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CNN INSIDE POLITICS

News; Domestic

Aired December 6, 2002 - 16:00   ET

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

JUDY WOODRUFF, CNN HOST: INSIDE POLITICS begins right now.
ANNOUNCER: A huge shake-up in the Bush economic team. Does it prove, as critics claim, that the president's plan isn't working?

ARI FLEISCHER, WHITE HOUSE PRESS SECY: I think that the American people have shown that they have confidence in the direction of the president's economic policy.

ANNOUNCER: Two days before the deadline, Iraq prepares to hand over its weapons report to the United Nations. Will that solve or trigger war?

Up in the air in Louisiana. Senate candidates barnstorm on the eve of their squeaker run-off.

Trent Lott on track : the senator talks about the hot issues and his future as Majority Leader.

SEN. TRENT LOTT (R), MISSISSIPPI: I've been smiling an awful lot, lately, Jonathan. So I'm pretty happy.

ANNOUNCER: Live from Washington, this is INSIDE POLITICS with Judy Woodruff.

WOODRUFF: Thanks for joining us. Amid signs the president has already narrowed the search for a new treasury secretary, lawmakers of both parties are urging Mr. Bush to quickly fill the holes in his economic team.

In this news cycle Treasury Secretary Paul O'Neill and White House Economic Adviser Larry Lindsey were asked to resign by Mr. Bush.

O'Neill is the first member of the cabinet to step down.

We'll tell you how the markets are reacting to the shake-up and to an unexpected surge in the unemployment rate. And we'll ask CNN's Lou Dobbs how all of this may affect your finances.

O'Neill and Lindsey are on the way out after widespread criticism of their performance and growing concern about the Bush economic policy.

Here now is our White House Correspondent Suzanne Malveaux.

(BEGIN VIDEO TAPE)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: Paul O'Neill is a - is doing a fine job as the Secretary of Treasury.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT (voice-over): President Bush just four months ago defending his economic team. But Thursday night a tough decision, aides say. Mr. Bush asked for the resignations of two top advisers: Treasury Secretary Paul O'Neill and Bush's economic adviser Larry Lindsey.

The resignations, widely rumored for months, coincided with the release of a report Friday morning showing an unemployment hike to six percent for November, the highest level in nearly nine years.

JIM MILLER, FORMER REAGAN BUDGET DIRECTOR: The president can start off and convince people that the economy is doing well and can set his agenda for this coming Congress.

MALVEAUX: The two got the call from the chief of staff, Andy Card, Thursday night to have their resignation letters ready first thing Friday morning.

In a three paragraph statement O'Neill says, "I hereby resign my position as Secretary of the Treasury. It has been a privilege to serve the nation during these challenging times. I thank you for that opportunity."

Publicly the White House refused to say O'Neill and Lindsey were pushed out.

REPORTER: Did President Bush ask either O'Neill or Lindsey to resign or did he request anybody else to ask for them to resign?

FLEISCHER: No. I've answered it as directly as I can. The individuals resigned, as you know.

REPORTER: Is that a yes or a no?

FLEISCHER: The individuals resigned, as you know.

MALVEAUX: The president offering nothing but praise.

(END VIDEO TAPE)

MALVEAUX: But administration sources say that Mr. Bush felt that both of them failed to inspire confidence in the markets as well as move the economy in a new direction.

Administration sources saying they're going to try to fill those positions as quickly as possible.

Some of the names being bandied about include Mayor Giuliani -- Rudy Giuliani -- as well as former Texas Senator Phil Gramm and brokerage giant Charles Schwab -- Judy.

WOODRUFF: All right, Suzanne at the White House. Thanks very much.

Well, a number of congressional Democrats say that the economic team shake-up points to bigger problems with White House policy.

Senate Democratic Leader Tom Daschle issued a statement saying, "Firing its economic team is an overdue admission by the Bush administration that its economic policies have failed. This administration has no comprehensive plan to get the economy back on track."

And as you would expect, Senate Republican Leader Trent Lott has a more positive take.

(BEGIN VIDEO CLIP)

LOTT: I think that Secretary O'Neill and Larry Lindsey are two good men who have done good work. But I think, once again, it's an opportunity for the administration to think about the best people to bring in as we try to develop an economic growth package and to get the economy moving and create jobs.

So I'm sure it will wind up being a positive thing for the administration.

(END VIDEO CLIP)

WOODRUFF: We'll have more of Jonathan Karl's Subway Series interview with Senator Lott ahead on INSIDE POLITICS.

But this is hardly the first time an administration has shaken up its team. But as our Senior analyst Jeff Greenfield suggests, there are some unusual aspects to this shake-up.

Jeff, what are they?

JEFF GREENFIELD, CNN SENIOR POLITICAL ANALYST: Well, for one thing, as we have heard, there is just about no pretense that these departures are voluntary.

"I have a deep desire to spend more time with my family"; "I'm off to fulfill my life's dream of backpacking through Nepal."

These departures, as we've heard, came at the request of the White House clearly to send a signal that its intention to put the economy as front and center as it can given that terrorism and Iraq are still very much on the table.

WOODRUFF: Well, what about the timing of this, Jeff? This is an administration that just a month ago came out looking very good after the mid-term elections.

GREENFIELD: Absolutely. And here, as we are about to see, are where these departures do mark a really sharp break with recent history.

(BEGIN VIDEO TAPE) GREENFIELD (voice-over): Usually top aides or cabinet members leave because they have become an embarrassment to the president.

Sherman Adams, Eisenhower's chief of staff, left because he had taken gifts from a rich favor-seeker.

Nixon dumped top aides Bob Haldeman and John Ehrlichman as the waters of Watergate rose.

Jimmy Carter axed Budget Director Bert Lance over financial dealings.

Ronald Reagan dumped Chief of Staff Donald Regan as Iran-Contra questions grew and as Regan's regal manner alienated friends.

Bush the elder ousted John Sununu for similar reasons.

JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: To emphasize conservation.

GREENFIELD: Other times housecleaning has been triggered by broader political troubles.

CARTER: We can see this crisis.

GREENFIELD: In the summer of 1979 President Carter tried to rally the nation in the midst of an energy crisis. Days later he stunned Washington by ousting four cabinet members: Energy Secretary Schlesinger, Transportation Secretary Adams, Treasury Secretary Michael Blumenthal and HEW Chief Joe Califano.

All of this came as Carter's poll numbers were sinking and as the prospect of a primary challenge from Senator Ted Kennedy was growing.

(END VIDEO TAPE)

GREENFIELD: But, Judy, as you've noticed, this time the shift comes barely a month after one of the biggest political triumphs of any first term president and that in itself is very telling.

WOODRUFF: OK, so what does it tell us?

GREENFIELD: OK, I think it tells us, once again, that this President Bush is acutely aware of the fate that befell his father. Back then huge approval ratings, a swift and almost pain-free Gulf War victory did not protect Bush the elder once people got the sense that he was indifferent to economic pain.

We just heard the unemployment rate rose to six percent. There are stories predicting future annual deficits as high as $900 billion a year. And the Republican base, especially in Congress, has never been particularly happy with Mr. O'Neill or Lindsey.

And I think the message here is, "We hear you and we're moving." -- Judy.

WOODRUFF: And, in fact, we're hearing that the president is narrowing his choices already. All right. Jeff, thanks very much.

GREENFIELD: You bet.

WOODRUFF: Well, whatever message the president may be trying to send by overhauling his economic team, there's every indication he had the timing in mind.

Here now is our senior political analyst Bill Schneider.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, timing is everything. That's what they say in show business. And the same thing holds for politics. Just look at this week's "Political Play of the Week."

(BEGIN VIDEO TAPE)

SCHNEIDER (voice-over): Here's President Bush a few days before the election last month.

BUSH: Our economy is bumping along. I'm optimistic about our economy.

SCHNEIDER: Democrats were sounding the alarm but who was listening to them?

UNIDENTIFIED MALE: We have lost two million jobs in the last 18 months in this country.

SCHNEIDER: Now it's a month after the election and the administration's "What? Me worry?" attitude has suddenly changed.

Look at the numbers. When President Bush took office the Dow Jones Industrial Average was over 10,000. When the stock market closed yesterday the Dow was more than 18 percent lower.

When President Bush took office the nation's unemployment rate was 4.2 percent. Today the bad news came out -- unemployment is up to six percent.

Suddenly the administration's two top economic policy makers are gone - just like that -- a month after the election on a Friday.

Remember two weeks ago when the administration announced plans to relax air pollution regulations? No? That was on a Friday.

Remember last week when the administration proposed easing restrictions on logging in national forests? No? That was just before Thanksgiving.

Now it's Friday again before a busy Christmas shopping weekend and if you happen to be paying attention to the news this weekend is the big story going to be Paul O'Neill or deadline in Iraq?

Actually Secretary O'Neill has been a pretty good story for nearly two years now -- a loose canon whose comments often get him in trouble like this one on the day the stock market reopened after the terrorist attacks.

PAUL O'NEILL, FORMER TREASURY SECRETARY: My guess is when we look a year down the road the people who bought today are going to be the happy people. The people who sold will be sorry they did it.

SCHNEIDER: Or a month later when he called the House Republicans' economic stimulus plan show business. Or when he told "The Wall Street Journal" -- quote -- "If you set aside Three Mile Island and Chernobyl the safety record of nuclear power is really very good.--

For months a question has been hanging over the treasury secretary.

REPORTER: Mr. Secretary (UNINTELLIGIBLE)?

O'NEILL: Thanks very much.

SCHNEIDER: Four months later we have the answer " yes " safely after the election on a day when bad economic figures come out before a weekend dominated by other news.

Shrewd timing makes for the political Play of the Week.

(END VIDEO TAPE)

SCHNEIDER: Good timing also for President Bush's 2004 re- election campaign. As Jeff Greenfield indicated, he knows what happened when his father won a great military victory and didn't pay enough attention to the economy until it was too late -- Judy.

WOODRUFF: All right, Bill. This administration is getting pretty good at timing. Thanks very much.

SCHNEIDER: Sure.

WOODRUFF: Well, as we have heard sources are saying the president hopes that today's shake-up will inspire greater confidence in the markets. At the closing bell just a short while ago the Dow ended the day up 22 points. The NASDAQ was up 11 points.

Let's bring in Lou Dobbs of CNN's "MONEYLINE."

Lou, what would you say this decision -- what signal does it send that the economy -- that the administration's economic policy is something the administration wants to change?

LOU DOBBS, "CNN LOU DOBBS MONEYLINE": Well, I think you're right, Judy, this is all about message today. And the president is obviously making it very clear that there will be no more misstatements from his treasury secretary, there will be no more remarks afield (ph) from whomever is designated as his principal economic adviser in the White House.

This is a very important message. You saw the markets react today. Now we don't have big moves in these indexes today, Judy, but we were down 90 points on the Dow earlier when this announcement came out and immediately the markets moved to the positive side.

This is one of those rare instances in which a president has made a move and simply eliminated some people and not replaced them. And the market took that elimination as the good news.

WOODRUFF: In talking to one person at the White House today I'm hearing the successors are likelier to come from Wall Street than from Washington. What are you picking up about that?

DOBBS: Well, Wall Street -- a number of names have already surfaced. Amongst them in terms of treasury secretary -- Marty Feldstein, the president of the National Economic Research Bureau - a well-respected economist at Harvard. He is perhaps a marginal case.

But it is interesting -- his organization, the NEBR, are the ones who declared the recession that Paul O'Neill denied ever took place.

Of course, Joe Grano at UBS here on Wall Street. His former boss, Donald Marren (ph), the former chairman of UBS, also a well- respected Wall Street leader as well as a supporter of the Republican Party.

Don Evans, the Commerce Secretary, a very close personal friend of the president, a man respected for his ability - without as a strong voice of business and within as a good team player with the Bush administration.

And those are just some of the names. The list is rather long right now but it's my guess that that list is probably the one from which we'll see the name emerge.

WOODRUFF: And, Lou, how much time do they have to make this decision? How long can they go and leave the Treasury vacant at the top?

DOBBS: Well, the stakes here are enormous, Judy, as you know, with the world currency markets, credit markets, equity markets, the direction of economic policy. This will be probably -- in my judgment at least, Judy -- the most important appointment the president makes in his remaining years in office.

And I think he has some considerable time in which to make that determination. This is - this deserves some considerable thought and care.

WOODRUFF: All right, Lou. Thanks very much. And we know you'll . . . DOBBS: Thank you, Judy.

WOODRUFF: . . . give us much more on MONEYLINE at 6:00 Eastern. Thanks very much.

DOBBS: Absolutely. Thank you.

WOODRUFF: And we'll have more on this big economic and political story in our Taking Issues segment. Up next Saddam Hussein's weapons report. What will U.S. and U.N. officials be looking for between the lines?

And we'll talk with a congressman who took his anti-war message all of the way to Iraq.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: I'm Candy Crowley in Donaldsonville, Louisiana. Yes, it is December but there is one more U.S. Senate race to be completed and if Tom Daschle and George W. Bush have a Christmas list, you can bet Louisiana tops them both.

WOODRUFF: Also ahead a dog day at the White House just in time for the holidays.

(COMMERCIAL BREAK)

WOODRUFF: She's the Republican many Democrats love to hate. Now Katherine Harris is moving up even more in the GOP ranks. We'll tell you how. INSIDE POLITICS back in 90 seconds.

(COMMERCIAL BREAK)

WOODRUFF: The Iraqi government tomorrow will release what is being described as a very huge report to the United Nations documenting its weapons programs. Iraqi officials say the report is expected to run about 12,000 pages.

It is not clear how long it might take to translate and analyze the content. Iraq's U.N. ambassador said today that the report will declare that Iraq possesses no weapons of mass destruction. He also said that it will provide all of the information demanded by the U.N. Security Council.

With me now from New York to talk more about the Iraqi report is Youssef Ibrahim, a fellow at the Council on Foreign Relations. He's also editor-in-chief of the Energy Intelligence Group.

Mr. Ibrahim . . .

YOUSSEF IBRAHIM, COUNCIL ON FOREIGN RELATIONS: Hi.

WOODRUFF: . . . if Iraq has nothing in the way of weapons of mass destruction, what are these 12,000 pages going to consist of?

IBRAHIM: That's a very interesting and good question. They've said they have nothing but they also have to report anything that's described as dual-use. For example, any stock in the chemical laboratory in the university is considered dual-use.

Sometimes pens -- regular pencils -- are dual-use since they contain lead.

So they've got to charge it with everything that could possibly be called dual-use. And I can tell you, the world is waiting on tender hooks for the other report, which is the United States government's report. And I think the price of oil will jump or go down on Monday in an interesting way.

WOODRUFF: You're talking about a report after it analyzes what the Iraqis say?

IBRAHIM: Well, we are expecting another report from the U.S. government as well about what Iraq might have. So we're going to have two reports. We're going to have what the Iraqis say and we're going to have what the Americans say.

WOODRUFF: Well, focusing on what the Iraqis say, we're now reading -- we're now hearing that the Bush administration and others are concerned that information could come out that would disclose and maybe upset weapons proliferation agreements. They're worried that information could get out and now they're trying to restrict the people who have access to this Iraqi document.

IBRAHIM: I'm not so sure I understand what the concern here is. We have asked Iraq -- the inspector of the United Nations are expecting Iraq to tell us exactly what is the list of mass weapons -- weapons of mass destruction they have.

I can't imagine what it is that will come out that would upset this resolution. This is what the U.N. resolution requires.

WOODRUFF: Is Iraq cooperating in your view?

IBRAHIM: So far they seem to be cooperating. One asks one's self why are they being so nice? Inspectors show up at the gates of the palace of the president and the president takes 10 minutes and says they can come in. I'm a little surprised but they are cooperating.

I think they are afraid . . .

WOODRUFF: All right . . .

IBRAHIM: . . . that's part of it.

WOODRUFF: Youssef Ibrahim who is a fellow at the Council on Foreign Relations, thank you very much.

IBRAHIM: Thank you.

WOODRUFF: We appreciate you talking to us.

IBRAHIM: Thank you, Judy.

WOODRUFF: Well, the Iraqi weapons declaration is only the latest procedural step in what some see as a diplomatic solution and what others view as an unavoidable military showdown between the United States and Saddam Hussein. Earlier today here in Washington President Bush talked about Iraq with his top national security advisers. Just last hour as Deputy Defense Secretary Paul Wolfowitz delivered a speech inside, anti-war protesters made their voices heard outside a San Francisco hotel.

With me now to talk more about U.S. policy toward Iraq is Democratic Congressman Jim McDermott of the State of Washington. He's one of three congressmen who visited Iraq in September.

Congressman McDermott, from your perspective right now is the Bush administration giving the Iraqis the chance that the Iraqis say they deserve to produce this information.

REP. JIM MCDERMOTT (D), WASHINGTON: I think they have for a very long time wanted a regime change. They're not interested in disarmament. And what they're doing is making this a complex situation. They keep ratcheting up the pressure again and again and again.

This morning's "New York Times" carries a story on the first page about how they are pressuring Mr. Blix to force the scientists in Iraq to come out so that they can be questioned outside of Iraq.

They continue to say they have information -- they have information but they don't give the information so . . .

WOODRUFF: Well . . .

MCDERMOTT: . . . they're playing a got you game.

WOODRUFF: . . . let me ask you the same question I asked Mr. Ibrahim and that is this -- there now is a sense that the Iraqis are going to put out 12,000 pages that there is going to be information in there relating to weapons of mass destruction.

If the Iraqis say they have nothing, what's in this report?

MCDERMOTT: Well, Judy, it really comes down to a question of whether they are building the capacity for weapons. And, for instance, if the - if Saddam Hussein asked to buy pumps to use to put chlorine into the water to make the water purified, those same pumps could be used on a nuclear missile.

So that's called a dual-use. And what they are doing is reporting everything that they consider to be dual-use. They say that's not weapons. But the United States may argue and say, "Well, those pumps that you say are going for chlorine are really going for building nuclear missiles." And that's where the disagreement is going to come.

WOODRUFF: At the very least, though, the fact that the Iraqis are putting this much information out there, which now has to be analyzed not just by the United Nations but by the member countries of the United Nations, by the inspectors, doesn't this mean that any military action has probably been pushed back? MCDERMOTT: I certainly hope so. I think that the most obvious timeline for that to happen would be the 15th of January. But I think they will not have all of these 12,000 pages analyzed and can give a coherent report. And I don't think they're going to go -- the military will not move if it's later than the 15th of January.

So I'm more optimistic right now than I had been because the Iraqis have cooperated at least on the surface. We really don't know what they are and there's lots of reasons not to trust them but certainly up to this point they have done what they said they would do.

WOODRUFF: All right. Congressman Jim McDermott, good to see you again. We appreciate your talking with us.

Earlier today CNN's Connie Chung got an exclusive interview with the Iraqi ambassador to the United Nations. He, once again, denied that his government has weapons of mass destruction.

(BEGIN VIDEO CLIP)

MOHAMMED ALDOURI, IRAQI AMBASSADOR TO THE U.N.: If we don't have such sites how we can lead inspectors to go to sites which we are not -- which are unknown by us? How? Which would be (UNINTELLIGIBLE) that would be the case.

I can understand really what the Americans want. And they want the impossible.

(END VIDEO CLIP)

WOODRUFF: You can see the entire interview with the Iraqi ambassador to the U.N., Mohammed Aldouri, on "CONNIE CHUNG TONIGHT." It begins at 8:00 Eastern, 5:00 Pacific right here on CNN.

More bottom line politics when we come back in our "Taking Issues" segment. The people behind the president's economic policy -- how much does it matter who is on the team and who's out?

(COMMERCIAL BREAK)

WOODRUFF: A senator in the driver's seat, our Jonathan Karl takes a ride with the man who will lead the Senate come January. That's coming up in a few minutes but, first, this "News Alert."

(NEWS ALERT)

And a major shake-up at the White House. The resignations of Treasury Secretary Paul O'Neill, shown on the left, and Economic Advisor Larry Lindsey, were announced today.

With us now Mindy Tucker, Communications Director for the Republican National Committee, and Jennifer Palmieri, Press Secretary for the Democratic National Committee.

Hello to both of you. MINDY TUCKER, RNC COMMUNICATIONS DIRECTOR: Hello, Judy.

WOODRUFF: We have the White House saying that the president is very happy with the service of these two men but they're out and privately saying the president asked them to leave.

You have Democrats saying this really means that the administration's economic policy is a disaster. What's the truth here? Jennifer?

JENNIFER PALMIERI, DNC PRESS SECRETARY: Well, I think that this isn't a surprise. We saw it coming. It is somewhat of an admission on the administration's part that their economic policies aren't working.

We have consumer confidence at a nine year low, unemployment's at a nine year high. And I think it's an admission that they need to change course. And it's a - politically it's a smart time for them to do it. They waited until after the election, it's a down time and they can start the year fresh. But there's big stakes I think in who they select.

WOODRUFF: And at a time with people focused on Iraq.

PALMIERI: Sure.

TUCKER: Well, look, what we do in Washington, sometimes, we get too involved in who the players are and all the inside baseball. What people care about is the policies. This is not about Washington players. It's about people's pocketbooks.

Bush has been very clear about what his economic policy is: tax cuts, helping small business, creating jobs. And that policy is going to be in place no matter who sits in these two positions. And I think that's what we need to be focused on. And that's the same agenda that people put their support behind in the November elections. And it's same agenda you're going to see carried out by this president and whoever in these positions over the next two years.

WOODRUFF: But, essentially, the president was saying he'd rather have somebody else carrying out those policies.

PALMIERI: Well, those may be his policies, but that's not what the result of this economic team has been for two years. They've had a disastrous record. And it's a really risky proposition for them, because I think they had to do this. They had to make this change.

But now that they've made this change, they've admitted that they fired the SEC chief, the Treasury secretary and their economic adviser. It's clear that they're cleaning house and they're starting fresh.

(CROSSTALK)

PALMIERI: ... on their part that they were headed in the wrong direction. TUCKER: People support the agenda. They showed that clearly in November.

WOODRUFF: So, this being said, where does the administration go now? We're already hearing the president is cooking up new proposed tax cuts come end of December or January.

Can something like that wait, Mindy, until the State of the Union or does the president feel pressure to do it more quickly?

TUCKER: We're talking about a matter of weeks. I don't know that the really matters.

I think, in the State of the Union, it will be a great opportunity for him to reiterate what his policy is and lay out any new ideas that are out there. But I also think that a lot of people are supportive of tax cuts. It's not just a Republican idea. And Jennifer has attempted to take credit for

(CROSSTALK)

TUCKER: And a lot of Democrats supported the tax cuts last time, so I don't know that that's really a: Is it now or is it later? I think it's an idea everybody's behind. It's a matter of just coming together and getting it done. And it doesn't matter who the leadership is. Bush really has driven this one.

WOODRUFF: And, Jennifer, if the president does propose tax cuts for the middle class, doesn't that take a big issue for the Democrats off the table?

PALMIERI: Well, it depends on how he does it. Sort of the warning signs we've seen from the stories in "The Wall Street Journal" this week is that they may go after helping big investors more than the middle class in a tax cut that they have proposed.

And I have heard that they may come forward with a plan before Christmas, which is sort of smart politically. They could probably get away with waiting for the State of the Union, but I think you'll see Congresswoman Pelosi and Senator Daschle having to say more about what Democrats think along an economic recovery plan, making sure that it's immediate, that there's immediate relief, that it's targeted, that it's for the middle class.

But I think that we'll see this before the end of the year.

WOODRUFF: And we're going to have plenty of time to talk about it between now and then.

PALMIERI: Yes.

WOODRUFF: Good to see you both. Happy Friday. Thanks for coming by. Jennifer, Mindy, take care. Thank you.

Al Gore is steamed, we're told. We'll tell you why coming up. Plus: It's the last day of stumping in the battle in the Bayou. Our eyes are on the rough race for the last remaining Senate seat. We'll go live to Louisiana ahead on INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: Now that Trent Lott is becoming Senate majority leader, does he see any political train wrecks up ahead? Up next, Lott joins Jon Karl on the subway to talk about the economy and the tip he got from Tom Daschle.

(COMMERCIAL BREAK)

WOODRUFF: When Senate Republican Leader Trent Lott was asked about a year ago whether Treasury Secretary Paul O'Neill should resign, he simply responded, "That's the president's decision."

Well, shortly after word broke this morning of O'Neill's resignation, Lott took a ride on the Capitol Subway with our Jonathan Karl.

(BEGIN VIDEOTAPE)

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Paul O'Neill was somebody who had no shortage of Republican critics up here on Capitol Hill. Would you have any advice to the president about who would get to replace him?

SEN. TRENT LOTT (R-MS), MINORITY LEADER: Well, first of all, he's very plainspoken and an interesting guy, to say the least. So, when you speak too plainly, sometimes, in a position like that, you can get into a little bit of trouble.

I don't have any candidates that I really want to push. I'd have some obviously I'd be excited about: Phil Gramm, naturally, a senator that served on the Finance Committee, the Budget Committee, got a long history, economics professor; or Bill Archer, a great guy from Texas, and the former chairman of the Ways and Means Committee. But they may want to look at somebody maybe that's got some financial, Street background to add a little confidence to that person having knowledge and experience on Wall Street and in the financial community.

So, those two would be great, but I could probably come up with some more that would be great also.

KARL: Do you think Phil Gramm would take the job?

LOTT: No.

(LAUGHTER)

LOTT: I've already asked him.

KARL: You have?

LOTT: Well, I've talked to him about it in the past. And he might, I guess, if the president really pressed it.

KARL: The other big economic news this week is, the unemployment rate has hit 6 percent. What are you going to do? Really, the pressure's now on you. You're in charge up here now. What's your plan to get the economy moving?

LOTT: Well, I'd like to, obviously, get the unemployment numbers down. And I'm always disappointed when it reaches 6 percent or beyond. And that's what we're focusing on right now. And I'm going to be meeting with the leaders of a lot of different sectors of the economy.

I think part of the problem with the jobs and the economy right now is here. It's attitude. I think some of the major industries are still having sort of a negative feeling. And they're still laying off too many people. Maybe they're doing some things they probably should have done a long time under the cover of the present situation. Now, they won't like to hear me say that.

And I've talked to leaders of different industries. And I've said: "Look, I don't want to hear whining. Don't tell me what the problems are. Tell me what the solutions are."

KARL: So, you'll come up with some kind of a growth package, some kind of a plan. I imagine tax cuts are going to be a centerpiece of that plan.

LOTT: Well, obviously, I think that's one way, particularly if you've targeted in such a way that has stimulative effect on overall growth in the economy, like rate cuts do that. But there are some other areas where, clearly, you can do some things that would be helpful to small business and industry and business in general.

I'm not going to reject anything at the gate, except that I think we need to be careful and targeted, so that this doesn't just become another big tax cut package. That's not what we're talking about. We're talking about a growth package. And they're different.

KARL: Some of your friends up here have said that they noticed that you seemed happier, personally, after you lost the majority, not because you lost the majority. But you didn't have that responsibility of trying to run this place with such a narrow majority. Realistically, what's this going to be like for you? Is it a lot more headaches? This is going to be a tough place to run.

LOTT: I've been smiling an awful lot lately, Jonathan. So, I'm pretty happy about...

KARL: Have you been gloating at all?

LOTT: No. I think you would have to acknowledge that the way I've handled myself in the media, I have tried very hard not to gloat. It is a humbling experience. When you've been in the majority and you are back in the majority, it's easier, because you don't have the same number of responsibilities. But you much prefer to have the opportunity to look at the agenda, set the agenda. KARL: You said, just after you won the midterm elections here, that you asked Tom Daschle for advice on how to be a majority leader. What did he tell you?

LOTT: That it always is positive if you will reach out and communicate more with your own people and the other party. Communication, it's essential. And he's right.

KARL: Mr. Leader, thank you very much. Appreciate it.

LOTT: All right.

(END VIDEOTAPE)

WOODRUFF: The political ads get down and dirty in Louisiana on the eve of tomorrow's Senate runoff.

(BEGIN VIDEO CLIP, AD)

NARRATOR: .. liberal senator in Louisiana history, Mary Landrieu.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, AD)

NARRATOR: As Louisiana jobs were sold out, Suzie Terrell was silent.

(END VIDEO CLIP)

WOODRUFF: Just ahead: our Brooks Jackson on the highlights and the lowlights of the contentious last election of the fall campaign.

(COMMERCIAL BREAK)

WOODRUFF: The last election of this fall campaign has lasted all the way into the holiday shopping season. Tomorrow's Louisiana Senate runoff offered Bayou voters a choice between the incumbent, Democrat Mary Landrieu, and Republican Suzanne Terrell.

With me now from Donaldsonville, Louisiana: our senior political correspondent, Candy Crowley.

Hello there, Ms. Crowley.

CROWLEY: Hi, Judy. Welcome to beautiful Southern Louisiana.

We're standing outside a sugar mill that was closed about two years ago. It's serving as a pretty good backdrop for Democratic Senator Mary Landrieu, who lately has been trying to highlight a report in a Mexican newspaper about a so-called secret Bush administration deal that will allow tons of sugar to come into the U.S., at the expense of Louisiana jobs.

Now, Landrieu's opponent, Suzie Terrell, says there's no such deal, secret or otherwise. And she says she knows that because she talked to the Bush administration Trade Office. All of this is pretty much indicative of what's been going on down here in Louisiana and what the main question of this campaign is. And that is: Who will better serve Louisiana, a Republican or a Democrat?

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Yes, sir. That's good.

CROWLEY (voice-over): It's against the rules to write a story about Louisiana politics without a comparison to jambalaya, that spicy, multi-ingredient state specialty dish. So, here you go.

SEN. MARY LANDRIEU (D), LOUISIANA: Gumbo today, jambalaya.

UNIDENTIFIED MALE: ... red beans and rice.

LANDRIEU: Red beans and rice. Are we not the Louisiana team?

CROWLEY: The food is always good, but the going is unusually rough for Democratic Senator Mary Landrieu, who struggles to find the sweet spot between her urban, mostly anti-Bush African-American base and white conservatives, many of whom are pro-Bush.

LANDRIEU: Well, I don't perceive that I'm running against the president. I have supported the president in many instances when his policies have been right for Louisiana. I am running not really against anything. I'm running for the state of Louisiana.

CROWLEY: All Republicans want for Christmas is Suzie Terrell in the Senate. A self-described member of Louisiana's new breed of reformers, Terrell is a popular gal these days, flaunting her friends in high places.

SUZANNE TERRELL (R), LOUISIANA SENATE CANDIDATE: What's important is that I'll have the president ear on issues that are important to Louisiana.

CROWLEY: A Terrell win would make history. There hasn't been a Louisiana Republican elected to the U.S. Senate since the Civil War.

Suzie and Mary are not playing well together in these final days. They rarely looked at each other in the last debate and they have loaded up the airwaves with nasty ads.

(BEGIN VIDEO CLIP, AD)

NARRATOR: What do we really know about Suzie? A paid lobbyist for a foreign drug company.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, AD)

NARRATOR: Mary Landrieu broke her word -- again.

(END VIDEO CLIP)

CROWLEY: They have fought over tax cuts, abortion, and Mexican sugar imports. But, in this incredibly close and final Senate race of the '02 election season, it's hard to ignore the Bush factor.

(END VIDEOTAPE)

CROWLEY: No matter who wins in this election Saturday, it will not change the big picture in Washington. Republicans will still be in the majority in the Senate.

But if the Democrats win here, it would allow them to keep a foothold in the South, increasingly Republican now, and give them a reason to celebrate the new year. For George Bush, it would be a little extra margin to guard against any defections -- Judy.

WOODRUFF: Candy, I have to ask you. What are you hearing about turnout, which they say is going to make all the difference in this contest? How interested are Louisiana voters?

CROWLEY: Well, you know, there's a couple of things. They don't really know. That's the bottom line. They don't know how many people are going to turn out. That's what all elections come down to in the final days. Certainly, that's what this has come down to.

A couple of things: First of all, what Mary Landrieu needs is a big turnout in her African-American base in the cities. They have been fairly lukewarm to Mary Landrieu. They are worried that, without that big turnout, she can't win. And they don't know if they're going to be able to turn it out. They've had some help from some high- profile black Democrats, so they're hoping that that will help them.

On the Republican side, tomorrow is the beginning of hunting season in Louisiana. And there's a big LSU football out-of-state game. So, that could also bring down some of the turnout. And, beyond that, it's a runoff election in December, right in the holiday season. They just aren't sure.

WOODRUFF: Don't you love it when it comes down to who's in the state because of a football game?

All right, Candy Crowley, we know you're going to be there tomorrow night when they start counting those votes. Thanks a lot.

Well, the Louisiana Senate race has featured two main kinds of political ads, as you just saw: mean and meaner. But are the ads really true?

We asked our Brooks Jackson to take a look.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): How sweet it is to have a good issue. In Louisiana, Democratic Senator Mary Landrieu is using sugar against her opponent.

(BEGIN VIDEO CLIP, AD)

NARRATOR: Sugar, one of our state's biggest industries. But, just before our election, Mexicans newspapers revealed a secret deal with Washington to flood America with Mexican sugar. As Louisiana jobs were sold out, Suzie Terrell was silent. The president came to campaign for Terrell. She didn't say a word.

(END VIDEO CLIP)

JACKSON: It's Landrieu attempt to drive a wedge between President Bush, who's very popular in Louisiana, and Republican Terrell, for whom he's campaigned.

So, what about that secret deal? It's no secret that Washington has been openly negotiating for a deal to take more Mexican sugar in return for Mexico taking more U.S.-grown corn sweetener. But there's no deal yet, according to the U.S. trade representative, the White House, and other Mexican news reports. So, Landrieu's allegation is just misleading.

Meanwhile, a Republican ad calls Landrieu the most liberal senator in Louisiana history.

(BEGIN VIDEO CLIP, AD)

NARRATOR: Landrieu voted to allow schools to distribute the morning-after pill to students, even without parental consent. Then, she voted to make it tougher for Boy Scouts to meet in those same public schools: abortion pills in, Boy Scouts out.

(END VIDEO CLIP)

JACKSON: Landrieu says it's a lie. But is it really? Well, she did vote to keep federal money going to school clinics that distribute morning-after contraceptive pills. And she also voted to keep federal funds going to schools that kick out the Boy Scouts for refusing homosexuals. Score those points for Terrell.

But what about this?

(BEGIN VIDEO CLIP, AD)

NARRATOR: Louisiana's most liberal senator ever.

(END VIDEO CLIP)

JACKSON: OK, she does get an 85 percent liberal rating from Americans for Democratic Action. Ted Kennedy gets 100.

But what about this guy? Louisiana Senator Huey Long pushed a positively radical share-the-wealth program back in the Great Depression. Landrieu's record pales next to the kingfish. So this ad...

(BEGIN VIDEO CLIP, AD)

NARRATOR: The most liberal senator in Louisiana history.

(END VIDEO CLIP)

JACKSON: ... is so misleading, it's junk history.

(on camera): Now, don't get the impression it's all nastiness and lies in the Louisiana Senate race. We saw one ad that was actually kind of sweet.

(BEGIN VIDEO CLIP, TERRELL AD)

UNIDENTIFIED FEMALE: First, she's a working mom.

UNIDENTIFIED FEMALE: But, sometimes, she's such a mom.

UNIDENTIFIED FEMALE: And she's honest. She's not really a politician.

UNIDENTIFIED FEMALE: Chrissy.

(END VIDEO CLIP)

JACKSON (voice-over): Terrell is endorsed by her children. We can't argue with that.

(on camera): It's been a nasty year for ads overall. At least these Louisiana attack ads are the last we'll see in campaign 2002.

Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Still ahead: a new view of a White House Christmas. The special guest who helped the first lady show off the holiday decorations gets his own moment in the spotlight -- details just ahead.

(COMMERCIAL BREAK)

WOODRUFF: Checking the headlines in our "Campaign News Daily": One of best-known incoming House freshman has already ascended to an entry-level post on the GOP leadership team. Former Florida Secretary of State Katherine Harris has been named an assistant majority whip. Her job duties will include helping the GOP pass its agenda by rounding up votes on key legislation.

Al Gore has some harsh criticism for recent White House changes to environmental policies. During a radio interview in Chicago, Gore called White House policy -- quote -- "shameful."

(BEGIN AUDIO CLIP, "THE JOHN WILLIAMS SHOW")

AL GORE, FORMER VICE PRESIDENT OF THE UNITED STATES: They got a lot of support from the oil companies and coal companies. And they have chosen to increase the levels of pollution that go into our families' lungs and increase the amount of water pollution that is consumed by people, because that will help the bottom line of some of their biggest campaign contributors. And I think that is exactly what this is all about.

(END VIDEO CLIP)

WOODRUFF: A reminder: The first part of my interview with Al Gore airs Monday at 4:00 Eastern right here on INSIDE POLITICS.

Laura Bush gets some dogged competition -- when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: Finally: a dog's-eye view of the White House.

As you may remember, the Bush family pets were featured guests when Laura Bush showed off animal-themed holiday decorations yesterday. Well, now Barney the dog is getting ready to give his own tour. He will roam the White House wearing a lipstick-sized video camera on his collar.

We hope to bring you the pictures once they're posted on the White House Web site, but administration officials are warning that Barney-cam may not capture much more than a lot of feet. Well, that is, of course, unless he jumps up on the furniture. And we don't know whether they're going to share those pictures with us. We'll find out.

That's it for INSIDE POLITICS this Friday. I'm Judy Woodruff. Thanks for joining us.

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