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CNN CAPITAL GANG

Bush Unveils Economic Plan; White House Modifies Stance on North Korea; Daschle Stuns Political Community

Aired January 11, 2003 - 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, Al Hunt, Robert Novak, Kate O'Beirne, and Margaret Carlson.

President Bush unveiled his economic plan, calling for nearly $700 billion in tax cuts.

(BEGIN VIDEO CLIPS)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: For the sake of economic vitality, I'm asking Congress to make all the tax rate reductions effective this year.

For the good of our senior citizens and to support capital formation across the land, I'm asking the United States Congress to abolish the double taxation of dividends.

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: My key concern is really twofold. First, there is no stimulus in the Bush stimulus plan. And secondly, it is grossly unfair.

(END VIDEO CLIP)

SHIELDS: The new Congress quickly passed and the president signed extension of unemployment benefits, but not before Democrats protested in the floor debate.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), NEW YORK: I would point out that passage of this bill, as important as it is, will leave many, many people without any means of support.

REP. CHARLES RANGEL (D), NEW YORK: We got a million people out there. They don't have dividends, they don't have savings. All they have is heart, and looking for work.

(END VIDEO CLIPS)

SHIELDS: Bob Novak, did this opening week foretell a partisan year ahead? ROBERT NOVAK, CAPITAL GANG: You bet, because the Democrats, most of them, feel that they had the wrong strategy in the midterm campaign, that they should have just pounded on President Bush. Now, whether that's right or not, they believe it is right, and so they feel that it wasn't because they were obstructionist that they lost, you know, they think they should be more obstructionist.

So we're going to, we're not -- they can't even organize the Senate. Their protests, the Democrats, are preventing that from happening. But they're going to be very tough on anything getting passed, and they're going to give President Bush no leeway. They're going to pound on him every day and twice on Sunday.

SHIELDS: Really?

HUNT: Yes.

SHIELDS: Margaret Carlson, is it going to be that ugly?

MARGARET CARLSON, CAPITAL GANG: While the rest of us at church, they're going to be pounding.

Bush is very good at not having changed the tone, but calling the other side partisan while begin quite partisan himself, because the lesson he took from the midterms is that he should come back and solidify the base that's already solid as concrete by taunting Democrats with renewing the Judge Pickering nomination, by saying, Hey, you didn't like that first tax cut? Well, what do you think about this one?

Now, that's the partisanship that we're seeing, and it's all coming from the Republicans.

SHIELDS: Kate O'Beirne, you'd have to say to some degree he's doing exactly the opposite of what his dad did. I mean, he is...

KATE O'BEIRNE, CAPITAL GANG: Absolutely.

SHIELDS: ... make -- he's making absolutely sure the conservative...

O'BEIRNE: Right.

SHIELDS: ... social-cultural right is with him, and the conservative antitax right is with him.

O'BEIRNE: And a whole lot more. Conservatives are far more enthusiastic about this proposed tax package than they were about the one in 2001.

SHIELDS: Really?

O'BEIRNE: We think they -- he's corrected a lot of mistakes then by now accelerating the rate cuts. I think they came back from the November elections, the White House, and some advisers have been quoted to this effect, saying that they think the president gets a second, quote, "honeymoon," a second 100 days, owing to his elevated popularity post-9/11 and the wins in November. So he's going to be bold.

And the way, it seems to me, you can tell the Democrats are being so partisan is, they're contradicting themselves. They're now making arguments that are directly contrary to what they were saying three months ago. Three months ago, shareholders had no better friends than the (UNINTELLIGIBLE), than the Democrats when corporate corruption was the issue. Now they're complaining that George Bush's tax cut stimulates the stock market on behalf of 100 million shareholders rather than the job market.

He really has them in disarray.

SHIELDS: Who are these stockholders, Al? Are they all just mom and pops and people out there? Is that what it is?

AL HUNT, CAPITAL GANG: It's crumbs for about 99 million, and then it's caviar for the, for the, for the very top. This is a, this is a bad proposal. Kate says it's bold. Well, the Clinton health care plan was bold too. Bold does not mean good, and this is bad.

It won't create jobs, it's not going to stimulate the economy, it will exacerbate the income disparity in America. It's just a -- and it's also bad tax policy.

But I must say, Mark, I think there's a real shot he's going to get much of what he wants, because I think the -- (UNINTELLIGIBLE) -- the White House calculation is, the Republicans in the House are like lemmings. They take their marching orders, and they just swim right along. Mixed metaphor. And in the Senate...

NOVAK: It is a mixed metaphor.

HUNT: I think it is.

SHIELDS: It's a good one.

(CROSSTALK)

HUNT: I think I got two or three in there.

SHIELDS: The swimming lemmings.

HUNT: And a marching one.

SHIELDS: That's right.

HUNT: But -- and in the Senate, it's a thin reed to count on GOP resistance to this plan, because other than John McCain, I -- invariably, Republican moderates capitulate, and I think Bush won't get the whole dividend proposal, but he'll get most of it. It'll be a bonanza for the rich.

(CROSSTALK) NOVAK: ... Al, Al has gone back to his days as a crack reporter for "The Wall Street Journal," covering the Ways and Means Committee...

HUNT: And loving it.

NOVAK: ... that was good reporting, it's a good analysis. But let me say one thing is, last week, I was rather negative about what I was -- feared that the president was going to negotiate with himself and cut back on the only half of a repeal of the dividend tax...

SHIELDS: Pretty bold, huh?

NOVAK: ... and was -- would not accelerate the 2001 cuts. He did negotiate with himself. Any negotiation's going to have to be done on the Hill, and that's the way you have to do a tax bill.

I think there's, there's enormous amount of enthusiasm in the investor community, in the business community, and among conservatives on this bill. This is a terrific bill.

SHIELDS: (UNINTELLIGIBLE) let's place a couple places where there's no enthusiasm, OK? The states that are, that are suffering, that there was, I mean, this went from $15 billion to $10 billion to $6 billion to nothing for the states. And 8.6 million Americans who are now looking for work actively. There was nothing in there for them.

O'BEIRNE: There was -- well, they already did the unemployment bill, and they finally solved the problem when you lengthen unemployment, you tend to lengthen spells of unemployment. They think that this new sort of novel plan, of permitting people to keep $3,000, they've solved that.

But I'll tell you who's going to be enthusiastic, every single taxpayer. A family of four at very modest incomes, $40,000, gets $1,100 in tax relief. That's why it's going to be so potent politically, this plan.

HUNT: Those figures are just balderdash. Let me tell you...

O'BEIRNE: No, that's not true! They have children!

HUNT: ... what -- let me...

O'BEIRNE: Child tax credit and marriage penalty.

HUNT: ... I mean, I mean, I'll tell you who else is incredibly enthusiastic about this is the Bush cabinet. You got to go back to Teapot Dome to find such a fleecing. This time it's legal. Bloomberg reported that George W. Bush himself, $44,000 tax break here. Dick Cheney, $327,000 tax break.

NOVAK: How much does that (UNINTELLIGIBLE)?

HUNT: The cabinet, can you imagine what they get? Jack Welch -- they took care of their friends too -- Jack Welch said, It's a great plan, but it's really peanuts. Now, it's a million dollars to Jack Welch. Now, that may be chump change to, you know, Jack and his girlfriend...

NOVAK: (UNINTELLIGIBLE)...

HUNT: ... but I'll tell you something.

SHIELDS: Susan.

HUNT: A welder making 60 grand a year trying to send two kids to school...

HUNT: Al, Al...

HUNT: ... that's not chump change.

NOVAK: Al...

(CROSSTALK)

HUNT: And I'll tell you something else. A fireman...

HUNT: (UNINTELLIGIBLE)...

HUNT: ... making 70 grand who wants to...

O'BEIRNE: (UNINTELLIGIBLE) big tax cut.

HUNT: ... has a severely -- it does not -- get -- who has a severely ill child, it'll mean nothing...

NOVAK: Al...

HUNT: ... to him.

NOVAK: ... how much have those people that you're, that you're libeling and slandering in the...

HUNT: I'm not libeling and slandering them.

NOVAK: ... in the cabinet, how much do they pay in taxes?

HUNT: Bob...

NOVAK: How much does George W. Bush pay in taxes? Do you know?

HUNT: ... they are (UNINTELLIGIBLE)...

NOVAK: Do you know?

HUNT: Can I finish?

NOVAK: How much?

HUNT: They are -- can I tell you something? Those people at that income strata have done better than anyone else in society...

NOVAK: I'm asking you how much they pay...

HUNT: ... in America...

(CROSSTALK)

HUNT: ... and they are paying much less...

NOVAK: ... you won't answer the question.

HUNT: ... they're paying much less than they used to pay. But I can understand why you want to duck that issue.

NOVAK: They paid too much.

(CROSSTALK)

HUNT: I don't blame you.

(CROSSTALK)

SHIELDS: Bob, Bob, time out.

CARLSON: (UNINTELLIGIBLE)...

SHIELDS: Margaret.

CARLSON: ... 30 percent of this tax goes to the top 1 percent, and there is a Mod Squad in the Republican Senate that's not going along with it. And they've already...

SHIELDS: Lincoln Chafee?

CARLSON: ... voiced their objections. Chafee, McCain, Olympia Snowe...

SHIELDS: That's it.

CARLSON: ... will go against it. And Senator Charles Grassley, no Mod Squad member himself, has said this tax cut is not going to go through as sent...

NOVAK: He didn't say that.

CARLSON: ... by the Bush administration.

(CROSSTALK)

CARLSON: ... wait, (UNINTELLIGIBLE)...

NOVAK: ... what Senator -- just a minute -- Senator Grassley, chairman of the Finance Committee, very independent mind, he said this may have some trouble, and he would prefer certain thing. I will predict he will be a good soldier, and I think you will agree with me, won't you? CARLSON: OK, I'll bet you, Bob.

O'BEIRNE: ... (UNINTELLIGIBLE)...

(CROSSTALK)

O'BEIRNE: ... (UNINTELLIGIBLE)...

CARLSON: ... he's going to accept compromise.

O'BEIRNE: ... (UNINTELLIGIBLE) bigger. The package will get bigger as it gets (UNINTELLIGIBLE)...

HUNT: And Bob, you'll be even richer when it's all over.

SHIELDS: Let me just say...

(CROSSTALK)

SHIELDS: ... what it comes down to, what it comes down to is the oldest approach in the world. Ken Galbraith said it best, if you stuff enough oats into the horse, then eventually something comes out the other end for the sparrow, and that's exactly it. It's all for the rich...

(CROSSTALK)

SHIELDS: ... I'm sorry, (UNINTELLIGIBLE) lemmings...

CARLSON: (UNINTELLIGIBLE) is over.

SHIELDS: ... we're going to -- we can go equine.

THE GANG of five will be back with twin crises in Korea and Iraq.

That's exactly what it is.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

President Bush modified his stand on dealing with North Korea's nuclear weapons development.

(BEGIN VIDEO CLIPS)

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: We will not negotiate, but we will talk to North Korea about North Korea's intentions and how they intend to come back into compliance with the obligations that they committed to.

PAK GIL YON, NORTH KOREAN AMBASSADOR TO THE UNITED NATIONS: The United States now say that we may talk to you how to (UNINTELLIGIBLE) comply with the international obligations, we'll not negotiate with you. I think this is not a sincere attitude of the negotiators.

(END VIDEO CLIP)

SHIELDS: North Korea initiated nine hours of talks with New Mexico's Democratic governor, Bill Richardson, the former U.S. ambassador to the United Nations.

(BEGIN VIDEO CLIP)

GOV. BILL RICHARDSON (D), NEW MEXICO: There will be a peaceful resolution of the current situation through diplomacy and through dialogue. It is my hope that we will see a direct dialogue soon.

(END VIDEO CLIP)

SHIELDS: Meanwhile, United Nations weapons inspector Hans Blix reported to the U.N. Security Council on Iraqi weapons.

(BEGIN VIDEO CLIPS)

HANS BLIX, CHIEF U.N. WEAPONS INSPECTOR: I said that we still get prompt access from the Iraqi side, that the inspections are covering ever wider areas and ever more sites in Iraq, that in the course of these inspections, we have not found any smoking gun.

JOHN NEGROPONTE, U.S. AMBASSADOR TO THE UNITED NATIONS: What we have seen of Iraq's actions over the past six weeks does not constitute active cooperation.

(END VIDEO CLIPS)

SHIELDS: Kate O'Beirne, are the signals from the Bush White House for war in Iraq and not for war in Korea?

O'BEIRNE: Mark, it seems to me that one reason bad policies are bad, which the Clinton policy on North Korea was, is because it leaves you with bad options. And I think the bad options we have confronting a nuclear North Korea helps focus the mind on how important it is that we never face a nuclear Iraq, because Iraq, unlike North Korea, has attacked its neighbors, openly supports Islamic terrorists, and would control the Middle East oil supply.

We can handle Iraq militarily because we're superior militarily, and I expect we will do so. It does not leave us a clear military option in dealing with a nuclear North Korea.

SHIELDS: So the conclusion from this, Al Hunt, seems to be, on the axis of evil, we get very tough with axis of evil countries that don't have nuclear weapons...

O'BEIRNE: While we can.

SHIELDS: ... but if you have a nuclear weapon, we're going to give you a pass, play patty cake, and ask you to talk to the Democratic governor of New Mexico.

HUNT: Well, Kate, I'd remind you that Korea did attack its neighbor, South Korea... (CROSSTALK)

HUNT: ... but the also...

SHIELDS: ... 53,000 Americans paid there...

(CROSSTALK)

HUNT: ... they blew an airplane out of the sky too some years ago.

NOVAK: (UNINTELLIGIBLE) American, American naval vessel...

HUNT: Right, exactly.

NOVAK: ... they're a real bad bunch of guys.

HUNT: They've done some really, really bad things. But this administration's policy, as I understand it is, well, first of all, blame it on the Clinton administration, and secondly say, you know, We don't talk to them until they capitulate. Now we're saying, this administration says, We're not going to negotiate, but we're going to talk. And who's going to do the talking? The Clinton administration's United Nations ambassador. Huh? That will tell you something.

CARLSON: Right.

HUNT: Look, I think there are clear distinctions, I agree with Kate on that, between Iraq and North Korea. But I'll tell you one thing they share in common. And that is that we can't go it alone. There've been four -- there've been four elections in major countries in recent months, in Germany, Brazil, South Korea, and Pakistan, the one common element they have is the anti-American side and theme has worked.

We can't go it alone, whether it's Korea or whether it's Iraq.

SHIELDS: Bob Novak, is Al Hunt right?

NOVAK: He's mostly right. I don't worry about these elections being anti-American, that's a good card to play for the local politicians. But I think one of the most delicious moments I have seen in a long time was this (UNINTELLIGIBLE), this talk in Santa Fe with Bill Richardson. I mean, it was just, it was just priceless.

Bill -- I mean, even in the, in the Clinton administration, they'd get mad at Bill because he wanted to talk to these rogue nations. I supported him, I think it was -- it was a very good idea.

SHIELDS: That helped him in the Clinton administration.

NOVAK: But, but the -- but, but the, but the interesting -- the interesting thing is that Colin Powell, the secretary of state, trying to tone down some of the absolutely belligerent attitudes in this administration, and he gave the OK to Bill Richardson. He said, Go ahead and do it. And he -- Colin Powell, his winning on Korea, not getting us into some kind of belligerent thing, that just, just...

The Iraq thing, the reason Iraq is important is because it has to do with Israel and the Middle East. That's why we're interested in them, that's all part of that. And again, Colin Powell is trying very hard to have a more reasoned approach.

SHIELDS: Margaret, go ahead.

CARLSON: Mark, I think we should all sleep better tonight knowing that peace is at hand between New Mexico and North Korea.

And by the way...

SHIELDS: Santa Fe-Pyongyang...

(CROSSTALK)

SHIELDS: ... that axis.

(CROSSTALK)

HUNT: The axis.

CARLSON: Yes. If diplomacy works here, maybe the Bush administration will say, Hey, if it works in North Korea, maybe it will work in Iraq. I mean, there's no intellectual consistency when the country that's thrown out inspectors is having talks with the United States...

SHIELDS: Right.

CARLSON: ... and the country swarming with inspectors can't be talked to.

So here we are in this, you know, this intellectual odd man out, and yet it is the right thing to be doing. Diplomacy is frustrating, but given the other choices, it's the best thing to do. And Kate has a point. Once a country has nuclear weapons or is about to have them, you do have to treat them differently. And so this is the right way to go.

SHIELDS: A comment, and then a question. If I'm not mistaken, the president began his term by undercutting Colin Powell and the South Korean leadership by refusing to talk at that point with North Korea.

CARLSON: Right.

SHIELDS: But did we see a little muffling of the war drums sort of this week, as far as Iraq was concerned? I mean, our allies and even Tony Blair sort of saying, Hold off?

O'BEIRNE: (UNINTELLIGIBLE)...

CARLSON: Five thousand new troops have moved there. NOVAK: The problem is, we've got all these troops (UNINTELLIGIBLE), it's really going to have -- be difficult for him to get off the dime. But I'll tell you something, Kate, there is a lot of rumbling among Republican senators. They had a little closed-door meeting at the Library of Congress. They're not being told the facts on, on, on, Iraq.

The reason that a lot of hawks didn't want the U.N. to get involved is, they didn't want what's happening now, is there's -- the longer this goes on, I think there's less support.

O'BEIRNE: We are finding that out. The world does not wait for you. And I think the administration is going to have to make some sort of a move. And until they do, Bob, they're not going to get our allies to step forward smartly, until we make -- until we let them know we're ready to make some move. That includes Turkey, that includes France, and that includes...

SHIELDS: Turkey, Turkey -- (UNINTELLIGIBLE)...

(CROSSTALK)

CARLSON: ... we had Blair.

HUNT: ... have to go back to the U.N.?

O'BEIRNE: No, I don't think they have to go back to the U.N.

HUNT: See, I think they do have to go back.

(CROSSTALK)

CARLSON: You know, I think the fact that we...

HUNT: I think to do something without going back to the U.N. really is to, is to, is to (UNINTELLIGIBLE).

O'BEIRNE: Do they need U.N. approval? Or just to make their case?

HUNT: They certainly have to go back to the U.N.

O'BEIRNE: I can see discussing things with the U.N., but they sure don't need...

(CROSSTALK)

O'BEIRNE: ... need approval.

SHIELDS: Margaret?

CARLSON: The fact that his best friend, Tony Blair, was with him and now is pulling back, I think, is actually a bad sign for moving forward on Iraq...

HUNT: It certainly elevates this whole thing... CARLSON: ... the British.

HUNT: ... going back to what (UNINTELLIGIBLE) was saying, it certainly elevates Bill Richardson as a prominent Democrat. There's no way that...

NOVAK: Richardson for president, is that, is that what we're talking about?

HUNT: Well, or vice president.

NOVAK: Oh, vice president, OK.

SHIELDS: Last word, Al Hunt.

Next on CAPITAL GANG, Daschle out, Gephardt in.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Senate Democratic leader Tom Daschle stunned the political community.

(BEGIN VIDEO CLIP)

DASCHLE: I'm not going to run for president because my passion is right here. And I must say I feel as good about this decision as any I've ever made.

(END VIDEO CLIP)

SHIELDS: Former House Democratic leader Richard Gephardt formally announced his own prospective candidacy. Listing problems facing the country he said, quote, "I look forward to offering a bold set of new prescriptions to address these urgent challenges and look forward to the vigorous debate ahead," quote -- end quote.

Margaret Carlson, can you explain why Tom Daschle is not running?

CARLSON: Well, the Republican talking points would have it that his wife is a lobbyist, and he didn't want to have to ask questions. He read the polls and on and on. And they so demonized him during the midterms that that's hurt him out there in America.

But, you know, I think the real reason is, hey, the reason that he gave, he has a real job. And by the way, if we all had to give up the job we had to get another job, would we do it? Bob, would you leave CAP GANG...

(CROSSTALK)

NOVAK: ... under no conditions, no.

CARLSON: ... yes, ever, no, no. So he would have to give up his Senate seat, not just this Senate minority leadership. SHIELDS: Margaret Carlson makes a very compelling point here. Of all the candidates, he was giving up the most. I mean, you know, John Kerry can still go back, or (UNINTELLIGIBLE), Joe Lieberman, these people can still go back and run for the jobs they've had. But, I mean, Tom Daschle would have been giving up the Senate leadership and the Senate seat.

NOVAK: But there's another factor, if I could put it in.

SHIELDS: Sure, what is it, Bob?

NOVAK: It was a long shot. You know, I don't say he couldn't be nominated. I wouldn't (UNINTELLIGIBLE) say that about anybody. But it was a long shot. There was a big field. I don't think he has a -- he's a very compelling national figure. I don't think it would -- I think his chances were not very good.

But the guy who was devastated by it, and he's in shock, I hope he's keeping sharp instruments away from him, is Harry Reid, the whip, because Harry thought he was going to be...

SHIELDS: Senate Democratic whip, who would have taken...

NOVAK: ... he, he would have been the leader. He had the votes all lined up, and I think he'd have been a very good leader too. But he didn't make it.

CARLSON: And Bob, you're very upset, because you're just wild about Harry.

SHIELDS: Name that tune!

All right, Kate, the -- sharp instruments ought to be kept away from some people on the Republican side who were dying for Tom Daschle to run so they could say that everything he did as a leader was seen through the prism of his presidential ambitions. They're deprived of that argument now.

O'BEIRNE: Well, he didn't, he didn't duck that charge last November when he was strategizing on behalf of his Senate Democratic colleagues...

SHIELDS: Tim Johnson.

O'BEIRNE: ... and he did a pretty poor job of it. He picks the wrong fights, and he makes the wrong case. I'm not surprised he's not running against George Bush. Tom Daschle, poor Tom Daschle, thinks he was vanquished by Rush Limbaugh last November. He's certainly not going to take on George Bush.

And I think he runs the risk now, which I thought he did when he criticized the president's tax package, he looks really angry and frustrated. And that's a problem for Tom Daschle, he's more effective when he looks terribly moderate in tone, and he's always just disappointed. I think he ought to -- has to knock off the angry, frustrated thing. And I wonder if it's because he has second thoughts now about being stuck in the minority in the Senate.

SHIELDS: Al Hunt, Tom Daschle made the mistake of calling an obscene tax package obscene.

HUNT: Yes, (UNINTELLIGIBLE), terrible.

O'BEIRNE: I think (UNINTELLIGIBLE).

HUNT: I think Bob is, I think Bob is actually right. I think he -- it was a long shot. I'm awfully glad we didn't do a segment last week, because I would have confidently predicted that Daschle was going to run, as a number of other people in this town believed. But it was a long shot. I don't think he really had it in his gut. I think you got to really, really want it badly.

I'll tell you this, though. I think it's good news for Democrats in the sense he's an incredibly effective leader. I do disagree with Kate on that. And I think it means he's almost certainly going to run, or he's probably going to run for reelection in 2004.

SHIELDS: Is the conventional wisdom right that Dick Gephardt is the beneficiary because it'll help him in Iowa?

NOVAK: I think it helps him a little bit. And I don't -- I'm not one of the people who say Dick Gephardt is hope -- is a hopeless case. I think, I think he is a much more viable candidate than Daschle ever was.

O'BEIRNE: I agree.

NOVAK: And I think if he, if he, if he poses -- that's a bad word, isn't it?

HUNT: Yes, (UNINTELLIGIBLE), Bob.

NOVAK: If he comes over, if he comes over as a moderate in a field full of liberals, it might be very helpful to him.

O'BEIRNE: Well, he's the only one in the field who's run before. And there are some advantages to having done this before...

HUNT: Ronald Reagan ran three times...

O'BEIRNE: ... which he did in 1988...

HUNT: ... before he was elected.

CARLSON: And there's a great advantage to having won Iowa to do it again. And, you know, Edwards doesn't have to win to South Carolina, and Kerry may have the advantage of New Hampshire, but out of the box, to take Iowa is a huge advantage for a Democrat.

HUNT: (UNINTELLIGIBLE). Gephardt must win.

NOVAK: Muscle in first.

CARLSON: He must win Iowa.

NOVAK: First.

HUNT: Right.

(CROSSTALK)

SHIELDS: And that, that -- and there's going to be three New England candidates in New Hampshire, probably, Lieberman, Dean, and Kerry...

O'BEIRNE: (UNINTELLIGIBLE), right.

SHIELDS: ... think about that.

(CROSSTALK)

NOVAK: And Sharp, and Sharp, and Sharp...

SHIELDS: ... geography.

NOVAK: ... and Sharpton...

CARLSON: But Kerry has to win that one.

NOVAK: ... is sort of New England.

HUNT: Is he?

(CROSSTALK)

CARLSON: It's got a "New" in it, it's New York.

SHIELDS: Bob, you, Bob, you just keep, you keep your powder dry, Bob.

We'll be back with the CAPITAL GANG Classic, a Bush economic stimulus plan more than 10 years ago.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Trailing in his 1992 reelection campaign, President George Herbert Walker Bush went to Detroit to unveil his economic stimulus package. Your CAPITAL GANG discussed it on September 12, 1992. Our guest was Republican William J. Bennett.

(BEGIN VIDEO CLIP, September 12, 1991)

NOVAK: I thought that the speech he gave in Detroit did put together a coherent economic program. Now, a lot of people in the news media, Al, and in the -- certainly in the Congress and in the Washington establishment, hate that program because it's less government, it's more private enterprise, it's less taxes. WILLIAM BENNETT, FORMER EDUCATION SECRETARY: The criticism that this is late is fair enough, but better late than never. And I think it is a coherent package, and you do have the opportunity here now to have a serious policy debate.

HUNT: The one thing that Mark Shields and Bob Novak agree on, albeit for different reasons, is that George Bush has been a disaster to the economy in his first term. Why should a second term be any different?

UNIDENTIFIED FEMALE: I think half the public thinks he's just going to -- if he wins, get on Air Force One and say, Thanks a lot, I'm going to Russia. I mean, he, he has a big credibility and trust problem here with the economy.

SHIELDS: The president last week said the -- in one day, said the economy was anemic, sick, lousy. We've been through economic hell in this country. And I'm the only guy that can get us out of the mess we're in. Now, I mean, that's, that's the, that's the message. That's a tough message to sell, that we're -- this is terrible, the last three years have been miserable, but I, who have been in control, can get us out of it.

(END VIDEO CLIP)

SHIELDS: Al Hunt, can you compare the first President Bush's economic program with his son's?

HUNT: Well, there are lots of differences. But one thing they share in common, in the guise of getting the economy going again, they give big tax breaks to the deserving rich. Thank goodness back then that Bill Clinton and Bob Rubin ignored it and slightly increased taxes on the wealthy, wealthiest Americans, producing the greatest economy in our lifetime and making Bob Novak an incredibly wealthy man.

SHIELDS: Bob Novak.

NOVAK: This was a desperation pass by the first George Bush. It was in the middle of his campaign that he was losing. Wasn't a very good -- it wasn't as good a plan as this one. Now, this is long before the election. The son is not making the mistakes of the father.

HUNT: You said it was coherent then, though.

NOVAK: I know, I was wrong.

HUNT: Yes, OK.

O'BEIRNE: I see a real similarity with respect to the state of the economy. Just yesterday, Vice President Cheney pointed out our economy is currently growing, and in September '92, the recovery was underway, the low point of the recession had been the previous summer. Right after George Bush was defeated, all the news stories let on that the recovery was already well under way. SHIELDS: It's a jobless recovery, though...

CARLSON: If it's...

O'BEIRNE: Yes.

SHIELDS: ... 100,000 people laid off in December.

CARLSON: If it's so good...

O'BEIRNE: Well, that's a lagging indicator, but the economy is (UNINTELLIGIBLE)...

NOVAK: It always is.

SHIELDS: It's pretty painful lagging indicator.

CARLSON: If it's, if it's not broken, then he shouldn't be trying to fix it with this enormous tax cut.

NOVAK: That's wrong. This is the tax, the tax structure is bad...

O'BEIRNE: It should be strong (UNINTELLIGIBLE).

CARLSON: It could be stimulating.

NOVAK: ... you should you should be...

HUNT: (UNINTELLIGIBLE)...

NOVAK: ... you should be cutting taxes all the time.

CARLSON: A hundred thousand jobs lost...

SHIELDS: Is there any time it's bad to cut taxes?

NOVAK: No, no.

(CROSSTALK)

SHIELDS: You've got to cut taxes coming in because we had too much money. Now they're going to cut taxes because there isn't enough money...

CARLSON: Because we don't have enough money.

HUNT: That's right.

SHIELDS: Yes, that's it.

(CROSSTALK)

HUNT: Do tax cuts cure the common cold?

SHIELDS: That's right. Coming up in the second half of CAPITAL GANG, less dribble. "Beyond the Beltway" looks at the California budget crisis with Governor Gray Davis. Our "Newsmaker of the Week" is freshman congressman Devin Nunes of California. And our "Outrages of the Week." That's all after the latest news following these significant messages.

(COMMERCIAL AND NEWS BREAK)

ANNOUNCER: Live from Washington, THE CAPITAL GANG.

SHIELDS: Welcome back to the second half of 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 the youngest freshman in the 108th Congress, Devin Nunes, a Republican from California's 21st District.

Congressman Devin Nunes, age 29, residence Tulare, California, religion Roman Catholic. Bachelor's and Master's degree in Agriculture, Cal Poly, San Luis Obispo. Managed his family's farm in the San Joaquin Valley, trustee, College of the Sequoias, 1996 through 2002. California state director for the United States Department of Agriculture, Rural Development agency, 2001 and 2002.

Al Hunt sat down with Congressman Nunes earlier this week.

(BEGIN VIDEOTAPE)

HUNT: Congressman Nunes, what are the advantages and disadvantages of being the youngest member of the freshman class, 29 years old?

REP. DEVIN NUNES (R), CALIFORNIA: Well, I think that the biggest advantage that you have is, this is largely a body that's built on seniority. If I can manage to stay around the Capitol long enough, I hope to someday be a major committee chairman, possibly move up to a leadership role.

HUNT: Eight years ago, when the Democrats were in the majority and had been for years, the GOP ran largely on term limits. Your state of California adopted term limits for its legislature. Do you think term limits are a bad idea?

NUNES: Yes, I've never been a supporter of term limits. I think they're bad for democracy. You know, I think we've seen in California what they've done to the state of California, where now we have legislators there who largely, you know, have no political experience. And, you know, it takes a long time to garner that experience.

HUNT: Do you consider yourself an outsider who's come in to sort of shake up the institution? Or do you consider yourself more in the mold of one of your mentors, Bill Thomas, who wants to be, as you said a moment ago, committee chairman, influential member of the club someday? NUNES: Well, I think one thing that Bill Thomas has done really well, and that I would like to model myself after, is that he has absolutely had the most superb constituent services, which I think is the most basic job of the congressman.

HUNT: First week, full of wonderful celebrations, especially for new members. Have you formed any real impressions of the House yet, any -- is it any way different than you thought it would be?

NUNES: No, I think the hardest thing is, is that you're thrown together with essentially -- you know, I know probably 10, 15 members pretty well, and the rest of them you don't know. So it's -- it takes a lot of time to get the faces down and the names and the states that they come from. That's probably the biggest challenge.

HUNT: Congressman Nunes, you've only been a member for five or six days, but you're one of 535 elected members of the legislative body of the United States of America. There is a prospect of war looming. Do you anticipate that within the first couple months of your term, there will be a war in Iraq?

NUNES: Well, we just had a briefing on it this morning at the Capitol. And at this point, I think we don't know. I really believe that -- I think the president is keeping his options open. I think that's why you're seeing a military buildup in Iraq. And it's very possible that it could happen. But at the same time, I think we've seen oftentimes in international diplomacy where you do a buildup for the purpose to get the other side to retreat from whatever the position may be.

And hopefully that is what happens, versus having to go war with Iraq. But I think that the Congress is fully prepared to do it as well, you know, to support the president.

HUNT: Congressman Nunes, you are one of several Portuguese- American members of the Congress.

NUNES: Yes.

HUNT: Are there any special issues that would interest you because of your (UNINTELLIGIBLE) Portuguese background?

NUNES: It's a very proud community, and, you know, I will fully support the community as to anything that they may need. I've already, of course, you know, received word from the governor of the Azores Islands and some of their representative folks there. And they've requested that we go back to visit the -- a very critical air base that we have right on the Terceira (ph) Island, which is one of the islands in the Azores.

HUNT: Final question. You're 29 years old. How long do you hope to be here?

NUNES: Well, I hope to be here long enough to do some things for my district, most notably is hopefully solve the looming water crisis that we face in the state of California. HUNT: And be a committee chairman someday?

NUNES: And be a committee chairman someday.

(END VIDEOTAPE)

SHIELDS: Al Hunt, Devin Nunes didn't sound much like Jimmy Stewart in "Mr. Smith Goes to Washington," just the outsider, the rookie, the against-the-grain guy.

HUNT: No, well, he wants to be a professional politician, Mark. You know what it does, it shows what a partisan sham that term limits movements was a decade ago. Now that Republicans are in the majority, how often do you hear the right wing clamor for term limits? Almost never.

SHIELDS: Kate?

O'BEIRNE: I never favored them, but I might now.

I -- this nice 29-year-old explains he's been in elected office since he was 23. Now, as the mother of a 23-year-old, and I'd even like to think he's an above-average 23-year-old, that really makes me nervous. I liked freshmen when they were on the floor with bags over their heads, not when they were planning for their oil port (ph) in the committee room.

HUNT: (UNINTELLIGIBLE).

NOVAK: One of the reasons I've always been for term limits is, I think congressmen get worse the longer they're here. Now, this guy's so bad when he starts out, I don't know how he can get worse, but maybe he'll reverse the process and get better. But my goodness, when you got Bill Thomas as your role model, where do you go?

CARLSON: Instead of thanking Bill Thomas, he should have thanked Eldridge Gary (ph), that little-known legislator who created gerrymandering, which created a district this guy can stay in until he's 99.

SHIELDS: Margaret Carlson.

Next on CAPITAL GANG, "Beyond the Beltway" looks at the California budget crisis with California Governor Gray Davis.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Facing a nearly $35 billion state budget deficit, California's Democratic governor, Gray Davis, proposed over $8 billion in tax increases, big reductions in state spending programs, and a massive shift of health and welfare programs to local governments.

(BEGIN VIDEO CLIPS) GOV. GRAY DAVIS (D), CALIFORNIA: This task will not be easy. All the choices before me were hard. But they had to be made in order to balance our books.

JOHN CAMPBELL (R), CALIFORNIA ASSEMBLYMAN: I am saying that the governor has inflated figures for a political purpose. Don't believe it. You do not have to have this kind of a tax increase...

(END VIDEO CLIPS)

SHIELDS: Joining us now from Los Angeles is (UNINTELLIGIBLE) Governor Gray Davis. Thanks for coming in, governor.

DAVIS: You're welcome, Mark.

SHIELDS: Governor Davis, you were proposing to increase taxes on the higher-income, highest-income Californians, increasing the sales tax. And yet the proceeds from that are going to go to counties and states -- cities to administer programs. Aren't you asking the legislature to do the toughest part, raising the taxes, and get none of the glory for doing so?

DAVIS: Well, I'm building my proposal on the model that Governor Wilson started in the early '90s, where he shifted about $2 billion worth of programs to local government. We're shifting programs, by and large, that are administered already by local government and providing a funding source to maintain those programs at their current level so they will not have to be cut.

NOVAK: Governor, does -- governor...

SHIELDS: OK, Bob Novak.

NOVAK: Governor Davis, do you reject the economic theory that in a fragile economy, about the worst thing you can do is to increase taxes?

DAVIS: No, I accept that notion, Mr. Novak. But we have proposed $20 billion worth of cuts. That's 60 percent of my solution, 24 percent of the solution are raising taxes. I just can't get to $35 billion of cuts, and so I had to have a mix of both reductions and taxes. If someone wants to show me a better plan, I think it's fair, I'll adopt it. But I doubt if they can get there without raising taxes.

SHIELDS: Margaret Carlson.

CARLSON: Governor, you have a majority of Democrats in the legislature, but you need a super majority to get this through. And Republicans are saying you're exaggerating the potential deficit as a way of pushing through a tax hike.

You're going to have to keep the Democrats and get some Republicans. How are you going to do that?

DAVIS: As your question suggests, Margaret, it's a very tall order. But at the end of the day, the legislature always comes through. We had difficult economic times when Governor Dukmajian (ph) was taking office. The legislature rallied around, and we solved the problem. Same thing in the early '90s, when Governor Wilson took office.

Now we have the biggest challenge since World War II. At the end of the day, all posturing aside, I think we'll get the two-thirds vote to do the right thing.

SHIELDS: Kate O'Beirne.

O'BEIRNE: Governor Davis, almost 10 years ago, the voters of Congress approved Prop 187 to deny state benefits, some state benefits, to illegal aliens. This courts have blocked its implementation. Is it a problem for Sacramento now to be cutting services for citizens when it seems that Sacramento and the government hasn't done enough to defend Prop 187 in court in order to see that that's implemented?

DAVIS: Oh, I dispute that premise, Kate. We have spent an awful lot of money implementing some of the provisions of 187 because they're the right thing to do. For example, we spent a lot of money on what we call English-language learners, people who do not have English as their first language. Governor Roemer is running the L.A. Unified System. He'll be the first to tell you, those students have done better than people whose first language is English.

So we're doing everything we can to give every child the opportunity for a better life.

SHIELDS: Al Hunt.

HUNT: Governor, what effect would the Bush tax cut proposals this week have on California? And what, if anything, would you like to see done differently on the federal level?

DAVIS: The proposal on dividends, which over the long term will probably help the stock market, which helps all of us who have an income tax, does nothing in the short term. In fact, it hurts us in the short term by depriving us of about a billion and a half dollars' worth of revenues.

I think most governors, Republican and Democrat, Al, want a short-term economic stimulus out of Washington, and I'd like the president and the Congress to find a way to put Americans back to work now, not later.

As your discussion earlier suggested, this is a jobless recovery. A lot of people are out of work. They don't like being on unemployment insurance, we don't like it either. We want to put them back to work.

I'm doing what little I can in California by accelerating jobs that are the result of the passage of bond issues last November for schools and housing. These jobs would come online on the natural (ph) late this year and early next year, but we're moving them out quickly so we can get them online early this year, because we want jobs now, not later.

SHIELDS: Governor Davis, one of the advantages your predecessors, George Dukmajian and Pete Wilson, had in dealing with the legislature was, that legislature, in many cases, included the same people who had an institutional memory. They had been there in Dukmajian, they were there under Wilson. With term limits and the incredible turnover in Sacramento, is -- the lack of that institutional memory, isn't that a problem for you?

DAVIS: There's no question. As a matter of fact, the young that you quoted, Assemblyman Campbell, a fine young person, I think he's been there three years, there is no institutional memory. There is no sense that in tough times, people have to come together because we're all elected to do the same thing, represent all of the people in this state, and righting the fiscal ship and restoring the state to financial health is our first challenge.

Nonetheless, I think they'll find a way, and we'll get this done. And I intend to work with both sides to do it.

NOVAK: Governor, Republican State Senator Tom McClintock (ph) says that if you were to cut spending 10 percent across the board, you would have this problem solved in 18 months. What's wrong with his arithmetic?

DAVIS: Well, I've cut spending at the state level by 9 percent. I'm cutting spending to the counties by about 5.5 percent, 4 percent to the cities. Virtually every program in the state government is going backwards. The only program not is our program to provide health insurance for the children of working parents.

So we're doing our best to cut. They are 60 percent of the composition of the solution to the budget shortfall, taxes are 24 percent. When Governor Wilson was in office, his system was 50-50. But mindful of your last question, I don't think we can raise taxes any more than I propose and still hope to have an economic recovery in the state, which is essential to our long-time -- our long-term economic well-being.

SHIELDS: Governor Gray Davis, thank you very much for being with us.

DAVIS: Thank you, Mark.

SHIELDS: The GANG -- Thanks. THE GANG will be back with the "Outrages of the Week."

(COMMERCIAL BREAK)

SHIELDS: And now for the "Outrage of the Week."

In opposing any reinstitution of a military draft, Defense Secretary Don Rumsfeld praised the volunteer army. Quote, "We have people serving today because they volunteered. They want to be doing what it is they're doing," end quote. Mr. Rumsfeld is absolutely wrong. Hundreds of thousands of brave men and women in the military whose enlistments are up and who planned to resume civilian life -- school, family, or whatever -- have been frozen on duty for the next year.

We do have a draft, Mr. Rumsfeld. You have chosen to draft only those patriotic Americans who already had volunteered.

Bob Novak.

NOVAK: Last Sunday on ABC's "This Week," George Stephanopoulos asked Democratic presidential hopeful John Edwards to name his favorite book. His answer, "The Trial of Socrates" by the late radical journalist I.F. Stone. That's incredible! Did Senator Edwards know that Izzy Stone was a lifelong Soviet apologist? Did he know of evidence that Stone received secret payments from the Kremlin?

As for his Socrates book, the late anticommunist liberal Sidney Hook in his book review called Stone "a cultural Philistine."

What does this tell us about Johnny Edwards?

SHIELDS: Margaret Carlson.

CARLSON: The audit board charged with stopping the accounting practices that allowed corporate CEOs to walk away with the store are themselves walking away with the store. Consider this. The board voted itself salaries greater than the president's, $452,000 a year. The chairman is going to get a cool half-million a year.

What's next, corporate jets for civil servants? And by the way, Harvey Pitt's still running the show over there.

These days we're instructed not to resent the rich getting richer. But what about greed, and what about the civil servants charged with cleaning up the corporate scandals themselves sticking their nose in the trough?

SHIELDS: Kate O'Beirne.

O'BEIRNE: Many claims of death penalty foes have been debunked. There's no evidence that an innocent person has been executed in the United States in 100 years. A fraction of the innocent released from death row are actually innocent of the crime. But the Illinois criminal justice system has been marked by corruption and abuse.

But needed reform is up to the legislature, not just Governor George Ryan, who, two days before leaving office, for the sake of a good photo-op, commuted the sentence of every death row inmate.

SHIELDS: Al Hunt.

HUNT: Mark, remember the furor when distinguished columnist George Will privately helped Ronald Reagan prepare for a 1980 presidential debate? One newspaper even canceled his column. This week, Lawrence Kudlow lavishly praised the Bush dividend tax cut in a "New York Post" column and conducted a phony interview with Vice President Cheney on his CNBC show.

One thing he didn't tell those readers or those viewers, Mr. Kudlow, who no doubt would handsomely benefit from the proposal, advised the White House on putting it together.

Now, my beef is not with Larry Kudlow, but I assume CNBC and "The New York Post" consider ethical transgressions an oxymoron?

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

If you missed any part of this program, do not despair. You can catch the entire replay at 11:00 p.m. Eastern and again at 4:00 a.m. Eastern.

Coming up next, "CNN PRESENTS: Inside the Army's Secret School."

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