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CNN CAPITAL GANG

Lott Apologizes for Remarks at Thurmond's Party; North Korea Breaks Nuclear Proliferation Treaty; Bush Picks New Economic Team

Aired December 14, 2002 - 19:00   ET

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

ANNOUNCER: Live from Washington, THE CAPITAL GANG.
MARK SHIELDS, HOST: Welcome to CAPITAL GANG.

I'm Mark Shields with the full GANG, that's Al Hunt, Robert Novak, Kate O'Beirne, and Margaret Carlson.

Senate Republican leader Trent Lott, under fire for his Strom Thurmond comments, talked Monday morning with his Democratic counterpart, Senator Tom Daschle.

(BEGIN VIDEO CLIPS)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: There are a lot of times when he and I go to the microphone and would like to say things we meant to say differently...

REP. MAXINE WATERS (D-CA), CONGRESSIONAL BLACK CAUCUS: I think that Mr. Daschle moved too quickly to explain Mr. Lott. I consider that this is a Democratic Party issue.

(END VIDEO CLIPS)

SHIELDS: The congressional Black Caucus declared, quote, "We call on the president, every member of the United States Senate, and the leadership of the Republican Party to support a formal censure of Senator Lott's racist remarks," end quote.

On Thursday, President Bush broke his week-long silence.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Recent comments by Senator Lott do not reflect the spirit of our country.

He has apologized, and rightly so.

(END VIDEO CLIP)

SHIELDS: Senator Lott faced the news media in Mississippi late Friday afternoon.

(BEGIN VIDEO CLIP)

SEN. TRENT LOTT (R-MS), MAJORITY LEADER: Segregation is a stain on our nation's soul.

I grew up in an environment that condoned policies and views that we know now were wrong and immoral, and I repudiate them.

I'm asking for forbearance and forgiveness as I continue to learn from my own mistakes.

(END VIDEO CLIP)

SHIELDS: Presidential spokesman Ari Fleischer responded, quote, "He apologized again, and rightly so. I reiterate, the president does not think he needs to resign," end quote.

Bob Novak, will Trent Lott keep his Senate Republican leadership post?

ROBERT NOVAK, CAPITAL GANG: I think he will, because of his abject apologies on Friday afternoon. But this whole thing, Mark, is absolutely ridiculous. He was trying to jolly along an old man. It was not a racist statement. It is something he has said to Strom Thurmond not once, not twice, but dozens, dozens of times.

The reason it was so slow developing, there was nothing to it. Not until the Congressional Black Caucus jumped in, and that is the tail that wags the Democratic dog, and then the news media just loves a story like that. They had a feeding frenzy.

And then the president, of course, stuck in the knife when he did not say one kind word about Senator, Senator Lott, which just goes to show you that if you are a Republican, you don't -- you can't (UNINTELLIGIBLE) expect that forbearance from your own colleagues when you haven't really done anything wrong.

SHIELDS: Al Hunt, ridiculous? A tempest in a teapot?

AL HUNT, CAPITAL GANG: Bob, Bob this time has it, has it all wrong. It wasn't -- there was nothing funny about what he said. What Senator Thurmond stood for in 1948 was despicable. It was a great stain on America, the civil rights revolution was one of the greatest moments in American history.

And Bobby, it wasn't the Congressional Black Caucus, it was Kate O'Beirne's "National Review," it was "The Wall Street Journal" editorial page, it was Jack Kemp, Rush Limbaugh, eloquently stated by conservative columnist Charles Krauthammer.

I mean, it was conservatives, I think, that (UNINTELLIGIBLE). I tell you what, Mark, race indisputably is a central facet of American life, and it has played a huge role in Southern politics and the resurgence of the Republican Party.

But it doesn't follow that all Southern Republicans are racists. And I'll give you a good example. The other senator from Mississippi, Thad Cochran, had been there 10 years longer, a bona fide conservative, but a guy who's never played the race card, is widely respected, a man of great decency, widely respected by blacks and whites.

I think the fear of a lot of Republicans, a lot of conservatives is that if Trent Lott stays, he will be seen, rather than Thad Cochran, as the face of the party in the Senate.

SHIELDS: Kate, who is right here, Bob Novak...

KATE O'BEIRNE, CAPITAL GANG: Well, Bob is partially...

SHIELDS: ... (UNINTELLIGIBLE)...

O'BEIRNE: ... right. There is clearly a double standard, Bob. Bill Clinton can praise that lovable old segregationist William Fulbright without any caveat whatsoever, and he gets away with it, former KKK member Senator Byrd can use the N-word on TV, barely a ripple. There's clearly a double standard.

Clearly this is being exploited. The Congressional Black Caucus is not deeply hurt, they're deeply delighted.

Having said that, though, and I do not believe that Trent Lott, when he was at birthday party for Strom Thurmond, was expressing nostalgia for segregated washrooms. But he's been so thoughtless and careless on a matter of race, it took him days to figure out the kind of damage he can do, I think the damage is going to be ongoing to causes an awful lot of conservatives care about when it comes to race.

The president adopted the implication that Trent Lott was waxing nostalgic for segregation, and I think put a gun in the room and walked out in the hall and said, Trent, do the right thing here.

SHIELDS: Margaret Carlson?

MARGARET CARLSON, CAPITAL GANG: Bob is right about only one thing. Trent Lott may keep his job. He has the job, he wouldn't have a prayer of getting the job. But Republicans are very reluctant to kill their own, and palace politics is in his favor.

And there's a small segment of the Republican Party that relies on the Southern strategy that Trent Lott still -- he's, he's, he's cast votes on the basis of it, and some of the things he says uphold that.

And Bob, you said some -- the opposite of what Trent Lott said. You said he said it many times. Trent Lott said it was a slip of the tongue. In fact, he has said it before, and his voting record is consistent with what he said. So it's of a piece, and it's unmistakable...

NOVAK: It's a, it's a, it's a...

CARLSON: ... that a proud chapter in our history is one that he laughingly dismisses...

NOVAK: It's, it's...

CARLSON: ... and wishes had never happened...

NOVAK: It's a joke...

CARLSON: ... (UNINTELLIGIBLE) the civil rights movement.

NOVAK: ... it's a...

CARLSON: It was not a joke.

NOVAK: It's a joke because, and if you listen to the tape, Margaret...

CARLSON: I listened to the tape.

NOVAK: (UNINTELLIGIBLE), (UNINTELLIGIBLE), can I, can I talk when you're interrupting, please? If you listen to the tape, you will hear the laughter immediately when he said it. It was taken as a joke. He has gone up to, to, to Trent Lott, to Strom Thurmond dozens of times. It's hard to carry on a really detailed conversation with, with Strom Thurmond at age 99, as much as it is at 100, and made this joke.

You know, Trent, Trent Lott, he gets -- has gotten a lot more substantial black support in his races for the Senate than, than a, than a lot of, of the moderate (UNINTELLIGIBLE) Republicans in the North.

Now, I want to say one other thing. There are a lot of Republicans who are -- want to get rid of him. It has nothing whatever to do with this silly statement. They don't like Trent Lott. They don't think he's a good leader. I'm not...

O'BEIRNE: Some of them, some of them think this is a...

NOVAK: And they're using this as a device.

O'BEIRNE: Bob, Bob, some of them think this is only the latest example of the fact that he is ineffective...

NOVAK: They don't like him.

O'BEIRNE: ... and a poor communicator...

NOVAK: Exactly, exactly.

O'BEIRNE: ... and he stands to do even more damage.

NOVAK: But this has nothing to do...

(CROSSTALK)

NOVAK: ... this, this all this posturing about race...

(CROSSTALK)

NOVAK: ... is nonsense. O'BEIRNE: The liberals have to use the race card. They race- monger.

SHIELDS: Kate...

O'BEIRNE: They didn't have the race card in November, and Trent Lott is now handed them another one.

SHIELDS: (UNINTELLIGIBLE) just say, I mean, (UNINTELLIGIBLE) William Fulbright supported Harry Truman in 1948, not Strom Thurmond, and he supported every Democratic (UNINTELLIGIBLE)...

O'BEIRNE: And he has a, he has a history...

SHIELDS: ... he supported every...

O'BEIRNE: ... as a segregationist.

SHIELDS: ... supported every Democratic candidate for president, OK, who were the civil rights guys.

But let's get that aside. I listened to the tape, Bob. When he said it, there was total silence.

NOVAK: There was a, there was laughter...

SHIELDS: Total silence in the room.

NOVAK: ... (UNINTELLIGIBLE) I beg to differ...

SHIELDS: (UNINTELLIGIBLE)...

NOVAK: ... if you want to look, you want to look...

SHIELDS: ... (UNINTELLIGIBLE) we will listen to the tape...

NOVAK: ... you want to listen to it to me together...

SHIELDS: ... we'll listen to the tape.

NOVAK: ... you'll hear the laughter. There wasn't...

SHIELDS: (UNINTELLIGIBLE) -- let me just...

NOVAK: ... total (UNINTELLIGIBLE), there was cheering and laughter.

SHIELDS: Bob, no, there wasn't. When he said it...

NOVAK: Well, that's not true.

SHIELDS: ... there was silence in the room.

NOVAK: That's a, that's, that...

SHIELDS: And there was embarrassment. NOVAK: ... that is absolutely untrue.

SHIELDS: There was embarrassment for him.

And let me, let me just say, the problem for Republicans is this. I don't know if Trent Lott can keep the job. The question is, can Republicans keep Trent Lott? I mean, the reality is if -- when Republicans try and reach out to suburban women, they're trying to reach out to college students, this is the face of intolerance. In the South, the Republican Party was born...

NOVAK: Listen, in all, in all due...

SHIELDS: ... in anti-civil -- in anti-civil rights movement, and it's moved beyond that in North Carolina to Elizabeth Dole, in South Carolina...

NOVAK: And in all...

SHIELDS: ... to Lindsey Graham (UNINTELLIGIBLE)...

NOVAK: In all due respect...

SHIELDS: ... (UNINTELLIGIBLE)...

NOVAK: ... in all due respect, I -- there's a lot of people giving advice to the Republican Party who might not have the best wishes of the Republican Party at heart and are just...

O'BEIRNE: Let me...

NOVAK: ... and I know, and I know the media just is delighted...

(CROSSTALK)

CARLSON: Let me respond to Bob, let me respond to Bob.

HUNT: I have talked to Republicans and conservative Republicans around the country, Bob, who I think do have the best interests...

O'BEIRNE: Who do have the party.

HUNT: ... and they say...

CARLSON: Yes. Yes.

HUNT: ... he ought to go. But Kate, one, one distinction, no one is criticizing Trent Lott for praising Strom Thurmond and saying nice things about (UNINTELLIGIBLE). That absolutely (UNINTELLIGIBLE). What was so deeply offensive to so many people, when he said the country would have been better off if we had adopted that...

NOVAK: He was (UNINTELLIGIBLE)...

(CROSSTALK)

NOVAK: ... he was that good old boy kidding around.

(CROSSTALK)

HUNT: ... I mean, that was quite different than just praising him.

(CROSSTALK)

CARLSON: You know, I...

O'BEIRNE: He has a constituency of 50, and so it's up to those colleagues. And most of them now have, which is not to their credit, a finger up in the breeze to try to figure out...

SHIELDS: They sure do.

O'BEIRNE: ... whether they have to.

SHIELDS: It's Margaret's turn to be heard.

CARLSON: I have seen the tape many times. There was not laughter. And he looked down and referred to notes. And he said it was off the top of his head. And he is an embarrassment...

NOVAK: Well, that's not true either.

CARLSON: ... he is an embarrassment to the Republican president, who wants to get rid...

NOVAK: Well...

CARLSON: ... of that (UNINTELLIGIBLE)...

NOVAK: ... I'm just, I'm just appalled...

CARLSON: ... (UNINTELLIGIBLE).

NOVAK: ... because I just saw this tape again today, and there was laughter...

(CROSSTALK)

CARLSON: ... behaved admirably...

SHIELDS: Last word, last word Margaret Carlson. THE GANG of five will be back with threats from the full axis of evil

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

North Korea's communist government announced it is breaking an agreement.

(BEGIN VIDEO CLIPS) UNIDENTIFIED MALE (through interpreter): The Democratic People's Republic of Korea will immediately revive the old Soviet-designed nuclear reactor and resume construction of other nuclear facilities to supply power by canceling the freeze agreement made with the United States.

RICHARD ARMITAGE, DEPUTY SECRETARY OF STATE: We believe that the situation on the Korean peninsula lends itself to the possibility of a diplomatic solution, given that the nations in the immediate area, Russia, China, Japan, South Korea, and the United States all share absolutely the same view that the peninsula must be denuclearized.

(END VIDEO CLIPS)

SHIELDS: Meanwhile, despite comments by officials that there was nothing new in Iraq's 12,000-page arms report, the United States government was not officially rejecting it.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: I don't think it's really possible to know in a matter of hours or days what that document represents, whether it represents a degree of cooperation, or whether it's another example of a lack of cooperation. And I just simply don't know.

(END VIDEO CLIP)

SHIELDS: And the U.S. charged Iran with building nuclear plants that could be used for nuclear arms development.

Is the U.S. concentration on Iraq ignoring the rest of the axis of evil?

(BEGIN VIDEO CLIP)

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The world is not -- cannot just be treated as a photocopy machine, where policies in one part of the world need to be identically copied for another.

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, what is the Bush administration's rationale for zeroing in almost exclusively on Iraq?

CARLSON: The rationale is that the countries we know have nuclear weapons and are, you know, waving them in our face, we're not going to invade, we're going to invade the only country we suspect doesn't have them. And we're waiting to find out.

This week, when you hear about North Korea and its, you know, blatant saying to the United States, We have nuclear weapons and we're going to build them and we're going to use them, you see the inability of the United States to respond. You know, Richard Armitage saying, We're going to negotiate. In some ways that strengthens the Bush administration's argument that once, once a country in the axis of evil has the weapons, then all you can do is negotiate, so we're going to get there ahead of time and, you know, destroy whatever the Iraqis have.

So there is a backdoor way of the Bush administration finding a way that this actually helps them.

SHIELDS: Al Hunt, the axis of evil is -- that's not an equal evil.

HUNT: No, I think it actually reflects the poor job the administration has done in selling the case on Iraq. First of all, they've talked about nuclear weapons, and Margaret's right, when you talk about the axis of evil, number one, it's North Korea for nuclear weapons, number two is Iran, and in third place is Iraq.

You talk about the export of terrorism, number one is probably Iran, with, you know, Hezbollah, North Korea close second, again, Iraq is a distant third.

But Mark, I think what that all ignores is that there is a real case against Saddam. I just don't think the administration has made it very well. And this current U.N. controversy now, this is not a civil liberties issue. Iraq is not innocent until proven guilty, it's the other way around. They are supposed to prove they have destroyed these weapons that the inspectors said in 1998 they had, the mustard gas, the biological weapons.

And we haven't seen all the documents, yet, but I think it's a pretty safe assumption that they not only haven't proven that they haven't destroyed them, but they haven't.

SHIELDS: Bob Novak, what's the story here?

NOVAK: What we're talking about, we aren't talking about mustard gas, for goodness' sakes. We're talking about nuclear arms. That's the question. And this, it's obvious that Iran and North Korea are much further advanced than Iraq. So you would think, a normal person would think that this, this, if, if, if negotiations are suitable in dealing with North Korea, as I think they are, I agree with Armitage, they would be suitable in Iraq.

But what's, what's the missing factor?

SHIELDS: What's the missing factor?

NOVAK: The missing factor is the power balance in the, in the Middle East on the specifications of Israel. This is all, I mean, this is no question, this is a change, they want to change the power realities and the oil realities in the Middle East. And that is why Iraq is treated differently than North Carolina -- North Korea.

(CROSSTALK)

NOVAK: Or North Carolina either. O'BEIRNE: This is one tough panel. The Bush administration has made its case against Saddam Hussein to the satisfaction of a majority of Congress and to the satisfaction of a unanimous Security Council. So we have a few holdouts here who are in very limited company at the moment.

They're of course not obliged to react in the same way to all three -- to three very different threats. And Margaret's right, the contemplation that Saddam Hussein could have a nuclear weapon -- and we're not even clear he doesn't -- does focus the mind when we think about the kind of threat North Korea poses.

But it's not just nuclear, Bob, we're talking smallpox vaccines because former U.N. weapons inspectors think Saddam Hussein has weaponized smallpox, has anthrax, has nerve agents, and hasn't, of course, accounted for...

NOVAK: Some do and some don't.

O'BEIRNE: ... any of it in this 12,000-page report.

HUNT: And Bob, the -- one of the fallacies of your argument laying it on Israel is the fact there are a number of Israelis who think frankly that Iran is a much bigger threat than Iraq.

NOVAK: The Israeli government...

O'BEIRNE: (UNINTELLIGIBLE) Hezbollah.

NOVAK: ... the Israeli government, Prime Minister Sharon, there's no question that he has zeroed in on Iraq. Now, one of the interesting things...

O'BEIRNE: (UNINTELLIGIBLE).

NOVAK: ... was the fact that the United States, the CIA, got word -- great intelligence on finding that the -- this ship was coming from North Korea with these Scud missiles...

SHIELDS: To Yemen.

NOVAK: ... and they didn't know it was to Yemen, they thought it might be going to the al Qaeda, and maybe even connection with Iraq, so we could really have a reason for connecting the September 11 attacks with Iraq...

O'BEIRNE: Bob...

NOVAK: ... and it was a huge embarrassment for the United States...

O'BEIRNE: Bob...

NOVAK: ... when they finally had to let the Scud missiles...

O'BEIRNE: Bob... NOVAK: ... go into Yemen.

O'BEIRNE: Bob, one quick reminder. Good for us that Israel does focus on Iraq. They're the ones who took out their nuclear reactor 20 years ago.

NOVAK: Oh, we don't want to get into that.

O'BEIRNE: Well, they did...

(CROSSTALK)

O'BEIRNE: Thank God they focus on Iraq.

NOVAK: ... it's a question of whether, whether they could or, or should have, but the -- but we don't -- I said we didn't want to debate that now.

SHIELDS: Last word...

CARLSON: Yes, if you can...

SHIELDS: ... Robert Novak. I'm sorry, Margaret?

CARLSON: Oh, no, no, I was just going to say, if you can preemptively get one of these things, all to the good. If you have to invade a country and start a war to do it, you want to make sure that you know what you're doing.

NOVAK: Well, you are a very, very militaristic person, aren't you?

CARLSON: Yes, I am. I...

SHIELDS: Last word, Margaret...

CARLSON: ... and thank you for noticing.

SHIELDS: ... General Margaret Carlson.

Next on CAPITAL GANG, the new Bush economic team.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

President Bush chose as his top two economic officials a railroad executive and an investment banker, John Snow, chairman of the CSX Corporation as secretary of the Treasury, and former Goldman Sachs chairman Stephen Friedman as national economic adviser.

(BEGIN VIDEO CLIPS)

JOHN SNOW, TREASURY SECRETARY NOMINEE: I look forward to joining your economic team to advance a pro-growth, pro-jobs agenda. Thanks to your leadership, and this administration's stewardship of the economy during a tough time, the recession was one of the shortest and shallowest in modern economic history.

STEPHEN FRIEDMAN, ECONOMIC ADVISER DESIGNATE: Growth has returned to the American economy. We must increase the momentum of the recovery. Your administration entered office facing a recession. Your economic policies helped make it one of the shortest on record.

(END VIDEO CLIP)

CARLSON: Same talking points?

SHIELDS: The president also named investment banker William Donaldson to the chairmanship of the Securities and Exchange Commission.

Kate O'Beirne, is this the right economic team, finally, for national prosperity (UNINTELLIGIBLE) national prosperity that apparently has returned?

O'BEIRNE: Mark, who knew the Ford administration was teeming with such talent? John Snow, of course, the new Treasury secretary nominee, has prior government service, Ph.D. in economics, which could be very helpful.

HUNT: I noticed that, yes.

O'BEIRNE: And I think by all accounts has been well received by the president's strongest supporters.

Look, this new team is going to push the Bush agenda, which is going to be, I think, focused on growth, which means tax cuts, help for shareholders by doing away with double taxation of dividends, promotion of savings and investment, new IRAs. Some people on this panel would like to see different people surrounding the president. But this president's agenda is not an anti-tax cut, deficit-phobic agenda, and so I think the new team members are going to be on his team.

SHIELDS: I remember when Republicans used to run on a balanced budget, Al. What happened?

NOVAK: That was a long time ago.

SHIELDS: Well, Ronald Reagan did.

O'BEIRNE: We've grown.

SHIELDS: Ronald Reagan did in 1980.

O'BEIRNE: No, the deficit would take care of itself.

(CROSSTALK)

SHIELDS: ... that was afterwards, Kate. He said that in 1983.

O'BEIRNE: Oh, all right.

SHIELDS: Go ahead.

HUNT: No, I think in a economy that is marked by, you know, it's a financial and it's a service economy, a global economy, pick a railroad guy, makes, you know, a great deal of sense. He's garrulous, everything, he's apparently a rather average CEO.

As for Mr. Friedman, I must say, I talked to a number of people, all of whom say this guy's an exceptional talent. He's too conservative for my taste, Kate is right about this. I don't think he believes strongly in government helping those that can't help themselves.

I would have picked -- I would prefer his wife, from what I've heard. She's much more liberal.

NOVAK: She's a lefty.

HUNT: But let me tell you this, Bob Novak. Steve Friedman was a co-chairman of Goldman Sachs with Bob Rubin, and if under the Friedman regime, you can get half as wealthy as you got under the Rubin regime, we all can retire on you.

NOVAK: That's just...

SHIELDS: Is that true, Bob?

NOVAK: That's just silly. Let, let's take, let's take a, let's take a look at what it, what it is. Program has been mapped out by people, including Larry Lindsey, who he fired ignominiously, and they want people who are going to be salesmen. Now, if you consider those two guys, and if you listen to them, good salesmen, you may have different tastes than I do.

But the problem is, they are deficit hawks. They don't -- they say (UNINTELLIGIBLE) going to be what, do whatever the president wants. But they're going to be questioned. And Al, as much as I like you personally...

HUNT: Thank you, Bob.

NOVAK: ... when I, when I hear you saying Steve Friedman is a terrific guy, it makes me wonder that -- why he named, why he named...

HUNT: (UNINTELLIGIBLE)

NOVAK: ... somebody who contributed so much money to Chuck Schumer's campaign, and is a vice chairman of the Concord Coalition.

I think these are very strange picks, and it's going to be very interesting to see how they work out.

SHIELDS: Margaret Carlson.

CARLSON: Either it doesn't matter what they believe, these two guys, and they're just front men, or Bush is going to become a deficit hawk and be more like his father and Clinton, and we're going to have surpluses again at some time.

O'BEIRNE: It'll be the former.

CARLSON: It makes -- it does not make sense to have the railroad guy come. Bush should have flipped them, actually. I mean, you might want to have Steve Friedman, who's a savvy Wall Street guy, in the Treasury post, and then put the old railroad corporate Main Street guy, who's a lot like Paul O'Neill, in the other job.

SHIELDS: Bob, this pedigree, you (UNINTELLIGIBLE), you have a purity of contributions, if somebody gave to the other party, that disqualifies them?

NOVAK: Yes, yes. Absolutely.

SHIELDS: OK.

NOVAK: Absolutely.

SHIELDS: OK.

NOVAK: See, (UNINTELLIGIBLE), because, because Bob...

SHIELDS: So much for good government, right?

NOVAK: ... ask, ask, ask anybody in the Democratic Party about Bob Rubin. He was an ideologue, a left-wing ideologue. He was a guy who used to do (UNINTELLIGIBLE) contributions. He was a partisan. What's wrong with being a partisan? Only if you're a conservative partisan is something wrong with that.

Al said that Snow was not a, considered a very good CEO, that's true. But I'll tell you, the reputation in Wall Street of Mr. Friedman, after he bailed out on Goldman Sachs, is not very good either.

HUNT: (UNINTELLIGIBLE), but why did you do so darn well during the Rubin years, Bob?

CARLSON: He's a balanced budget partisan.

HUNT: (UNINTELLIGIBLE), Margaret. I want to ask you...

(CROSSTALK)

HUNT: ... why did you do so darn well?

NOVAK: I'm just a humble reporter. I don't do well...

HUNT: No, I mean, financially.

NOVAK: ... in any time.

SHIELDS: OK, no, that's true, Bob, you did do very well.

CARLSON: You don't do good, but you did well. SHIELDS: We'll be back, we'll be back with our CAPITAL GANG Classic, trouble with North Korea's nuclear program in 1994.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

More than eight years ago, the Clinton administration was faced with the danger of North Korea's nuclear development. THE CAPITAL GANG discussed the issue on March 26, 1994. Our guest that night was former secretary of defense Dick Cheney.

(BEGIN VIDEO CLIP, March 26, 1994)

SHIELDS: The United States reacted to North Korea's refusal to permit inspection of its nuclear program by sending Patriot missiles to South Korea, building up defenses and mobilizing diplomatic support for possible sanctions.

CARLSON: I think we've gone much too easily on the North Koreans. They are not a regime that responds to diplomatic measures, and I think we do withdrawn the olive branch and get tougher.

NOVAK: Have we decided that if they have a single nuclear bomb, that we are going to attack them militarily? We haven't. And it would, and it would be suicidal. So I really think you have to put pressure on them -- private pressure would be better...

DICK CHENEY, FORMER SECRETARY OF DEFENSE: I would not argue for military action at this point, other than to reconfirm our commitment...

HUNT: Unless they shut down that reactor again, then you may have to seriously consider it, because then they really are accelerating.

CHENEY: But the military option, Bob's right, is not an attractive one.

HUNT: Dick, I agree with everything you said. I'm just not sure that that regime's going to be there in six or seven years.

(END VIDEO CLIP)

SHIELDS: Al Hunt, were we not all wrong? Were we all wrong in not advocating in 1994 a military response?

HUNT: Well, Mark, I was wrong, that crazy regime's still here. But I still think time's on our side. I don't think they can last much longer. Anyone's been to the Korean peninsula knows what an incredibly dangerous place it is and how careful you have to be. This administration, the only thing you can't do, you can't deal with North Korea by proxy. You got to deal with them directly.

SHIELDS: Directly, Bob? NOVAK: Yes, I think so. And I just -- I'm just amazed how hawkish all these people were. General Carlson wants to bomb, and CIA director Hunt thinks that they're going to pass away. So I stand on my record.

O'BEIRNE: Did you know there'd be a Cheney regime in six or seven years?

(CROSSTALK)

O'BEIRNE: No, what Bill Clinton wound up doing was letting himself be blackmailed, that he would give North Korea everything they wanted in exchange for their promises, and of course they didn't keep them, unsurprisingly, and now they're going to try the same thing with George Bush, but not get away with it.

SHIELDS: Oh, George Bush going to get tough?

O'BEIRNE: Well, he's not going to -- he's not going to...

SHIELDS: OK.

O'BEIRNE: ... give them, give them...

SHIELDS: All right.

O'BEIRNE: ... anything they want, (UNINTELLIGIBLE)...

SHIELDS: Oh, I just missed that this weekend.

O'BEIRNE: ... in exchange for phony promises...

SHIELDS: I missed it this (UNINTELLIGIBLE).

O'BEIRNE: He's not, he's not bombing them, nobody's recommending that.

SHIELDS: Oh. OK, oh, (UNINTELLIGIBLE).

CARLSON: Well, the vice president, the vice president was dovish there on the program.

SHIELDS: Yes.

CARLSON: (UNINTELLIGIBLE) to General Carlson. If, you know, we were tough all along, we wouldn't be in the fix we're in with North Korea now. And all through the Clinton administration, actually, I think each time something came up...

HUNT: What is tough, Margaret?

CARLSON: ... the Clinton administration let it go. Well, why don't -- we've been looking for 12 years of the nuclear weapons, but never following up when Iraq says, No, you can't come in and look. If we'd find them, we could do some surgical kind of strike instead of saying, now, We're going to invade your country and take it out. SHIELDS: Last word, General Carl -- Margaret, General Carlson.

Coming up in the second half of CAPITAL GANG, our "Newsmaker of the Week" is Democratic Governor-elect Jennifer Granholm of Michigan. "Beyond the Beltway" looks at the resignation of Boston's Cardinal Bernard Law with Michael Paulson of "The Boston Globe." And our "Outrages of the Week," that's all after the latest news following these urgently significant messages.

(COMMERCIAL AND NEWS BREAK)

ANNOUNCER: Live from Washington, THE CAPITAL GANG.

SHIELDS: Welcome back to the second half of your CAPITAL GANG.

I'M Mark Shields with the full GANG, Al Hunt, Robert Novak, Kate O'Beirne, and Margaret Carlson.

Our "Newsmaker of the Week" is Democratic Governor-elect Jennifer Granholm of Michigan.

Jennifer Granholm, age 43, residence Northville, Michigan, religion Roman Catholic. Undergraduate degree University of California, Berkeley, LLB Harvard Law School.

Wayne County, which is Detroit, corporation counsel 1994 to 1998, attorney general of Michigan 1998 to 2002, elected governor of Michigan in November of 2002.

Earlier this week, Al Hunt interviewed Governor-elect Granholm from Southfield, Michigan.

(BEGIN VIDEOTAPE)

HUNT: General Granholm, you won the governorship decisively, and you're going to assume office in a few weeks, but you're going to confront a $1.8 billion deficit. The rainy fund is depleted. Are you going to have to defer your campaign promises to reduce class size in elementary schools and increase access to health care?

JENNIFER GRANHOLM (D), MICHIGAN GOVERNOR-ELECT: Yes, I will. In fact, I'm going to have to go to the people and say not only are we going to have to put a pause on some of these campaign promises, but we're going to have to cut programs that you may all find very valuable.

This is going to be a government that's about needs and not wants. All bells and whistles are off. And in fact, we may have to cut some departments out of the state entirely.

HUNT: Do you have any idea which ones they would be?

GRANHOLM: Yes. I'm going to collapse some departments together. I'm going to create a new department out of two departments. I'm going to -- there's going to be two departments that don't even exist any more, the department of environmental quality will be collapsed into the department of natural resources, and the department of career development will be collapsed into another one.

HUNT: You've been very lukewarm to any tax increases, yet given the dire fiscal situation of your state, should the entire burden be borne by those receiving services?

GRANHOLM: Well, you know what we need to do is, we need to get our federal -- our states, in fact, all the governors need to work on Washington. You know, the states are where the rubber meets the road. This is where services are provided. Yet Washington has not yet come up with any relief on Medicaid.

Well, clearly, we need to have a safety net, but we want it to be a government that is lean but not mean. We -- Medicaid across these states is broken. It needs fixing, and it needs some help from Washington.

So the governors need to band together, to have a strategy in Washington to see some relief at the state level.

HUNT: Do you rule out flatly, then, any tax increases?

GRANHOLM: Yes, I don't want to increase taxes. This is -- this state should be a competitive state. When you increase taxes, obviously the burden on businesses and on individuals becomes too high for the state to be competitive. But to seek additional revenue, we need to go to Washington.

HUNT: What can they realistically expect from a Bush administration and a Republican Congress?

GRANHOLM: Each of these legislators in Washington lives in a state. They should have a relationship with their governor. The governors all feel very bipartisan about this. It is critical that we have good roads. These senators, these House members all drive on the roads. It's critical that we have health care. These senators all live in districts where they hear from constituents who may not be getting service.

HUNT: Your first choice to be -- have -- is to have the feds pick up a big chunk of the Medicaid bill?

GRANHOLM: You bet.

HUNT: OK.

GRANHOLM: You bet. And it's -- but, you know, I'm not saying that Medicaid doesn't need to be fixed. But we also need relief, because people are falling through the cracks.

HUNT: You cited the other governors, but the -- Colorado's Bill Owens, who's head of the National Governors' Association, says the real answer is not more money to the states but more federal tax cuts. They're going to produce economic growth and jobs and restore those salad days of several years ago.

GRANHOLM: Well, I think we all have to have an agreement at the governors' association level that we need relief, and we need relief at home. And I think that even Governor Owens would agree that it's not about -- we don't want to just throw money at a problem when a system is broken. Tax cuts, tax cuts, tax cuts is great, because it makes sense from a stimulus point of view. But at some point, people need to understand that the services need to be provided. You can't cut your way out of service altogether.

HUNT: Let's turn to politics. Do you believe that Mississippi Senator Trent Lott should be forced out as the Senate majority leader for his racially insensitive remarks?

GRANHOLM: Yes.

HUNT: You do.

GRANHOLM: I think that it is appalling.

HUNT: On presidential politics, you have a great deal of leeway, because as a Canadian-born, you cannot run for president...

GRANHOLM: Whew!

HUNT: ... or vice president, though a lot of Democrats regret that. But looking over the potential field as of right now, who would be the strongest Democratic candidate in Michigan?

GRANHOLM: Oh, you know, in Michigan, I suppose that if you had to look today and you took a poll, like in every other state, Al Gore would come out on top, because he's the most well known. But that doesn't mean that that's the way it's going to be on -- when these primaries start to roll around. I think there's some very, very promising stars on the horizon.

John Kerry is a great star, I think that Howard Dean is a great star. I think that we're going to have some very robust debates and great decisions ahead.

HUNT: You think Al Gore's going to run again or not?

GRANHOLM: I don't know.

(END VIDEO CLIP)

SHIELDS: Al Hunt, if Jennifer Granholm rules out tax increases and stresses spending cuts, how does she differ from Republicans, or as Republican predecessor?

HUNT: Well, she'll be different, Mark, in appointments and on regulatory matters and some spending priorities, I'm sure. But when it comes to the -- comes to spending, she is in a fiscal straitjacket, as are most governors. It was fun to be a governor in the salad days of the '90s. It ain't such fun any more.

SHIELDS: It was great during those Clinton years, right, Bob?

NOVAK: Did you notice the (UNINTELLIGIBLE) love light went out of Al's eyes when she said no tax increases? I mean, he said, Oh, my God.

You know, but the thing is, Al...

HUNT: I didn't ask that, (UNINTELLIGIBLE).

NOVAK: But the thing is, Al...

HUNT: That was on her.

NOVAK: The thing is, Al, that I really believe that she understands that tax increases resulted in 12 years of John Engler, Republican, as governor, and she is going to avoid that trap. People don't like to pay taxes in the, in the -- they'd rather give up spending.

O'BEIRNE: The fact that the states went on a huge spending spree in the '90s, she's right, she dare not raise taxes, it's bad for a state's competitiveness. So what they'd like to do is make the federal taxpayer bail them out, because what are we going to do, move to Canada?

SHIELDS: All those Republican governors in all those states during the '90s. Go ahead, Margaret.

CARLSON: Yes, and some states are going to have to, there's just going to be no way about -- around it, because each governor (UNINTELLIGIBLE) of the time but a deficit. And these governors are left holding an axe on spending. But it's not going to be enough. There's not enough to cut.

SHIELDS: Last word, Margaret Carlson.

Next on CAPITAL GANG, Beyond the Beltway looks at the resignation of Boston's Cardinal Bernard Law with "Boston Globe" religion reporter Michael Paulson.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

In Rome, Pope John Paul accepted the resignation of Cardinal Bernard Law as archbishop of Boston after revelations that Cardinal Law had failed to remove sexually abusive priests in his own archdiocese.

His statement of resignation said, quote, "It is my fervent prayer that this action may help the archdiocese of Boston to experience a healing reconciliation in unity, which is so desperately needed to those who have suffered from my shortcomings and mistakes. I both apologize and from them beg forgiveness," end quote.

(BEGIN VIDEO CLIP)

MITCHELL GARABEDIAN, ATTORNEY FOR VICTIMS: Just because Bernard Cardinal Law resigned doesn't mean everything's OK now. There's enormous rot, enormous decay within the archdiocese of Boston. And now it has to cleanse itself. And it's -- this isn't going to be a magic wand...

(END VIDEO CLIP)

SHIELDS: Joining us now from Boston is Michael Paulson, the religion reporter for "The Boston Globe." Thank you for coming in, Michael.

MICHAEL PAULSON, RELIGION REPORTER, "THE BOSTON GLOBE": Thank you.

SHIELDS: Michael, I wanted to ask you, before the Catholic Church in Boston can reclaim its moral authority on issues especially of social justice, doesn't the church first have to meet its enormous financial obligations of liability to the victims of this abuse even if it means selling off arch diocesan property and other valuables?

PAULSON: Yes, the financial challenge facing the church is huge. There's still 500 victims pressing legal claims against the archdiocese of Boston. And that's just the situation here in Boston. There are hundreds of other cases around the country. Here in Boston, we're estimating that the bill to the archdiocese could be as much as $100 million.

SHIELDS: OK. Bob Novak?

NOVAK: Michael, the -- I don't quite understand the connection of the bankruptcy, possibility of the church declaring bankruptcy. There's been -- I've read that the Vatican is opposed to that, and that Cardinal Law's resignation makes it less likely that there'll be bankruptcy. Can you, can you explain that connection?

PAULSON: Well, the Vatican does have to approve the filing bankruptcy by an American diocese, and there's a lot of resistance to that, partly on symbolic grounds, it would just be a public relations disaster, and people don't like the comparison of financial bankruptcy to spiritual bankruptcy.

But also it would lead to an unprecedented role of the state of church affairs, because a federal judge would be allowed to oversee the church's finances.

The reason that Cardinal Law's resignation might affect this is that it has somewhat lowered the temperature between lawyers for the church and lawyers for victims. They've agreed today to postpone some of the depositions of Cardinal Law and his former deputies, and there's some hope that they might be able to reach a mediated settlement rather than having to go the route of declaring bankruptcy and letting a judge intervene.

SHIELDS: Margaret Carlson.

CARLSON: Michael, wouldn't the temperature have been lowered sooner if the hierarchy, the bishops in Boston, hadn't gathered around Cardinal Law and stonewalled like accountants at Enron or like Trent Lott or just behaved like a corporation or a politician? PAULSON: You know, Cardinal Law was fond of saying that the archdiocese of Boston and the Catholic Church are not either a political institution or a business. They're not bound by the same rules, and they don't behave in the same way. Cardinal Law, as we've seen over and over this year, was not directly accountable to people in the pews. He was accountable only to one man, and that's the pope.

But certainly had he left earlier, this story would be very different.

SHIELDS: Kate O'Beirne.

O'BEIRNE: Michael, by accepting Cardinal Law's resignation, might the Vatican have now initiated a domino effect, the kind of thing that they've long worried about? What do you suppose would be their response to Catholics in other dioceses whose bishops behaved in ways similar to Cardinal Law?

PAULSON: Yes, that's a very interesting question. That fear of a domino effect has been a dominant one at the Vatican all year. There has been some thinking over the last couple weeks, as the news out of Boston has gotten more incendiary and more horrifying, that Cardinal Law stood apart from the other bishops so much that the risk of a domino effect might be less.

But certainly there are Catholics in other dioceses around the country, particularly where Cardinal Law's auxiliary bishops are now serving, who are very angry and will continue to push the case for removal of others. And I expect the Vatican will resist that.

SHIELDS: Al Hunt.

HUNT: Well, Michael, let me follow up on that. One of the, one of his, his disciples is right up there near you in Manchester, New Hampshire, is it Bishop McCormack? Is he, is he imperiled, do you think?

PAULSON: Bishop McCormack has a tough case. I mean, he has been implicated in many of the abusive priest case here in Boston, where priests that he knew and he oversaw remained on the job despite abusing children.

There's also a remarkable legal development this week in New Hampshire where the church, the diocese of Manchester, signed an agreement with the attorney general of New Hampshire acknowledging that they had the facts to prove a case of child endangerment against the diocese.

SHIELDS: Michael, I want to say, as someone who grew up in the archdiocese of Boston, I was baptized and confirmed there, that I know that there was initial criticism of you and the paper for this story. I salute you for what you've done. I mean, these are crimes and offenses that cry to heaven for vengeance, and thank you for uncovering them.

I wanted to know, from a legal point of view, is there any Vatican ultimate responsibility or culpability financially for the archdiocese's obligations?

PAULSON: You know, we think of the church as this very well- organized hierarchical institution, but it's organized legally into a large number of subdivisions. The Vatican has said over and over again that it will not bail out financially any diocese that runs into trouble, and the archdiocese of Boston is in serious financial trouble, and no lawyer has succeeded in making a legal case against the Vatican. There have been some cases brought, and they've all been dropped.

SHIELDS: OK. Bob Novak?

NOVAK: Michael, we ran the sound bite for the lawyer for the victims, and he sounded like he was almost regretted that the, that the archbishop, that the cardinal had resigned as archbishop because it might be more difficult to win in court now, to win these legal cases. Is that, is that your impression too?

PAULSON: Well, I don't think the legal cases depend on Cardinal Law being archbishop of Boston. I mean, what happened, happened. And if those cases get to court, the archdiocese is going to have a very difficult time.

But certainly Cardinal Law's presence here served to energize laypeople and priests who were pushing for change, and I think there remains now a question about whether those folks who have gotten exercised this year and have spoken up in a way that they hadn't before, whether they remain engaged now that Cardinal Law, who was the lightning rod, has moved on.

SHIELDS: Margaret Carlson.

CARLSON: Michael, I'm wondering, how strong is the voice of the faithful going forward here? And what about the role of the priests? Some of them did, you know, have the courage to go against the hierarchy.

PAULSON: Yes, you know, the role of the priests here was really historic. Catholic priests, as you know, promise obedience to their bishops. And they're generally very shy of getting into open criticism of bishops or the church. But we did this past week in Boston have 58 priests sign a letter that they released publicly calling for Cardinal Law to quit, and we believe that that played a role in the Vatican's ultimate decision to accept his resignation.

The priests have formed an organization here called the Boston Priests' Forum that they say they will move ahead with, and they say that no longer are they willing to remain silent about problems they see in their own church.

Similarly, there's a new lay organization that was formed here in February by Catholics who were outraged about the conduct of their church. They also pushed for Cardinal Law's resignation, and they also say they're sticking around to push for what they call structural change in the church.

SHIELDS: OK. Michael, Michael Paulson, thank you very much for being with us.

THE GANG will be back with the "Outrages of the Week."

(COMMERCIAL BREAK)

SHIELDS: Now for the "Outrage of the Week."

One of Trent Lott's dumbest mistakes last week was his failure to emphasize that Mississippi, only the nation's 31st largest state in population, has today more elected black officials, 897, than any of the other 50 states, including the fact that they have 11 black sheriffs.

But here's the outrage for the party of Abraham Lincoln. Of the 9,040 black elected officials in the United States, only 50 of them ran and won as Republicans. That is a profound indictment of a GOP failure.

Bob Novak.

NOVAK: Who could imagine a better team for the blue ribbon terrorist commission than Henry Kissinger as chairman, named by the Bush administration, and George Mitchell as vice chairman, named by Democrats? Liberals began immediately picking on Kissinger, and he quit yesterday rather than reveal his firm's clients. Mitchell quit earlier rather than leave his law firm.

Now, during World War II, the government hired business executives at $1 a year while they kept their private interests. Too bad the priests of political correctness prevent successful people from serving their country.

HUNT: Ohhh!

CARLSON: Ohhh!

SHIELDS: Margaret.

CARLSON: Recently, "The Wall Street Journal" editorial page took after tax dodgers. No, not new Treasury Secretary John Snow's corporation, which didn't pay taxes for years. "The Journal" loves that sort of thing.

No, it's the, quote, "nontaxpaying class," driving cabs and selling Slurpees, who pay too little taxes to be angry enough to vote for tax-cutting Republicans. An early April Fool's joke? No, they were serious about the awful burden the angry wealthy must shoulder all alone.

What next? An editorial sympathizing with GE's Jack Welch for having to pay property taxes on his four mansions?

SHIELDS: Kate O'Beirne.

O'BEIRNE: Well, it is the season to discriminate against Christians. A federal suit was filed this week because nativity scenes are banned from New York City's public schools. Is this a legitimate prohibition of religious symbols? No. The school system allows the display of what it calls secular symbols like menorahs and the star and crescent.

Now, these Jewish and Muslim symbols are historic, cultural, and religious, just like creches. This phony distinction privileges some religions over another, and singles out Christians for discrimination. How very merry.

SHIELDS: Al Hunt.

HUNT: Mark, Latin America has been ignored by the Bush administration. There are greater concerns in other regions in the Middle East and Asia.

But the White House, pandering to the Cuban-American vote in Florida and over the objections of Secretary of State Colin Powell, selected a right-wing ideologue, Otto Reich, for its top Latin American post, even after he couldn't win Senate confirmation. He's been a disaster.

Now, leading Senate Republicans have told Mr. Bush to send up a new appointee with Latin America rather than domestic politics in mind.

SHIELDS: This is Mark Shields saying good night for THE CAPITAL GANG.

Coming up next, "CNN PRESENTS: Showdown Iraq -- Five Questions."

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