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CNN CAPITAL GANG

Bush Addresses Nation From Aircraft Carrier Deck; Judges Strike Down Key Provisions of McCain-Feingold; Congress Returns From Recess

Aired May 3, 2003 - 19:00   ET

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

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

I'm Mark Shields, with Al Hunt, Robert Novak, and Margaret Carlson.

Our guest is Republican Senator John Sununu of New Hampshire.

It's good to have you back, John.

SEN. JOHN SUNUNU (R), NEW HAMPSHIRE: Great to be here.

SHIELDS: Thank you.

President Bush addressed the crew of the USS Abraham Lincoln from the deck of the aircraft carrier.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Major combat operations in Iraq have ended. In the battle of Iraq, the United States and our allies have prevailed.

(END VIDEO CLIP)

SHIELDS: Meanwhile, the president unveiled the road map to Israeli-Palestinian peace.

(BEGIN VIDEO CLIP)

MAHMOUD ABBAS, PALESTINIAN PRIME MINISTER (through translator): For ending the disorder and chaos of arms with the threats that are imposed on the country will be one of our main tasks, and we will not be lenient at all.

(END VIDEO CLIP)

SHIELDS: But after a suicide bomber in Tel Aviv left three dead, the Israeli military forces then killed 14 Palestinians.

(BEGIN VIDEO CLIP)

GIDEON MEIR, ISRAELI FOREIGN MINISTRY: I am not willing to talk about anything which has to do with the political situation before there is a stop and a cessation of terror and violence against the people of Israel.

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, is the Israeli-Palestinian conflict, crisis, raining on George W. Bush's victory parade?

MARGARET CARLSON, CAPITAL GANG: A hurricane couldn't have interfered with that particular parade. It was so well done, and even though we knew that everything was choreographed down to, you know, catching that fourth hook on the ship, it was still a pretty stirring tableau. Cecil B. DeMille couldn't have been done better.

And even though you know there's no Santa Claus, Christmas is still great, and that was with that particular moment.

As for the Middle East, Bush has kept his distance from it up to this point, and he's not associated so much with the violence, but it is off to an awfully bad start. And Colin Powell being sent there is going to get the administration involved. And only administration involvement is going to move it along.

SHIELDS: John Sununu, I'm going to give you a chance to agree with Margaret Carlson.

SUNUNU: Well, if you recall, I believe Margaret and I agreed on the last show I did, and she makes a good point. The administration does have to be involved. They've got to be involved aggressively. That's what putting out the road map is all about.

There are going to be highs and lows in this process. What is important is that there's a true commitment to end the violence, to end the terrorism, and that there's confidence building in the near term, an ability to -- for Palestinians to move back and forth to their jobs, to help support economic growth, and in addition to that, commitment on the other side, to stop the growth of settlements.

Those are critical steps, but this is going to be a very long process. And I don't think the administration is going into this with rose-colored glasses.

SHIELDS: Bob Novak, the political reality of it, though, if you look at it, the religious right, much of it, is a -- is opposed to this. Large sections of the American Jewish community, both Republicans and Democrats, members of Congress, 297 of them signed, you know, basically a letter endorsing the Sharon position.

I mean, is the president willing to spend this kind of political capital?

ROBERT NOVAK, CAPITAL GANG: I don't know. And this is the biggest test of his presidency, in my opinion, because you will not have a good situation in not just Israel and the Palestinian area, but the entire region, unless this problem is addressed.

You know, the -- it -- the scenario was so bad after he put out the road map, was that the terrorist group who doesn't want any peace killed -- did a suicide bombing, and immediately the Israeli Defense Force went on a rampage, and we had an announcement by this official spokesman that we can't have peace while this is going on.

They don't -- Sharon doesn't want a Palestinian state. We all know that.

But I just have to say one other thing, that that was a great photo-op on the aircraft carrier, and the Democrats I've talked to tried to think of Joe Lieberman in an Air Force jumpsuit, and they can't quite make it.

SHIELDS: Well, it was just as unlikely for some of us to see George W. Bush in that position after...

CARLSON: He grew into that.

SHIELDS: (UNINTELLIGIBLE). Al Hunt.

AL HUNT, CAPITAL GANG: It was fantastic political theater. I mean, it was as good a photo-op as I have ever seen. Democrats not only say what, say what Bob just cited, but they're a little upset about this. They say they're using it for political purposes. Well, guess what, get used to it, because the second-most powerful man in America, Karl Rove, is going to use this war and any success in the war on terrorism any way he can.

If things are going well in Iraq a year from now, if the war on terrorism's going well, that will make a powerful television commercial. If things aren't going well, they'll have to drop it.

I think the Middle East -- there are two key questions. There are two -- there's two, still two troubling thorns, if you will. One is Arafat. I think we have to be encouraged by what's happening with the Palestinians, but I -- let's be careful about Arafat trying to muck up this new constitution, giving himself too much power.

And if Sharon overreacts, because there's going to be acts of terrorism. And if he uses it as an excuse to sandbag this thing, then it's going to put tremendously...

NOVAK: What, what, what do you think of killing 14 Israelis, including a 2-year-old baby...

SHIELDS: Fifteen Palestinians.

NOVAK: Fourteen Palestinians, including a 2-year-old baby, just in, just immediately? And, I, you know, to me, this is all -- this is all orchestrated, (UNINTELLIGIBLE) to try to torpedo that.

President -- well, is the president up? What do you think? Is the president up to this?

SUNUNU: He is up to it. He has to be up to it. You know, you pointed out that this will affect -- his commitment to this process will affect the way we're perceived throughout the entire Middle East, Israelis, Palestinians, throughout the Arab world. And if he wants to solidify and build upon the success that we've had in Iraq, and hopefully progress in working with the -- a lot of the Iraqi people to establish representational government, he also has to show commitment to this process.

Otherwise, those gains...

SHIELDS: I...

SUNUNU: ... might go by the wayside.

SHIELDS: I don't argue with that, John. But, boy, certainly the early returns from Iraq are anything but encouraging. When you read that General Jay Garner, who has been in charge up until now, doesn't have phones himself, doesn't have e-mail, doesn't even have security, and doesn't have any way of communicating with what's going on. One of his top aides was unaware of the fact that American troops had fired on and killed 14 Iraqi civilians.

CARLSON: And he may be trumped by Paul Bremer being appointed, and the lines of command there getting muddied just at a time when things aren't up and running.

SUNUNU: (UNINTELLIGIBLE)...

NOVAK: Mark, just for the sake of correction, in Iraq, you say is -- fired on 14 Iraqi civilians. The -- our troops, which I believe, said they were fired on, they told them not to fire, and then they -- and they only shot them, I believe our troops, not the Iraqi civilians.

SHIELDS: I'm not talking about, Bob, if you listen to what I said, I said the -- one of his top aides was unaware of the fact that (UNINTELLIGIBLE) the incident even occurred.

NOVAK: I'm just (UNINTELLIGIBLE), I'm just correcting you. I know you didn't mean to give the impression that it was unprovoked.

(CROSSTALK)

CARLSON: Correcting a mistake you didn't make.

HUNT: Look I...

SHIELDS: Yes, that's right.

HUNT: ... I think we still have, we still have, have this tremendous conundrum over there that we, A, want to get out quickly, and B, we want to build a model, a model democracy. Well, they're, they're, they're contradictory. You can't do both.

I think John Sununu, Sununu is absolutely right that over the long term, if you don't have progress in the Middle East, if he's right and George Bush is really committed to it, that's an incredibly important, Mark. SUNUNU: (UNINTELLIGIBLE), and one final thought about the organization over there. I'm not worried so much about the command structure as I am about having the right people in the right people with the right expertise to get the job done, having the right people to work on the electricity or the water, having the right people to work on the civil authorities or training a police force.

That's what's most important. And if you take those people from -- whether they're from State or from Pentagon, anywhere else, get the right people in place.

SHIELDS: As political theater, the only thing that could top the "Abraham Lincoln" on Thursday night would be George W. Bush giving his renomination acceptance speech at Ground Zero in New York. That would be, that would be the only thing, I think, that would be...

(CROSSTALK)

CARLSON: He -- and he's going to get, he's going to get as close as possible.

SHIELDS: One step beyond -- That's right.

And have the courts shredded the McCain-Feingold finance reform? John Sununu and THE GANG will be right back with an answer.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

A panel of three federal judges ruled that major provisions of the recently enacted McCain-Feingold campaign finance reform law are unconstitutional. This would reinstate soft money contributions, which are unlimited money from contributions, labor unions, and individuals, but would ban soft money paying for political TV ads.

Republican Senator Mitch McConnell, a leading opponent of McCain- Feingold, said, quote, "I am gratified by much of the court's decision today," end quote.

Sponsors of the legislation expressed concern that the decision, quote, "could create serious loopholes that undermine its effectiveness," end quote.

The decision now goes to the Supreme Court directly.

Al Hunt, is this a major blow to campaign finance reform?

HUNT: No, Mark, because the Supreme Court's going to decide anyway. But first of all, this was misreported in the very beginning. Today's stories are much more accurate. This was about a 75 percent victory for that law, much better than the defendants had anticipated.

On soft money, it said you can ban the use of soft money for those ads, which is what -- since Dickie Morris and Bill Clinton, they have been used for. It said federal office holders cannot raise soft money. On issue ads, it went further than anyone expected and said that any soft money, anybody use of soft money can't take out those issue ads if they mention a candidate. It was very, very tough on disclosure.

To be sure, there are lots of loopholes that they've left open, but I think it was -- it set the table for the Supreme Court, which now has to decide, either they're going to cancel their summer recess, or they better stay this decision and take it up in October.

SHIELDS: Bob Novak, you've always been ambivalent. You love reform, you don't like the law. Generally committed to it, but specific objections. What's your take?

NOVAK: Well, I'm going to try to be a reporter on this. And as a matter of fact, it's very hard to tell what they were doing. This was a chaotic decision. The three judges were going in opposite directions. Putting one appeals court judge and two district court judges together didn't prove a happy marriage.

I would say it was not as favorable for the campaign reformers as you say, Al, because -- let me just tell you one little anecdote. There's a big Republican fund raiser, national fund raiser, that they're having a hell of a lot of trouble selling tickets for. They were going to put some potted plants in there to take up the place where people ordinarily would be.

When this decision came out, they put out an order to take the plants back, because we're going to have soft money coming in. Because I don't think the Supreme Court is going to stay this decision, it's going to be a long process. And the safe money (UNINTELLIGIBLE), the -- Even though they can't use it for the attack ads, the soft money's going to roll in.

SUNUNU: Here's the problem I see, though, let's take Al's numbers. You say 25 percent of it was pretty much thrown out. Name me any piece of legislation that you can go and tear out 25 percent and have it even come close to what the intention, the supposed intention, of those that write the bill were.

The court did identify three particular problems, and I think they're going to be a problem at the Supreme Court too. First, on issue ads, you're trying to restrict the ability of groups to advertise with concern to issues, environmental issues, veterans' issues, gun issues that they care about. And the issue ads are going to run into a lot of trouble.

Second, as you mentioned, they're trying to restrict my ability as an American citizen to participate in and to support political activities, in this case, events where state soft money is being raised, restricting the ability of an American citizen to attend a political event. I think that's going to run into a lot of trouble.

And the final piece was restricting the ability of the parties to do get-out-the-vote drives and voter registration drives. I think those are very likely to fall in the end, even in the Supreme Court.

SHIELDS: Just for clarification's sake, you're saying restrict your ability as a citizen.

SUNUNU: (UNINTELLIGIBLE)...

SHIELDS: John elected a federal office holder, that's what this is.

SUNUNU: That's true, but I...

SHIELDS: Federal office holders can't raise soft money.

SUNUNU: ... I am an American...

SHIELDS: (UNINTELLIGIBLE).

SUNUNU: ... and I think when you...

SHIELDS: I understand that.

SUNUNU: ... when you start saying that any American, whether you hold office or don't hold office, can't go to a political event, I think that is going to run afoul of the Constitution.

SHIELDS: Margaret Carlson.

CARLSON: The most interesting Bob said is this idea that maybe we could put a potted plant there in your place. Did you read the decision, Bob, 1,638 pages?

NOVAK: I stayed up all last night, but I didn't read the decision.

CARLSON: I don't want to ask what you were doing.

You know, the fact that soft money still exists means that this free speech, which we all want American citizens to have, isn't free at all. It belongs to the people in the groups with the most money to buy it. And that's what needs to end.

People in the country just throw up their hands, and they say, Oh, just -- it's all corrupt, because there's so much money in the system. And this decision doesn't really help that.

And it doesn't matter, because both parties are going to want a stay of the decision until the Supreme Court can get it.

In the meantime...

NOVAK: I don't think that's so.

CARLSON: You don't think both parties want a stay?

NOVAK: Oh, I don't...

(CROSSTALK)

HUNT: ... will, because of this issue, as I think the National Rifle Association...

(CROSSTALK)

NOVAK: Yes, but I don't think...

CARLSON: Because why muddle...

NOVAK: ... I don't think the parties want it.

HUNT: But...

NOVAK: It's the -- the parties, parties seeing the soft money flowing again...

CARLSON: Again, yes...

NOVAK: ... because of this decision.

CARLSON: ... I mean, they can still collect it, and that's...

NOVAK: Yes.

CARLSON: ... part is really good, and it only restricts how they can spend it. But the green eyeshade people are at this very moment...

SUNUNU: Let's go to your point, though.

CARLSON: OK.

SUNUNU: You want to restrict the ability to raise money. And I maintain anything you do to make it tougher for candidates out there to raise money benefits, as a group, incumbents.

You know, this is -- this always...

SHIELDS: I would say...

(CROSSTALK)

HUNT: ... John, John, I...

SUNUNU: ... this always benefits incumbents.

HUNT: ... you cannot come up with a system that is more of an incumbents' protection act than what we have right now.

SHIELDS: That's right.

HUNT: You -- everybody would agree...

SUNUNU: Then why does the headline...

HUNT: ... (UNINTELLIGIBLE)...

SUNUNU: ... in "Roll Call" today, "Corzine Seeks Millionaires"? HUNT: You would...

SUNUNU: Because he knows, with this new law, he needs more and more people...

HUNT: But Bob, Bob Kerry did that...

SUNUNU: ... that can sell fund.

HUNT: ... 10 years ago. You would be the first to admit that there, that they shouldn't let you take a bribe or any other take a bribe.

SUNUNU: Of course not.

HUNT: This what the court said was, this, very, the soft money clearly pertains to the appearance or the actuality of corruption.

And that is a...

SUNUNU: But the -- but not the party-building...

HUNT: ... (UNINTELLIGIBLE)...

SUNUNU: ... activities.

(CROSSTALK)

HUNT: It doesn't (UNINTELLIGIBLE) without the votes.

NOVAK: The appeals court judge, who is a regular appointee, said that she thought the whole thing, all the restriction of free speech, was up, was unconstitutional. That could be the Supreme Court too.

HUNT: To be charitable, she's an idiot, which is -- and that's why...

NOVAK: Well, come on...

HUNT: ... she didn't get -- No, seriously...

NOVAK: ... come on.

HUNT: ... she is. She lost this very good, there's a new Republican, Judge Leoni (ph), who everyone thought would be in a two- to-one majority...

NOVAK: Oh, the people who agree with you...

HUNT: ... (UNINTELLIGIBLE)...

NOVAK: ... are terrific...

HUNT: No, no.

NOVAK: ... and the people who don't agree with you are idiots. (CROSSTALK)

HUNT: ... that's not true, Bob, because basically, she was...

NOVAK: Well, you shouldn't call her...

HUNT: ... (UNINTELLIGIBLE)...

NOVAK: ... an idiot.

HUNT: ... she started to write her opinion before the final briefs came in. (UNINTELLIGIBLE), I think in this case, she certainly was.

(CROSSTALK)

NOVAK: ... that's really unfortunate.

SHIELDS: Let me just say (UNINTELLIGIBLE) what the court, what the court decided, which I think was good, is that the Congress is not powerless to act in the face of this rush of money...

(CROSSTALK)

SHIELDS: ... they ruled, they ruled as well, which I think is encouraging, that the public is not doomed to just drowning in this sea of special interest money.

Next on CAPITAL GANG, is the Bush tax cut near death?

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Congress returns from recess with House Republican leaders bitter that their Senate counterparts had cut in half President Bush's tax reduction.

(BEGIN VIDEO CLIPS)

REP. DENNIS HASTERT (R-IL), SPEAKER OF THE HOUSE: You know what? I'm tired of trying to fit the Senate. You know, we have moved, the -- in the House. If the Senate can't get its work done, that's too bad.

SEN. CHARLES GRASSLEY (R-IA), FINANCE COMMITTEE CHAIRMAN: Personally, I do not think that the president's tax program is wrong, but it doesn't matter how good it is, or how good I think it is. You don't pass anything in the United States Senate with just 48 votes.

(END VIDEO CLIPS)

SHIELDS: However, the Republican chairman of the House Ways and Means Committee unveiled his own version of the tax cut, very different from the president's, and the House GOP leaders approved it.

Bob Novak, is the death knell -- is this the death knell for George W. Bush's tax cut?

NOVAK: No, far from it. The substitute plan by Congress and by Chairman Bill Thomas, I think, in many ways, is superior to the president's. I think they're both very good. But this one goes to capital gains cuts, it has a partial cut, not an elimination, of the dividend tax. It should all be eliminated. It also has, it has more of a immediate effect on the economy by (UNINTELLIGIBLE) depreciation.

The White House doesn't understand that the -- you can draft a bill on -- in the Congress as well. And they were stunned when the leadership went -- said, Gee, we're going to go with Thomas's bill.

I think it provides a new deal for the whole, for the whole game, and I think it would probably improve things in the Senate as well.

SHIELDS: Al Hunt, is Bill Thomas, chairman of the Ways and Means Committee, proposal superior to the president's already flawed initiative?

HUNT: My great fear is that Bob Novak may be close to right on this, because the Thomas bill is just an absolutely miserable bill, unemployment going to 6 percent...

NOVAK: I'm glad you said that.

HUNT: ... going to 6 percent. Does nothing about stimulating the economy, really. States are cutting back on school days, they're slashing people off Medicaid. Does nothing about that.

What it does is give $106,000 to, $106,000 annual tax cut to a millionaire, $1 to someone making $10,000, $8.75 a week if you're making $50,000.

So it is worse, it is more regressive than the, than the, than the Bush plan. But I'll tell you what else that really is disturbing about it, it's -- why it's a total fraud. It goes, and the tax cuts on dividends and on capital gains for the wealthy people are made permanent. The things for middle-class people, like the child care credit and the marriage penalty are only temporary.

Now, there's only one of two conclusions. Either the supporters care a lot more about wealthy people than they do working class people, or it's a total fraud, because they know they'll, they'll enact those later, at which point it costs $1 trillion it adds to the deficit over the next 10 years. Take your pick.

SHIELDS: John, look, sunsetting, sunsetting child, the child tax credit increase and the marriage penalty repeal by 2005 really is a sham.

SUNUNU: I happen to believe it should all be permanent. I think the idea of sunsetting reforms, having a -- having them temporary, one, it messes up people's planning and investment, and it doesn't achieve the intended behavioral aspects.

But Al's point, the beginning of his point, underscores this classic liberal position that the only way to support economic growth is to spend more of the taxpayer's money, and that's just patently false.

There's also a little bit of hypocrisy here, in that a lot of liberals in the Senate or the House are talking about the deficits, and suddenly they're so concerned about the deficits, but they want to spend more money, tens of billions, hundreds of billions more on highways or other initiatives that really won't have a stimulative effect on the economy.

This recession has come from a slowdown in business investment. If you want to do something about that, you do address capital gains or double tax on dividends. You also cut the rates, because hundreds of thousands of small businesses pay the highest personal tax rate. Cutting those rates helps small businesses. And cutting rates, marginal rates, is also the best way to encourage new investment, productivity, and additional work that will help the economy get going and create jobs.

SHIELDS: Margaret Carlson.

CARLSON: Both bills are so terrible, you just don't know where to begin. Neither one, neither one is going to stimulate the economy, most economists say, even some in the Bush administration. And they're not aimed at normal taxpayers, middle-class taxpayers. It's all so tilted. And when you think it can't get worse, Bill Thomas comes along and proposes one that's even more tilted towards the wealthy taxpayers in this country.

SUNUNU: It is not a question...

CARLSON: And by the way...

SUNUNU: ... of focusing...

CARLSON: Let me just finish.

SUNUNU: ... on wealthy taxpayers.

CARLSON: There's an unemployment...

SUNUNU: (UNINTELLIGIBLE)...

SHIELDS: Just a second.

CARLSON: ... unemployment expires at the end of the month, and no one, you know, seems to be rushing as much to take care of that. Unemployment benefits...

NOVAK: I just -- I (UNINTELLIGIBLE)...

(CROSSTALK)

CARLSON: ... extend for 3, 4 million people.

HUNT: ... trillion dollars to the deficit over the next 10 years? I mean, if you accept that up front, that's fine.

SUNUNU: The two most significant drivers for deficits are revenue collections and controlling government spending. And if you want to improve long-term revenue collections, you need to get the economy going. Why have revenues fallen?

HUNT: As we did in the 1990s...

SUNUNU: Not because of...

(CROSSTALK)

SUNUNU: ... not because of...

NOVAK: Al, Al, (UNINTELLIGIBLE)...

SUNUNU: ... not because of any tax cuts...

(CROSSTALK)

SUNUNU: ... but because of the slowdown in the economy. And if you want to do something about economic growth...

(CROSSTALK)

SUNUNU: ... you have to do something about...

SHIELDS: (UNINTELLIGIBLE)...

SUNUNU: ... the part of the economy that is weakest, and that's business investment. It's not consumer spending.

NOVAK: You know, there's such a, there's such a...

CARLSON: (UNINTELLIGIBLE)...

NOVAK: ... class, there's such a class...

SHIELDS: One (UNINTELLIGIBLE).

NOVAK: ... warfare going on over there, and, you know, and I just get sick of that Marxist ideology coming out of (UNINTELLIGIBLE), if somebody's rich, you can't give them a tax cut. Let me, let me tell you this, that I think that this is, that the Bush...

I can't understand why President Bush had resisted a cut in the capital gains tax all these years. Now Bill Thomas has taken the move. David Dreier, chairman of the rules committee, is pushing it, Tom DeLay, the majority leader, is pushing it.

I hope you go for a cut in the cake...

(CROSSTALK)

SHIELDS: We're not, we're not lobbying senators here.

(CROSSTALK)

SHIELDS: We're not lobbying senators here.

(CROSSTALK)

HUNT: ... good old trickle-down economics.

SHIELDS: That's right. Boy...

CARLSON: Yes, trickle (UNINTELLIGIBLE).

SHIELDS: ... oh, boy, Bob, I've had...

HUNT: (UNINTELLIGIBLE), trickle...

SHIELDS: It's a tribute...

HUNT: ... send it to the (UNINTELLIGIBLE)...

SHIELDS: ... it's a tribute for the deserving rich, Bob Novak...

HUNT: ... (UNINTELLIGIBLE)...

SHIELDS: ... we've just heard him again, ladies and gentlemen, he's never met a millionaire he didn't like.

THE GANG will be back with a CAPITAL Classic, an historic handshake on the White House lawn.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Nearly 10 years ago, Palestinian leader Yasser Arafat and Israeli Prime Minister Yitzhak Rabin, prompted by President Bill Clinton, shook hands at a White House ceremony.

Your CAPITAL GANG discussed this historic development on September 18, 1993. Our guest was Democratic Congressman Jerrold Nadler of New York.

(BEGIN VIDEO CLIP, September 18, 1993)

HUNT: Margaret, was Yasser Arafat credible this week as a messenger of peace?

CARLSON: I think he was credible. He was a little disappointing in that Rabin overshadowed him with that great sentiment in his speech. And people say it doesn't mean enough to come and say words. But it is unimaginable a year ago that Arafat would have been standing on that stage and shaking hands with Rabin.

SHIELDS: I thought both of them were credible. I thought all three of them were credible. I thought it was the best day of Bill Clinton's presidency. And I thought both Rabin and Arafat grew in everybody's esteem and regard. REP. JERROLD NADLER (D), NEW YORK: Well, I don't think Arafat is ever credible as a messenger of peace, but he may very well -- he might be credible as someone who can contribute to bringing peace now.

NOVAK: You got to remember that people have been pounding on Arafat for years as a terrorist. When people get their own country, yesterday's terrorists become tomorrow's founding fathers.

HUNT: It really was an extraordinary moment. I mean, it's a moment that none of us will, you know, who saw it, will ever forget...

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, why were you and all of us, even Jerry Nadler, wrong about Yasser Arafat?

CARLSON: Because it was almost as moving as George Bush landing on the USS "Abraham Lincoln." You know, you had to be hopeful. It was quite a moment. It's unimaginable now to think that you -- we could see Arafat and Sharon shaking hands on the White House lawn. But we can still pray for it.

SHIELDS: John Sununu.

SUNUNU: One item of note, one of the key negotiators for that agreement was Abu Mazen, the new prime minister for the Palestinians. There's a lot riding on him right now. I think there's general consensus he's the right person for the job. But it bears watching that he can exert his authority and his leadership over the months to come.

SHIELDS: Bob Novak.

NOVAK: I think Arafat was an enormous disappointment to people who wanted peace. But he was under enormous attack from the Israelis, from the first go. And Abu Mazen is going to be, I predict it, that pretty soon they're going to say, Well, he's just another Arafat, or he's under Arafat's control, because they don't want a Palestinian state.

SHIELDS: Al?

HUNT: I agree with John Sununu. I think that Arafat was -- he blew it. He had a chance. And I'll tell you, watching that is a reminder of, God, do we miss Rabin. What a terrible tragedy.

SHIELDS: Real loss, absolutely. But Bob, you know, there was poetry in your words then, you know? Today's terrorist is tomorrow's...

CARLSON: Founding father...

NOVAK: Founding father.

SHIELDS: ... founding father.

NOVAK: Thank you.

SHIELDS: Ooh.

CARLSON: ... founding father Arafat.

SHIELDS: Wow.

John Sununu, thank you for being with us.

SUNUNU: Thank you.

SHIELDS: Coming up -- Thank you. Coming up in the second half of THE CAPITAL GANG, our "Newsmaker of the Week" is Ken Bacon of Refugees International. "Beyond the Beltway" looks at the SARS epidemic with infectious disease expert William Schaffner. Plus our "Outrage of the Week." That's all after the latest news headlines, next on CNN.

(COMMERCIAL AND NEWS BREAK)

SHIELDS: Welcome back.

Ending the Chinese cover-up, "The Mirror" of Beijing admitted deficiencies in handling the SARS epidemic.

It sure is, I apologize. I -- OK. OK, what -- I'm sorry.

Welcome back to the second of CAPITAL GANG.

I'm Mark Shields with THE CAPITAL GANG. That's Al Hunt, Robert Novak, and Margaret Carlson.

Our "Newsmaker of the Week" is Ken Bacon, the president of Refugees International.

Ken Bacon, age 58, residence Washington, D.C., religion Episcopalian. Bachelor's degree from Amherst, Master's degree in business and in journalism from Columbia, "Wall Street Journal" reporter and columnist, 1969 to 1994.

Assistant secretary of defense for public affairs 1994 to 2001, currently CEO of Refugees International, member of the Council on Foreign Relations Task Force on Iraq.

Earlier this week, Al Hunt sat down with Ken Bacon in (UNINTELLIGIBLE) Washington, D.C.

(BEGIN VIDEOTAPE)

HUNT: There were dire warnings of a postwar humanitarian disaster in Iraq. Why hasn't it happened?

KEN BACON, PRESIDENT, REFUGEES INTERNATIONAL: Well, you're right, it hasn't happened, and I think the primary reason was, the war was very, very short, and Saddam Hussein did not use weapons of mass destruction. All the U.N. estimates for disaster were based on a war that would last two to three months and anticipated the use of chemical weapons, maybe biological weapons as well.

Didn't happen, therefore we had minimal displacement, no real starvation, and some problems with the medical system, but not really huge.

HUNT: Let's talk about health care. The hospitals and medical personnel now all functioning well?

BACON: They're not. And the real reason for that is twofold. First is lack of security. As you know, the hospitals in Baghdad and other places were looted. The International Committee for the Red Cross says they're still having a hard time running hospitals because of lack of security.

The second is, the sanctions regime which has been in place now since 1990, this is the regime that prevents shipping various things to Iraq, and frankly, the donor countries, the U.S. and others, have not been able to move fast enough to get basic supplies like insulin, antibiotics, bandages, and basic surgical equipment back into the country.

HUNT: We have 150,000 U.S. forces now. Will we need a force that size for the foreseeable future?

BACON: Well, we -- probably not that size, but I think we'll need a significant force for quite a while, maybe 75,000. But I think we have to change the complexion of the force. It has to move from being a military force to being more of a police force.

Military force wants to inflict maximum damage on its enemy and absorb minimum damage on itself. A police force is more trained to control crowds without inflicting violence or damage on the crowds. So we've seen in Fallujah over the last couple of days where American soldiers have shot into crowds and killed for, the numbers are in dispute, but it could be as many as 20 people on two separate occasions.

That is just going to generate much more hostility toward the Americans.

HUNT: If the humanitarian efforts are going so well, why isn't the faction in this administration that says we don't need the U.N., why shouldn't we just keep them out?

BACON: Well, the humanitarian problems aren't as big as the U.N. projected, or as the U.S. prepared for. But there are humanitarian problems. Even before this war, 50 to 70 percent of the pregnant women were anemic. And over one in five babies were born with low birth rate.

Nutrition is a problem still. In a town outside of Basra, a standard meal, the main noonday meal, is a piece of bread with a slice of tomato and some black tea. A lot has to be done to improve humanitarian conditions.

So the U.N. is skilled at doing this. They know how to bring in food. They've been running the oil-for-food program that's fed most of the country. I see the U.N. as another set of helping hands, a set of experts in humanitarian operations, that will free the military to do what only the military can do, and the principal job now is security. It's finding weapons of mass destruction, and it's tracking down war criminals.

HUNT: Are there are any unique problems for women in Iraq?

BACON: Yes, I think there are three problems. One is very little access to reproductive health care. Only 14 percent of the women in Iraq have access to reproductive health care. Two, the education rates for girls are sharply lower than they are for boys.

And three, I think we need to figure out a way to get women more involved in the political rehabilitation of Iraq in representative government. If you look at these meetings that General Garner has held over the last couple of weeks, there are very few women there. And if you're going to build a representative government, you've got to represent the 55 percent of the population made up by women.

(END VIDEOTAPE)

SHIELDS: Al Hunt, United for a Fair Economy point out this week that the average CEO for defense companies makes 577 times more than a Marine PFC. Ken Bacon, unlike many, turned down that opportunity to go to work for a defense contractor, just went to Refugees International.

And tell me, is he really describing a situation that is manageable in Iraq?

HUNT: Well, he's an old colleague. He's an incredibly decent guy, and when it comes to judgment, he's an A-plus.

Yes, I think the refugee situation is very manageable, because, as he said, the war was much shorter than some people anticipated. That doesn't mean that the really tough institution-building, creating a rule of law, a free press, secular education, transparency, isn't going to be incredibly difficult. It's a -- it would have been even rougher if we hadn't had a refugee problem.

NOVAK: I think -- I gather that Ken Bacon is a -- is concerned with refugees, not with rebuilding the Iraqi superstructure, and that's what we're talking about. I think it's manageable.

You consider the refugee situation, for example, in Europe after World War II, when there were millions of displaced persons running around. This is a manageable situation.

CARLSON: You know one of the things that's surprising is that in Afghanistan, we knew that women were, you know, in burkas and not allowed to go to school, not allowed to leave the house. But in Iraq, where there's an educated population, that women would be integrated into society. And he said no, they're not, they're not present, 55 percent of the population is not being utilized.

SHIELDS: That's right.

Next on CAPITAL GANG, is the SARS epidemic under control? "Beyond the Beltway" with an expert on infectious disease, Dr. William Schaffner.

(COMMERCIAL BREAK)

SHIELDS: Welcome back again.

Ending the Chinese cover-up, the mayor of Beijing admitted deficiencies in handling the SARS epidemic.

(BEGIN VIDEO CLIPS)

WANG QISHAN, MAYOR OF BEIJING (through translator): We find that we are ill prepared in terms of the ability of doctors and nurses and of medical facilities.

SEN. BILL FRIST (R-TN), MAJORITY LEADER: The consensus was that there was a cover-up, a cover-up of data from a centralized Communist Party and a centralized government...

(END VIDEO CLIPS)

SHIELDS: Despite overall improvement in controlling the epidemic, U.S. public officials, health officials, are cautious.

(BEGIN VIDEO CLIP)

DR. JAMES HUGHES, CENTERS FOR DISEASE CONTROL: We cannot say that we've dodged this. We most definitely are not out of the woods.

(END VIDEO CLIP)

SHIELDS: Joining us now from Nashville, Tennessee, is Dr. William Schaffner, chairman of the department of preventive medicine and professor of medicine at Vanderbilt University.

Thanks for coming in, Bill.

DR. WILLIAM SCHAFFNER, VANDERBILT UNIVERSITY: OK, Mark, delighted to be here.

SHIELDS: Bill, is this epidemic not really under control now?

SCHAFFNER: Oh, certainly not in China. Now, Hong Kong is coping, Taiwan is still having some problems. Now, in the United States and in Canada, things seem -- we seem to have a lid on things. But it's still brewing. And China's the big problem. Until they get their epidemic under control, they're going to be a problem for, really, the rest of the world.

SHIELDS: Bob Novak.

NOVAK: Bill, the (UNINTELLIGIBLE) -- the, the AIDS epidemic around the world, even some of the flu epidemics we've had, are just massively larger than this one. Don't you think that this is being distorted out of all proportion because of the headlines and the television networks and particularly the news networks spending so much time on it?

SCHAFFNER: Not really. You know, SARS has a fatality rate -- it's variously calculated somewhere between about 4 and 8 percent. That's much higher than any of the other diseases. And even AIDS, now that we have AIDS treatment available.

So the ease with which this can be transported around the world makes it a very, very serious disease. And the combined World Health Organization-CDC response, I think, has really been first rate.

CARLSON: Dr. Schaffner, given how China did not control SARS when it started there, and it got out of control, would a bioterrorist, rather than creating a disease in this country, go to China or someplace like it now, in hopes that it could later come to the United States when the United States is actually the target?

SCHAFFNER: You know, bioterrorists probably have an infinity of things that they can do. What this has been, has been a fire drill, really. It's helped us all around the world cooperate better and be better able to respond to bioterrorist then -- threats.

I think we've learned a terrific amount. And we're more reassured that we can work together now.

SHIELDS: Al Hunt.

HUNT: Dr. Schaffner, I guess I really have two, two, two questions. One going back to what you alluded to earlier, if the Chinese had handled this properly in the beginning, not tried to cover it up, would this just have been a small blip, only a couple days' story, and not the huge episode it's become? And how has the World Health Organization handled it once it became a crisis?

SCHAFFNER: Well, Al, I think for sure it would have been a much smaller problem if the Chinese had been open and welcomed assistance in the beginning. Now it's kind of out of control, and we've got to put the genie back in the bottle. So that clearly was the case.

The World Health Organization, I think, responded with alacrity, with energy, with real insight, and got everyone, the CDC and the other global health authorities, to collaborate on this.

And that's been a terrific exercise, I think. Beyond anything else, I'm impressed with the international collaboration that we've had, both on the public health side and on the laboratory side.

SHIELDS: Dr. Schaffner, in the -- in dealing with infectious diseases, is it possible to come up with a cure without knowing the ultimate cause, and without knowing the ultimate cause, and we, do we worry about future outbreaks?

SCHAFFNER: Well, we're working on both cures and prevention, Mark. So what we need on the public health side is to contain it, and we can certainly do that without a magic bullet for cure.

In the meantime, as I like to say, the lights are on in the labs at night while the lab scientists are working to try to get a cure for us.

SHIELDS: OK.

NOVAK: We've had a little sound bite by the only doctor and the only M.D. in the Senate, you -- Senate Majority Leader Bill Frist, in which he said that the problem was a communist government and a centralized government in China being unable to cope with that. Do you think that was what the problem was in China?

SCHAFFNER: Well, my understanding is that the local health departments, the provincial health departments, don't talk very well to the central government, and they have a long tradition of keeping things to themselves, and not opening up. And I think SARS has indicated that that era is clearly, at least from the point of view of health, over in China. They've got to be more communicative, they've got to welcome in the outside world for assistance.

CARLSON: Dr. Schaffner, the city fathers of Toronto were hysterical at the thought of being shut down and not having tourists and conventions come there. The pressure on a city, on a place, not to let the, not to let the epidemic be, be known, is -- works against controlling it, doesn't it?

SCHAFFNER: Well, Margaret, you know, it works both ways. If you keep it to yourself, it's likely to simmer and then explode. And look what we have now. So it's better to get in on the front end.

You know, a little bit of prevention early on prevents worse disease later on. That works for the individual, and it certainly does work for public health also.

CARLSON: Do you think everybody's learned that...

HUNT: Dr. Schaffner...

CARLSON: ... this time?

SCHAFFNER: I hope so.

HUNT: Dr. Schaffner, we only have about 30 seconds left. Let me just ask you quickly, are we close to knowing the cause of this?

SCHAFFNER: Oh, we know the cause. It's a coronavirus. And that -- that's now been well established through international laboratory cooperation.

SHIELDS: OK. Dr. William Schaffner, thank you very much for being with us.

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

(COMMERCIAL BREAK) SHIELDS: To put it delicately, New York City is different, and not to be confused with Middle America. As an example, in her article in "The New York Observer" criticizing the practice of women breastfeeding their babies, writer Leora Tanenbaum (ph) listed a major, quote, "sacrifice," end quote, of this maternal practice.

She says it forces women to wear, quote, "loose-fitting, unfashionable nursing shirts," end of quote.

Thank goodness mothers continue to make that sacrifice and are willing to risk even the wrath of the New York fashion police.

Bob Novak.

NOVAK: Last week, I said Fidel Castro's new repression imprisoning 70 Cuban dissenters and ordering summary execution of two skyjackers, offended even some soft-minded liberal apologists. Some, but not all.

A hundred and sixty artists and intellectuals from all over the world have signed a letter defending the Cuban dictator. They include the incorrigible Harry Belafonte, who has called Colin Powell a house slave, and Nobel laureates Gabriel Garcia-Marquez of Colombia and Nadine Gordimer of South Africa.

It reminds me of the German intellectuals who defended Hitler.

SHIELDS: Margaret Carlson.

CARLSON: Mark, did you know that investment bankers just paid $1.4 billion to settle charges they'd cheated their clients? They turned around and immediately claimed their innocence.

Morgan Stanley chair Philip Purcell said they'd done, quote, "not one thing wrong." Merrill Lynch chair Stanley O'Neal, whose star broker, Henry Bloget, touted stocks to normal folk while trashing it to insiders, whined about wimpy investors afraid to lose a little money.

It's the SEC that's wimpy. If the big fish get off with small fines paid out of their profits from cheating, the cheating of the little fish will never stop.

Next time, jail time.

SHIELDS: Al Hunt.

HUNT: Mark, on his own victory lap, Defense Secretary Donald Rumsfeld bragged about how well everything's going in Afghanistan.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: ... have moved from major combat activity to a period of stability...

It's secure... (END VIDEO CLIP)

HUNT: If it's so secure, why, then, is it so perilous for President Karzai to venture outside of Kabul, or why do the warlords still dominate most of this country?

Let's hope that Afghanistan isn't the secure and stable model the secretary envisions for Iraq.

SHIELDS: Let's hope not.

And kudos to Eliot Spitzer, the New York attorney general.

CARLSON: Yes.

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

Coming up next, "CNN PRESENTS: War Stories From the Front Lines."

At 9:00 p.m. on "LARRY KING WEEKEND," the Central Park jogger. And at 10:00 p.m., the latest news on "CNN SATURDAY NIGHT."

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