Well, first, it is July, not November. Second, the press always piles on, always runs in a pack. If there is better economic news in a month or two, the press will be falling all over themselves to report about the president's sudden resurgence.

Or maybe he can just remind himself of the wise words that former NBA great Bill Russell used to dispense when he was a basketball analyst: "When things go bad, they go bad."

Jeff Greenfield, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: And, if nothing else, they have the stock market up by almost 500 points. That didn't hurt.

Up next: dueling food groups on Capitol Hill.

(BEGIN VIDEO CLIP)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Veggie dog. Yum.

(END VIDEO CLIP)

WOODRUFF: Our Bill Schneider on the creative ways that interest groups bring attention to their causes.

(COMMERCIAL BREAK)

WOODRUFF: A casual walk across Capitol Hill could include sightings of professional athletes, celebrities, even pets and puppets. It is all part of the strategy that interest groups use to get out their message. Our Bill Schneider has more.

(BEGIN VIDEOTAPE)

SCHNEIDER: A "Playboy" centerfold and baseball stars on Capitol Hill. It's a guy thing. "Hot dog," you say. Well, that's exactly why the idea.

(voice-over): On one side of the House Office Building: hot dogs and baseball stars and lots of guys. For underpaid and overworked congressional staffers, it's a free lunch. For members of Congress, it's another chance to campaign.

UNIDENTIFIED MALE: When you're so darn busy and traveling around so much -- I go back to Colorado every weekend. So...

UNIDENTIFIED MALE: Well, actually, I am glad to hear our senators are working that hard.

(LAUGHTER)

UNIDENTIFIED MALE: Well, we don't fit the mold. I drive a pickup truck instead of a limousine.

(LAUGHTER)

UNIDENTIFIED MALE: Oh, OK. There you go. All right.

SCHNEIDER: The hot dog lunch is sponsored by the American Meat Institute to promote, well, meat. Get the symbolism?

UNIDENTIFIED MALE: Baseball, hot dogs -- we are just missing apple pies and I guess Chevrolet.

SCHNEIDER: Just across the way: a competing event sponsored by People for the Ethical Treatment of Animals. To compete with hot dogs: veggie dogs. And to compete with baseball stars: a "Playboy" centerfold, Miss July, to be precise. Here she is in the, uh, flesh.

LAUREN ANDERSON, MISS JULY, "PLAYBOY": They don't know what's better for them. And this is definitely better for them.

SCHNEIDER: You see, you've got to have a gimmick to get these guys' attention and to get the press to show up.

Want to make the case against pork-barrel spending? Bring in some porkers. Want to track down legislation that got lost between the House and the Senate? Bring in the bloodhounds. Want to promote music education in the schools? Bring Elmo in to testify.

ELMO, MUPPET: Please, give the kids the gift of music.

SCHNEIDER: Gimmicks work best if they are as nonpolitical as possible.

(on camera): Are you at all political? UNIDENTIFIED MALE: No way.

SCHNEIDER: No way.

UNIDENTIFIED MALE: No way shape or form.

SCHNEIDER: Where do you live?

ANDERSON: Florida.

SCHNEIDER: Florida. Good. OK, did you vote last -- in 2000?

ANDERSON: Of course.

SCHNEIDER: Good. Did your vote count?

ANDERSON: I hope so.

SCHNEIDER: I'm not going to ask you how you voted.

ANDERSON: Good.

SCHNEIDER (voice-over): Although sometimes things come out.

UNIDENTIFIED MALE: But I'm a very right-wing Republican from California.

SCHNEIDER: Would he like to meet the opposition?

(on camera): Have you met Miss July?

UNIDENTIFIED MALE: No, I have not.

SCHNEIDER: Would you like to meet Miss July?

UNIDENTIFIED MALE: No, that's OK. No, I just -- a small road trip from home. And everybody's safe at home. So, that's OK. No thank you.

SCHNEIDER (voice-over): Carry bipartisanship too far and it can get you in trouble.

Bill Schneider, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: One of the stars of ABC's hit series "The West Wing" is quitting the show -- details just ahead.

But now let's take a look at what is coming up on "WOLF BLITZER REPORTS" -- hi, Wolf.

WOLF BLITZER, "WOLF BLITZER REPORTS": Hi, Judy.

A shock witnessed up and down Wall Street, the kind our viewers have not seen in quite a while. Also, that great escape that shocked police: Meet the 7-year-old girl with guts. How did she fool her kidnappers? And is it really the end of the world? The asteroid astronomers say is on a collision course with us.

It is all coming up right at the top of the hour, right after INSIDE POLITICS.

WOODRUFF: Thanks, Wolf.

Well, "The West Wing," as we said, is losing one of its most prominent characters, not the real West Wing, but the NBC television show.

(COMMERCIAL BREAK)

WOODRUFF: Well, on this day when the markets shot way up, CNN has confirmed this important story: that the Securities and Exchange Commission is conducting an inquiry into the accounting practices of AOL Time Warner. Of course, that is CNN's parent company. AOL Time Warner is saying -- quote -- that it "will cooperate fully with the inquiry." And, of course, CNN will bring you more information on that as soon as we have it.

I'm Judy Woodruff in Washington. That's it for INSIDE POLITICS. Thank you for joining us. "WOLF BLITZER REPORTS" is next.

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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