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CNN INSIDE POLITICS

Bush to Unveil Economic Stimulus Package Tomorrow in Chicago; Republicans Chose New York City for 2004 Convention

Aired January 6, 2003 - 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: The president's plan for your money. Will it boost the economy and put more in your pocket? And how much of it will Congress buy?

New York, New York. For the first time, Republicans will hold their national convention in the Big Apple.

The doctor is in. The new Senate majority leader already is working to heal GOP relations with African-Americans.

The Democrat stance. Why are so many presidential hopefuls taking steps toward running and so few opting to sit this one out?

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

WOODRUFF: Thank you for joining us. I'm on Capitol Hill, as can you see, where members of the 108th Congress are getting down to business before their opening session tomorrow. Senate Republicans are settling into their new role in the majority, and both parties are trying to set their agendas and hit the ground running.

In this "Newscycle," House Democrats outlined their economic plan less than an hour ago. A centerpiece: tax rebates, which they say would help the middle and lower income families more than the president's plan, which would eliminate taxes on stock dividends.

Republicans, hoping to showcase President Bush's leadership since September 11, have selected New York City as the site for their 2004 national convention. New York beat out New Orleans and Tampa-St. Petersburg. We'll have more on that ahead.

Meantime, at the White House, President Bush has been meeting with his cabinet before he formally unveils his economic stimulus package tomorrow in Chicago.

We're joined by our White House correspondent Suzanne Malveaux.

Suzanne, what more have you been able to learn about the president's plan?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, it's a $600 billion package. It's going to be over the course of 10 years, and a senior administration official tells us the centerpiece of this is really the elimination of the tax on stock dividends. That, officials saying, it's a matter of fairness -- that dividends are taxed twice, once in corporate profits and then again in income to shareholders. The whole idea -- eliminate that tax so shareholders spend more, they'll invest more, they'll get a well-needed boost for the stock market.

Critics are saying this is only going to benefit the wealthiest Americans, the top 5 percent. But White House spokesman Ari Fleischer earlier today defending the package, not giving too many details about it, but defending the package, saying there is something for every one.

(BEGIN VIDEO CLIP)

ARI FLEISCHER,WHITE HOUSE PRESS SECY.: Under the president's proposal to provide tax relief, 92 million taxpayers will receive, on average, a tax cut of $1,083 in 2003. Forty-six million married couples would receive average tax cuts of $1,716. Thirty-four million families with children would benefit from an average tax cut of $1,473 and 13 million elderly taxpayers would receive an average tax cut of $1,384. While the statistic I'm happy to give is a typical family of four with two earners making $39,000 in income, will receive a total of $1,100 in tax relief under the plan.

(END VIDEO CLIP)

MALVEAUX: Well, Judy, that's a lot of numbers. You can bet that economists and analysts are going to be looking at those very carefully and debating exactly what they mean.

Some of the highlights of the plan would also include an increase in the child tax credit, an extension of unemployment benefits, also a decrease in the so-called marriage penalty tax, as well as federal dollars for needy states.

And, as you know, it's going to be quite a debate; the administration hoping it will pass it through the House, but there's going to be quite a fight in the Senate -- Judy.

WOODRUFF: Suzanne, how sensitive are they at the White House about this charge from Democrats that this plan benefits the rich more than any body else?

MALVEAUX: Well, honestly, the administration is quite sensitive about that, but they defend the policy. They defend the plan. They truly believe that if you actually promote growth, they believe that that is what is really going to get the economy -- jump-starting the economy again. And they believe that that is going to be through increased spending, through increased investment, greater confidence in the markets and they believe that that is going to be accomplished through these tax cuts as well as the elimination of the tax on stock dividends.

WOODRUFF: All right. Suzanne Malveaux at the White House. And we'll talking to you a lot more about this tomorrow and through the week. Thanks.

MALVEAUX: Thank you.

WOODRUFF: Well, it's easy to get a little confused when politicians start throwing around those economic proposals and competing numbers we just saw.

So let's review the basic elements of the president's plan and who may get the most out of it.

(BEGIN VIDEOTAPE)

WOODRUFF (voice-over): Everyone agrees the economy needs help. The argument is over how much, how soon and who gets the money?

Take the president's plan and its centerpiece, eliminating the taxes that investors pay on dividends.

A dividend is basically a cash payout to investors who hold stock in certain companies or mutual funds. The theory: if you get rid of the tax on dividends, investors will buy more stock, giving companies more money to build factories, upgrade equipment and so on. And that means more jobs for average Americans.

But the biggest beneficiaries of the dividend tax elimination will be wealthier Americans. One non-partisan study says Americans earning $40,000 to $50,000 a year will save $84 off their annual tax bill, but those earning a million or more a year will save $27,000.

And in other likely proposals in the Bush stimulus plan, and the gulf between rich and poor is even wider.

(END VIDEOTAPE)

WOODRUFF: Well, for their part, House Democrats say they have a fairer and a cheaper tax plan that they say would put money directly in the pockets of average Americans so that they can spend it now, when the economy needs it the most. Just a short while ago, the Democrats proposed $136 billion in immediate tax relief, including a $300 per worker refundable tax credit, tax breaks for businesses investing in new equipment, aid to states and an extension of unemployment benefits.

(BEGIN VIDEO CLIP)

REP. ROBERT MENENDEZ (D-NJ), DEMOCRATIC CAUCUS CHAIRMAN: The Democratic plan stimulates. The president's plan procrastinates. The president's plan is too little, too late, and much too irresponsible. The Democratic plan is significant, fast-acting and is fiscally responsible. We stimulate the job market. The president's plan stimulates the stock market.

(END VIDEO CLIP)

WOODRUFF: Congressman Robert Menendez.

Well, our Congressional correspondent Jon Karl is here.

Jon, you know, to listen to the Republicans, the Democrats you'd think that they were miles apart. But is there anything that these plans have in common?

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: There is very little common ground.

They both want to extend unemployment benefits for those people that saw those benefits expire on December 28. They both want to give some aid to the states, but really -- and they both want to do something to encourage businesses to invest in new equipment. But there's -- they are miles apart on this, both in terms of the size the plans and the specifics.

But as far as this Democratic plan that you just outlined, the key here is that that's really not going anywhere in the House because the Republicans are in charge here. The Republicans in the House really probably will have the votes to pass the president's plan or something very much like it.

The trickier part for the Republicans is going to come in the Senate, because they are not going to be able to pass the Republicans' plan without at least some Democratic support.

So in this House -- the House, this plan you saw unveiled by Nancy Pelosi and the Democrats today, is really kind of an opening gambit. It's a way for them to hit the Republicans by saying the Democrats have a plan that is fairer, that would help lower and middle income workers instead of the rich. That's their -- it's kind of a rhetorical device. It doesn't have much of a chance of passing.

But the Republicans have a lot of work, because they're going to have to find some Democratic support in the Senate.

WOODRUFF: All right. So we've heard from the leadership among the Democrats in the House. We haven't heard from the Senate yet. How much consensus is there among all the Democrats about what's the right thing to do?

KARL: Well, the Democratic finance chairman -- the outgoing finance chairman, Max Baucus, put out a plan last month that is quite a bit different and more expensive than the House Democratic plan. They've got common elements, but they're quite different. Tom Daschle has said that he's going to look at -- Tom Daschle's aide said he's going to look at Max Baucus' plan, he's going to look at the House Democratic plan and he'll have his own plan.

So really, even Democrats up here are not yet on the same page, although they all agree they would much rather do something like what Nancy Pelosi's talking about than what the president's talking about.

WOODRUFF: Hmmm. All right. Jon Karl, we're going to try to keep all this straight and you're going to help us do that.

KARL: I'll try. WOODRUFF: Thanks a lot.

Well, in any partisan squabble over policy, it helps to have voters on your side. So let's bring in our senior political analyst Bill Schneider.

Bill, you've been looking at these numbers. Are Americans supporting these different economic stimulus proposals that are being talked about?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, yes, even if they won't benefit personally.

Let's take a look at the list. A majority of American supports every proposal being discussed, from a high of 86 percent, who favored expanding tax credits for child care to 58 percent, who favor cutting the tax on dividends. Most Americans think only three of these proposals will benefit them personally: the child care tax credit, reducing the so-called marriage penalty, that extra tax married couples now pay when both the husband and the wife work, and speeding up the tax cut.

The public supports two of the proposals because they believe they will help the nation's economy even if most people do not expect to benefit themselves: cutting taxes for businesses and cutting the tax on dividends. Just 38 percent of Americans expect to benefit from a dividend tax cut, but 50 percent think it will help the economy.

Finally, there's one proposal people support even though they do not expect to benefit personally, and they don't think it will help the economy. And that is -- extending unemployment benefits. Why do two-thirds of Americans favor that? Probably because they feel it's the right thing to do.

(AUDIO GAP)

WOODRUFF: ...Democrats, and what the president is proposing favor the rich?

SCHNEIDER: Yes. People get it. Fifty-one percent say President Bush's policies do favor the rich. Only 5 percent believe they favor the middle class or the poor, while 41 percent say the president's policies are fair to everybody. You know, Judy, Democrats have what I'd call a "so what" problem. People know Bush's policies father the rich but support them anyway. So what?

WOODRUFF: All right, Bill. When you ask people about international issues out there, and you ask them about Iraq versus North Korea and what's happened in the last few weeks, which country are they saying poses a greater threat?

SCHNEIDER: Iraq. Fifty-one percent say Iraq is the bigger threat. Only 18 percent say North Korea. 28 percent say they're both equally threatening. Now, why? North Korea has thrown U.N. inspectors out and has clearly expressed the intention of developing weapons of mass destruction. The answer is, Americans believe Iraq is more directly linked to terrorism. Americans think the U.S. could win a war with Iraq fairly easily. Their biggest concern is that it could lead to further acts of terrorism here in the United States.

By comparison, more than 70 percent of Americans think the situation in North Korea could be resolved using just economic and diplomatic efforts. Both countries may be evil, but Iraq, a country that's linked to Islamic radicalism, is seen as the bigger threat.

WOODRUFF: The American people have done thinking about these questions.

Bill Schneider, thanks very much.

Much more ahead on INSIDE POLITICS. We'll continue this debate over dueling economic plans and in our "Taking Issue Segment" and find out how markets react.

Also ahead political shots and an early test for Senate Majority Leader Bill Frist. Bob Novak has the "Inside Buzz."

And coming up next.

JEFF GREENFIELD, CNN SENIOR ANALYST: I'm Jeff Greenfield in New York. When Republicans chose New York as the site of their next convention, were they sending a message, and does it really make any difference where the conventions are?

(BEGIN VIDEO CLIP)

(SINGING)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WOODRUFF: Does the new Senate Majority Leader Bill Frist have the new prescription to heal strained relations with black Americans? The prognosis coming up.

Plus, did your stocks make money today? We'll live to Wall Street for a look at today's winning ways. INSIDE POLITICS, back in a minute.

(COMMERCIAL BREAK)

WOODRUFF: Democrats have not always been attracted to New York. So what's the story here?

GREENFIELD: Well, you think it's the city where Democrats almost always run a huge majorities, their party would always want to take to New York. But they once had a very unpleasant experience for years left them Big Apple shy. Take a look.

(BEGIN VIDEOTAPE)

GREENFIELD (voice-over): In 1922, Democrats gathered in New York City for the first time since 1868. It proved to be a disaster. The party was split between New York Governor Al Smith, who represented the emerging big city ethnic block and William McAdoo of California representing the rural more conservative Democrats. That convention lasted 103 ballots, a record, before the exhausted Democrats chose John W. Davis as a compromise. He got clobbered by President Coolidge that fall. It wasn't until 1976 that the Democrats went to New York City again to nominate...

JAMES E. CARTER, FORMER PRESIDENT OF THE UNITED STATES: My name is Jimmy Carter.

GREENFIELD: ... Jimmy Carter. It proved to be a political fortunate course. New York City narrowly escaped bankruptcy the previous year and a famous if not entirely fair headline suggested President Ford didn't care much about the city. That fall, Carter beat Ford in New York state by only four points. A Ford win would have given the Republicans the White House. Four years later, in New York again. The convention split between Carter and Senator Edward Kennedy foreshadowed the Reagan landslide. A landslide in which New York went Republican. In 1992, Democrats came back to New York to nominate Bill Clinton and Al Gore. The duo set out on politically successful bus tour right after the convention ended.

(END VIDEOTAPE)

WOODRUFF: So, Jeff, it's hardly their strongest base. What does it mean to the Republicans to pick New York?

GREENFIELD: A couple of things. First, we shouldn't forget both New York city and New York state have been governed by Republicans almost a decade. Second, obviously much more important, clearly an acknowledgement of what New York went through on September 11, that picture of President Bush a few days after standing in the rubble, addressing rescue workers is a would powerful one.

While this may not be directly relevant, we should think about the last time Republicans met in a supposedly unfriendly environment. That was Detroit in 1980. That could very well, as it turns out, with Ronald Reagan, disaffected blue collar Democrats, the voters we eventually came to call Reagan Democrats. I think it is a basic politics when you play on the other guy's turf, you're in good shape.

WOODRUFF: For all of that, Jeff, do you think convention sites really in the last analysis make much of a difference?

GREENFIELD: Usually, no. I think it's very hard to imagine an undecided voter on election day choosing on the basis the convention met in his or home town, unless you happen to own a catering business or hotel. On the other hand, Judy, I'm sure there are some old Democrats who wonder what would have happened back in 1968 if Democrats hadn't met in Chicago? So it can make a difference, maybe even Republicans have been to New York and three presidentials in our generation, maybe they think this will help. It couldn't hurt.

WOODRUFF: We shall find out. All right, Jeff Greenfield, thanks very much. Well, as Republicans are certainly well aware, the New York media spotlight can shine like none other. With me now, a man synonymous with politics in the Big Apple, former New York City mayor, Ed Koch.

Mr. mayor what about Jeff Greenfield's line, when you can play on the other guy's turf, you're in good shape. Does this mean Republicans are in pretty good shape?

ED KOCH, FORMER MAYOR OF NEW YORK: I think they decided and correctly, that New York state and the city itself are in what we call play. That they can take it. When you consider the fact that we've now had a Republican mayor, Giuliani, and the current mayor, Mike Bloomberg, and he has an enormous victory here, because I think it was his importuning in great part that brought Republicans here. And you have Governor Pataki off a very big recent win.

So I think the Republicans came here believing that it is quite possible that they will take New York, and I believe that they have a very good chance of taking New York. It wouldn't shock me if I end up voting for George Bush. I think he's doing a terrific job.

WOODRUFF: You're saying that maybe there aren't Democrats out there you like. What about the Democratic senator from the state of New York? Hillary Rodham Clinton? Her name's been thrown around...

(CROSSTALK)

KOCH: And I like to take pleasure and pride in helping helped elect her when she ran.

WOODRUFF: Well, what about the notion, Mr. Mayor, that the Republicans will be holding their convention in a city where the Republican mayor has just raised taxes, raised property taxes?

KOCH: Now Bloomberg is highly regarded. If Moses came down from Mount Sinai and imposed an 18 percent real estate tax for a brief period of time, he would not be able to carry the Ten Commandments without been pelted with tomatoes.

But the fact is, that Bloomberg has done a terrific job, and when the convention comes here, my judgment is, he will be very, very popular.

WOODRUFF: Mr. Koch, what about -- we also understand that the city is going to need to raise something like $80 million from the private sector to put on this convention, which both you and I know is really just a big party, that each political party has every four years. Is this a good use of this money at a time when New York City really hurting after 9/11?

KOCH: Oh, I do think it is. Firstly, the $80 million that you referred to would never go in to the general fund for the purpose of delivering services by the city of New York. It will enhance the reputation of the city. It will help business, give us the same kind of feeling that we would have if we had the Olympics. It's just a wonderful thing. I was here when we had the last two conventions. They were Democratic. And they gave the city a very big lift.

WOODRUFF: All right. So let me get this clear before I let you go. You may vote for President Bush, but if Hillary Clinton were to change her mind, you might vote for her?

KOCH: I don't have a hypothetical, because I know that she is not running. I like President Bush.

WOODRUFF: All right. Ed Koch, always outspoken. Great to see you. Thanks very much for talking with us.

KOCH: Thank you.

WOODRUFF: Dick Gephardt is the latest Democrat to enter the race for the presidency, for real. Coming up, why so many Democrats are willing to run against President Bush.

Plus, economic dividends. Do President Bush's proposed tax cuts favor the rich. Our guests from the left and right take issue.

But first, seems like all investors were getting richer today on Wall Street. Rhonda Schaffler joins us like from the New York Stock Exchange with a look at your money.

(NEWSBREAK)

(COMMERCIAL BREAK)

WOODRUFF: We want to take you to the White House now. We've just gotten access to some videotapes shot in the White House in the Cabinet Room where the president's been meeting with members of his cabinet to talk about the agenda for 2003. Let's listen.

(BEGIN VIDEOTAPE)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... the 15th cabinet meeting we've had since we were sworn in and appreciate each of you working so hard on behalf of the American people.

Today we talked about the issues facing our country. The war on terror continues. We'll hunt down the terrorists, wherever they hide. We'll do everything we can to secure the homeland. We heard a briefing today from Tom Ridge about how the reorganization of the Homeland Security Department is going. It's very important for Congress -- I mean the to confirm Tom as quickly as possible and to confirm his team so they can get doing the work of the American people.

Here at home, I hope the Congress will extend the unemployment benefits for the American workers who don't have a job soon. As quickly as possible. As well, it's important for Congress to pass the '03 appropriations bill. We're living under -- continuing resolutions. The agency heads here want to have those budgets finalized so they can have certainty in the appropriations with which they have to work. Congress has got work to do.

Tomorrow I'm going to talk about how to continue the economic growth that we have. Make sure our economy as robust at possible. I look forward to the speech in Chicago because it's a plan that speaks directly to the American citizen. That we'll do everything we can to revitalize the small business sector, to make sure it remains strong so people can find work. Put together a fine economic team. I hope Congress -- the Senate acts quickly to confirm John Snow and Bill Donaldson. They need to move quickly.

I look forward to working with the leadership in the House and Senate. Doesn't matter who's in charge. We'll work with them. Obviously, we're pleased that Senator Frist will be leading the Senate. We'll work with him, we'll continue to work with Senator Daschle and we'll work with Speaker Hastert and Leader DeLay and Congresswoman Pelosi as well.

We have a job to do for the American people, and we'll do that job. Make sure the country's secure, we win the war on terror and make sure people can find work.

Now let me ask you some questions. Sandra (ph), this is your last day, I understand, and therefore you get to ask the only -- I mean, you get to ask a question.

(LAUGHTER)

QUESTION: The first question and the last. You say the economic plan will speak directly to the American citizens. The Democrats say that it speaks most directly to the rich American taxpayers. How do you answer that criticism and the charge that your just (UNINTELLIGIBLE)?

BUSH: Well, the critics haven't seen the plan. This is a plan that provides tax relief to the working citizens. It's a plan that is a very fair plan. It's a plan that recognizes when somebody has more of their own money, they're likely to spend it, which creates more jobs.

Our administration's concerned about deficits and the way you deal with deficits, one, you control spending. And I hope Congress lives up to their words when they talk about deficits, they can join us in making sure we don't overspend. They can join us to make sure that the appropriations process is focused on those issues -- those items that are absolutely necessary for the American people.

I'm pleased that members of the Congress are talking about deficits. It means they understand their obligations not to overspend the people's money.

And the second way to deal with deficits is to encourage revenue growth. And the way to encourage revenue growth is to encourage the private sector to grow. And tomorrow I'll be talking about ways to encourage the growth of the private sector.

Steve? QUESTION: Sir, a few weeks ago, until U.N. inspectors report back, are you seeing signs of compliance by Iraq? Saddam says you're carrying out intelligence work.

BUSH: Well, I thought that was an interesting statement on his part. And when you combine that with the fact that his declaration was clearly deficient, it is discouraging news for those of us who want to resolve this issue peacefully.

He has the obligation to disarm. For the sake of peace, he must disarm. The United Nations has clearly said that.

It is in our nation's interest that he disarm. He is a threat to the American people. He is a threat to our friends and neighbors in the Middle East. He is a person who's used weapons of mass destruction. And so therefore the world has said to Saddam, "You won't have any weapons of mass destruction, get rid of them." And thus far it looks like he hasn't complied.

But he's got time, and we continue to call upon Saddam Hussein to listen to what the world is saying. Not just the United States, but the entire world expects Saddam Hussein to disarm.

QUESTION: Mr. President, (OFF-MIKE) taxation on stock dividends, a lot of analysts say that in and of itself would not have a particularly stimulative effect for the economy. Do you disagree with that? And if in the end you get a benefit like this yourself, is it money that you would then direct to be reinvested or is it...

(CROSSTALK)

BUSH: I didn't hear the second part of your question, the hypothetical part of the question, which I'm probably not going to answer.

(CROSSTALK)

QUESTION: ... Congress does your bidding and you get benefits from dividends that aren't being taxed, would you use that money to reinvest or would you spend it on consumer goods?

BUSH: Me personally?

QUESTION: You personally.

BUSH: My money's in a blind trust, Stretch, so I don't know if I've got any dividends.

QUESTION: If you did.

BUSH: Oh, if I did.

QUESTION: (OFF-MIKE)

BUSH: Well, it's interesting you ask that question. A lot of people get dividends, see, and that's one of the reasons why we're analyzing this issue of taxing things twice, particularly dividends. Most seniors -- over 50 percent of seniors receive dividends.

First of all, it's unfair to tax money twice. There's a principle involved: The government ought to be content with taxing revenue streams or profits one time, not twice.

And in dividends, we tax the corporate profit, and then we tax the money being sent to the shareholder. That doesn't make any sense. That's unfair. That's bad public policy.

Many of the shareholders that pay the taxes are senior citizens. These are senior citizens who've retired and senior citizens who can use that money.

Thirdly, the reduction in taxes on dividends will encourage capital flows, capital flows into the marketplace. It'll encourage investment. And that's what we want, we want to encourage investment activity. Investment means jobs.

And so, I'm not going to specifically tell you what's in the speech tomorrow, but it looks like some others might have already done that. I do encourage you to listen to it, but I encourage you to look at the entire package. It's a package that's shaped for economic vitality and growth.

Listen, we're doing fine. Tomorrow you'll hear me say this economy is one of the strongest in the world. But what we believe is that we can be stronger. And we also know that when somebody's looking for work who wants to work, means we got to continue to try to stimulate job growth.

We don't believe it's the role of government to manage the economy. We've got great faith in the private sector. And so, we're going to create the environment for the private sector to be stronger That's the policy of this administration.

Sandra (ph), good luck to you.

Thanks.

QUESTION: Mr. President, on North Korea?

BUSH: I'll answer one on North Korea, yes.

QUESTION: What would it take for the U.S. or any other nation to have direct talks with North Korea? And they claim to believe that the U.S. is a threat to them. BUSH: Well, first of all, I went to Korea and clearly said that the United States has no intention of invading North Korea. I said that right there in South Korea. And in Kim Jong Il's neighborhood, I spoke as clearly as I said and said, "We won't invade you." And I repeat that: We have no intention of invading North Korea.

We expect North Korea to adhere to her obligations. She's in an agreement with the United States and said that she would not develop nuclear weapons, and we expect people to keep their word. We will have dialogue, we've had dialogue with North Korea. The secretary of state visited with the deputy foreign minister -- the foreign minister, excuse me.

And talking is one thing, but we expect people to honor obligations. And for Kim Jong Il to be a credible member of the world community he's got to understand that he's got to do what he said he's going to do.

I believe this will be resolved peacefully, and I believe it can be resolved diplomatically.

Thank you.

(CROSSTALK) QUESTION: (OFF-MIKE)

BUSH: I'm not telling you.

(LAUGHTER)

BUSH: I won't tell, but somebody will leak it.

(LAUGHTER)

(END VIDEOTAPE)

WOODRUFF: President Bush in the Cabinet Room, meeting with his Cabinet, asked questions there.

You just heard about North Korea, a subject the administration is getting a lot of questions about, because of the difference in its policy toward North Korea vs. Iraq. And North Korea, the president is saying, even though they have nuclear weapons, we can resolve this peacefully, diplomatically, whereas, with Iraq, they are developing nuclear weapons, we think. They may not have them yet, but we are threatening military action.

On his economic plan, which the president will speak about tomorrow, the president said it's fair and balanced. He said it is geared to -- he said look at the entire plan. This is a plan that is geared to growth. Of course, we will hear much more about that tomorrow.

President Bush, again, speaking to his Cabinet, talking to reporters just now in the Oval Office. That was a videotape of the president's remarks.

We're going to take a very short break.

When we come back, we're going to hear from the left and the right, Betsy Hart, Maria Echaveste, on the president's economic plan. Does it favor the rich? And also a question about North Korea.

We'll be right back.

(COMMERCIAL BREAK)

WOODRUFF: With us now: Maria Echaveste, former Clinton White House deputy chief of staff; and Betsy Hart of the Scripps Howard News Service.

Maria, we just heard the president saying this is an economic plan that he's going to talk about tomorrow that is geared toward ordinary Americans. The Democrats say it's geared to the rich. Who's right?

MARIA ECHAVESTE, FORMER CLINTON WHITE HOUSE CHIEF OF STAFF: Absolutely geared to the rich.

The majority of Americans who are invested in the stock market do so through their 401(k)s, their retirement pensions. So, the people who are going to benefit now are those who are getting thousands of dollars in dividends, which are people in the higher-income bracket. More importantly, $600 billion in tax cuts means less money for important priorities for the country, like prescription drug benefits, investments in health, investments in education.

So, this is a totally irresponsible tax plan.

WOODRUFF: Betsy?

BETSY HART, SCRIPPS HOWARD NEWS SERVICE: There they go again with the class-warfare rhetoric.

Let's talk about who pays the taxes. The top 10 percent of income earners in America pay almost 70 percent of taxes. The top 50 percent pay 96 percent of all taxes. You cannot give any kind of a meaningful tax cut to anybody except that it's going to affect the people who pay the taxes. It's impossible to give one without it benefiting those people who actually send the money into Washington. It will benefit the economy over the long term.

And as far as the dividends go, regardless of who is getting them now, because they are taxed so steeply, companies are loath to pay them. Whether or not that's a good decision, they will be more likely to pay dividends in the future and let the market decide and their company's best interests decide whether or not they should pay those dividends.

And that going to raise the entire stock market. It will makes stocks more valuable. It will make equities more valuable. It means there will be more money going into smaller companies. That means jobs. It means economic growth. It's a good idea.

WOODRUFF: Well, let me ask you both, though, about what the American people -- the poll that Bill Schneider referred to earlier. We looked at some other numbers there.

People were asked, which political party is going to do a better job when it comes to taxes, the economy and unemployment? It's pretty close on taxes, the Republicans ahead 46 to 40 percent, exactly even on the economy and unemployment, 43, 42. And on unemployment, the Democrats are assumed to do a lot better. What does this tell you, Maria?

ECHAVESTE: What it tells me is that many people don't understand how our budget works. And they believe the tax cut means that they're going to get money in their pocket. Even if it goes, by the way, that they believe that somehow investing, more businesses will be getting resources, they believe that it's not going to cost them.

What they need to understand is that, for every dollar that is given in tax cuts, it means less in the federal budget for important priorities.

HART: That is simply wrong. Every major tax cut in recent history, including John F. Kennedy's, Maria, has brought in huge revenues to the federal Treasury. That was true of Kennedy. It was true of Reagan. It will be true this time if we allow significant tax cuts. People will benefit at all levels of income.

What's interesting is, the class-warfare argument doesn't work. Bill Clinton knew it, which is why he didn't use it.

WOODRUFF: We're going to have to leave it there. We wanted to talk about North Korea. We're going to save it for next time.

ECHAVESTE: And we need to talk about that one.

WOODRUFF: We're going to have to save it, though.

Betsy, Maria, thank you both. Good to see you.

Well, when the 108th Congress formally convenes tomorrow, Americans have a good idea of what they want the lawmakers to do. Our new poll, which we just mentioned, shows the public views terrorism as far and away the most important issue for Congress to address. The economy is ranked second. That's followed by Iraq, health care costs, education, and prescription drugs for senior citizens.

Well, the new House majority leader, Tom DeLay, is going to be a major player in pushing the GOP agenda through Congress. Our camera was there when the old majority whip sign over his office was replaced today to reflect his promotion.

Another sign of the times: Republican Bill Frist now in charge over in the Senate as majority leader.

And our congressional correspondent, Jon Karl, is back with us.

Jon, you've been talking to Senator Frist and the people around him. What do they say is at the top of their agenda?

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Well, he moves into his office tomorrow, so we'll get that name change tomorrow.

But No. 1 is a very short-term, very important issue for Republicans. On Thursday, if they can pass unemployment insurance and get the president to sign it by Thursday, they can renew unemployment insurance for those people who saw their insurance expire on December 28, without those people missing a single check. So, he has put it at the very top of the agenda in the short term, to get that unemployment insurance extended by this week, by Thursday.

WOODRUFF: Very interesting to hear Republicans talk about that.

Just quickly, Tom Daschle, he's been a little bit coy, but now you think you've got the sound bite that makes it certain he's going to run.

KARL: He's been going around South Dakota explaining to people in South Dakota why he wants to run for president. They've been concerned that they'll lose clout if they lose him as the Senate majority leader.

Look at this quote from Tom Daschle in "The Argus Leader" in Sioux Falls: "How much more clout would we have here if we had a president of the United States? I could be the single biggest economic boon for the state in its history."

So, it sure looks to me like Tom Daschle is going to run.

WOODRUFF: It sounds like it. He's sound like he's been giving it a lot of thought.

OK, Jon, thanks again. See you later.

As expected, the former House Minority Leader Dick Gephardt filed papers today to create a presidential campaign exploratory committee. Another potential White House hopeful, Senator Chris Dodd of Connecticut, says he's going to take a few weeks to decide whether he will join the Democratic field.

Well, many Democrats, as you can see, are lining up to run against President Bush, despite his continued popularity.

Our Bruce Morton has considered how the early 2004 race contrasts with the last time a President Bush ran for reelection.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): Remember 1992? George Herbert Walker Bush was the man of the hour, the winner of the Gulf War, and looked like a cinch for reelection. Some Democrats stayed out of the presidential race, he looked so strong. But some didn't. And one, Bill Clinton, beat him.

Will history repeat itself? Just look at all the Democrats who are running or thinking about running: Tom Daschle, Vermont Governor Howard Dean, Richard Gephardt, Florida Senator Bob Graham, John Kerry, Joseph Lieberman, the Reverend Al Sharpton, and John Edwards. That's eight. And the field could grow.

They are looking not at the president's approval rates, still healthy, but at his reelect rate. If Bush runs in 2004, are you more likely to vote for Bush or the Democrat? And in the most recent CNN/"USA Today"/Gallup poll, Mr. Bush's reelect rating was just 49 percent.

KEATING HOLLAND, CNN POLLING DIRECTOR: There's a magic 50 percent line. And real or not, there's a belief among political junkies that, if an incumbent doesn't get that reelect figure over 50 percent, he's vulnerable.

MORTON: Forty-nine percent is where the first Bush was in October, 1991, a year before his loss to Clinton. The economy -- remember the slogan, "It's the economy, stupid," -- did in the elder Bush. This time, the economy troubles could get better or worse by election time, but the international scene is different, too.

The Gulf War was short and fairly painless. This time, the war on terror looks long. And what about Iraq and what about North Korea?

HOLLAND: In November of 2004, Americans, because of 9/11, may still be looking for someone who can lead militarily. So, we don't know whether or not people will feel that way about Bush in 2004, because we don't know what's going to happen in Iraq.

MORTON (on camera): One other thing. So many Democrats are announcing so early because the primary season is so much shorter this time. Not all states have picked their dates yet, but Iowa is likely to hold its caucuses January 19, New Hampshire its primary the following week.

And so many states may vote the week after that, that we could have a nominee chosen, can you believe this, on February 3.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: And we can hardly wait. We can already see them leaving the starting gates.

Well, the new Republican Senate leader faces a key test right off the bat. Up next, Bob Novak joins me with the "Inside Buzz" on Bill Frist -- when INSIDE POLITICS returns here on Capitol Hill.

(COMMERCIAL BREAK)

WOODRUFF: All right, Bob Novak is here with some "Inside Buzz."

First of all, Bob, Bill Frist is facing a big test right away, as he takes over as the Senate majority leader. Tell us about it.

ROBERT NOVAK, CNN POLITICAL ANALYST: You remember, Judy, that, last year, there was a huge hue and cry that the Republicans in the House of Representatives had stuck an amendment on the Homeland Security Bill giving Eli Lilly and other pharmaceutical manufacturers protection from lawsuits.

Well, what's not so well-known is, the real author of that bill was Dr. Bill Frist. Now, he's got some good arguments. But there's been so much heat that this was an anti-kids and pro-drug manufacturers, there's going to be a big effort to try to remove that from the Homeland Security Bill in the continuing resolution, when that comes up. Is he going to stick to his guns or is he going to retreat? Everybody's watching him on that.

WOODRUFF: All right, well, Bob, everybody knows that, in order for the federal government to spend any of its money, the Congress has to pass these so-called appropriations bills. Out of, what, 10, they have only passed three.

NOVAK: Only passed three bills last year. And so, these were supposed to have been passed by September 30.

Now, what the leaders in both parties and both chambers and what to do is just take what the Appropriations Committee has done and get rid of these old bills. They've got to start work on the next year's bills. But there are conservative Republicans in the House who say there's too much pork in what the committees do. They want to bring these bills to the floor and work them over, cut them down. That would take forever.

So, there's going to be a little bit -- there could be an explosion between the House Republicans leaders and some of these conservative backbenchers.

WOODRUFF: OK, moving along quickly, we've been talking about John Edwards, one of the Democrats looking to run for president. You're hearing something about his media strategy.

NOVAK: He had a terrible "Meet the Press" performance under questioning by Tim Russert. He said he wanted to get back on the horse, go on "Meet the Press" again on NBC. He told me that.

But his advisers have told him, under no condition could he go on "Meet the Press," with Russert's tough questioning. So, he ended up on "This Week" on ABC. He got some very soft questions from George Stephanopoulos. I don't know if he'll ever get on that "Meet the Press" horse again.

I know that he used to be on "CROSSFIRE" all the time. I'm told these same advisers say he never, never can go on "CROSSFIRE." I hope he doesn't think I'm an unfair questioner.

WOODRUFF: Boy, you sure do have some inside information today.

Just last, but not least, Bob, a little information about Harry Reid in the Senate. We've got 15 seconds.

NOVAK: I think he's going to replace Tom Daschle, assuming Tom Daschle quits. Harry Reid is not Mr. Charisma, but he's done a lot of favors. He is running for reelection. Told me that. He may run against Chris Dodd, who's got plenty of charisma, but has done less favors. So, you're going to have Harry Reid, not the most exciting guy in the world, as your Democratic leader, probably, for much of the next two years.

WOODRUFF: I have a feeling the senator would disagree with you, but, Bob, we'll let you get away with it today.

Thanks a lot. See you soon.

NOVAK: Thank you.

WOODRUFF: The Golden State governor begins a second term. Up next: Gray Davis takes the oath of office and prepares to tackle his state's budget crunch.

(COMMERCIAL BREAK)

WOODRUFF: Checking the headlines in our Monday edition of the "Campaign News Daily" here from the Capitol: The last congressional race of the 2002 campaign finally has been decided. Democrat Ed Case won Saturday's special election in Hawaii's 2nd District. Case got 43 percent of the vote, against 43 other candidates in the race to win a full term as the replacement for the late Congresswoman Patsy Mink.

Back on the mainland, New York Republican Congressman Peter King is considering a run for higher office. King says he may challenge incumbent Democratic Senator Charles Schumer in 2004. Congressman King has represented Long Island for the last 10 years.

In California, Governor Gray Davis was sworn in for his second term just a few hours ago. After the ceremony in Sacramento, Davis plans to attend a casual inaugural party tonight, downsized from past inaugurals in deference to the state's fiscal crisis.

Also in the Golden State, shades of the recent Trent Lott controversy: State Republican Vice Chairman Bill Back has apologized for circulating an article in 1999 suggesting the nation would have been better off if the South had won the Civil War. Back is now running for GOP state party chairman.

The article that he circulated read in part -- quote -- "The real damage to race relations in the South came not from slavery, but from Reconstruction, which would not have occurred if the South had won." Well, Back now says that he should not have included that article in the newsletter. Californian Republicans will select their new party chairman next month.

Well, that's it for INSIDE POLITICS from the noisy Capitol Cannon House Office Building.

I'm Judy Woodruff. Thank you for joining us.

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