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CNN LATE EDITION WITH WOLF BLITZER

Showdown: Iraq

Aired January 12, 2003 - 12:00   ET

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

WOLF BLITZER, HOST: It's noon in Washington, 9:00 a.m. in Los Angeles, 8:00 p.m. in Baghdad, and 2:00 a.m. in Pyongyang in North Korea. Wherever you're watching from around the world, thanks for joining us for LATE EDITION, Showdown: Iraq.
We'll talk with two key United States senators about Iraq, as well as the increasingly high stakes in the North Korea standoff in just a few minutes, but first a CNN news alert.

(NEWSBREAK)

BLITZER: And joining us now to talk about what lies ahead in the showdown with Iraq, as well as the standoff with North Korea, are two key United States senators: Republican Richard Shelby of Alabama, he is a former chairman and vice chairman of the Senate Intelligence Committee. And Democrat Carl Levin of Michigan, he is currently serving on the Intelligence Committee as well as the Armed Services Committee.

Senators, welcome back to LATE EDITION.

Senator Shelby, I'll start with you. The administration insists this is not a crisis with North Korea, but a lot of people are thinking this certainly feels like a crisis.

SEN. RICHARD SHELBY (R), ALABAMA: Well, it might not be in a crisis stage at the moment, but it's going to get there if something is not done about it. It's a question of finding out, I believe, what does North Korea really want here? Do they want some kind of guarantee by us economically? Do they want us to open -- help them open up their economy and so forth? Or are they just determined to have the nuclear option?

BLITZER: Well, as far as a military option is concerned, you heard Senator McCain say don't get that off the table yet.

SHELBY: I think we should never take anything off the table because you don't know where this is going to lead. What we all want to do is try to settle this by diplomatic means. It's potentially a very, very dangerous situation on the Peninsula of Korea.

BLITZER: Senator Levin, you've given this a lot of thought. Is this a crisis?

SEN. CARL LEVIN (D), MICHIGAN: I think it's a crisis. Sure, it's a crisis, and it ought to be called for what it is. On the other hand, when you face a crisis, you don't have to focus on the military option. You ought to have a steady policy. And it's obvious to me, and has been for a long time, we ought to have a direct dialogue with North Korea.

Instead, this administration has gone back and forth from hot rhetoric to cool rhetoric, hot rhetoric, diplomatic rhetoric. It came to office, one of the first things it did was say, "We're not going to talk to North Korea." That's one of the first things it did, cut off those kinds of...

BLITZER: On that specific point, Senator Levin, about a dialogue, Bill Richardson, as you know, has been meeting, had met over three days with a North Korean ambassador from the United Nations. He emerged from those meetings, Bill Richardson, the now governor of New Mexico, the former U.S. ambassador to the U.N. during the Clinton administration, and said this about what emerged during the course of those talks.

(BEGIN VIDEO CLIP)

GOV. BILL RICHARDSON (D), NEW MEXICO: Ambassador Han has expressed to me -- this is encouraging -- North Korea's willingness to have better relations with the United States. He told me that the government of North Korea wants to solve -- resolve the nuclear issue through dialogue.

(END VIDEO CLIP)

BLITZER: Now, the administration's position is there can be no direct dialogue between Bush administration officials and North Korea until North Korea backs away from the earlier provocative steps it took, including the resumption of its nuclear weapons program.

LEVIN: I think it's wrong, and there ought to be direct dialogue and it ought to be at a high level. That doesn't mean that you're going to capitulate, doesn't mean you're going to give concessions. All it means is you're going to talk to people to avoid miscalculation, and so they know directly what is on our mind, and we can hear from them what is directly on their mind.

BLITZER: But should North Korea be forced to take some step first to show that it's willing to be a more responsible international player out there? Or in effect, do you reward that kind of irresponsible action by giving them what they want, that dialogue, right away?

LEVIN: You don't have to give them anything. Talking to people is not giving them anything. Talking to people is the way you let them know why it is that we are so concerned.

One of the things we must do is work a lot more closely with our South Korean allies. We have been on different pages relative to North Korea when it comes to our relationship with South Korea.

We've got two crises brewing now. One is with North Korea, but we cannot -- we have not connected with South Korea. We have pulled the rug out from under them a number of times. Just a couple of weeks ago we announced some new policy called tailor containment. I guess that one's now out the window. We announced that one without even consulting with South Korea.

We must work with South Korea. We're not going to give them a veto, but we've got to treat them as equal partners. We've not done that.

BLITZER: Are you ready to support a resumed dialogue between the United States government and the North Korean government?

SHELBY: I think ultimately there's got to be some type of dialogue. I agree with Senator Levin on that. But the administration's going to have to lead us. You know, they direct foreign policy.

I believe the situation there has got to involve China. It's got to involve Japan and South Korea and us, along with North Korea.

BLITZER: Let's talk a little bit about Kim Jong Il, the leader of North Korea, a very mysterious guy. There's been a lot of profiles, intelligence reports about him.

But Secretary of State Colin Powell was in this chair that you're sitting in right now two weeks ago, and he said on this program, he believes that they already have two nuclear bombs and could be developing more bombs very quickly.

How serious is that concern? You're privy to that kind of information.

SHELBY: I'm very concerned. We've thought that for a long time, that they could have at least two nuclear bombs. If they have moved in that direction, they could probably build six or up to 15 quickly, a lot quicker than people think.

BLITZER: How quickly?

SHELBY: Depends on what their engineering capability, which is pretty good.

BLITZER: This is a pretty shocking, pretty nerve-racking moment in international affairs, isn't it? Kim Jong Il having nuclear bombs?

LEVIN: He's had them for many -- for a number of years. We've known that. The question isn't whether it's a threat. It's a threat. The question is how you deal with the threat. And it seems to me, we ought to be working with allies, with South Korea, Japan and other countries there that are willing to work with us.

And cut out the hot rhetoric, too, by the way. That does not help. Some of this hot rhetoric of this administration calling him a pygmy or saying that they loathe him, talking about this two wars going on at the same time, this kind of rhetoric just plays right into the paranoia of North Korea. And we should...

BLITZER: Are you referring, also, to the axis of evil comment?

LEVIN: Axis of evil comment. We shouldn't be just feeding the paranoia of North Korea.

BLITZER: What do you think?

SHELBY: I think what we've got to do, Wolf, is decide -- try to find out what does the leader of North Korea really want in this situation? If we concede that he's got some nuclear bombs now, nuclear weapons, and the method to deliver them, which I believe he does, what does he want?

BLITZER: Well, he's not going to...

SHELBY: He wants something from us. He wants something from the international community.

BLITZER: Presumably, he wants respect. He wants aid. He wants the kind of recognition he thinks he deserves.

But under any circumstances, and I'll ask both of you this question, do you believe that North Korea would give up its nuclear arsenal?

SHELBY: No, I don't.

LEVIN: I do. I think that it's at least possible that they'll give it up, but we ought to find out what it'll take for them to give it up.

They did, at least, can their plutonium. The part of their nuclear program that they said that they were going to end, they ended. We know that. There was inspections.

Then what they did is they deceived us and the world by moving in the enriched uranium direction. We should be meeting with them, talking to them, working with the South Koreans who live next to the North. The threat is even greater to the South surely than it is to us, and we ought to be working closely with our South Korean allies and China and Russia to find out what they want, if we can, and to try to de-nuke them.

SHELBY: We know that there's a big threat there. It's a huge danger. But on the other hand, we can't trust North Korea unless they change, unless they open their country and I don't believe that they can stand to open their country.

BLITZER: The director general of the International Atomic Energy Agency, Mohamed ElBaradei, referring to the North Korean decision to withdraw from the Nuclear Nonproliferation Treaty, was very blunt in his comments on Friday. Listen to what he said.

(BEGIN VIDEO CLIP)

MOHAMED ELBARADEI, DIRECTOR GENERAL, IAEA: Withdrawal from the NPT is a very serious issue. This is a cornerstone of the whole nuclear arms control regime, and a country cannot just walk out without ramification.

(END VIDEO CLIP)

BLITZER: And Senator McCain went further in writing an article in the Weekly Standard that's about to come out. I'll just put a couple of quotes up on the screen, Senator Levin, so you can hear what he says, what he writes.

"The administration," referring to the Bush administration, "now appears to have embraced and in some respects, exceeded the style and substance of Clinton's diplomacy. Both the president and secretary of state publicly ruled out the use of force, although force could eventually prove to be the only means to prevent North Korea from acquiring a nuclear arsenal. A dangerously short-sighted precedent that even the Clinton administration did not publicly suggest."

Those are strong words from Senator McCain criticizing a fellow Republican administration.

LEVIN: Well, I think this administration is finally, after flip- flopping twice, got into the point where they realize that the diplomatic solution has got to be followed, working with our South Korean allies, particularly. I'm glad they've arrived there.

Threatening force doesn't seem to me helps. Again, it just plays right into the paranoia of the North and the fear of the North, if in fact, they have the fear, if that is what is motivating them.

But I just -- force is obviously an option. You don't have to threaten it for it to be there. It's obviously there. We're the most powerful country in the world, and it doesn't take constant focus on it for people to be aware of the fact that we have that power.

BLITZER: Well, Senator McCain and others make the point that if you don't threaten bluntly, they don't get the message. They see silence, in effect, as a sign of weakness.

SHELBY: Well, it could be construed that way, but I think we have to realize that we do have forces there. We've had a strong policy with South Korea. That's not going to go away. We just can't run on the situation. But if you threaten force, you better be ready to use it.

BLITZER: And the 37,000 U.S. troops along the DMZ, the Demilitarized Zone, you want them to stay there?

SHELBY: I want them to stay there as long as there's any crisis and South Korea wants us there.

BLITZER: You want them to stay there?

LEVIN: I want them to stay there, but I want South Korea to want us there. We cannot tell South Korea, and I agree with Senator Shelby, they're going to be there whether you like it or not. This should be a South Korean-U.S. joint decision, equal partnership is key, it hasn't been there enough. BLITZER: All right, Senators, stand by. We have a lot more to talk about.

We'll continue our conversation with Senators Shelby and Levin when we come back. We'll shift to the showdown with Iraq. How close is the U.S. to war? They'll also be taking your phone calls.

LATE EDITION, Showdown: Iraq will be back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: 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 interests that he disarm.

(END VIDEO CLIP)

BLITZER: Despite the North Korea standoff, President Bush makes it clear that the Iraqi leader, Saddam Hussein, also must disarm, and disarm very quickly.

Welcome back to LATE EDITION, Showdown: Iraq. We're talking with Senators Richard Shelby of Alabama and Carl Levin of Michigan.

Senator Levin, I want you to listen to what Hans Blix, the chief U.N. inspector, told the U.N. Security Council this past week, as far as the inspections, what they found so far.

(BEGIN VIDEO CLIP)

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

(END VIDEO CLIP)

BLITZER: Presumably, if he makes the same statement on January 27th, when he's supposed to give this report to the Security Council, no smoking gun, the Bush administration will be hard-pressed to go to war.

LEVIN: I think it's going to be difficult for them to get the international community to support a war, to get the U.N. to authorize an attack, in the absence of actually finding weapons of mass destruction there. We believe they have chemical and biological weapons, but that's a lot different from saying that we know for sure that they have them or that they represent an imminent threat.

And so it seems to me that what the administration's going to need to do -- first of all, I'm glad this week, I am very glad that they're avoiding using the 27th of January as some kind of decision day. It should not be that. We have just begun, Wolf, just begun to share information with them which we think points to suspect sites. That process is just beginning and could take many, many months. We must share with them all the information that we possibly can, which doesn't jeopardize methods or individuals, but we must share all that information if we're going to pursue this inspections process the way it is.

BLITZER: At some point, the administration will have to share that information, if the administration believe there is hard intelligence, a smoking gun, not only share it with the inspectors, but with the American public, the U.N. and the allies out there, if it wants to make the case for a war.

SHELBY: I believe they've made a case, but, Wolf, there is more information that they will have to consider whether to share or not, because it's sensitive. Sources and methods there, you know, could be compromised. But the administration will have to make that decision.

Ultimately, I think a lot will depend on what Saddam Hussein does in the meantime, because I know from the information that I've been briefed on, over the last several months, that he does have weapons of mass destruction, chemical and biological.

BLITZER: Well, why can't the administration make that information public and convince the world, if you will, that there's no alternative?

SHELBY: I don't know if you'll ever convince the world, but I'll leave that up to the administration. I think we're moving toward disarming him, if he's going to disarm himself or we're going to disarm him.

BLITZER: But you're open to the notion that, if Hans Blix and Mohamed ElBaradei come to the U.N., say, "You know what, they're giving us the access we need, we need a few more months to get the job done, let us do our work," you're open to giving them that kind of flexibility?

SHELBY: Well, I would look at it. It won't be up to me to whether we give them that flexibility or not.

But I believe that what Dr. Blix and others, they need to get some of those scientists out of Iraq to where they can really interrogate them, and they will, I believe, get real information then.

LEVIN: Inspections are relevant. We support inspections. If they're relevant, they should be completed. We ought to share with them all the information that we can, which does not jeopardize sources and methods.

And by the way, the administration will acknowledge that we have just begun to share information with them. And I'm talking about information that does not jeopardize sources or methods. We've just begun to share that. So, once you acknowledge that these inspections are relevant and we finally have done that, we should complete them, we should share information, and we should not prejudge the outcome of those inspections.

BLITZER: But, Senator Levin, you're a member of the Armed Services Committee, former chairman of that committee. You know military planners don't believe they can remain on a high level of alert, tens of thousands, perhaps hundreds of thousands of troops, and sustain that level indefinitely.

LEVIN: That is correct. I just hope we're not baking ourselves into a corner, though, where we're going to attack because we can't sustain. That is not a reason to initiate an attack.

An attack could only and should only be initiated, number one, if it has the international support, in my judgment, authorized by the U.N., unless we are directly and imminently threatened.

But we should not be putting ourselves in a position where we have no alternative but to attack because we can't sustain forces. That is not a good enough...

BLITZER: So you want a second Security Council resolution before any attack?

LEVIN: I think it's very important the international community support us, because the risks otherwise are huge.

BLITZER: You don't believe in a second resolution?

SHELBY: No, I don't think we need a second resolution.

LEVIN: We don't need one. I just think it's wise to have one.

BLITZER: Do you think that the weather factor, the change of seasons -- as March, April comes, it gets very hot. You've been in that part of the world, you know how it gets -- that should be a factor?

SHELBY: I think it will be a military factor. I hope that any resolution, one way or the other, to this will be before it gets too hot over there.

BLITZER: All right, senators, why don't we take another quick commercial break, but we have more to talk about.

We're going to continue our conversation with Senator Shelby and Senator Levin. They'll also be taking your phone calls.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: We know that the tax cuts work, and Americans deserve to know their tax cuts will not be taken away.

(END VIDEO CLIP) BLITZER: President Bush working on a plan to try to rejuvenate the U.S. economy.

Welcome back to LATE EDITION. We're continuing our discussion with Republican Senator Richard Shelby of Alabama and Democrat Carl Levin of Michigan.

I want to get to the economy in just a moment. But very quickly, on this, the fate of a U.S. pilot, a navy pilot, Captain Scott Speicher, who was originally listed as killed in action during the first hours of the Gulf War a dozen years ago, they changed the status to missing, captured more recently.

Pat Roberts, the Senator from Kansas who's now the new chairman of the Intelligence Committee was on my show Friday. I asked him about the fate of Captain Speicher. Listen to what he said.

(BEGIN VIDEO CLIP)

SEN. PAT ROBERTS (R), KANSAS: I myself used to say it was possible he may be alive. I think it is probable. If you connect the dots of all of the information that we're receiving from the Speicher team, from the intelligence (inaudible), all of the intelligence community involved, and then also other reported sightings, I think there is a pretty good chance he is alive.

(END VIDEO CLIP)

BLITZER: That's pretty shocking stuff, that this American pilot, 12 years later, may still be alive, held in captivity in Iraq.

SHELBY: Well, he could be alive. I don't know that he's alive. Senator Roberts, who is now chairman of the committee, when I was chairman of the committee, he headed up a lot of the tasks dealing with this issue.

I hope he's alive, and I hope we'll find him and bring him home someday. But I don't know why they would keep him if he is alive.

BLITZER: What do you think, Senator Levin?

LEVIN: I think it's possible, not probable, but possible.

BLITZER: Possible that he is alive. But, obviously, the U.S. has got to do whatever it can.

SHELBY: Absolutely. We should leave no one behind.

LEVIN: That's our obligation.

BLITZER: Let's talk a little bit about the president's economic stimulus package that was unveiled this week. A lot of your fellow Republicans seem to be raising questions whether it's viable, whether it will pass -- Senator Grassley, Senator McCain, Senator Chafee and others. What do you think? SHELBY: Well, that's part of the debate, not only in the Senate but it will be in the House, too. The president has made this recommendation. The bills will come forth, and we'll debate them.

I believe the plan overall looks good. I like a lot of things.

BLITZER: Including the benefits for the rich?

SHELBY: I don't like double taxation. I think that is wrong. We've had it for years, and we ought to get rid of it. And this is one way to get rid of it.

What will happen ultimately with the economic package, or the tax package, I'm not sure. But I believe overall it's sound.

BLITZER: As you know, 12 of your fellow Democrats two years ago, in 2001, went ahead and voted for the original Bush tax cuts, and it sailed through, effectively, during that first year.

You weren't one of those 12 Democrats, but do you think that there are going to be defections on the Democratic side this time around?

LEVIN: Well, there may be, but I think there'll even be more defections on the Republican side.

BLITZER: Why?

LEVIN: The tax cut does almost nothing to stimulate the economy, short-term, which is where you want the stimulus. It puts us into a huge deficit long-term. In other words, we'll weaken the economy long-term because of its size. And puts money into the pockets of the people who need it the least and who will not spend it.

We should be putting money, if we're going to have tax cuts, in the pockets of middle-income, low-income people who will spend it, and we ought to have a short-term jolt for the economy and not have this approach, this approach of the administration which is more and more tax cuts for upper-income folks and hope somehow or other that that will trickle down to help the rest.

The president, in you little squib there, said we've shown that tax cuts work. Well, I'll tell you, that's what he told us last year about last year's tax cuts. They sure didn't work. This economy's still weak.

SHELBY: I believe the tax cuts have worked, and if we hadn't have had them we would be deep, deep in a recession. We're rocking along. We have some good news in certain parts of the economy, but I believe we can do better, and I think we will.

BLITZER: Senator Daschle, the Democratic leader, this morning said he would even go forward with a filibuster, if necessary, to defeat the nomination of this Mississippi judge, Charles Pickering, for the U.S. Court of Appeals.

Are you ready to filibuster to oppose this nomination because, supposedly, of his civil rights record?

LEVIN: From what I know of it, yes.

BLITZER: You would support that.

LEVIN: From what I know of it, yes.

BLITZER: That means 60 votes would be necessary to defeat a filibuster.

SHELBY: It'd be hard to get 60 votes. But I can say this, Judge Pickering has a good record. There are a lot of Democrats who are going to be for him. There are a lot of people in the African- American community, especially in the state of Mississippi, that have come out for him. And I believe we ought to have an up and down vote on him.

BLITZER: All right, we're going to have leave it right there, unfortunately. We are all out of time.

Senator Shelby, Senator Levin, thanks for joining us on LATE EDITION.

SHELBY: Thank you.

LEVIN: Thank you.

BLITZER: Just ahead, as the United States keeps up the pressure and prepares for possible war with Iraq, could a military conflict with another part of President Bush's axis of evil, North Korea, be on the horizon?

We'll get perspective from former Secretary of State Henry Kissinger, former Defense Secretary William Cohen and former National Security Adviser Samuel Berger.

LATE EDITION, Showdown: Iraq, will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: North Korea has thumbed its nose at the international community.

(END VIDEO CLIP)

BLITZER: The U.S. secretary of state, Colin Powell, reacting to North Korea's stunning announcement that it's withdrawing from the Nuclear Non-Proliferation Treaty.

Welcome back to LATE EDITION.

Joining me now with some insight into what impact this development has on U.S. policy toward North Korea, as well as the showdown with Iraq, are three men who have advised U.S. presidents on national security issues: in Kent, Connecticut, the former Nixon and Ford secretary of state, Henry Kissinger. Here in Washington, the former Clinton defense secretary, William Cohen. Also in Washington, the former Clinton national security adviser, Samuel Berger.

Gentlemen, welcome to LATE EDITION.

And, Dr. Kissinger, I'll begin right with you. Where do you stand, as far as the recommendation from Bill Richardson, the New Mexico governor, who has met these past three days with the North Korean ambassador to the United Nations, that the U.S. administration should resume a high-level dialogue with North Korea?

HENRY KISSINGER, FORMER SECRETARY OF STATE: I am extremely uneasy about the way this process has evolved. North Korea has violated the agreement it made with the Clinton administration already during the Clinton administration. It is now breaking a whole series of other agreements, and it is demanding a dialogue about what?

I would favor a dialogue whose objective is the destruction of the North Korean nuclear capability. And in the framework of the destruction of the nuclear capability, I would favor a dialogue.

But I do not -- secondly, I do not believe it should be a U.S.- Korean dialogue. There are many countries in the region -- China, Japan, South Korea -- who are much more immediately involved. And I think we should call a conference on the North Korea nuclear problem and force the people that are directly involved to take up a position together with us.

BLITZER: But, Dr. Kissinger, the North Koreans don't necessarily want a dialogue with Japan or South Korea or China. They want high- level talks with the Bush administration. They want the kind of international respect that they believe they should get.

KISSINGER: Well, here is a country whose claim to international respect is severely limited. They have blown up half the South Korean government. They have kidnapped people, that they've admitted, from Japan and Korea.

And I'm not opposed to talking to them. And it is certainly enough respect if they are obliged to talk to all their neighbors and the United States together so that we can achieve what they claim to achieve: They get rid of their nuclear capability. We give them, together, all kinds of whatever guarantees are possible that they will not be attacked.

But they want to maneuver the United States in the position that we are the principal cause of their problems. And therefore, the debate all over the world is on the question, will the United States negotiate about an agreement that the North Koreans have abrogated and unilaterally abrogated and they're constantly threatening us with it?

BLITZER: What about that, Mr. Berger?

KISSINGER: It certainly should give them plenty of status to talk to their neighbors plus us. BLITZER: All right, let me bring Sandy Berger in.

You heard what Dr. Kissinger said very forcefully, a very hard line as far as North Korea is concerned. You disagree with him, don't you?

SAMUEL BERGER, FORMER NATIONAL SECURITY ADVISER: Well, let me say three things, Wolf. Number one, this is a very serious situation. If the North Koreans proceed on the course that they're on, they would have the capacity to build six nuclear weapons within six months and then 30 thereafter, essentially becoming a plutonium nuclear weapons factory for every rogue-state terrorist group in the world. So this is a dangerous situation for us.

Number two, our leverage is greatly undermined by the fact that over the last two years a wide breach has grown up between us and the South Koreans. We can't do much without solidarity from the South Koreans. And our tough talk has caused many in South Korea to believe that the North Korean nuclear program -- I think mistakenly believe -- is not a threat to South Korea but is North Korea's reaction to a threat from the United States.

BLITZER: And the third point?

BERGER: And, therefore, I think we, in order to have South Korea with us and the others, are going to have to engage in direct negotiations, direct talks with the North Koreans. But I would go...

BLITZER: And in effect reward North Korea's actions?

BERGER: No, not at all. I would go farther than Dr. Kissinger. I would expect the North Koreans, not only to go back to the status quo ante, that is, not only to roll back what they have done, but to open the country nationwide to international inspections so that it would be more difficult for this kind of illicit activity to take place.

BLITZER: Is that doable, Secretary Cohen?

KISSINGER: No, that's what I'm proposing.

BLITZER: All right, I'm going to...

KISSINGER: That's what I want too.

BLITZER: Dr. Kissinger, I'm going to bring you in in just one moment, but I want to get Secretary Cohen on the record now.

Where do you stand, as far as a dialogue between the Bush administration and the North Korean government?

WILLIAM COHEN, FORMER DEFENSE SECRETARY: Well, I stand with Dr. Kissinger and Sandy Berger, because I think they're both saying essentially the same thing. Dr. Kissinger's saying that we should make this a broader discussion, a broader dialogue, not just the United States, but South Korea, Japan, China and Russia. And I think that that is certainly desirable and, I think, even doable.

Secondly, that -- and Sandy's quite correct, as Dr. Kissinger just said, we have to do more than simply trust and verify. We know we can't trust them. We need deep verification, something far more serious and intrusive than anything in the past.

If they want this kind of discussion, if they are looking for international recognition, international economic assistance, et cetera, they're going to have to give that up, and they've got to agree to very intrusive inspections.

BLITZER: Should military action, Secretary Cohen, against North Korea be on the table?

COHEN: I think you don't rule it out. It is certainly the last possible resort. You would not rule it out at this point. It's a very dangerous situation in that peninsula, so I don't think you talk about it in the first instance, but it would not be off the table, no.

BLITZER: Dr. Kissinger, I want you to listen to what the North Korean ambassador to the United Nations said on Friday in New York, talking about North Korea's nuclear program. Listen to this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Our nuclear activities will be confined at this moment purely for the peaceful purposes, such as generation of electricity. But the future developments will entirely depend on the attitude of the United States.

(END VIDEO CLIP)

BLITZER: What is your interpretation of that position, assuming it reflects the position, as I assume it does, of the North Korean government?

KISSINGER: My interpretation is that this is nuclear blackmail, that he is threatening us with a nuclear military program if we do not meet unspecified demands. And it's also appeals to the South Korean/American apparent rift. It makes us the principal country responsible for the establishment of this nuclear program, and we cannot accept that kind of negotiation.

We should be willing to negotiate with the North Koreans on the condition that they are prepared to give up any nuclear military program under international inspection. We should not put ourselves in the position where South Korea and every other country can comment on every move we make without sharing responsibility to a threat that is much more serious for them in the long run than it is for us.

And if the world community cannot stop a real rogue regime from engaging in this sort of nuclear blackmail, we are going to head into a very desperate period.

BLITZER: I want to take a quick commercial break, but I want to ask you this question, Sandy Berger, before I do. In 1994, you were the deputy national security adviser in the White House to President Clinton. How close were you at that point to using military force to order air strikes to take out North Korea's nuclear capability?

BERGER: When the North Koreans said essentially what they're saying now, that they planned to reprocess further nuclear fuel. We said that was -- we said unequivocally that was completely unacceptable to the United States, that we would take them to the United Nations for economic sanctions. They said that would be an act of war. We were reinforcing our troop presence in South Korea and had other military options on the table.

As a result of that, we had a negotiation which stopped their nuclear program. Had we not stopped it, there would have been perhaps 100 nuclear weapons the North Koreans had produced.

In exchange for that, the North Koreans got a few million barrels of oil. The Japanese and the South Koreans promised to provide them a different kind of nuclear power plant, which they have not provided them. So if look...

BLITZER: The light-water reactors.

But the president at that time, he seriously considered some options to launch military strikes.

BERGER: We took no options off the table. Economic sanctions, military options, negotiations. We seem to have taken all of those options off the table now.

BLITZER: All right, we're going to pick that up when we come back. We have a lot more to talk about. Secretary Cohen will be joining this conversation once again, as well.

LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're talking about the international flashpoints facing the United States, including North Korea and Iraq. Joining me, the former U.S. Secretary of State Henry Kissinger, the former U.S. Defense Secretary William Cohen and the former U.S. National Security Adviser Samuel Berger.

Secretary Cohen, let's talk a little about -- finish, wrap up this North Korea situation. I want you to listen to what the president told his cabinet at the White House earlier this week, because he finessed a clearly, clearly dangerous situation. Listen to this.

(BEGIN VIDEO CLIP)

BUSH: 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 says he's going to do. I believe this will be resolved peacefully, and I believe it can be resolved diplomatically. (END VIDEO CLIP)

BLITZER: Talk about Kim Jong Il, the man, because a lot of people say he's weird, he's mysterious, he's unpredictable, he can't be trusted under any circumstances, and he's reclusive. You've heard all these descriptions of him.

But can the U.S. make a deal with him to eliminate North Korea's nuclear military capability?

COHEN: Well, the first thing you have to do is to deal with him. Whether in a broader context or a narrow context, you have to deal with him and to meet with him or his subordinates.

But secondly, you can't trust anyone at that level. You must, in fact, put in place a series of checks to make sure that you're not relying upon words or a personal relationship but you must rely upon those mechanisms that prevent, as best as possible, any kind of future deception that we've seen Kim Jong Il practice in the past.

BLITZER: I want to move on and talk about Iraq. But before I do, one final thought from you, Sandy Berger, on -- apparently there seems to be some increasing criticism of the Clinton administration, the deal that you helped negotiate in '93, '94, the first time this similar kind of crisis came up with North Korea, that you were suckered in, you got carried away and you should have never made these kinds of concessions to North Korea, that's why they're doing it again now.

BERGER: The fact is that there are 100 nuclear weapons that were not produced by North Korea as a result of that deal. What they got was a few million barrels of oil. It seems to me 100 nuclear weapons, a few million barrels of oil, that's not a bad deal.

And I must say, for some people in the administration, I'm beginning to think that blaming Clinton is a substitute for thinking.

BLITZER: All right. Let's move on and bring back Dr. Kissinger.

Dr. Kissinger, in the showdown with Iraq, the standoff, of course, continues. Dr. Mohamed ElBaradei, the chief nuclear inspector, the director general of the International Atomic Energy Agency, spoke out in Time magazine, the new issue coming out today and tomorrow, and among other things, he said this.

He said, "I hope the U.S. does not know anything we do not know. If they do, they should tell us. If they are talking about indigenous capability, Iraq is far away from that. If Iraq has imported material hidden, then you're talking about six months or a year. But that's a big if." Talking about Iraq's potential nuclear capability.

Should the U.S. go further and share all of its intelligence with these inspectors if it wants the inspectors to do a credible job?

KISSINGER: The United States is limited by not wanting to disclose its sources and methods. But with that limitation, I believe that the administration, at an appropriate point and before a decision is made, shares the information that it can.

BLITZER: And shares it not only with the inspectors but with the American public and the international community, as well?

KISSINGER: Well, we are committed to consultation at the United Nations Security Council before we go into action, not for an approval but for a consultation. I believe we have to put forward a plausible case.

Now, in 1998, when President Clinton was considering going to war, he made a speech in which he listed the stockpiles that he believed, at that time, the Iraqis had. And they were fairly substantial at the time, and one has to assume that they have increased since then. So I would imagine that by putting together the Clinton information and the Bush information, we should be able to make an overwhelming case.

BLITZER: And presumably, the Bush administration, Sandy Berger, could do that without compromising sources and methods, how they collected this kind of information?

BERGER: Yes, Wolf, the burden of proof here is on Saddam Hussein to establish what happened to weapons we know he once had and he claims he now doesn't.

The burden of putting together a broad coalition is on us. And therefore, we're going to have to move on a time table when we're ready and able to demonstrate that a war, if it comes, is a result of his intransigence, not our impatience.

And that's going to require us to both share more with the inspectors and, as Secretary Kissinger suggested, more with the American people.

BLITZER: Very quickly.

COHEN: Just to add quickly, you tend to quote only one part of Hans Blix's statement: There's no smoking gun that they found to date.

The other part of that statement is that he is not satisfied that Saddam has done anything but provide either misinformation, some disinformation, what would be the equivalent of spam on the Internet.

So there's still a material breach, and I think the burden will rest on Saddam to supply the information. It'll make a much stronger case for the United States if he fails to do so.

BLITZER: All right, gentlemen, stand by. We're going to take another quick break.

KISSINGER: Yes, I'd strongly agree with it.

BLITZER: All right, Dr. Kissinger, stand by. We're going to continue this conversation. Let's take this break. We'll be right back. (COMMERCIAL BREAK)

BLITZER: Welcome back. We're continuing our conversation right now.

Dr. Kissinger, as far as the showdown with Iraq is concerned, I'll ask you a question everyone seems to be asking me. What's your assessment? What's going to happen? How will this showdown play out over the next weeks and months?

KISSINGER: I suspect that we will find Saddam in material breach and that we will impose disarmament on him.

And I think we should keep in mind that the events in Korea should prove that any inadequate agreement or anything that leaves the capability potentially intact is going to face us with a much worse problem down the road.

And indeed, we have to consider this, if Saddam Hussein gets through this and then acquires the oil revenues that the lifting of sanctions would bring, then two, three, four years from now, we would face a Korean crisis in the Middle East. So that I have now come to the view that a regime change in Iraq is inseparable from the disarmament that we started out with.

BLITZER: All right. Sandy Berger, what's your assessment?

BERGER: I tend to agree with Secretary Kissinger that we are heading to conflict here, and that once we're in a war, the purpose of it is regime change.

I would say this, that it is extremely important that we do so with the broadest possible coalition. All of the risks of such an enterprise, whether that is anti-American terrorism or turmoil in the region that leads to regime change in Pakistan and Jordan, as well as in Iraq, are substantially increased if this is perceived as an American-British enterprise as opposed to the international community moving against Saddam Hussein.

So that is -- that is, seems to me, the real responsibility of the administration at this point is to build that broad coalition.

BLITZER: Is that doable?

COHEN: I think it's doable. Secretary Kissinger, in his most recent book, pointed out the United States should recognize its role as a preeminent power but conduct its policy as if there are a number of other powers, as well. And that's precisely what we have to do here to continue to try to build that coalition.

But I think nothing is inevitable until it happens. In this particular case, ratcheting up the pressure of some 200,000, 250,000 troops over in Kuwait and other areas in the Middle East pretty much is a foregone conclusion. And unless Saddam goes into exile or he is taken out by a coup, the probability is that there will be military action. BLITZER: Dr. Kissinger, I'll give you the last word. Is that at all possible, that a leader like Saddam Hussein might voluntarily go into exile to end this standoff?

KISSINGER: I think if his 20 closest associates recommended to him, he might voluntarily go. But seriously, I think he probably has to be forced out. That's conceivable, but we would still then face the problem of some sort of international inspection with teeth that ensures that all the weapons get destroyed in the process.

BLITZER: We're going to have to leave it right there. Dr. Henry Kissinger, as usual, thanks very much for joining us.

Secretary Cohen, thank you very much.

Sandy Berger, always good to have you on the program. Appreciate it very much.

Coming up in the next hour of LATE EDITION, the president's plan for bolstering the U.S. economy. The commerce secretary Don Evans, the former Clinton economic adviser Gene Sperling, and the publishing mogul and former Republican presidential candidate Steve Forbes will all weigh in.

The debate over who benefits most, when LATE EDITION continues.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. We'll explore President Bush's plans for jumpstarting the U.S. economy in just a moment, but first, here's CNN's Fredricka Whitfield in Atlanta with a CNN news alert.

(NEWSBREAK)

BLITZER: This week, President Bush unveiled his plan for getting the U.S. economy back on track. Its centerpiece: more tax cuts. The proposal is drawing fast and furious criticism from many Democrats and even some Republicans.

Earlier today, I spoke with the president's commerce secretary, Don Evans.

(BEGIN VIDEOTAPE)

BLITZER: Mr. Secretary, thanks so much for joining us on LATE EDITION.

Let's get to this nearly $700 billion economic stimulus package the president unveiled this past week. Do you believe it will pass as is, or will there be significant changes?

DON EVANS, COMMERCE SECRETARY: Wolf, we're going to fight real hard to see that it passes as is. I know there's a process. Certainly, I was very much involved in the tax cut bill of 2001, and we certainly got most of what was laid out to the American people in that bill. But there's a process and there's -- members, leadership of the House will have some ideas; leadership in the Senate will have some ideas.

But I'll be on the Hill arguing very hard for the president's plan and explaining why I think it is the right plan for this country not only today to make sure our economy performs at its full potential this year, but next year and years to come.

BLITZER: There's one report out there -- you probably saw it -- suggesting the White House is sort of encouraging House Republicans to increase it, to get even more tax cuts so they'll be in a better bargaining position with a perhaps more reluctant Senate.

EVANS: Well, you know, Wolf, again, I mean there is a process, and I think I'm going to be up there arguing very hard for the full implementation of the $674 billion tax cut over a 10-year period. You know we'll talk to House members; we'll talk to Senate members. You know we'll just see how the process proceeds.

BLITZER: But if House Republicans want to increase it, are you open to that?

EVANS: Well, you know, we're going to be up -- I'm going to be fighting for the president's position. That's what I'm going to be fighting for. And we'll listen to what they have to say and deal with them. I mean, it's a process where we all work together. I'm not confused about that.

BLITZER: You realize, though, you do have a problem already that's developed only in these past few days with some Senate Republicans. And I'll put up on the screen some comments that have been made by several of them.

Senator Charles Grassley, chairman of the Finance Committee: "We may not be able to sell it."

Senator Voinovich of Ohio: "It's heavy, it's big. I don't think it will give us the shot in the arm or rev us up like I think we need to be revved up."

Senator McCain: "I would like to see more middle income, low income Americans get the benefits of a tax cut."

Senator Chafee of Rhode Island: "As you start to do your arithmetic, there could be problems."

Senator Snowe of Maine: "At a time of growing federal deficits, it is especially important that this plan be right-sized, without putting our future at risk."

And her colleague from Maine, Susan Collins: "The package needs a lot of scrutiny. I would have chosen different elements."

Now, those are all Republicans.

EVANS: As you said, it's just in the last few days. And so I'm looking forward to spending time on the Hill and taking my business experience to the bill and explaining to members of Congress how the economy works, how businesses think, how they need to know what the tax structure is going to be not just this year but next year and the following year and the following year, how businesses plan their work, and how when they have that certainty as to what the tax structure is going to be, they're more prepared to invest, which means the creation of more jobs.

I'm also going to explain how I think families like to plan their own budget. Because what the president has laid out is a program of tax cuts that extends out over a long period of time. We talk about the savings to family members all across America. This benefits 92 million taxpayers.

BLITZER: But are you surprised that all these Republicans are now expressing serious reservations, if not opposition to key elements of the plan?

EVANS: Well, you know, I've talked to Chuck. I've talked to Chairman Grassley already on the phone, and he sounded open-minded to me. You know I haven't had the chance to go up to the Hill yet and talk to him about the specifics of this plan. I'm looking forward to that.

I mean, the president just laid out the plan this last week, and so I'm not sure anybody has had the chance to fully go through the entire -- all elements of the plan and totally understand what it means to the economic strength of this country.

BLITZER: The president, of course, did get a huge tax cut through the first year of his administration. And he even managed at that time to get 12 Democratic senators on board to vote for it. Senator Daschle, the Democratic leader, says that's not going to happen as far as this latest economic stimulus package is concerned. Listen to what he said earlier today.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: I'm absolutely confident that our Democrats feel much more strongly about this tax plan then they did the last one. They realize now that a mistake was made in many cases. We are devastating the economy. We are increasing the debt. We are creating fiscal havoc here in ways that many of them didn't anticipate. So the experience of the last two years has served as a real guide. And I am confident that we're going to have a lot more votes than we did the last time.

(END VIDEO CLIP)

BLITZER: It looks like he's going all out to try to beat you.

EVANS: "Devastating the economy." You know, Wolf, I'm going to say to you that, as I think about the performance of the economy over the last two years, and the president's leadership with respect to the economy, I think that it's clear to all Americans that it's because of the president's leadership the recession was shallower than it might have been and shorter than it might have been.

The economy over the last 12 months, as a matter of fact, or from the fourth quarter of 2001 through the third quarter of 2002, was growing at three percent. The economy, when you think about inflation, it's at record lows, well under control. Interest rates are at 40-year lows. Productivity in 2002 was the highest it's been in 30 years. It grew at 5.6 percent. Now that doesn't sound like to me an economy that has been devastated.

BLITZER: But there are still a lot of jobs that have been lost.

EVANS: Absolutely.

BLITZER: And jobs are key right now for a lot of people who need to put food on the table.

EVANS: Wolf, they're more than key. I mean, the president has said over and over again, it's how he believes, that if there is one person in this country that does not have a job, that's not right and that's not good. And we ought to do everything we can to grow this economy so they'll have a job. And the way you grow an economy is you cut taxes and you control spending. That's how you create the conditions for economic growth.

The president understands that those that create jobs and create the wealth of the country are the small businesses across this country, the workers of this country, the entrepreneurs and innovators of this country. What the president is doing with this plan is creating the conditions so that the workers and small business owners can do what they do so well, which is to create the wealth. This benefits 23 million small business owners.

BLITZER: The critics, though, point to numbers. And I'll put a couple of numbers up there so that we can get a sense of what the criticism of the president's plan is.

Look at this number. The Brookings Institute, together with the so-called Tax Policy Center, says that people on average earning between $30,000 and $40,000 a year are going to get a tax savings of about $351 this year, coming year.

BLITZER: People who make $1 million a year or more will get almost $90,000 in benefits. Now that sounds it's going to really benefit the rich, as opposed to the middle class or the poorer people.

EVANS: Let me talk about that benefit-the-rich charge. Let me take my friend Jose Cuervas (ph) in Midland, Texas, who started a company in 1979 with $5,000 and a Sears credit card, a burrito stand.

Over the last 24 years, he has built that company to where he has now six burrito restaurants.

Jose employs 115 people. This last year, his sales, not income, but his sales was $4.5 million. From that $4.5 million he must pay his light bill, his utilities, his rent. He pays the wages and salaries of those 115 employees, who he feels responsibility for because they're there pursuing their own American dream. And so Jose happened to have a pretty good year, when he took his $4.5 million and he paid 115 people and he paid his light bill.

He happened to wind up in the highest income tax bracket. But you know he may not this next year. He may not have as good a year. But the key is the benefits are going not to the millionaire people that they want to imply it is, it's going to small business owners all across America.

BLITZER: But what Democrats and some Republicans, like Senator McCain and others are saying is, why benefit the millionaires right now at a time of economic struggle?

Why not help those people who really need it the most?

EVANS: Here's how it goes, Wolf. First of all, 79 percent of the benefits in the top bracket go to small business owners. Small business owners that are responsible for employing other people.

The small business owners employ over half of the workers in America. They contribute more than half of the GDP to America.

So 79 percent of the tax bracket goes to the small business owners. Ninety-two million taxpayers get a big benefit. Forty-six million families get an average savings of $1,700 a year, this year and next year and the following year and the following year.

Thirty-four million families who have children get a benefit of $1,500 this year, next year, the following year. Thirteen million of our elderly get a benefit.

BLITZER: But you know politics and you know the perception out there. I'll show you these numbers from the CBS News poll that came out this week. "Who do Bush administration policies favor?"

Look at these numbers. Rich, 59 percent, middle class, 11 percent, poor, 2 percent, treated all the same, 23 percent.

You have a perception problem that what you're doing is overly helping the rich.

EVANS: You know, Wolf, I do understand politics. I've been in town for a couple of years. The previous 26 years of my life was in the private sector.

Too many people in this town think about politics when they make every decision. That's not how the president thinks. How the president thinks is what's in the long-term best interest for all of the American people.

He approaches a problem like this and says nobody wins unless we all win. And that's the kind of program he's laid out here. All Americans will win, because, in the end, you create the conditions for this economy to grow for this year and years and years to come. To grow at its full potential.

BLITZER: One of the most controversial, if not the most controversial proposal, eliminating the taxes on the dividends. The dividend earnings from the big corporations, any corporation that makes a profit, for that matter.

Senator Grassley says that simply may not fly. Is there any wiggle room, where you're willing to rethink that tax cut proposal?

EVANS: I'm not willing to rethink it, because I think it's right for the American people. I think it's what creates the conditions for this economy to grow at its full potential.

Right now there is some inequity as to how companies raise debt versus equity. Fifty-four million shareholders in this country own stocks that pay out dividends.

Thirty-five million of those get direct benefit from the exclusion of double taxation.

Over half of the benefit will go to our senior citizens. But, in addition to that, what happens with double taxation of dividends, it puts incentives in the wrong place.

It doesn't give the company the incentive to pay out a dividend to their shareholders. It creates an incentive, in a matter of fact, for companies to inflate their earnings.

And so this is about creating the right conditions for the formation of capital and for the creation of jobs, which will indirectly benefit all Americans in years to come.

BLITZER: A couple very quick answers, if you have them. Aren't you overly concerned, are you concerned at all at what officials used to be really concerned about, this deficit exploding, $100 billion or so this year?

But it could go up to $350 billion. That would be extremely high as far as deficits are concerned.

EVANS: The way to reduce the deficit is economic growth. And you have economic growth when you cut taxes and you control spending. That is what to focus on.

BLITZER: One final question before I let you go. Steve Forbes is going to be joining us momentarily. Of course he supports a flat tax, which he ran on when he tried to become president.

Is President Bush thinking at all about simplifying the tax code some place down the road and bringing in, for example, a flat tax?

EVANS: We're having ongoing discussions about the tax code. But right now, the president is focused on passing this economic package that he presented to the American people just last week.

BLITZER: So are you open-minded as far as a flat tax?

EVANS: Oh, we're continuing to look at different possibilities with respect to the code, sure. But, I mean no decision's been made. We're just thinking about it, studying it.

BLITZER: So Steve Forbes would be happy to hear that maybe some day there will be a flat tax?

EVANS: Yeah, well we're going to continue to look at it.

BLITZER: We'll talk to him about it as well.

EVANS: Right, exactly.

BLITZER: Mr. Secretary, thanks for joining us.

EVANS: Thank you, Wolf. You bet. Nice to see you.

(END VIDEOTAPE)

BLITZER: And coming up next, two very different views on President Bush's economic proposals. We'll talk with the former Republican presidential candidate Steve Forbes and the former Clinton economic adviser Gene Sperling.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: We will not rest until every business has a chance to grow and every person who wants to find work can find a job.

(END VIDEO CLIP)

BLITZER: President Bush insisting his administration is focused on reviving the U.S. economy.

Welcome back to LATE EDITION.

Joining us now are two men with very different views on the best economic prescription for the country. From our Los Angeles bureau, the former chief Clinton economic adviser Gene Sperling, and in our New York bureau, the president and CEO of Forbes, Inc. and the former presidential candidate Steve Forbes.

Gentlemen, welcome back to LATE EDITION.

And, Gene Sperling, I'll begin with you. You just heard the commerce secretary make the case for these proposals. Do you believe -- put your political cap on for a moment -- that the Democrats in the Senate will stay united as a team, all 49 of them, and oppose this kind of proposal the president has put forward? GENE SPERLING, FORMER CLINTON CHIEF ECONOMIC ADVISER: I believe so, Wolf. I think they find it disappointing in a few regards.

One, we've just lost, in the two years, 2.3 million private- sector jobs. You wouldn't know that from hearing Secretary Evans. In fact, Friday we saw we lost 115,000 private-sector jobs last month.

Here's a plan of which its centerpiece, a dividend exclusion, nobody thinks is actually designed to actually stimulate job growth in the economy right now. So I think Democrats find it very disappointing as an actual economic stimulus. I think they feel that Nancy Pelosi's plan in the House provides much more stimulus, at probably 1/7 the cost.

But I think what you're really hearing from both Democrats and Republicans that you were quoting before, Wolf, is this concern over the long-term deficit. Everybody agrees it's OK to increase the deficit this year to help jumpstart the economy.

But I think you're hearing a lot of people remind President Bush, there is still a very serious Social Security and Medicare deficit out there. We have a new challenge of homeland security.

BLITZER: All right.

SPERLING: This is a time when you need a president to say that we have to do some savings for the long term, for both growth and to meet these challenges, not this attitude of, you can have something for nothing. That's exactly the wrong type of moral leadership we need right now.

BLITZER: Steve Forbes, even some Republicans, a handful in the U.S. Senate, the ones I quoted earlier, are raising serious questions, reservations about the president's initiative.

Where do you stand, first of all, on this whole latest economic stimulus package?

STEVE FORBES, CEO, FORBES, INC.: Well, I think it's a very good step in the right direction. First of all, it lowers the cost of capital, which is inducement to get more investment, which is how you create jobs in the future. And by lowering the cost of capital, it also helps creates new capital, new pools of capital, by increasing after-tax returns.

And there's another aspect to it, which has been overlooked, and that is, this bill will reduce the misallocation of capital by corporations. Under the tax system we have today, the inducement is to keep the money, waste the money, not return it to investors for new opportunities.

So in that sense, I think it brings more accountability to corporations today which is why some of them are not very enthusiastic about ending double taxation of dividends.

BLITZER: Well, let's talk about that double taxation of dividends. Gene Sperling, you oppose the president's initiative on this front. Listen precisely to what the president said earlier in the week in unveiling the proposal.

(BEGIN VIDEO CLIP)

BUSH: Taxation falls especially hard on retired people. About half of all dividend income goes to America's seniors, and they often rely on those checks for a steady source of income in their retirement. It's fair to tax a company's profits. It's not fair to double tax by taxing the shareholder on the same profits.

(END VIDEO CLIP)

BLITZER: All right. What about that, Gene Sperling?

SPERLING: Two main points. Number one, I think Democrats should be open to listening to proposals for overall corporate tax reform that dealt not only with dividends but, Wolf, the $154 billion of income that is apparently not reported to the IRS.

If you had comprehensive corporate tax reform, maybe you could make things more efficient but you would not have to expand the deficit in this dramatic way. That's what's so irresponsible about the president's proposal.

Secondly, let's not kid ourselves. The top 1 percent gets more of this tax cut, the dividend exclusion, than the bottom 95 percent combined. The top 1 percent more than the bottom 95 percent combined. And the overwhelming number of senior citizens share about 5 percent of the benefits of this plan.

Now, I don't support Democrats talking class warfare. But I certainly don't support the president implementing policies that just take off a slice of the top 1 or 2 percent at this critical moment in our economy.

If we want to help saving and investment in the stock market, Wolf, let's help the 86 million Americans who don't have a 401(k) at all right now. Let's offer them a generous match so that we can have universal 401(k)s.

BLITZER: All right.

SPERLING: That way we could have more savings, more investment, but it would help all Americans, not just the top -- not just a windfall to the most fortunate.

BLITZER: Steve Forbes, tell Gene Sperling why he's wrong.

FORBES: Well, first of all, if you want investment, you've got to reduce the cost of investment and increase the pool of investment to create jobs.

And the fact of the matter is, the top 10 percent of income- earners in this country pay over 70 percent of taxes. And those people don't consider themselves -- most of them don't consider themselves rich. You take a typical police officer in Chicago and a teacher in Chicago. By Gene's standards apparently, or certainly Daschle's standards, those people are rich because they each make about $40,000, $50,000 a year.

So he's right, get off of this class warfare thing and figure out what's going to get this economy moving. And helping middle-income earners -- if you have a family making $40,000 a year, they get over $1,000 back from this tax cut. That's real money. This is across- the-board. If you put the whole package together, it's a good package.

BLITZER: All right.

FORBES: And as for people who don't have 401(k)s, reform Social Security so they have their own private accounts there and get a real return on that money.

BLITZER: Well, on that specific point about those people earning $40,000 a year, Gene Sperling, listen to how the president described his plan and how they will benefit.

(BEGIN VIDEO CLIP)

BUSH: Under this plan, a family of four with an income of $40,000 will receive a 96 percent reduction in federal income taxes. Now, that may not mean a lot of money to some of the big shots. It means a lot of money for the family of four making $40,000.

(END VIDEO CLIP)

BLITZER: It sounds like that plan is really going to help those people, isn't it, Gene?

SPERLING: Wolf, the White House is using, you know, these averages. They average in the $88,000 that a millionaire gets so that it seems bigger.

Here's the facts they're not telling you: 50 percent of American taxpayers will get less than $100. Most lower-income or moderate- income families or single-head-of-household families will get no tax cut from this at all.

So -- but, Wolf, here's the main point. If President Bush wants to work with Democrats to give a strong middle-class tax cut in 2003 that doesn't expand the deficit later, Democrats will work with him so fast he could get a job and growth package done in January.

If he wants to hold out for a long fight just on this dividend taxation issue, which goes overwhelmingly to the top 1 percent, I think he's going to hurt our country economically and I think he'll hurt himself politically.

BLITZER: I'll let Steve Forbes respond to that right after a commercial break.

We have a lot more to talk about, including your phone calls. They'll be taking phone calls. LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: You hear a lot of talk in Washington, of course, about, you know, this benefits so-and-so or this benefits this, the kind of the class-warfare politics.

(END VIDEO CLIP)

BLITZER: Charges and countercharges of class warfare in response to President Bush's new economic plan.

Welcome back to LATE EDITION. We're continuing our debate with former Clinton chief economic adviser Gene Sperling, former Republican presidential candidate Steve Forbes.

On the whole notion, Steve Forbes, of Gene's argument that the rich are overwhelmingly going to benefit from these proposals, at a time of economic struggle here in the United States right now -- and the country has lost a lot of jobs -- why let the rich benefit at all? This is what Democrats are asking, and some Republicans. Why let them benefit at all? Why not let them wait until the economy rebounds?

FORBES: Well, the whole notion that they have is that there's a certain fixed amount of money in this country, that it's a fixed size of a pie. And what the president wants to do is expand the pie to create new jobs and better-paying jobs.

And the way you do that is to give people encouragement to make investments in new technologies, new businesses, new services, expanding existing businesses. And this is what this thing is aimed for.

For example, they have a provision to help small businesses, which create most of the new jobs in this country, by allowing them to write off quickly more of their investments. That's positive.

But also, as I keep emphasizing, it also gives money back to people who earn it, people who pay taxes. People making $40,000, $50,000 a year will get a meaningful tax cut with it.

So it takes care of the consuming side, but most importantly, long term, it takes care of the job-creation side. And that's how...

BLITZER: What about the...

FORBES: ... ultimately you reduce deficits in the future, aside from Congress exercising a little bit of spending discipline, which they never seem to be able to do.

BLITZER: But on this...

FORBES: But long term, you need a growing economy, and this is what this does. BLITZER: On this issue, though, of the deficits, the deficits, at least in the short term, are going to go way up. $300 billion, $350 billion projected for the not too distant future in annual deficit. That's about as high as it's ever been.

You used to be really concerned about the deficits. You're not concerned about that anymore?

FORBES: Well, the reason you get deficits, aside from Congress' spending habits, is also from a slow economy. And when you get a faster-growing economy, you get more revenues. We should have learned that from the '80s and '90s, when you had a vibrant economy and had more revenue.

And in terms of the size of deficit, it's a big number, but in terms of the size of our economy, it's smaller than what we've had in the past. The key is, get the economy growing, and these things will take care of themselves.

BLITZER: All right, what about that, Gene Sperling?

SPERLING: My concern is not the size of the deficit this year when we're trying to help stimulate growth. But what is tremendously disturbing about this administration's policies, Wolf, is that, when you add together their initial tax cut, their desire to make the tax cuts permanent, and this stimulus plan, you get a cost of nearly $4 trillion over the next 10 years, Wolf.

Nothing's changed on our Social Security challenge. Nothing's changed on Medicare. The only thing that's changed is we have a new homeland security crisis, which should make all of us be more savings- oriented. We should hold back on expensive prescription drug plans, but we should also hold back on these long-term obligations, in terms of expensive tax cuts.

And what Steve Forbes forgets is that in the '90s, we had a policy of savings surpluses. It was a pro-growth policy, because it meant that the government, instead of borrowing from the private sector, was putting more capital and more savings.

So let's have a pro-savings plan. That's a pro-growth plan, and that helped lead to the virtuous cycle and the high productivity growth that was so powerful in the 1990s.

BLITZER: All right. What about that, Steve Forbes?

FORBES: Well, first of all, the president's package is pro- growth, pro-savings, pro-capital-creation oriented. And, as for the 1990's, growth really started when the Republicans took control of Congress in 1994, started reducing taxes, controlling spending a little bit, and the economy took off. And that's the bottom line.

And as for the even taking seriously Gene's $4 trillion number, that's over 10 years, and when you compare that to size of the economy, that comes to about two or three cents on the dollar. This is not a big tax cut by historic standards, it's the minimum we need to get this economy moving again.

And it does the right thing: Gives consumers more money. Gives investors greater incentives to invest and create those better-paying jobs in the future.

BLITZER: All right, stand by, gentlemen, we're going to take another quick break. We have a lot more to cover, including phone calls.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

Are more tax cuts the answer for a sagging U.S. economy? We're continuing our debate with former Clinton chief economic adviser Gene Sperling, former Republican presidential candidate Steve Forbes.

We have a caller from California who has a question. California, go ahead.

CALLER: Hi, thank you. You project a deficit of $300 billion to $350 billion coming up. What will happen to that deficit if we go to war? How are we going to pay for the war with Iraq?

BLITZER: Good question. Steve Forbes, what's the answer?

FORBES: I think that deficit assumes we're going to be increasing more on defense spending and homeland security.

And in terms of in past wars that we've had to fight, such as in Vietnam, Korea and World War II, the money cost of this war on terror is fairly small. The real cost comes in what they've done to our home life here and in terms of terrorist attacks here with diseases and other agents, that's the real cost, not a money cost. We can afford this war against terror very easily. We're a very rich country.

BLITZER: What about that, Gene, do you agree?

SPERLING: I agree with this: When it comes to defending our homeland, cost should not be an issue. If the deficit has to up to defend ourselves, that's what we should do.

But what is relevant and what should be concerning to viewers like yourself is that we had a $5 trillion surplus over the next 10 years projected. That's completely wiped out. It is that long-term surplus, that long-term fiscal deterioration that means that our country will be less prepared in the future to deal with the rainy days, the crisis.

BLITZER: But...

SPERLING: And one of the reasons, Wolf, that we could respond so strongly right now is because President Clinton and others focused on saving the surpluses so when we did hit this downturn, when we did hit a period of war, America had saved up enough that we could unload our fiscal canons and our actual canons.

BLITZER: But President Bush has...

FORBES: Wolf, that $5 trillion surplus, Wolf, that was projected was based on a bubble economy. And so the Clinton administration has a lot to answer for 1999 and 2000. That was a false prosperity, and we're paying the price for it now.

BLITZER: Gene, go ahead.

SPERLING: Steve, it was not a false prosperity for the 22 million Americans who had their jobs created. They'll take that over the 2 million lost private-sector jobs.

It wasn't a false prosperity for productivity growth that you even acknowledge is still lasting.

FORBES: Productivity growth is real and great...

SPERLING: It wasn't a false prosperity for all the Americans who saw their income's gains go up in the 1990s for the first time.

What we need to do is restore to that period of fiscal discipline.

FORBES: What we need is a solid prosperity, not the false one of 2000.

SPERLING: If we have to spend, it should be for absolutely critical imperatives, whether the spending side or on the tax cut side.

BLITZER: Steve Forbes, I didn't get the last point you made. What were you saying?

FORBES: I said we need a solid prosperity, not the bubble kind of the year 2000.

BLITZER: You know, Gene Sperling, I want you to listen to what president says. He says as far as the deficits, about stimulating the economy, there is an answer, and the answer is tax cuts. Listen precisely to this little excerpt from his speech earlier in the week.

(BEGIN VIDEO CLIP)

BUSH: By speeding up the income tax cuts, we will speed up economic recovery and the pace of job creation. If tax relief is good enough for Americans three years from now, it is good enough for Americans today.

(END VIDEO CLIP)

BLITZER: What's wrong with that logic? Getting more money into the hands of the American public, they'll spend more. That'll create new jobs and that will also stimulate the economy. There'll be greater economic growth. Why is the president wrong? SPERLING: Two points, Wolf. Remember it is Democrats, such as the House Democrats, who proposed putting $136 billion into the economy right now. So we agree, let's put money into the economy right now to small businesses, to working people. We can get something done quickly.

Where the disagreement is, is over what happens to the long-term deficit. And, Wolf, any time in life somebody tells you you can have something for nothing, you can eat more chocolate and cake and lose weight or you can have expensive tax cuts or big spending programs and that will reduce the deficit, Americans, I think, are smart enough to see through that.

That's exactly what President Reagan said in the beginning of the '80s, and it took a decade of tough bipartisan work to work our way out of it. And the reason you're seeing some of those Republicans objecting is because they don't want to make our country get into that same fiscal hole again.

BLITZER: Steve Forbes, when you ran for president, you ran on a so-called flat tax, anxious to simplify this enormously complicated tax code that is currently in existence and is likely to get even more complicated over the short term.

I did not hear a robust endorsement of that flat tax from Secretary of Commerce Don Evans, did you?

FORBES: Clearly, he was not expecting the question. But I think when President Bush gets reelected in 2004, which I think he will, I think tax simplification will be at the top of the agenda. They're starting to move toward it now, first by getting rid of the death tax, then double taxation of dividends. But they're not moving as quickly as I would have liked, but at least they're making a step in the right direction.

As for Gene's thing on the taxes, if he wants to increase this tax cut, I am all for it. To me this tax cut the president proposed, good but a little small.

BLITZER: Gene Sperling, what's wrong with a flat tax, something that Steve Forbes proposed a long time ago, getting rid of a lot of these accountants and making it so much simpler for all of us to do our taxes every year?

SPERLING: I think when you look at overall tax reform, you should have three tests. One, is it really comprehensive? Two, is it revenue-neutral or just an excuse to expand the deficit? And three, is it fair? Does it keep the same progressivity in our tax code?

What's wrong with this dividend exclusion is that, as opposed to being overall corporate tax reform that is fair and deficit neutral and comprehensive, it's just another expensive tax cut that hurts our deficit.

If Steve Forbes can come up with a flatter tax that keeps the progressivity of our system and doesn't expand the deficit, him and I can talk. I have never seen a proposal from Mr. Forbes, or really anyone else who has been in that flat tax school, who has met those tests.

BLITZER: I will give you the last word, Steve Forbes.

FORBES: Well, Gene shouldn't be in the position of defending this horrific tax code today and the IRS as we know it. I do have a plan on the table that has progressivity. The more you make, the more you pay. That simple. You can't hide. No more corporate machination because of the complexity of the tax code.

You want honesty and fairness, make it simple that the average and typical American can understand instead of having the lobbyists feast on the current tax code today and corporate chieftains get away with hiding taxes that they should be paying as they would under the flat tax. BLITZER: We are all out of time, unfortunately.

Gene Sperling, at the beginning of this program, our viewers saw you with the very good-looking beard. What happened to that beard?

SPERLING: You know, my friends said, "How can you go on Wolf Blitzer's show with a chief Wolf Blitzer imitation? Shave that thing." So I did.

(LAUGHTER)

BLITZER: You looked great with that beard. But then again, I speak with a little bit of bias.

(LAUGHTER)

We're going to see Steve Forbes with a beard one of these days. Maybe not.

(LAUGHTER)

Steve Forbes, Gene Sperling, thanks for that excellent debate. We'll have you back. Happy New Year to both of you as well.

SPERLING: Thank you.

FORBES: Thank you.

BLITZER: Thank you.

Just ahead, as the U.S. deals with the dual crises of Iraq and North Korea, tensions, of course, remain between the Israelis and the Palestinians. We'll explore the prospect for Israeli-Palestinian peace with a top U.S. official who has just left government service.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're following a developing story, breaking story coming to us from Israel right now in the Middle East.

We're told that two Palestinian gunmen launched an attack earlier today in the Israeli village of Moshav Gadish (ph), which is near the West Bank, killing one Israeli, wounding three.

According to Israeli police, Israeli soldiers and police killed the attackers, two attackers we're told, in an exchange of gunfire near Afula in northern Israel. We're also told they are searching for a third gunman in this particular incident unfolding right now in the northern part of Israel.

We're also told that Israeli soldiers killed two other gunmen, searching for a third near Israel's border with Egypt. That, according to Palestinian sources in Gaza. Israeli military sources say the gunmen infiltrated the area.

We'll continue monitoring both of these incidents along the Israeli-Gaza border as well as in northern Israel, get some more information to you as it becomes available.

Meanwhile, the Bush administration has been focused, of course, as we all know, on Iraq and North Korea over these past several weeks, but the Israeli-Palestinian conflict certainly remains a tinderbox.

Joining us now with some perspective is a special guest, Aaron Miller. He served as the U.S. State Department's Mideast coordinator in four presidential administrations. He left government service on Friday. He's now the president of the organization Seeds of Peace, which works with young Israelis, Palestinians, other young people in regional conflicts to try to promote peace around the world.

Mr. Miller, welcome to LATE EDITION. Thanks so much for joining us.

Why did you decide to leave government service after, what, 20 years?

AARON MILLER, FORMER STATE DEPARTMENT'S MIDEAST COORDINATOR: Almost 25 years. Friday was my last day at the State Department. I met with Secretary Powell, a man for whom I have tremendous respect and admiration.

And I thought that these had been the most remarkable 24 years of my life, but it was time for a change. And I'm going on actually to lead an organization which will be involved in work which is as challenging.

Seeds of Peace is committed to coexistence and conflict resolution among young people from regions of conflict. And I think the timing is particularly important because my real concern, other than the events on the ground, which is obvious, is that we are in danger of losing an entire generation of young Israelis, Palestinians and Arabs to the kind of hopelessness and despair of the last several years. And it's about the future, and none of us can afford to give up on it.

BLITZER: But it seems like there's very little hope right now of actually reviving negotiations, peace negotiations between Israelis and Palestinians. You had been intimately involved in those negotiations for so many years, going back several U.S. administrations.

Is there any hope in the short term of a resumption of talks?

MILLER: I think the focus right now, obviously, is on Israel's elections on January 28th. There is also looming on the horizon the prospects, the possibilities, however you want to describe it, of military confrontation against Iraq.

I think the basic factors that have driven the Israeli- Palestinian confrontation have not changed. Israelis and Palestinians suffer from a proximity problem. Their lives are inextricably linked together by demography, by geography and by history. And the fact is, sooner or later, in one way or another, this process will resume, slowly, incrementally probably, but I think there is a future, yes.

BLITZER: They were so close only a few years ago, as you well remember after the Oslo Accords, the signing of the Israeli- Palestinian agreement on the White House lawn with Rabin and Arafat present. But it all seemed to collapse after the failed Camp David Accords negotiations that you participated in at end of the Clinton administration.

Who's to blame for this horrible detour, if you will, this horrible turning back of the clock?

MILLER: Let's be clear. An extraordinary historical moment was lost. I don't believe that we would be where we are today if in fact Camp David had produced a different outcome.

Blame, recrimination, I don't think that's the point. The analysis, I think, is clear. Number one, Palestinians missed an opportunity, not that there was a deal to sign on the table. There was no formal agreement ready to be signed. But it was Palestinian passivity, Palestinian lack of responsiveness, the unwillingness to put forward authoritative positions and take to take responsibility for them in response of what the Israelis put on the table, I think, that created a problem in the negotiation.

But the Palestinian case was, in that respect, undermined, as well, by Israeli tactics. I think Camp David started too late, in July of 2000, in large part because of Israelis had focused on Syria. I think, perhaps, in that respect we tried to achieve too much.

BLITZER: You'll remember, though, this editorial in the New York Times that appeared on July 28, 2001, after the collapse. It said this: "Camp David fell short because of insufficient preparation and a lack of trust and chemistry between the two leaders," referring to Ehud Barak and Yasser Arafat.

But the Clinton administration is accused of not doing enough advance work to get the process in motion.

MILLER: I agree with the latter assessment, that there was tremendous trust (sic) and suspicion in July of 2000 between Barak and Arafat, and between Israelis and Palestinians.

BLITZER: Lack of trust?

MILLER: Lack of trust.

I do not agree with the former characterization.

Look, we argued, I argued that failure to take advantage of the opportunities that we saw in the summer of 2000 would have produced violence. The previous administration would have been criticized by those same people who criticize it now for being too reckless if in fact there had been violence in September and the administration had done nothing to prevent it and preempt it.

Yes, Camp David was a difficult proposition, but I think the previous administration had to go in. When in fact, if in fact the Israeli-Palestinian conflict is resolved, over time, people will look back on Camp David and the negotiations that followed, until the end of December of 2000, and they will probably admit that the genetic code on each of the four core issues that constitute and still bedevil relations between Israelis and Palestinians, that genetic code was broken at Camp David.

BLITZER: So, in other words, they'll start off at some point down the road, if they ever do start off, again where they left off at Camp David?

MILLER: Well, you're going to need an environment, which you do not have now, for recreating any kind of serious negotiations between the Israelis and Palestinians.

BLITZER: Well, could that...

MILLER: We don't have that environment now.

BLITZER: Can that environment exist as long as Ariel Sharon is the prime minister of Israel and Yasser Arafat is the leader of the Palestinian Authority?

MILLER: Look, I've watched and participated in negotiations for a long time, and on the Israeli side we have managed to facilitate and help Israelis, every Israeli prime minister since Menachem Begin, every single one, Labor, Likud, we managed to help facilitate, reach an agreement, in part because it is a national interest. It's not a parochial, partisan interest, whatever Israeli prime minister.

As far as Arafat is concerned, I think there you have a somewhat different problem. You have the Arafat predicament. It seems you can't do it with him. At the same time, it seems you can't do it without him.

The government of Israel has made a decision, understandable, that anyone who acquiesces and orchestrates in suicide terror is not a partner. The United States, particularly after 9/11, in order to maintain the moral consistency and clarity of its own counterterrorism policy, has adopted much the same attitude.

The problem is that Arafat is still a factor. And when and if negotiations resume, the trickiest problem may well be to determine just, ironically, as it was 12 years ago, as we prepared for Madrid, who would in fact represent the Palestinians.

BLITZER: We only have a few seconds left. What if there's no peace, what if there's no negotiations, it just continues as it is? What are the stakes for the region, indeed for the world?

MILLER: I think the stakes are very high. And one minute of historical perspective. If you look back on the last half-century of the last century, there was a war in every single decade: '48, '56, '67, '73, '82. The '90s came and went without a major Arab-Israeli war. That was the decade of negotiation.

If that principle is undermined, that Arabs and Israelis can use negotiations to resolve their differences, then we risk surrendering the field to the forces of history.

And the forces of history, if they could speak, would say, there'll be one winner and one loser, and no one who cares about American national interests or the interests of the state of Israel or the interests of the Palestinian or Arab peoples can afford to court such an outcome.

BLITZER: All right, ominous words. Aaron Miller, thanks for joining us. Good luck at Seeds of Peace, a very important, good organization trying to do something on the ground. Life will be quite different for you after the State Department, but I'm sure equally, if not even more, challenging.

MILLER: Thank you, Wolf.

BLITZER: Good luck to you. Up next, Bruce Morton's essay. Should the U.S. military revive the draft? LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: And now Bruce Morton with some thoughts on restoring the military draft and shared sacrifice.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): New York Congressman Charles Rangel has proposed bringing back the draft. You remember, or if you're young maybe you don't, but the U.S. drafted young people into the armed forces to fight World Wars I and II, Korea and, for most of its duration, Vietnam.

Congress won't vote to bring it back, of course. Defense Secretary Donald Rumsfeld was quick to point out it's inefficient. You train the people in the present all-volunteer force once. With draftees, you train them, they serve briefly, then you train the next batch and so on.

That's true. But Rangel, a high school dropout who enlisted and served in Korea, makes a different point. He talks about shared sacrifice. "I think," the chairman said, "if we went home and found there were more families concerned about their kids going off to war, there would be more cautiousness and more willingness to work with the international community, instead of just saying it's my way or the highway."

Rangel says, correctly, that disproportionate numbers of the poor and members of minority groups comprise the enlisted ranks of the U.S. military. He notes, as columnist and CNN colleague Mark Shields pointed out last fall, that only one member of the U.S. Congress, Senator Tim Johnson of South Dakota, had a son or daughter in the enlisted ranks.

So there is a disconnect between the country's elites, including the political elite who decide on war or peace, and the young men and women who have to go fight if the elite decides on war.

World War II was different. The U.S. had the draft and Americans at home shared sacrifices. Rationing, women leaving home to go to work, stars in windows indicating a son or daughter in the service. When was the last time you saw one of those?

Even Korea, an unpopular war, had a draft widely seen as fair. You could get a college deferment, but if you finished, graduated and then you went. Vietnam was different somehow. If you had a lawyer, you could probably avoid the draft. Our last president was one who did. And a new draft would have to leave room for pacifists, alternative service, teaching in a public school perhaps or joining the Peace Corps.

Talk to voters about Iraq these days and they say, "Yes, I guess we'll invade," or "Gee, I'm not sure." But they don't say it with much passion. If they or their kids might be the ones who'd fight such a war, the discussion might be livelier, the issue suddenly much closer to home.

I'm Bruce Morton.

(END VIDEOTAPE)

BLITZER: Thank you very much, Bruce.

We say goodbye now to our international viewers. Thanks very much for watching.

Coming up for our North American audience, the next hour of LATE EDITION. We'll get the inside scoop from a former Bush speechwriter and two White House reporters. Stay with us.

BLITZER: Welcome back. We'll get some unique insight into the Bush wartime presidency in just a moment, but first, here's CNN's Fredricka Whitfield in Atlanta with a CNN news alert.

(NEWSBREAK)

BLITZER: More than a year after September 11th and the start of the war on terrorism, President Bush is maintaining high job approval ratings.

Earlier today, I spoke with the former Bush speechwriter David Frum. He's the author of the new book, "The Right Man: The Surprise Presidency of George W. Bush." I also spoke with The Washington Post's Dana Milbank and CNN's own senior White House correspondent John King about the George W. Bush presidency, what's being called the wartime president.

(BEGIN VIDEOTAPE)

BLITZER: Gentlemen, thanks very much for joining us.

David, you have a hot new book that's out. Let's talk about that key phrase, "the axis of evil." First of all, I want our viewers to hear what the president said almost exactly a year ago in a State of the Union address.

(BEGIN VIDEO CLIP)

BUSH: States like these and their terrorist allies constitute an axis of evil, arming to threaten the peace of the world by seeking weapons of mass destruction.

(END VIDEO CLIP)

BLITZER: All right, what was the origin of that phrase? Originally, you had it slightly different.

DAVID FRUM, AUTHOR: Right. It began in a memo. The question was put, how can we explain to the American people the connection, the links, between al Qaeda, Iraq and the other regimes that the president is worried about?

And so, this was for the State of the Union, January of 2002. And you begin these things with a series of memoranda and ideas that end up in the final speech.

So I wrote a note, I was concerned about, in my own thinking, about a couple of things. One was people were comparing the war on terror to the Cold War. Long struggle, basically not a shooting war. And two, they were putting too much emphasis on the religious character of America's enemies and not enough on the ideological character.

So I thought, one thing we know all these people have in common is they all hate America. And the other thing we know is this is a lot more like the violence and irrationality and recklessness of World War II than like the care and caution and prudence of the wicked but careful Soviet side of the Cold War.

So I proposed, well, they're linked with an axis of hatred, and then wrote a long memo...

BLITZER: You originally called it an axis of hatred? FRUM: Right. And wrote a long memo, that was sort of the origin of that, actually, segment, whole segment of the speech. This went around. The president liked it. It was worked on. Mike Gerson (ph), who's the chief speechwriter, my boss, said, "You know, the president likes to use religious and moral language." And so, instead of axis -- they were linked by their evil as well as by their hatred, and so that's what it became. Was it your notion that these three countries, Iran, Iraq, North Korea, represented this axis?

FRUM: No, it was my notion that there were a number of countries the president was concerned about. And so, the door was open, that you can make the list what you want.

You had a rough idea of who was going to be on it. And especially as the criteria got clear -- look, if we're talking about states that are linked by vicious ideologies, opposition to the United States, reckless foreign policies, and weapons of mass destruction, it's pretty self-evident who that list is, and you can sort of guess in advance.

BLITZER: Because other countries -- Dana, let me bring you into this conversation. I remember that day very vividly. I had lunch at the White House that day with a senior, very senior administration official, and went through the list, almost, of other countries that could have been included -- Syria, for example, Libya, for example.

And the argument was made, no, that these countries, to a certain degree, might be helping the U.S. right then and there as far as intelligence involving al Qaeda. You remember all of that.

DANA MILBANK, WASHINGTON POST: Sure. And it didn't seem very troublesome at the time. It does a bit more now. In fact, some people who are advising the Defense Department have said, "Well, why isn't Saudi Arabia on the list? Why isn't Egypt on the list?"

And this is sort of -- defines the, "You're with us or you're against us" strategy. And that actually works quite well in the case of these three countries.

There are other countries, though, that are clearly not with us but are not entirely against us. And so the very clear moral certainty has yielded to a bit more ambiguity, and the world is not quite as simple as that.

But it was very, very effective when he released that.

BLITZER: Yes, John, you remember that day, because we spoke that day when I heard that phrase, the "axis of evil." And I remember at that point I said to myself, and maybe David will have some information on this, North Korea, not an Islamic country, not a Muslim country. It seemed to have been added at that point because they didn't want it to look as if the U.S. was simply ganging up on the Muslim world.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Right. And a country that the Bush administration at that time was still searching for a policy, how to deal with North Korea. But the one thing at the time you would get in reporting is that they disagreed with the Clinton approach, that they believed the Clinton people gave a lot and got nothing in return, at least got nothing that you could verify in return.

A year later, some say the president was dead-on. We have the stand-off with Saddam, you have the North Korean nuclear program, and you have, and we don't discuss it much, those satellite photographs showing Iran busy building nuclear facilities.

But North Korea would say that line was a mistake, in the sense that in some at the State Department, they don't say it's a mistake, but they say it complicates their task of trying to get into a dialogue with North Korea because it is confrontational.

BLITZER: Why add North Korea, for example, and not Cuba?

FRUM: Because North Korea meets all of these -- meets every criteria the president laid out. It meets all of the criteria the president laid out for defining the membership.

Now, remember, it's an open-ended list. "States like these, and their terrorist allies," that implies the possibility there are some others. You don't have -- to mention these three is not to omit the dangers of everybody else.

BLITZER: But you mentioned three names, that's pretty specific.

FRUM: These are the head of the list and the most dangerous.

BLITZER: Was there any of that notion of, you have to include a non-Muslim country?

FRUM: I think it was much more this, that when the president gives that statement and he says, "Look, this is what we're worried about," if you don't put North Korea on that list, that looks incredibly odd and it would raise the question, why is North Korea not here? They sound -- I mean, they meet all these other agreements. Is there something going on? And then all the paranoids would say, no doubt the Carlisle Group has business dealings there.

(LAUGHTER)

So you -- and at that point also, I think, they were absorbing the information that the Clinton policy toward North Korea had been a disaster. And even though the Bush policy is not yet worked out, and who knows whether it will be more successful, I think the president also wanted to signal a clear break with the failed policies of the '90s.

BLITZER: Dana, I want to get back to the book, but up to the moment right now, is there a sense in the Bush White House that perhaps including North Korea in that axis-of-evil comment a year ago, set the stage for this current nuclear tension with North Korea?

MILBANK: Well, certainly nobody in the White House is going to say that. They're going to say it was the opposite behavior by the Clinton administration. But the critics certainly have a reasonable case now that that accelerated North Korea's behavior here.

Now, the interesting thing about the axis of evil is you deal with them in very different ways. You confront Iraq. Iran, we sort of believe will change of its own volition. And then you have North Korea, where we don't know what to do at all, really, about it. And that's a very tricky situation that we could not have foreseen a year ago that we're right in the middle of.

BLITZER: And the whole North Korea situation, you have a leader there, Kim Il Jong, who is very different than Saddam Hussein. Because as much as the U.S. knows about Saddam Hussein, they probably know a lot less about Kim Il Jong.

MILBANK: Very unpredictable Bush...

BLITZER: Kim Jong Il.

MILBANK: Kim Jong Il -- Bush administration officials say they cannot even answer definitively this defining question. Is this all bluster? Is North Korea upping the rhetoric, upping the ante, threatening testing of missiles, threatening nuclear confrontation just to get a dialogue? Or has Kim Jong Il made the conclusion, like India, like Pakistan, he wants to develop say 10, 20 nuclear weapons and become a nuclear power?

They say they cannot answer it definitively. They think it's bluster, but they're not positive.

BLITZER: When you were in the White House, did you sense that the administration did have a good sense who this North Korean dictator is?

FRUM: If they -- I'm sure they did. They weren't sharing it with me. That would be well above my paygrade.

I wanted -- can I deal with this question about did this somehow push North Korea? You know, whenever a criminal is caught, he always explains that he would have lived a different life if only the police hadn't been so mean to him.

But the Bush administration busted the North Koreans. But their wrong acts long antedate the Bush administration. They made up their minds back in 1994, the were going to sign a deal with the United States, take aid from the United States, and cheat.

Now, the question that the Bush administration had to confront was, how long are we going to put up with this? The Clinton people, I don't know how many years they put up with it, but they -- I think they had a growing sense in the late '90s that this deal was not working.

BLITZER: Even though Madeline Albright did go to Pyongyang at the end of the Clinton administration.

FRUM: That was the famous dialogue. Their idea was, you know, we know the North Koreans aren't living up to their end of the -- or we suspect, I think that would be. Let's cajole them some more.

The Bush people had to make their own determination, what are we going to do about this? Now, you may disagree with what they did, but the idea that by calling the North Koreans on their misbehavior that you somehow caused the misbehavior, I think that's really wrong.

BLITZER: All right, we're going to take a quick break. But we have a lot more to talk about, including your book, your assessment, sort of a mixed assessment of George W. Bush. We'll have some specific details when this LATE EDITION continues.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. We're continuing our conversation, inside this Bush administration and the Bush White House. David Frum is the author of "The Right Man: The Surprise Presidency of George W. Bush."

Among other things, David, you write this: "George W. Bush is a very unusual person -- a good man who is not a weak man. He has many faults. He is impatient and quick to anger, sometimes glib, even dogmatic, often uncurious and, as a result, ill-informed, more conventional in his thinking than a leader probably should be. But outweighing the faults are his virtues: decency, honesty, rectitude, courage and tenacity."

I think it's fair to say that's a mixed review.

FRUM: A mixed review, yes. But on balance, a positive review.

Presidents have faults, and different presidents have different faults, and those are George Bush's.

And the question is, how do your faults and virtues match the problems of your time? That if, in this time, if the opposite were true, if you were knowledgeable and never got angry but you were not tenacious, not courageous, that would be a big problem.

So you have to match the man to the times, and this man matches his times well.

BLITZER: This White House is known as a White House that keeps the information close to the vest, very concerned about loyalty. Are they angry at you?

FRUM: Well, they have no reason to be. I can't predict how every single person there is going to react. And when you decide you want to write, you can't let that govern your actions. You have to tell your story honestly.

But I have been very careful. Anything that was a confidence that was given to me, I have kept. And I have also tried to not talk about things where the president hasn't made up his mind yet. Anything that would compromise his ability to do what he thinks is right to defend the country, I'd want no part of in any way compromising that. But you have to tell the story candidly. People want to know who this president is. And I actually don't think that you serve a president well by making him a mystery to the country.

BLITZER: You cover the White House, Dana, on a daily basis. Are they angry at him?

MILBANK: No, I don't think they really are. In fact, you've read what is probably the most negative paragraph in the book. This is not a kiss and tell. If anything, it's a kiss and kvell (ph).

(LAUGHTER)

He loves George Bush. But I'm not -- and I don't mean that as a criticism at all.

The one area in which I think it's not that he told secrets, they may resent just the fact that it has David Frum's name on it. Meaning that everybody who works for the president is supposed to say, as David said, "the president." You don't refer to "Bush," and you certainly don't refer to yourself.

So it's something of a sin in Bushland to bring yourself into the picture at all. And that may be the one area that they feel that he's profited at Bush's expense.

BLITZER: John, let me read to you another excerpt from what David writes in the book, "The Right Man." He writes this: "Bush's great gift to the country after September 11th was his calm and self- restraint. He seemed to feel not the rage that the rest of the country felt, but the quiet determination it knew it ought to feel."

I think a lot of us who have watched George W. Bush felt there was a change in him after 9/11.

KING: Certainly, and a change in him even from 9/11 and as that first 24 hours played out and then the subsequent days. The first day, many of the reviews, you might remember, were quite critical, that the president, why was he traveling, why wouldn't he come back to Washington?

There were security concerns. There were also language concerns -- and David can talk to them more -- as to what do you say at that moment based on what you know, knowing that early reports are often false about things you get in?

But the president has changed, politically, rhetorically. If you look simply at his political standing, he was at 51 percent in the polls on September 10th, 2001, very much a president still who had won a contested election, who had not won over the country.

He's in the 60s now. He's come down quite a bit from the post- September 11th, the highest. But he is transformed politically going into the second half of his term out of the tragedy of that day.

BLITZER: And that, when he stood at 9/11, at the epicenter there at the World Trade Center a few days later, you could see the impact that this event had on him as he met with those fire fighters. Let me read to you another quote from the book, because it's caused some interest.

Karl Rove, you're referring to one of the top political, the top political adviser to the president. "Rove was a risk-taker and an intellectual. Karen Hughes, another top aid to the president, loathed risk and abhorred ideas. Rove was a reader and a questioner, a curious man, always eager to learn. Hughes rarely read books and distrusted people who did. Anything she did not already know, she saw no point in knowing."

That's pretty tough on Karen Hughes.

FRUM: Yes, but I also say that she -- look, she served the president well. I mean, one of Bush's methods is to get opposite people to advise him so that he can steer his course between them. Rumsfeld, Powell. That Rumsfeld gives him one kind of advice; Powell gives him the other.

Hughes, Rove. You know, you listen only to Rove, you're going to take too many adventures. You listen only to Hughes, you take no adventures. And somewhere in between those two lies safety.

And, you know, Hughes is a particular kind of person. She's not everybody's cup of tea. But she served...

BLITZER: Not your kind of cup of tea, clearly.

(LAUGHTER)

FRUM: But she served the president well. And I give her credit for that stem cell speech, which she largely wrote, which is, the administration had backed itself into a big problem on that where they were in danger of either alienating their coalition or alienating the country.

And she found a way to talk to America that satisfied the country as a whole, satisfied the pro-life movement, honored the president's political commitments, and yet communicated effectively. And I give her credit where credit's due.

BLITZER: I think it's fair to say, Dana, that the president communicated very effectively after 9/11 in his scripted speeches. But I sense that even unscripted, he was perhaps even more effective, and I'll give you this example.

(BEGIN VIDEO CLIP)

BUSH: I want justice. And there's an old poster out west, as I recall, that said "Wanted: Dead or Alive.

(END VIDEO CLIP)

BLITZER: Now, that was an unscripted comment. Nobody wrote that for him, right? It just came out. And that's vintage George W. Bush.

MILBANK: It was. And 9/11, in a strange way, was made for George Bush's leadership style. He thinks boldly, as David wrote about in this book. He has a very black and white world view, the notion of with us or against us.

That's hard to do when, you know, well, the Democrats aren't with us so they're the enemy, they're against us. Suddenly it was crystal clear. We had a very defined enemy, and this was perfect for George Bush's leadership.

Now that's receded a bit, but we see him applying the same technique to Iraq. We see him being very forceful with a very large dividend tax cut, a very conservative slate of judges. He's using that same leadership style and it tends to run him into more trouble in other areas.

But 9/11 uniquely suited him and allowed him -- it's not so much that what he was doing, but it was that he was leading. And America wanted a strong leader and he offered that.

BLITZER: John, you've covered him long before he became president of the United States. This notion that he's understimated and he's used that to his advantage politically with an enormous amount of skill, is that overly used, that notion?

KING: No, not at all. He was never going to beat Ann Richards. She was in the high 50s when he was running against her as governor of Texas. Everybody thought, what is he doing? Well, he was the governor of Texas. He expanded his base, minority base, in Texas as governor.

He was never going to beat Al Gore. Al Gore had the Clinton economy. Al Gore had been on the national stage forever. And he did. Yes, a contested election. He is constantly underestimated.

I think the question now is, he has benefited, I think, rhetorically from the contrast with Clinton, a very accomplished public speaker. Love him or hate politically, a gifted politician in that sense. After eight years, sort of this straight-talking, plain- talking sheriff language, "dead or alive", has benefited Bush.

Some Democrats beginning to think, though, if Osama bin Laden is still a question mark 18 months from now, does that open the door to saying the sheriff said he wanted him dead or alive. We don't even know where he is. We need a new sheriff. Some Democrats are starting to think there is an opening there.

BLITZER: And -- we only have a few seconds left, David. What are you doing now? What are your plans?

FRUM: I write a daily column for National Review Online, which -- nationalreview.com. I write a lot for other magazines. But I've got -- I want to go around the country telling the story of this book. I think there is a story to tell about the president.

My response to him was discovering the better I knew him, the more I liked him. And I think a lot of people will have that response too and I hope they'll get to know him better through "The Right Man."

BLITZER: I think a lot of people feel the way you do, the more you know George W. Bush, the more you probably like him. At least that's the impression I get from a lot of people who know him quite well.

I want to thank all of you. Dana Milbank of The Washington Post, John King -- our own John King of CNN.

MILBANK: Thank you.

BLITZER: David Frum, you've got a hot, new book that's out there doing very well, "The Right Man, The Surprise Presidency of George W. Bush." Thanks for joining us.

FRUM: Thank you.

BLITZER: Up next, LATE EDITION's Final Round. Our panel is ready to face off on the week's biggest stories. The Final Round, right after a CNN news alert.

(COMMERCIAL BREAK)

(NEWSBREAK)

(COMMERCIAL BREAK)

BLITZER: Welcome back. Time now for our "Final Round." Joining me, the Democratic strategist Donna Brazile, Peter Beinart of the "New Republic," Stephen Hayes of "The Weekly Standard," and Robert George of the "New York Post."

With President Bush's new plan to jumpstart the U.S. economy now on the table, both supporters and opponents are weighing in on who benefits most.

Today the commerce secretary, Don Evans, told me that any perception that the administration's economic policies favor the wealthy is wrong.

(BEGIN VIDEO CLIP)

EVANS: How the president thinks is what's in the long-term best interests for all of the American people. He approaches a problem like this and says, "Nobody wins unless we all win." And that's the kind of program he's laid out here.

(END VIDEO CLIP)

BLITZER: Let me guess, Donna, you totally disagree with Don Evans?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Absolutely. Look, two years ago it would have been -- it was an easier sell two years ago because we had record budget surpluses. But today with deficits soaring out of the window, record job loss, I don't know how they will sell this plan on Capitol Hill.

Of course they'll ram it down the House. But hopefully the moderates, both in the Republican Party as well as the Democratic Party, will scale it back and perhaps put more stimulus in it and take out some of the tax cuts for the wealthy.

BLITZER: Is that what's going to happen?

STEPHEN HAYES, THE WEEKLY STANDARD: I think it might happen. There's clearly going to have to be some moderation of it, unfortunately.

I think the debate, though, will change. We'll see a change in the debate when the administration gets out and kind of does a full- court press on it. And the House Republicans who really want to go much further and want to talk about things like tax simplification, when they get out and make their arguments, we'll see a shift.

BLITZER: Similar predictions, as you well remember, Peter, were made in 2001, the first year of the Bush administration, when they thought there's no way he's going to get all these tax cuts through. He didn't get them all through, but he got most of them through.

Are people underestimating George W. Bush once again?

PETER BEINART, NEW REPUBLIC: They well may be. The real question is whether the Democratic Party this time is going to have guts, because this is, again, a big lie. It's the same lie the Bush administration pushed.

This is not a stimulus plan. The vast majority of it does not go in in the first year. And most economists recognize that if you want to stimulate the economy, you give money to people who will spend it, people in the poor and working class. The vast majority of this goes to people who will not spend the money. It's not a stimulus bill. It's the same lie they managed to ram down Congress' throat two years ago.

ROBERT GEORGE, NEW YORK POST: It's actually -- the thing is, though, it's directed primarily at people who hold stock. There are more people who are invested in the stock market than ever before.

BEINART: But most of those people have very little stock, Robert. The people who have a lot of stock are the people at the very top.

Those are the people who are really going to benefit, not the people who have a small amount of stock.

GEORGE: By focusing, for example, on cutting the tax on dividends, you do two things. Aside from giving a basic tax cut, it's also directed at things like corporate governance, which I believe that Peter is actually interested in.

BEINART: Sure.

GEORGE: By focusing on, say, Blue Chip companies, as opposed to some of these so-called "new economy" companies,...

(CROSSTALK)

BEINART: But, Robert, that's not a stimulus package. Corporate governance is fine,...

(CROSSTALK)

BEINART: ... but that's not a stimulus package. It doesn't help the economy.

(CROSSTALK)

GEORGE: ... disagree with you, it's not exactly -- it's not an immediate economic stimulus, it's long-term.

BRAZILE: And it's going to hurt the states.

(CROSSTALK)

BLITZER: Will the Democrats be united, though, this time? Twelve of them voted for the tax cuts in 2001.

BRAZILE: And, you know, and George Bush went out of his way to defeat at least two of them this past political season. So I don't believe he'll generate a lot of support this time, and even Dianne Feinstein this week indicated that she's not willing to go along with this plan.

GEORGE: So they won't be voting for it, in other words, since they're no longer in office.

(LAUGHTER)

BLITZER: Let's move on to the international front, where the stakes in the North Korea standoff are even higher now that the country is withdrawing formally from the International Nuclear Non- Proliferation Treaty.

The former U.S. Ambassador to the U.N. and the current governor of New Mexico, Bill Richardson, held informal talks with North Korean officials this past weekend with the blessing of the White House.

Earlier today, Richardson offered insight into the mindset of the North Korean government.

(BEGIN VIDEO CLIP)

RICHARDSON: They demand international respect. They want to deal directly with the United States, not with South Korea. They want to be considered a big major power.

Now, we shouldn't give them everything they want.

(END VIDEO CLIP)

BLITZER: What kind of leverage does North Korea really have, when all is said and done, Peter? BEINART: They have two things going for them. The first thing is, they probably they have nuclear weapons. And that takes the military option off the table. So we don't have the kind of stick we have in some other circumstances, say with Iraq.

But the big other thing they have going for them is, the Bush administration has done a very poor job of assembling a united diplomatic front, which is the only way you can put pressure on North Korea.

One of the big stories here is, the Bush administration has badly mishandled our relationship with South Korea. And unless we are on the same page with South Korea, and we don't have rising anti- Americanism in South Korea, we can't put the pressure on North Korea we need to.

BLITZER: Is there no military option against North Korea?

HAYES: No, actually I disagree strongly with Peter. I mean, the worst possible thing the administration could have done is take the military option off the table from the beginning. You need to have a military option.

Unfortunately, because of a decade of the Clinton administration, it's no longer as credible as it was if we had done it, say, 10 years ago. You had, the whole reason anybody ever talked about a two-war standard was because of a flare-up on the Korean peninsula and in the Persian Gulf, exactly the situation we find ourselves in.

But we had such dramatic, drastic cuts throughout the Clinton administration, that we find ourselves now unable to make a credible case that we should be pursuing these both.

BLITZER: Sandy Berger on this program earlier, you might have heard him say that a lot of Bush supporters are attacking the Clinton Administration because they don't think about what really happened. He says, if the Clinton Administration had not made that deal in '94, North Korea could have 100 nuclear bombs right now.

BRAZILE: And next week, I'm sure they'll blame someone else. Look, last week, Colin Powell and others were saying that the Clinton Administration was right in formulating that agreement in 1994, and this is the right way to deal with the North Koreans. Unfortunately the North Koreans reneged.

Now, this week, they're saying that perhaps, you know, the Clinton Administration is at fault. Look, I think that the administration should seize the diplomatic ground, now that they're in the region, and after the discussion's over with tomorrow in South Korea, I think Mr. Kelly should hop on a plane to Beijing and get the Chinese involved in this situation as well.

GEORGE: Yes, I think -- I mean, I think the Clinton Administration was obviously naive when it made its agreement in 1994. But I do think that the current administration can't really just say it's all the Clinton Administration's fault. I mean, you are seeing now that the North Koreans have really been able to see that there's divisiveness within the administration. I mean, when they start calling Bill Richardson in a sense, you know, go to the Secretary of State of the Southwest to start negotiations, it's really a finger in the eye at the Bush Administration and its failure to speak with one voice.

BLITZER: Were you surprised when all of a sudden Bill Richardson, the new governor of New Mexico, the former U.N. Ambassador under Clinton, emerged a as a key player in this standoff?

BEINART: Not really. He actually has some connections to North Koreans. No one in the Bush Administration does. I understand the Bush Administration's revulsion at ever having to get into a room with these guys.

But Steve, you can't say the military option should be on the table when everybody knows that it would be an utter catastrophe to go to war with North Korea. We can't put it on the table unless we're serious about it. It's not on the table.

HAYES: Of course the military...

(CROSSTALK)

BEINART: It's not on the table.

HAYES: You don't back into negotiations. You can't back into negotiations.

(CROSSTALK)

BEINART: You can't put it on the table when it's not credible and everyone knows it's ridiculous to even talk about.

(CROSSTALK)

HAYES: Well, it's unfortunately less credible than it was 10 years ago because the military has been decimated, totally hollowed out, by the Clinton administration.

BEINART: It's not credible because North Korea has nuclear weapons and because they could kill hundreds of thousands of people in South Korea if we went to war with them.

HAYES: We couldn't defeat North Korea in a war right now? Is that what you're suggesting?

BEINART: We could, but the consequences were be utterly catastrophic.

BLITZER: What, are you suggesting that if they use those two nuclear bombs that Secretary Powell and other administration officials suggest they have?

BEINART: Even if they used one of them. (CROSSTALK)

HAYES: But you don't argue by backing -- that's backing into the argument.

(CROSSTALK)

BEINART: No, but I mean, the rhetoric -- the rhetoric about on the table, on the table doesn't matter. You can't say it's on the table when everyone knows it's not credible.

BLITZER: All right. We're going to continue this tomorrow on our program, because I have a whole session on...

GEORGE: Peter's been (inaudible). He's got a lot of stuff he's got to get out there.

(LAUGHTER)

BLITZER: ... is there a military option?

We're going to take a quick break. We have a lot more to talk about. Our "Final Round" will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Even as he deals with North Korea and Iraq, President Bush is facing several fights with Democrats in Congress. An early one deals with his renomination of the Mississippi judge, Charles Pickering to the federal bench. Democrats oppose Pickering for what they say are his racially insensitive views.

Today, the new Senate majority leader, Bill Frist, addressed the issue.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R-TN), MAJORITY LEADER: If he is a well- qualified man, the president believes in him. He deserves a fair hearing the United States Senate.

What I would be offended if, because of what's happened the last three weeks, all of a sudden that nomination went away if it weren't based on principle, truth and fact.

(END VIDEO CLIP)

BLITZER: Robert, can the president and the Republicans withstand this fight, and it is going to be a fight?

GEORGE: Well, I mean, I think in one sense you almost put Pickering up so people may not focus so much on a lot of the other candidates. I think a lot of the things against Pickering are some cheap shots. However, we are going to end up -- we are going to be talking about Mississippi. We're going to be talking about when Pickering resigned from the Democratic Party because of segregation and sovreignity councils and things like that.

And I just don't necessarily think this is language that the Republican Party needs to be debating. Even though I think Pickering, on the merits, is a qualified man.

BLITZER: You heard Daschle say earlier today, the Senate Democratic leader, he's ready to go for a filibuster against Pickering.

BRAZILE: Absolutely.

BLITZER: Meaning 60 votes would be necessary to defeat that filibuster.

BRAZILE: Well, I'm glad the Democrats are finally standing up for something. Look, Robert, on the merits, I don't think he is qualified for a promotion up to the Circuit Court of Appeals. And people can debate the merits once again. But all of a sudden the Republicans believe that they have accrued some political capital after denouncing Lott and criticizing his comments. And then they come back and make a sharp u-turn and renominate this guy.

I think it's going to reawaken some of the racial wounds, once again, that the Republican Party is insensitive to minorities, and especially African-Americans.

BLITZER: You know, Steve, what a lot of Republicans say, this is payback time. The Democrats are trying to do what Pickering what the Republicans did to Ronnie White, who was a federal judge nominee during the Clinton administration that the Republicans trashed.

HAYES: Yes, I think -- and that's a nice representation of that argument.

The other thing I think you're seeing, in the Senate especially, is this dynamic that both parties are acting as if they are in the majority. The Democrats were reinvigorated by Mary Landreau's win in the run off in Louisiana and by the bringing down of Trent Lott.

And I think they're acting -- you can see this in other aspects, whether it's the reorganizing resolution and procedural things that they're doing to block Republicans from setting up their majority. It's also coming to bear on the Charles Pickering nomination. You see the Democrats who are, kind of fired up for a fight.

BLITZER: Are they being fair to Charles Pickering?

BEINART: Yes. I don't think that some of the criticism of Pickering which suggest that he is personally a racist are absolutely wrong. I don't think it's really about his being a racist. I think that he was a kind of conservative judicial activist of the worst sort and you see it particularly in that -- in his crazy behavior in that case over cross burning. And I think you have to ask the question, people like Robert (ph) and other eloquent conservatives said during the Lott thing, we need an agenda for African-Americans. It can be a conservative agenda. Push vouchers. I'm -- that would be a good thing.

They have done absolutely nothing. There's nothing in this tax plan, and there's certainly nothing in this new group of judges. So, you know, did they take those criticisms seriously?

BLITZER: All right. Let's, we're going to move on because it's...

GEORGE: I think that's still in the development stage.

BRAZILE: That's what I'm saying. Don't push vouchers. Fund Leave No Child Behind.

(LAUGHTER)

BLITZER: We're not going to get to vouchers right now. There was a stunning development this weekend involving the death penalty debate.

The outgoing governor of Illinois, George Ryan, a conservative Republican, emptied the state's death row, commuting the sentences of all 157 inmates to life in prison. He cited evidence that some inmates were wrongly convicted and that the death penalty isn't imposed fairly.

Steven, did the governor go too far?

HAYES: Yes, I think he did. I mean, what you're seeing here, there's a scene from the movie Naked Gun where Leslie Nielsen goes undercover as a baseball umpire. And he first comes out and tentatively calls a strike and gets some applause for it. And then he calls a strike more forcefully, and he gets a lot more applause for it. And this goes on until he starts doing a dance each time he calls a strike.

You're seeing the same thing here with Governor Ryan. He's a disgraced governor, involved in a bribery scandal, who got beat up in the press, beat up by his own party, beat up by Democrats, and he could get kudos from nowhere other than doing something really radical like freeing all death row inmates.

BLITZER: What do you think?

BRAZILE: Well, look, the legislature, after finding people on death row wrongly accused, the governor said to the legislature, do something. The legislature did nothing. This governor decided to do something. It was courageous. It was a moral decision. And I think he's right, we should not put innocent people to death.

HAYES: If there are some cases, why not examine them on an individual basis rather than freeing everybody on death row? BEINART: But there's a systemic problem, which is that the whole -- in Illinois like in most other states, the whole system is absolutely screwed up.

There were 17 people, that's not just a couple, 17 people exonerated from death row in Illinois.

I don't think that this -- I think this was a kind of a -- in some ways, this was overreaching, but it was because no one, none of the other politicians in Illinois would stand up and say, "We need to fundamentally change the system of the death penalty."

If you're going to have a death penalty, it has got to be fair. And it wasn't fair.

GEORGE: Fine, in that case you keep the moratorium, which he put in, and he can recommend to his successor to keep the moratorium. Because I would say that, obviously, there's something definitely wrong in Illinois if you've got 17 people that are wrongfully on death row.

However, you don't throw, literally, you know, throw the baby out with the bath water, and just commute them to life sentences. I mean, the governor has that power, but I think it's morally wrong.

BLITZER: Well, he may be morally wrong, whatever it is, it certainly took guts to do what he did so dramatically.

GEORGE: But it doesn't take guts because there's no downside for him. He's leaving office tomorrow. Where is the -- if it's -- it's guts if you actually have to stand for election.

BRAZILE: Robert, it's a barbaric system, and it should be eliminated across the board.

HAYES: But then have that debate, don't wipe away the whole...

GEORGE: That's what the legislative system is for.

BRAZILE: They won't act.

BLITZER: We're going to take a quick break. We have a lot more to talk about. Our Lightning Round is just ahead.

(COMMERCIAL BREAK)

BLITZER: Time now for our Lightning Round.

The Connecticut Democratic senator, the former vice presidential candidate Joe Lieberman plans to announce as early as tomorrow he's running for president in 2004.

Does Lieberman carry the burden of a loser's label?

BEINART: No, I don't think so. He has two big advantages. First, he can raise money. Second of all, he has a profile on national security.

His problems are, he's not very well liked by the Democratic base. Labor and potentially African-Americans. And in Iowa in particular, where the party is very anti-war, I think he's going to have trouble on that issue there.

GEORGE: I think that's largely true.

He also doesn't really have a geographic base which to call his own. I mean, he overlaps in the Northeast with Kerry. Obviously, Gephardt would be the odds-on favorite in Iowa. And you've got Edwards and Al Sharpton because of his ability to attract the black vote going on in South Carolina.

So I think Lieberman is going to have to find a place.

BLITZER: I'm seeing polls among African-Americans that show Joe Lieberman doing relatively well with African-Americans.

BRAZILE: And I think he will do very well with African- Americans. Look, Lieberman can lead. He helped to revive the Gore campaign to the extent that we were able to carry many states, including almost winning Florida. I think Joe Lieberman was primarily responsible for that.

I think, among African-Americans, they are going to give all of the candidates a close look. But Lieberman has a record. He has a record that African-Americans like, and he has many, many supporters in the Congressional Black Caucus.

BLITZER: He went down and fought for civil rights in Mississippi in the '60s.

BRAZILE: Absolutely.

BLITZER: Is he the front runner among Democrats right now, assuming he gets in the race tomorrow?

HAYES: Yes, it might be too much to call him a front runner. I mean, he certainly is going to be leading in name recognition, because of his time on the Gore/Lieberman ticket.

I guess I disagree with you a little bit on the black community and Lieberman, given that, you know, he had been strongly opposed to racial preference programs, and that caused a little bit of a stink at the Democratic convention in 2000. So I think he's got more work to do there if he wants to excite the base.

BLITZER: Let's move on and talk about reality TV. It seems we can't get enough of it. The new series Joe Millionaire pulled in -- get this -- more than 18 million viewers in its debut this past week. The debut of The Bachelorette also pulled in millions and millions of viewers.

Is reality TV, Robert, your cup of tea?

GEORGE: No. No, I would have to say. I mean, I just don't get it. You know, I just don't...

(CROSSTALK)

BLITZER: People love this kind of stuff, Donna. You don't watch it.

BRAZILE: No, I don't.

Unfortunately -- well, I must -- no, I have a confession.

BLITZER: All right.

BRAZILE: I've been watching The Osbournes.

BLITZER: Oh, really?

BRAZILE: Yes, and I'm enjoying it. So I guess I'm a little bit pregnant on this issue.

(LAUGHTER)

BLITZER: You watch The Bachelorette and Joe Millionaire?

HAYES: This shows the disconnect between Washington elites and the rest of the country. Nobody up here is watching these reality TV shows.

(LAUGHTER)

HAYES: So, I -- you know, as a service to the Weekly Standard readers, I watched both shows this week, just so I was able to comment. BLITZER: Part of your professional responsibility.

HAYES: Exactly. I felt like I needed to do it.

BLITZER: Peter is a devotee.

BEINART: Oh, absolutely. And I actually think, to say something strangely serious about this, I actually think that this is -- you know, I think it's responding to the sense that people have about a lot of things, that everything is fake and everything is canned, and this kind of yearning for authenticity.

It's a little bit of the same phenomenon you saw why people went for McCain's kind of straight talk so much. And people like the idea that something on TV is not scripted.

BLITZER: All right...

GEORGE: You watch a TV where the network lies about the setup?

(LAUGHTER)

BLITZER: Speaking about fake and canned, it seems the North Korean leader Kim Jong Il doesn't think too highly of, among other people, me, at least according to last night's "Saturday Night Live." Check out this parody.

(BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")

UNIDENTIFIED ACTOR: Recent provocative and hooliganistic statements by the cowboy government of the United States have villainously slandered our nation and threatened the joyful happiness of the Korean people.

The North Korean people contemptuously reject these accusations and continue to support our wise policy of cheating on all international agreements, then indignantly denying this when we are caught.

So let me warn the gun-slinging buccaneer George Bush and his henchmen Jimmy Carter and Wolf Blitzer. I am not some petty chieftain to be easily intimidated. I am extremely unstable and highly irrational and, for your information, quite completely insane.

(END VIDEO CLIP)

BLITZER: He clearly hates me for some reason.

GEORGE: So now we know where you were last week, Wolf.

BLITZER: I'm the henchman.

GEORGE: You're the henchman. Exactly.

BRAZILE: I think they're making a...

BEINART: I feel better about this North Korea situation knowing that you're in charge.

(LAUGHTER)

BRAZEIL: ... I do too.

(CROSSTALK)

BLITZER: If you notice, he puts me in the same category as George W. Bush and Jimmy Carter.

BRAZILE: Nobel Prize material.

(LAUGHTER)

Absolutely.

HAYES: That's next.

BLITZER: The henchman -- you know, it's an honor to be even mentioned on "Saturday Night Live."

HAYES: Hey, I would like to be mentioned some day on...

BLITZER: And by Kim Jong Il. Can you imagine? BRAZILE: And you didn't even have to get in the bathtub with anybody.

BEINART: I already dislike this guy, but now that he's insulted you, he's gone over the line.

GEORGE: As Run DMC said, you be Kim Jong Illin'.

(LAUGHTER)

HAYES: Wow, wow.

BLITZER: Let me thank our "Final Round" panel. We have to move on.

But finally, I want to leave all of our viewers with this note of appreciation and thanks.

For more than five years, Pam Stevens (ph) worked on LATE EDITION as a senior editorial producer and our chief booker. She was responsible for getting us the great guests that we got every week. She never once let us down. She worked tirelessly, virtually every day of the year, always on call to make sure our viewers got to hear from the top newsmakers here in Washington and, indeed, from around the world.

Pam has now decided to move on. She did a great job for us at CNN. We will miss her, but we wish her only the best of luck down the road. Pam Stevens (ph), thanks very much for making this show better than it was before and what it is today.

That's our LATE EDITION for Sunday, January 12th. Please be sure to join me next Sunday and every Sunday at noon Eastern for the last word in Sunday talk.

I'll also be here, of course, Monday through Friday, twice a day, at 12 noon until 1 p.m. Eastern for Showdown: Iraq. Later in the day, 5 p.m. Eastern for Wolf Blitzer Reports.

Until then, thanks very much for watching. I'm Wolf Blitzer in Washington. Please enjoy the rest of your weekend.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com



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