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CNN CAPITAL GANG

President Bush Takes Responsibility For Intelligence Info; President met with Ariel Sharon; Gay Marriage: Political Quagmire?

Aired August 2, 2003 - 19:00   ET

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

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

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

In a rare press conference before beginning his August vacation, President Bush took responsibility for using dubious intelligence information to justify the U.S. attack on Iraq.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I take personal responsibility for everything I say, of course. Absolutely.

I analyzed a thorough body of intelligence, good, solid, sound intelligence that led me to come to the conclusion that it was necessary to remove Saddam Hussein from power...

(END VIDEO CLIP)

SHIELDS: A day earlier, the ranking Democrat on the Senate Foreign Relations Committee clashed with the deputy secretary of defense and the federal budget director over the cost of Iraqi policy.

(BEGIN VIDEO CLIP)

SEN. JOE BIDEN (D-DE), FOREIGN RELATIONS COMMITTEE: Give me a break, will you? When are you guys starting to be honest with us? You're not even...

PAUL WOLFOWITZ, DEPUTY SECRETARY OF DEFENSE: To suggest that this is an issue of honesty really is very...

BIDEN: It is a suggestion (UNINTELLIGIBLE) of candor.

WOLFOWITZ: (UNINTELLIGIBLE) -- it's very misleading.

BIDEN: Of candor. Of candor...

(END VIDEO CLIP)

SHIELDS: The president also met with Israeli Prime Minister Ariel Sharon.

(BEGIN VIDEO CLIP)

ARIEL SHARON, ISRAELI PRIME MINISTER: The security fence will continue to be built, with every effort to minimize the infringement on the daily life of the Palestinian population.

BUSH: The fence is a sensitive issue. I understand. And the prime minister made it very clear to me that it was a sensitive issue...

(END VIDEO CLIP)

SHIELDS: Earlier in the week, House Majority Leader Tom DeLay addressed Israeli Knesset members.

(BEGIN VIDEO CLIP)

REP. TOM DELAY (R-TX), MAJORITY LEADER: It is the position of the people of the United States, as expressed by their representatives in Congress, that Israel's fight is our fight...

(END VIDEO CLIP)

SHIELDS: Bob Novak, what messages, consistent or diverse, on foreign policy was President Bush sending this week?

ROBERT NOVAK, CAPITAL GANG: I think two messages. One was, he finally took the blame for this, I think, relatively minor intelligence mistake. And I think only Washington media really can stick with the story. I think people are sick of it. And the president should have said about a month ago what he said this week.

I think the question on Israel is a much more serious thing. The -- he had told Prime -- the Palestinian prime minister, Abbas, that he was going to lean on Sharon on this fence. He gets in Sharon's -- President Bush gets in Sharon's presence, and he capitulates, does whatever Sharon wants, and then they have Tom DeLay there as the, as the incredible performance of four days in Israel, where he was absolutely celebrated as a, as a, as a visiting messiah, almost.

And so I think it was a very, a very disappointing message from the president. I think in his heart, he wants to have a Palestinian state and a settlement, but he's not doing the right thing.

SHIELDS: Kate O'Beirne, do you agree with Bob?

KATE O'BEIRNE, CAPITAL GANG: No, I don't. I do on the first half. I think the 16 words have had their far more than 16 days of controversy, and of course the president's responsible, in the sense that he's responsible for everybody who works for him. So hopefully the media will stop beating that dead story.

With respect to the security fence, I think it is a tricky, sensitive issue. But the sundry terrorist groups in the Palestinian towns have only agreed to a 90-day ceasefire. And Abbas is not disarming them, he's not jailing anyone. And if the Israelis are going to be pulling out of those Palestinian towns, they want some measure of security.

And Tom DeLay is just expressing what Congress has time and time again, that the American public, as represented by their members in Washington, support the existence of Israel as a Jewish state. And of course they're our ally in the war on terrorism.

SHIELDS: Al Hunt, question, you've been a long-time observer of presidents and Congress. Would a leader of his party, like Tom DeLay, do this, and then make such emphatic, unequivocal, categorical statements in critically supporting Israel and the Sharon government without the White House's concurrence, or at least agreement?

AL HUNT, CAPITAL GANG: In this case, I think yes.

SHIELDS: You do.

HUNT: Yes, I do, and I don't think -- and I think the question is, does George Bush have the guts to take on Tom DeLay? I agree with much of what Bob said, and I certainly support the Jewish state of Israel, and I think...

NOVAK: (UNINTELLIGIBLE).

HUNT: ... they're an important ally there.

But I think what Tom DeLay did was shameful over there. I really question whether George Bush has the guts to stand up to Tom DeLay, much less Ariel Sharon.

On the first issue, we've been hearing for weeks that this is a nonstory, it's going to go away. We now have a great -- we have a great SAT test. Who was responsible for the disinformation in the president's State of the Union, A, Steven Hadley, B, George Tenet, C, Condoleezza Rice, or D, George Bush? Or all of the above?

This is a guy who -- he's not a sit-down guy on this, he's not a stand-up guy, he's kind of a kneel-down guy. I mean, this is really a bad performance, and I don't think it's just going to go away. He shouldn't overlook Michael (UNINTELLIGIBLE), though.

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

HUNT: He was, he was in the mix briefly.

(CROSSTALK)

O'BEIRNE: I spot that as a trick question, given that it wasn't disinformation. And if you check my SAT scores, you'll see I'll spot that trick question.

NOVAK: So it should be none of the above.

O'BEIRNE: The British -- the -- the -- exactly. The British still stick with it as an accurate assessment.

HUNT: It was erroneous information, as our intelligence agencies said.

SHIELDS: But Margaret, with what (UNINTELLIGIBLE) -- in three weeks, in spite of the 16 words, from -- this is attempts to rewrite history to, It's my State of the Union speech, I take responsibility, what's in my State of the Union speech.

MARGARET CARLSON, CAPITAL GANG: Right. It did take the steam out a little. And Michael Gerson took responsibility the day that Uday and Qusay were killed.

SHIELDS: That's right.

CARLSON: So he didn't really -- he -- there's no "E" on that question, as a result of that.

I think it, you know, Kate is right, it kind of takes the steam out of the inquiry a little bit for the president to take responsibility. Now, if matters in Iraq deteriorate further, our reasons for going in stay in the news, and that being one of them and questions about that, the president's credibility.

The security fence is so inimical -- is that how you say that?...

SHIELDS: That's right, (UNINTELLIGIBLE).

CARLSON: ... to the -- to the road map that let us hope that this was a temporary moment where Bush had Sharon in the room and so was being polite, because this cannot continue, (UNINTELLIGIBLE)...

NOVAK: I, I think it's, I think it's worse than that, because I think it's a question of whether Secretary of the -- of State Powell is very strong for the road map, appalled by this, by this fence, and the president tells Abbas that he's (UNINTELLIGIBLE) going to do something with the offense, and he sits down with Sharon, and he's enthralled by him. He won't -- he can't move against him. What...

CARLSON: But when he leaves the room, let's hope he comes back to his senses, and Powell's in the room, and he agrees with him.

SHIELDS: We have just one minute, but I just want to ask quickly, that exchange between Joe Biden, ranking Democrat on the Senate Foreign Relations Committee, and Paul Wolfowitz, does that indicate either growing disenchantment on the Hill and Congress with the administration, or is it just the opening salvo of...

O'BEIRNE: As a, as a general...

SHIELDS: ... Biden's presidential campaign?

O'BEIRNE: ... matter, when liberal Democrats are worrying about the extent of government spending, one should be deeply suspicious about what their real problem is. And Paul Wolfowitz is exactly right. There are so many unknowns with respect to how long we're going to be committed in Iraq that you simply can't put a precise number on.

But the president's made it clear...

CARLSON: They never...

HUNT: Oh, but that's utter...

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

CARLSON: The thing is, we know it's not free. We know that.

O'BEIRNE: Right, right.

CARLSON: And so therefore, we shouldn't have had the tax cut, not knowing.

HUNT: Why can't Paul Wolfowitz and Josh Bolton say what not just Joe Biden but Chuck Hagel, Dick Lugar, people have been over there, we're going to be there for four or five years, it's going to cost $50 to $100 billion, we're going to lose some more life, and we're going to do it because we have a geopolitical and a moral obligation to do it? They won't say that.

O'BEIRNE: (UNINTELLIGIBLE), we don't know that.

NOVAK: Let me, let me just say one thing -- let me just say...

HUNT: We do know that.

NOVAK: ... Kate, that the Republicans on the Foreign Relations Committee thought that, that but Wolfowitz did an absolutely horrible job, and that they have to have better answers.

SHIELDS: Last word, Bob Novak.

THE GANG of five will be back with the gay marriage debate.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

With a judicial decision looming in Massachusetts, President Bush in his press conference addressed the question of gay marriage.

(BEGIN VIDEO CLIPS)

BUSH: I believe in the sanctity of marriage. I believe a marriage is between a man and a woman. And I think we ought to codify that one way or the other, and we've got lawyers looking at the best way to do that.

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: I'll just read you what the law says. "The word 'marriage' means only a legal union between one man and one woman as a husband and wife." You can't get any clearer than that.

(END VIDEO CLIPS) SHIELDS: His statements followed an announcement on gay marriage laws from the Vatican. Quote, "One must refrain from any kind of formal cooperation in the enactment or application of such gravely unjust laws," end quote.

The CNN-"USA Today" Gallup poll taken last weekend showed 57 percent oppose civil unions for homosexual couples compared with 49 percent opposition in May.

Margaret Carlson, is President Bush moving with the trend of public opinion on this controversial issue?

CARLSON: Mark, I believe that President Bush is in the closet on being tolerant about gays in general, and will come around at some point to some form of civil union, if it's not called marriage.

SHIELDS: Elaborate. In the closet?

CARLSON: Bush is privately tolerant. He's had gay couples stay overnight at the governor's mansion in Austin. He shows no bigotry in his private life.

Now, that's not the best thing in the world, because if your privately that way but not publicly, and you have public responsibilities, you should live that out and be tolerant overall.

But we now have Catholics, it's amazing that the Vatican is so quick to react, Catholics are almost ahead of public opinion about being tolerant of homosexual unions.

SHIELDS: Bob Novak.

NOVAK: I think you've got that completely wrong, Margaret. I don't -- this is a -- this gay marriage issue is a huge issue, and it's running, I think the (UNINTELLIGIBLE), the homosexual lobby completely misjudged this. They thought things had reached the point of so-called tolerance, that this was acceptable.

It's not acceptable. The president is 100 percent on board against the gay, gay marriage. It doesn't mean you're a homophobe, doesn't mean you can't have them as a guest, (UNINTELLIGIBLE) as a guest in your home. He's against gay marriage.

And it -- and practicing, the polls I've seen is the active Catholics, (UNINTELLIGIBLE), Catholics who go to mass, are against it as well. I think he's on the, on the, on the side of public opinion, which has really changed, not at gay marriage becomes reality, it moves in that direction.

CARLSON: And it's called something else other than marriage?

NOVAK: (UNINTELLIGIBLE) it's still marriage.

CARLSON: With some legal rights?

O'BEIRNE: Well, one of the fundamental questions here is, how will this come about? The reason why Congress passed the Defense of Marriage Act, saying to states, if another state has some sort of gay marriage permitted, you, we, not recognize that, and the reason why Bill Clinton signed it, it's because none of these, civil unions in Vermont or now maybe Massachusetts, none of it's happening democratically. It's judges imposing this on the public.

So at a very -- at a minimum, even civil unions should not be imposed by judges. Thirty-seven states then passed laws restricting marriage to only heterosexuals.

I do think there's a very strong live-and-let-live attitude among Americans, but they clearly want to draw the line at permitting gays to marry.

SHIELDS: Al Hunt, Pope John Paul II, you'll recall, personally and successfully intervened with then-Missouri Governor Mel Carnahan to stop the execution of a prisoner in that state, a convicted murderer, and the question, I guess, is, do you think this Vatican pronouncement was -- it didn't seem to sway an awful lot of conservative Catholics on the issue of capital punishment. Do you think the Vatican will lead Catholic opinion on this issue?

HUNT: I don't think a whole lot, Mark. I -- look, I -- I'm not -- I am not for legalizing gay marriage right now. But I think that civil unions have worked very well in the states, they've worked very well in companies. My company, "The Wall Street Journal," Dow Jones, gives spousal benefits, gives insurance benefits to gay and lesbian couples.

I think the government should try to stay out of this. I think (UNINTELLIGIBLE) either should not be a big role for the state. We don't need constitutional amendments. I think -- I agree with Margaret, I think George Bush was much better than, say, Rick Santorum, who talked about homosexuality in the same context as bestiality.

But I think that, that, that, that the country has not really moved that much in the last couple -- in the last year or so. We asked a question in our poll this week, "Wall Street Journal" poll, done by Bob Teeter (ph) and Peter Hardbat (ph), the whole question of civil unions, outside of marriage, but giving those legal and financial benefits.

And by 53 to 34, people say, Yes, we're for that.

O'BEIRNE: Well, if they're for that, it hasn't gotten democratically approved in any state yet. And the reason why there might have to be constitutional amendment, which I wouldn't welcome aesthetically, is because Tom Daschle reads for the wording of the Defense of Marriage Act, but there's every chance. And Lawrence, the decision on Texas sodomy laws, points in this direction, a federal judge would be capable of saying that federal law...

NOVAK: And that, and that...

O'BEIRNE: ... discriminates against gays and is therefore unconstitutional.

NOVAK: And the, and the, and the Massachusetts court ruling is, is what is -- everybody's waiting for it. I don't know why, it was supposed to come out about a week ago, I believe.

SHIELDS: (UNINTELLIGIBLE) been billed now for three or four weeks.

(CROSSTALK)

SHIELDS: Let me ask one quick question once around, and that is, politically, if this does become an issue, how will it, will it benefit either party, or will it -- is it to Bush's advantage, Margaret?

CARLSON: You know, Democrats don't want to be seen as pushing gay marriage. It's -- it's -- but what's behind it, which is just some acceptance of gay couples, and some legal rights, which equals some kind of civil union, it's not such a bad thing. And I think Republicans are trying to be careful to be tolerant and not to be seen as antigay.

NOVAK: Oh, Margaret...

SHIELDS: (UNINTELLIGIBLE)...

NOVAK: ... what it is, is, the, the homosexuals are a big part of the Democratic coalition. It's a terrible problem for the Democrats. And in that sense, it's a big asset for the Republicans.

SHIELDS: Al?

HUNT: There are a number of homosexuals in the Republican coalition too, Bob...

NOVAK: Not that many.

HUNT: ... (UNINTELLIGIBLE), yes, there sure are, Bob...

NOVAK: Not as many.

HUNT: ... Bob, I'll introduce you to some of them. If the issue becomes one of preference or morality, then it's -- then the conservatives are going to win. If it becomes one of tolerance, or of equality, then I think the (UNINTELLIGIBLE) will win.

NOVAK: (UNINTELLIGIBLE)...

SHIELDS: Kate?

O'BEIRNE: I agree, it's (UNINTELLIGIBLE) defending the traditional mores of marriage, it helps the Republicans. But there is also a significant anti-antigay sentiment, where they want to block marriage for gays, but they certainly don't support any hostility toward (UNINTELLIGIBLE)... SHIELDS: Well, that's it, I mean, the Log Cabin Republicans have pointed out that a number of appointees in this administration who are gay, and openly so.

Next on CAPITAL GANG, is Howard Dean really the authentic front- runner?

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Two polls gave former Vermont governor Howard Dean a narrow lead in New Hampshire Democratic presidential primary. The Franklin Pierce College poll gave Dean 22 percent to 21 percent for Senator John Kerry of Massachusetts. The "Boston Herald" poll showed 28 percent for Dean and 25 for Senator Kerry.

(BEGIN VIDEO CLIP)

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: We're going to give Democrats a reason to vote. This is not going to be election about the worst of two evils. This is going to be a time when Democrats are proud to be Democrats.

We're going to stand up against Rush Limbaugh and the right wing.

(END VIDEO CLIP)

SHIELDS: Kate, six months before the Iowa caucuses, is Howard Dean an authentic Democratic front-runner?

O'BEIRNE: Mark, I think by a nose, although it's a little -- it's early still, he is, in fund raising in the last quarter and in some of these recent polls. He is certainly the front-runner with respect to setting the pace for the Democratic field. He's staked out this territory to the left of George Bush on foreign policy and national security, and other leading Democrats are scurrying to be there with him, as though if anybody who's tough on terrorism is a Bush lite.

And that's terribly appealing to angry liberal Democratic primary voters. He reflects where they are.

SHIELDS: Bob Novak, he, in fact, reflects the membership of the Democratic Party more than did Joe Lieberman, Dick Gephardt, John Kerry, and John Edwards on the question of going to war with Iraq, right?

NOVAK: Yes, and so does, so does Dennis Kucinich. And Dennis Kucinich is still at 1 percent. So it takes more than that. You have to be -- these are not attractive candidates, and Dean is a pretty attractive candidate. He looks better. People can imagine him as President Dean.

Now, you say someday, if he's going to be elected, he's going to have to move to the center, that's true. But he doesn't have to move to the center now. I think he's playing it just right. And what he does is, he just creates a tremendous fear and anxiety in the Democratic establishment for this little guy from the People's Republic of Vermont, might be our candidate.

CARLSON: You'd be so thrilled, Bob.

SHIELDS: This little guy, this little guy from the People's...

NOVAK: (UNINTELLIGIBLE) little, (UNINTELLIGIBLE).

CARLSON: Yes. Yes. I think you and him are the same height.

SHIELDS: Yes.

NOVAK: Yes.

SHIELDS: OK.

CARLSON: Just about, yes.

Karl Rove and Bob Novak for Howard Dean. That's -- the White House would like him, and Bob would like him.

You know, all of the disaffected Democrats, new Democrats, angry Democrats, are going to Howard Dean, and the rest are split among all these candidates, many, many Democrats can't even name all of them. And I think there's going to be a kind of stop-Dean moment coming soon.

There's a stirring among Gore supporters, trying to get him to come back into the race, to find a receptacle for everybody else. There is this, he gets everybody that's on this one side. And then the split. And Kerry now looks like the stop-Dean person.

But you don't know, because look at how close it's come. And if Kerry loses New Hampshire, it's really going to be a scary time for Democrats.

SHIELDS: Al Hunt, you know the -- as better than Britch Ladybye (ph), there's a rhythm to these things. Is Howard Dean six months, wouldn't he prefer to be emerging as the hot candidate next December rather in July?

HUNT: Well, that's the way insurgencies typically work. This is a -- we've never seen a front-running insurgent before. I want to say six weeks ago on this program, I said Howard Dean would clearly have an impact on the race and certainly wouldn't be the nominee. I now want to withdraw that latter assurance, because I think that -- I think that Kate's right.

He -- what he's done, I think it's less ideological and even slightly less war than sometimes people say. I think he has captured, as Bob Matsui told me this week, the anti-Bush mantle. And there is a great, there's an anti-Bush sentiment in that party that's very, very pronounced, and he's captured it. He's the one. And Margaret, it's not just the Gore people. Al Gore himself has been making phone calls the last couple days. I happen to think it would be a dumb idea, but I think that is -- for Al Gore to get back in the race. But he's been calling around, and because he really thinks that Dean is now the alternative, and he can beat Dean.

SHIELDS: Let me exercise my prerogative. I was out in Iowa covering Howard Dean last week. He is -- he's confident, he's articulate, he's responsive, he does -- handles the questions. He's getting good crowds.

Two things about him, I would say. One, there isn't much optimism to his message. That's missing. And I think a presidential nominee who lacks optimism basically loses. And secondly, there's, there's, there's minimal humor, that, and that, and I guess.

But I do recall Robert Novak saying once that Democrats in 1980 had one hope, and that was that they would -- the Republicans would nominate Ronald Reagan. And I think Bob said that Howard Dean could, in fact...

O'BEIRNE: Mark, Mark...

SHIELDS: ... do the same thing.

O'BEIRNE: ... is he something of a sloppy candidate? He's already had to apologize a couple of times for shooting from the hip to some of his Democratic opponents.

SHIELDS: I, I think he's a supremely confident candidate. He doesn't work from a text, he works from notes. And I would say this, Kate, that he is -- doctors don't make great candidates, I don't care who the doctor is. Doctors are used to us all going as supplicants and mendicants to them and saying, Please, make me better, doctor. I'm sorry.

And I don't think it makes the...

NOVAK: You don't think Bill Frist is (UNINTELLIGIBLE)?

SHIELDS: I don't think Bill Frist is a good candidate.

HUNT: (UNINTELLIGIBLE) something else at work here. Insurgents usually have, Kate, six, seven months to work it out. No one knew...

SHIELDS: That's right.

HUNT: ... what George McGovern was saying...

SHIELDS: He's getting (UNINTELLIGIBLE).

HUNT: ... a year before.

SHIELDS: That's exactly right.

HUNT: No one knew what Jimmy Carter was saying 1975. They didn't know until people like...

NOVAK: Yes, but the time factor...

HUNT: ... (UNINTELLIGIBLE) and Bob (UNINTELLIGIBLE)...

NOVAK: ... the time factor is so...

HUNT: ... but...

NOVAK: ... you know.

HUNT: Right.

NOVAK: I want to ask Mark a question.

SHIELDS: Sure.

NOVAK: Tell, (UNINTELLIGIBLE) say he doesn't show much optimism. He -- I -- please tell me, because you -- I would help -- I would love to know, what Democratic candidate is showing any optimism?

SHIELDS: Well, I think, I think Gep -- (UNINTELLIGIBLE)...

CARLSON: Gephardt...

SHIELDS: ... I've heard the others, I've heard...

CARLSON: ... Lieberman.

SHIELDS: ... Gephardt, yes, I've heard, I've heard Lieberman. There's a sense of, If we do this, we'll be better. And I just think that it's been...

HUNT: It's marginal...

(CROSSTALK)

CARLSON: Yes. The only, the only thing I'm...

SHIELDS: Well, I think it's a...

CARLSON: ... I've been with (UNINTELLIGIBLE)...

SHIELDS: Can you be upbeat, Bob?

CARLSON: ... (UNINTELLIGIBLE) is a low threshold for irritability.

O'BEIRNE: Yes.

CARLSON: And that may be...

O'BEIRNE: He's very thin-skinned.

CARLSON: ... the doctor thing.

SHIELDS: That, that's a good, that's a very good...

O'BEIRNE: (UNINTELLIGIBLE).

SHIELDS: ... point.

Speaking of irritability, last word, Bob Novak.

Coming up in the second half of CAPITAL GANG, our Newsmaker of the Week is William McDonough. He's head of this SEC's accounting oversight board. Beyond the Beltway looks at another case of runaway Democrats in Texas with Wayne Slater of "The Dallas Morning News." And our Outrages of the Week. That's all after the latest news headlines.

(COMMERCIAL AND NEWS BREAK)

ANNOUNCER: From Washington, THE CAPITAL GANG.

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

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

Our Newsmaker of the Week is William McDonough, the head of the SEC's accounting oversight board.

William McDonough, age 69, residence Washington, D.C., and New York City. Bachelor's degree in economics, Holy Cross College, master's degree in economics, Georgetown University.

Twenty-two years at the First National Bank of Chicago, president of New York Federal Reserve Bank for 10 years, became chairman of the Public Company Accounting Oversight Board on June 11.

Al Hunt sat down with Bill McDonough earlier this week on the occasion of the first anniversary of the Sarbanes-Oxley Act, which established oversight over American corporations.

(BEGIN VIDEOTAPE)

HUNT: One-year anniversary of Sarbanes-Oxley. When will the effects filter down to citizens, grassroots investors?

WILLIAM MCDONOUGH, CHAIRMAN, SEC ACCOUNTING OVERSIGHT BOARD: I think that we're already having a positive effect for all the American public of Sarbanes-Oxley.

The Sarbanes-Oxley Act, I think we have to remember, was really called by the American people, who had lost confidence in the way the economy was functioning, had lost confidence in the believability of corporate financial statements, and the auditing of corporate financial statements.

I believe already that there's a noticeable pickup in the confidence the American people have in the functioning of the financial system, something that's immensely important. HUNT: Some critics look and they say that the Ken Lays, the Bernie Evers, the people who ran the companies that perpetuated these scams haven't been touched. There've been new shenanigans, Health South (ph), Freddie Mac. And they really ask, Look, is there any finger in the dike?

MCDONOUGH: The main finger in the dike has to be that the leadership of the private sector of the American economy, the leaders have to step forward and say, We are going to run our companies better.

I believe that that is what, in fact, they are trying to do. But they're not vocal enough.

HUNT: There's some people on the other side who worry that this law and your board threatens entrepreneurial risk-taking, that corporate greed might, as your colleague Bill Donaldson worried, be replaced with a pervasive sense of caution. Does that worry you?

MCDONOUGH: It worries me, but I also am concerned that people are using regulatory concerns as some did the Iraq war, as a cover story, to be very blunt, for the uncertainty that they really have about the way the economy is behaving.

HUNT: Do accounting firms have an obligation to uncover fraud in companies they audit?

MCDONOUGH: They have an obligation to look as intensely as possible for the existence of fraud. If you have an extremely well- managed fraud by enough key participants in a company, then I think it can be impossible for the auditor to find the fraud.

HUNT: Hundreds of companies, including some big ones, Microsoft, Citigroup, Coca-Cola, are now -- have chosen to expense their stock options. Should all companies be required to do that?

MCDONOUGH: That's an extraordinarily difficult question to answer. As a sort of religious credo, are stock options an expense, and should they be recognized as an expense? Yes. I like the idea of some companies deciding that they're going to use -- have stock grants instead of stock options.

HUNT: Two thousand two was not a particularly good year, yet the average increase in compensation in the S&P 500 CEOs was -- it went up more than 60 percent. Should that worry us?

MCDONOUGH: CEOs 20 years ago made about 40 times the income of the average person who worked in the company. That multiple has increased 10-fold over the last 20 years. Now, I knew the CEOs 20 years ago, and I am a CEO today. And I know that we are not 10 times better than the folks were 20 years ago.

I think that something needs to be done about it.

HUNT: Legislation? MCDONOUGH: No, because I think legislation is too blunt an instrument. I do not think that we can justify the present levels of executive compensation. I don't think you can do it economically, and I don't think you can do it morally.

If it has a taste of a society in which the leaders of the private sector have simply shown bad judgment, and it is time for them to recognize that their judgment has been bad and to correct it.

(END VIDEOTAPE)

SHIELDS: Al Hunt, is Bill McDonough saying that there's really not much he or the government can do if corporate America will not, in fact, reform itself?

HUNT: No, Mark, I think he would say that Sarbanes-Oxley was much needed and much welcomed. I think he realizes his board can provide a valuable function.

But I think what he says is that despite all that, that if corporate America, particularly CEOs with these astronomical salary, these greedy CEOs, don't face up to the responsibilities they have to the public and investors, we're still going to have problems.

SHIELDS: Bob Novak, I read the other day that the average CEO works five hours a day, one day, and makes more than the average worker does in a year. Does that strike you as unfair?

NOVAK: I don't know, but maybe he should go to Burma. I think they have a better system that you might like. They're a lot, a lot better. As a matter, as a matter of fact, Al, I don't like to criticize you, but you must not have been listening to your own interview, because he said that essentially this is up to the, to the, to the executives, and then the government can't do it, and they can't control wages.

SHIELDS: Last word, Bob Novak.

CARLSON: Oh, darn it.

SHIELDS: Margaret, was there something you wanted to add, Margaret?

CARLSON: Yes. CEOs set their own pay, which is -- they're rewarding themselves, and they're greed heads. It's terrible.

(CROSSTALK)

O'BEIRNE: Congress has (UNINTELLIGIBLE).

(CROSSTALK)

O'BEIRNE: ... made CEOs personally liable for every decimal point on their books. Now, you're going to have to pay them for that risk.

SHIELDS: Oh, (UNINTELLIGIBLE).

(CROSSTALK)

CARLSON: Oh. They were, they were, they were being paid before they were responsible for the decimals.

SHIELDS: All right...

CARLSON: They were moving the decimals.

O'BEIRNE: Why not?

SHIELDS: Hey, it sounds like...

(CROSSTALK)

SHIELDS: ... a battle between Margaret and Kate. I don't know what to do.

But I will say, coming up, THE CAPITAL GANG Classic, when First Lady Hillary Clinton caused a storm, and that was just five years ago.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Five years ago, President Bill Clinton's pressure on Israeli Prime Minister Benjamin Netanyahu to agree to U.S. peace proposals with the Palestinians was protested by 81 U.S. senators, and, with particular emphasis, by House speaker Newt Gingrich.

At that point, First Lady Hillary Clinton unexpectedly endorsed a Palestinian state. THE CAPITAL GANG discussed the situation on May 9, 1998. Our guest was then-Democratic Senator Dale Bumpers of Arkansas.

(BEGIN VIDEO CLIP, May 9, 1998)

NOVAK: I would say I would like to give kudos to Mrs. Clinton for a courageous and correct statement on a Palestinian state. I really give her credit. And I think that Newt Gingrich is just way over the line in saying that the president is trying to blackmail Israel. That's just wrong.

O'BEIRNE: I think Newt Gingrich and the 81 senators who signed that letter are exactly right. Netanyahu's is not interested in ceding more land in exchange for empty promises from Arafat.

Now, I can understand why Bill Clinton is trying to jump-start the peace process. He's weak at home. And I think this explains all of his foreign travel.

SEN. DALE BUMPERS (D), ARKANSAS: I was one of the 19 senators that did not sign the letter.

It's a very difficult chore, and it's get -- the peace process is going to continue. I didn't want to tie the president's hands, and I don't think any of us should.

HUNT: I think that Mrs. Clinton's comments were very ill timed and ill considered at this moment. Mr. Gingrich, according to "The Boston Globe," told Madeleine Albright Wednesday morning...

SHIELDS: That's right.

HUNT: ... we -- what you're doing is absolutely right. And then some Jewish groups started criticizing, and he did a 180.

(END VIDEOTAPE)

SHIELDS: Al Hunt, would you amend your judgment of five years ago and say today that Mrs. Clinton was then on the right track?

HUNT: Not really, Mark. She was right substantively, but that wasn't the position of her husband's administration. And I still think that's ill conceived for a -- for a first lady to do that.

But Newt Gingrich looks just as craven five years later.

SHIELDS: Bob Novak?

NOVAK: Well, I think Mrs. Clinton was right. I like, I like to say something good about her when I can. And I'm very disappointed in you that you can't admit that a Palestinian state is the way to peace there, and she was ahead of her time.

HUNT: It is.

O'BEIRNE: Well, also, what this president recognized that Bill Clinton never did is getting rid of Arafat as fundamental to peace. There's still a very long road ahead. But as long as Bill Clinton hung in there with Yasser Arafat, it certainly wasn't going to be happening.

SHIELDS: But Kate, Kate, she was scolded and reprimanded for even suggesting a Palestinian state five years ago. Now, that just shows how far we've moved under a conservative Republican president.

CARLSON: Mrs. Clinton was becoming a person in her own right. We should have known she was going to run for the Senate.

SHIELDS: It's amazing that Andy Young was fired as U.N. ambassador to the United States for just meeting with the Palestinian representative in New York.

NOVAK: It's OK for first ladies to be pro-choice when their husband is pro-life, but they can't be for a Palestinian state, is that it?

HUNT: No, no, not if they publicly take on their husband's position.

CARLSON: Barbara Bush did not...

HUNT: I think that's unseemly.

CARLSON: ... take a public position...

(CROSSTALK)

HUNT: ... and if they -- she sure did not, she sure did not.

(CROSSTALK)

NOVAK: How did we find out?

CARLSON: Oh...

HUNT: You look at the public record...

CARLSON: ... we didn't, I mean, the...

HUNT: ... Bob, it's easy. You examine the public record.

SHIELDS: Last word, Al Hunt.

Next on CAPITAL GANG, Beyond the Beltway looks at Democrats galloping out of Texas. Again, we'll be joined by Wayne Slater of "The Dallas Morning News."

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Republican efforts to redistrict the 32-member Texas delegation in the United States House continued to be frustrated when Democratic state legislators again left the state. This time, state senators went to New Mexico to block a quorum.

Republican Governor Rick Perry claimed this also blocked health care for the poor.

(BEGIN VIDEO CLIPS)

GOV. RICK PERRY (R), TEXAS: Today's developments are disappointing, not just to me, but to the many Texans who would benefit from the services $800 million would provide. That's why today I'm calling another special session.

LETICIA VAN DE PUTTE (D), CHAIR, TEXAS SENATE CAUCUS: This is no time for gamesmanship and the photo opportunities that mislead and misrepresent the things that we have fought for on the Senate floor. This is not a public relations game.

(END VIDEO CLIP)

SHIELDS: Joining us now from Austin, Texas, is Wayne Slater, Austin bureau chief of "The Dallas Morning News."

Thank you very much for coming in, Wayne.

WAYNE SLATER, AUSTIN BUREAU CHIEF, "THE DALLAS MORNING NEWS": Good to be here.

SHIELDS: Wayne, I'd never realized before what a -- how committed Rick Perry was to poor people's health care. But is there a political winner in this dispute?

SLATER: You know what? I -- the real question is, does anybody not lose? I mean, this is like one of those reality TV shows where somebody is declared winner at the end eventually, but everybody coming out of the jungle has been damaged in some way or another.

I think both sides lose in this fight.

SHIELDS: Bob Novak.

NOVAK: Wayne, just a very simple question. Is this, is this the game that goes on forever, that it's there's never an end to it? Is there, is there some time where this ends, and you say, Gee, the Republicans didn't get it done?

SLATER: Yes, there really is. If, in fact, the effort to reapportion the congressional seats in Texas has to be on the ballot next year, about October, mid- to late October is pretty much the deadline. If they haven't passed something, then they don't have anything to show to the Justice Department that has to preclear it, to go through some early court fights, and to get the ballots prepared.

So they have a couple of more months, but after that it's dead, certainly, for next year.

SHIELDS: Margaret Carlson.

CARLSON: Wayne, when the president was the governor of Texas, it was a lovefest down there. Bob Bullock (ph) was his best friend. He said, We get everything done by working across the aisle. What happened?

SLATER: Yes, I mean, that's really the story here. We all remember during the campaign, I traveled with the president, I know you were there. He kept talking about all this bipartisanship in Texas, and it was true.

There really was a period, a long period, in which Republicans and Democrats worked together, not so much on the redistricting issues every 10 years, but worked together on issues, and there was a lot of trust and a lot of bipartisan cooperation.

That's pretty much out the window now. Bush went to Washington, saying, I'd like to bring some of this Texas bipartisanship to Washington. And what's really happened now is, some of that Washington-style politics has arrived in Austin. And it's going to have implications for the future here in this state. It's going to raise questions about how easy it is to pass health care, issues on school finance at the next couple of sessions.

A lot of trust has been lost in this state.

SHIELDS: Kate O'Beirne.

O'BEIRNE: Given, Wayne, that they've had this huge fight in Texas over an issue that's actually of more importance to Washington Democrats and Republicans, who's winning the public relations game when it comes to Texas voters?

SLATER: Yes, you know, that's a really good question, and that -- both sides are worried about that. It's funny, the Democrats in Albuquerque, New Mexico, had a couple of folks from the DNC parachuted in. And part of what they were working on was the public relations game.

The governor stepped out, the clip we just saw was the first comment by the governor since the Republican senators bolted. And that's the beginning of a public relations game here.

The Republican side, basically, is, Real Texans don't cut and run, seems to have some resonance here in this state. I mean, this is the state where the Alamo was there. The odds were heavy in 1836, but nobody ran.

So I think the early polling I've seen indicates by a fairly narrow margin the Republicans are winning the battle, the battle (UNINTELLIGIBLE) an issue, but you don't just run away if you've got a tough fight.

SHIELDS: Al Hunt.

HUNT: Wayne, who's the major figure in this fight for the Republican Party? Is it the governor? Is it the president? Or is it Tom DeLay?

SLATER: Well, it is the governor. He certainly is the person who put the issue on the ballot. But, you know, we know what's going on here. I've talked to people in the back of the House chamber, the Senate chamber, talked to various sources here and in Washington, and the key instigator of this, if you will, was Tom DeLay. He saw this as an opportunity to pick up five, maybe six congressional seats.

And also the White House, Karl Rove has been in contact with the governor on several occasions, or the lieutenant governor, both of whom are Republican. And with a number of state senators and some house members, trying to push this issue forward.

I mean, you look at Rove and the president moving around the country raising money to try to pick up a seat here and a seat there. This is an opportunity to pick up five or six seats in Congress, simply by redrawing the map. So it's big stakes. And the White House and Tom DeLay are the key figures behind it.

SHIELDS: Wayne, one of the new wrinkles in the Senate struggle in this matter has been the question of urban versus rural, which has come to the forefront more, with even Republican senator expressing that this would be the disenfranchisement of thousands of rural voters in Texas.

Is that a factor in the fight at this point?

SLATER: Well, it is a factor. It's a factor in part because, as you said, one Democratic senator stayed behind, and in part because, he said, he wanted to defend the interests of rural Texas.

The problem with that battle, when you get to the Justice Department or the courts is, that kind of disenfranchisement, rural versus suburban voters, which is what's happened in every state, including Texas, people are moving to the suburbs, they're moving out of the rural areas, that kind of fight doesn't really work.

The kind of challenge that the Democrats see as more likely to work is a minority challenge, the dilution of minority rights. And so while there is some discussion of rural versus urban, the better hope by the Democrats and the fear by Republicans is that the new maps that are drawn might unfairly and illegally, unconstitutionally, disenfranchise minority voters.

And so that's why you hear talk about minorities among the Democrats in Albuquerque, and that's why you hear reassurance by the governor and the Republicans that they're paying attention to that issue and won't disenfranchise minorities, if and when everybody comes back to Austin and we draw a new map.

SHIELDS: Wayne, we have less than one minute. And Bob Novak, the final question.

NOVAK: Wayne, just on the basis that Republicans win all the statewide elections in Texas, they control both houses of the legislature, and at least at this point in time, they have the majority party, can you say that the districts are unfairly drawn now, when they have a majority of Democrats in the delegation in the House of Representatives?

SHIELDS: Well, I'm not saying that, Bob...

NOVAK: Can I say it?

SLATER: ... of course. But obviously the Democrats aren't...

SHIELDS: You just said it.

SLATER: Look -- Well, some people say that. Bob, you're making a real good point, and the truth is, Texas is completely a Republican state. All statewide office holders, the House and the Senate, the leadership of both the House and the Senate. If you look statistically, then you can see that the congressional seats were disproportionately Republican right now.

But in a few seats, Charlie Stenholm, Chet Edwards, they're members of the local home town delegation are elected, Democrats. So already we have a Republican delegation, it's just that Republicans won't elect them.

SHIELDS: Wayne, you've been a great guest, other than saying that Novak made a good point, you've been a terrific guest, and we thank you very much for being with us.

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

(COMMERCIAL BREAK)

SHIELDS: And now for the Outrage of the Week.

Responding to pressure from its business supporters, the Bush Labor Department plans to rewrite the Fair Labor Standards Act, something Ronald Reagan never did in his eight years. The new rules would deny overtime pay to workers who earn more than $22,100 a year.

(UNINTELLIGIBLE) opponents say that the new Bush rules would deny overtime pay to some 8 million American workers, including nurses and firefighters.

Doesn't anybody in this administration know and understand that millions of hard-working American families in this unhealthy economy depend on overtime to make ends meet?

Bob Novak.

NOVAK: National Football League commissioner Paul Tagliabue has done something that transcends sports. Detroit Lions' president, Matt Millen (ph), decided to hire a football coach who happens to be white, and fired his present coach, also white, to get him.

Following NFL rules, Millen tried to interview black candidates, but they wouldn't come in, since Millen had already made his decision.

Commissioner Tagliabue then fined Millen personally $200,000, forget due process. This was hush money to keep Johnnie Cochran and Jesse Jackson quiet as they pressure the NFL.

SHIELDS: Margaret Carlson.

CARLSON: Mark, the Pentagon has gone well beyond the $600 toilet seat, now sending troops to butler school. "Slate" magazine reports the military trains about 300 soldiers a year in the domestic arts, how to set a table, arrange flowers, serve Diet Coke on a silver tray, and press the dress whites of three-star admirals.

Forget on-the-job training. At a monthly cost of $7,000, some are trained at the Starkey International Institute, the country's premiere school for valets, maids, and footmen.

All this while Bush is cutting veterans' benefits and air marshals.

SHIELDS: Kate O'Beirne.

O'BEIRNE: A recent study by professors at Berkeley, Stanford, and the University of Maryland determined that being a conservative means, well, not being right in the mind.

According to the academics, conservatives are low in cognitive complexity, intolerant of ambiguity, and motivated by fear and aggression. The conservatives cited as proof include Hitler, Mussolini, and Ronald Reagan.

This disordered condition also obviously includes other well- known conservatives. My own mental state is admittedly intolerant that this left-wing study was paid for with federal grants. Now, that's crazy.

SHIELDS: Al Hunt.

HUNT: Mark, there are a number of reasons why the recent House- Senate conference committee decision to privatize some air traffic control, controller sites to the lowest bidder, as demanded by the White House, is troubling.

One, safety, not budgeting, should be the prime concern in air safety. Two, it flies in the face of votes in both houses opposing this privatization.

But finally, this deal was pushed through by House Appropriations chair Don Young, and it affects controllers in 49 states. What state was exempted, you ask? Alaska, the home of none other than, you ask, Don Young.

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

Coming up next, "CNN PRESENTS: Scheduled to Die." At 9:00 p.m., "LARRY KING WEEKEND," the classic 1994 Marlon Brando interview. And at 10:00 p.m., the latest news headlines. All that and much more right here on CNN.

Thank you for joining us.

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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