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JUDY WOODRUFF'S INSIDE POLITICS

Schwarzenegger Latest Entrant Into Packed California Gubernatorial Race; Issa Quits Run for Governor

Aired August 7, 2003 - 16:00   ET

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

(BEGIN VIDEOTAPE)
ANNOUNCER: A political earthquake rocks California.

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

ARNOLD SCHWARZENEGGER (R), CALIFORNIA GUBERNATORIAL CANDIDATE: I'm going to run for governor of the state of California.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

ANNOUNCER: We'll gauge the aftershocks, from Hollywood to Capitol Hill.

Before the Terminator jumped into the race, California's senior senator said she'd stay out.

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: I thought a lot about it.

ANNOUNCER: But will Dianne Feinstein now change her mind? She's our guest.

He's fighting for his political life, but how does Governor Gray Davis battle back now that Arnold is after his job?

More political theater: California's lieutenant governor jumps in as a candidate.

LT. GOV. CRUZ BUSTAMANTE (D-CA), CALIFORNIA GUBERNATORIAL CANDIDATE: Vote no on the recall and yes on Bustamante.

ANNOUNCER: What other big names are in and out?

(END VIDEOTAPE)

ANNOUNCER: Live from Los Angeles: a special edition of JUDY WOODRUFF'S INSIDE POLITICS: "The Road to Recall."

JUDY WOODRUFF, CNN ANCHOR: Thank you for joining us for this special 90-minute edition of INSIDE POLITICS.

I'm in Los Angeles for the program today in a state where, literally, this has been a political earthquake: Arnold Schwarzenegger surprising not only the political world today, but the people very close to him, who had assumed that he would not be a candidate. He made the announcement last night on late-night talk television.

Today, the news is, another Democrat is in the race, the most prominent name so far. He is California Lieutenant Governor Cruz Bustamante. After saying he would not be a candidate, he has announced today he's changed his mind. And Bustamante will be our guest later on in this half-hour.

Still, he may have a tough time cutting into Schwarzenegger's spotlight.

CNN's Miguel Marquez is in Norwalk, California, with more on the actor's first full day as a candidate -- Miguel.

MIGUEL MARQUEZ, CNN CORRESPONDENT: And what a spotlight it is. It just keeps getting bigger and bigger and bigger, Judy. Welcome to L.A., by the way.

We're here at the registrar of voters. And maybe Mr. Schwarzenegger will get a bigger draw here than he is in theaters. Check out this crowd. I can tell you, there's not usually this many people at the registrar of voters for L.A. County. What he is doing here today is picking up papers so that he can make his candidacy official. He'll take those papers home with him, presumably, and he will need to get 65 signatures and $3,500 together in order to put all that together and be here by 5:00 p.m. on Saturday in order to make his candidacy official.

Last night, of course, political bombshell when he announced that he would, in fact, run for governor, after pretty much for some time telling people that he was not going to run. I talked to some of his campaign staffers who are here now, although they're not quite campaign staffers yet. They said, we're all just kind of friends chipping in at this point. But there are a lot of guys from Pete Wilson's campaign. He, of course, was a former Republican governor of California.

And they are here now trying to get going. They've got to get office space together. They've got to figure out who's going to be working for the campaign and who's doing what. So this thing does seem like Mr. Schwarzenegger did decide this thing at the last minute and has really kind of shook the ground here politically -- Judy.

WOODRUFF: All right, Miguel Marquez outside the registrar's office, where we do expect to see Arnold Schwarzenegger personally show up within the hour to pick up papers that he will then fill out and file to say he's running for governor.

Well, the incumbent, Governor Gray Davis, says he doesn't plan to lose his job to Arnold Schwarzenegger or anyone else without a fight. The Davis camp is portraying the actor as just another edition to a costly political circus. In a statement last night, a Davis spokesman said: "We expect many more names and far more rumors. The more candidates who join, the greater the likelihood that a small minority of voters will be controlling California's future." Our senior political analyst, Bill Schneider, has more on Davis vs. Schwarzenegger.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): What is this campaign going to look like?

UNIDENTIFIED FEMALE: I'm Angeline (ph) and I'm running for governor.

SCHNEIDER: You might call it a free-for-all, except for the fact that this campaign is going to be far from free. Governor Gray Davis' backers say they'll spend $20 million or more. Other wealthy candidates will spend whatever it takes.

SCHWARZENEGGER: I don't need to take any money from anybody. I have plenty of money myself.

SCHNEIDER: That's a clue to Schwarzenegger's campaign strategy. He wants this to be an outsider vs. insider campaign, the people vs. the political establishment.

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

SCHWARZENEGGER: I want to go in there, reform the system, so it's back in the people's hands. The people should make the decisions, rather than special interests.

(END VIDEO CLIP)

SCHNEIDER: The fact that Davis is an obsessive fund-raiser makes him look beholden to those special interests, as opposed to Arnold, the incorruptible.

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

SCHWARZENEGGER: No one can pay me off. Trust me. No one.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

SCHNEIDER: Gray Davis, cautious, calculating, deal-making, fund- raising, looks to voters like the face of the political class that rules them, or misrules them.

ALLAN HOFFENBLUM, "CALIFORNIA TARGET BOOK": We have dysfunctional government. That, they hate. But they can't do anything about the dysfunctional state legislature. They can do something about Gray Davis.

SCHNEIDER: Davis' campaign style is to attack, ruthlessly and relentlessly, like the ad he ran in 1992 against his Democratic primary opponent, Dianne Feinstein, comparing her to hotel queen Leona Helmsley. (BEGIN VIDEO CLIP, AD)

NARRATOR: Helmsley is in jail. Feinstein wants to be a senator?

(END VIDEO CLIP)

SCHNEIDER: Davis' plan has been to run against the process, a costly and unfair recall perpetrated by a conservative conspiracy. Now he'll also have to challenge Schwarzenegger's credibility.

WILLIE BROWN, MAYOR OF SAN FRANCISCO: I think he has to prove that he can actually run the state of California. And that's different from handling a robot.

SCHNEIDER: Davis backers hope that will resonate with the voters.

UNIDENTIFIED MALE: I don't think his background is really in politics. I don't think I could support him as far as his abilities as a governor.

SCHNEIDER: Expect a brutal, nasty, no-holds-barred campaign of relentless destruction, kind of like an Arnold Schwarzenegger movie.

(END VIDEOTAPE)

SCHNEIDER: Wait a minute. There are a lot of other candidates on the ballot. What's their strategy? Simple. Let Davis and Schwarzenegger destroy each other. And then maybe the voters will say, in despair, isn't there anybody else we can turn to? -- Judy.

WOODRUFF: What a story. Bill Schneider, also here in L.A., thanks.

SCHNEIDER: Sure.

WOODRUFF: Well, now let's take a look at the Schwarzenegger's competition in a special recall edition of "Campaign News Daily."

This hour, GOP Congressman Darrell Issa, who bankrolled the campaign to recall Gray Davis, is to file his papers to run for governor. Republican Bill Simon is scheduled to file his papers tomorrow in hopes of winning the job that he lost to Davis in 2002, just last year. CNN has learned that former U.S. Olympics president and one-time baseball commissioner Peter Ueberroth will pick up the paperwork tomorrow and decide whether he'll join the race by Friday, a day before the deadline.

And while columnist Arianna Huffington is a candidate, her ex- husband is not. Former Congressman Michael Huffington says he's doing what's best for his children, who didn't want either of their parents to run. He is endorsing Schwarzenegger.

Well, one of California's most popular Democrats, Senator Dianne Feinstein, ruled out a run for governor yesterday, calling the recall election a carnival. Senator Feinstein joins us now live from Aspen, Colorado.

Senator, would you have made the same decision if it were today and you knew that Arnold Schwarzenegger were running?

FEINSTEIN: Yes, I probably would have. It's a hypothetical, but I probably would have.

I mean, I think what you're going to see is -- if it weren't so sad, it would be laughable. I think we're in a carnival. I think it's going to end up in the most factional kind of politics, could well, if there is -- if the recall is successful, end up with somebody absolutely unskilled in government at a particularly critical time in California's history, when an understanding of problems is essential to solving them.

(CROSSTALK)

WOODRUFF: Senator, are you giving any thought at all to reconsidering your decision?

FEINSTEIN: No, not at this time. And, as you know, the time ends on Saturday, with exception, I suppose, of a write-in down the pike.

But I spent -- I've had, in 13 elections, Judy, the closest thing I've ever come to a draft, a lot of people calling me, people that represent the entire state of California, saying, do it. And I looked at three or four very recent polls, polls that ended the early part of this week and felt that the governor could beat the recall if he were willing and able to come forward as a transparent, hard-working, problem-solving governor.

This is about him. It isn't about ideology. It isn't about a right-wing conspiracy. He's got to come forward and he's got to show it to people in a very tangible form. I believe it can be done.

Now, what's happening is everybody out there wanting to be governor, as you might say, on the cheap, not having to visit 58 counties, not having to understand what a state that is bigger than 21 states put together, plus the District of Columbia, the sixth largest economic engine on Earth, what the problems are. I mean, you can say -- and everybody has said -- I'm going to be a governor for all the people, but if you don't know all the people, how can you be a governor for all the people?

WOODRUFF: But, Senator, that calculation was made before Arnold Schwarzenegger got into the race, with limitless money, enormous name recognition. Isn't Governor Davis now in mortal danger of losing his job?

FEINSTEIN: Well, first of all, I wouldn't get too excited.

In looking at all these polls -- and there will be a bunch of people that will debunk what I'm going to say -- California voters are going to have to go a long way before they elect Arnold Schwarzenegger. He really doesn't figure into it at this time. And I think the image of this gun-toting, musclely actor is not necessarily one that is successful in this particular arena.

And I think Californians are going to begin to come to terms with the fact that we have a carnival on our hands. And instability, uncertainty also play a role in the destiny of our state and many programs that people take very seriously.

WOODRUFF: Senator, you say that. And yet, at a time when it's clear people -- most people in California, according to the polls, are disenchanted, at best, with Gray Davis' leadership, they're upset with government overall, why wouldn't someone like Arnold Schwarzenegger coming along, who, by the way, is described as having moderate politics, very close to your own views, why wouldn't he be an attractive alternative?

FEINSTEIN: Well, first of all, I've heard only cliches so far.

I'd like to have him answer: How would you solve this budget dilemma? How would you solve the deficit from this point on? Would you change the deficit financing? Would you change the revenue estimates? What programs would you cut, also, what bills? You've got 1,500 bills coming up that the governor will have to sign shortly, probably -- if there is a new governor, probably that governor. What bills would you sign and what bills will you veto, because you've got to look very deeply into these, these areas?

What programs would you produce? And, critically, how will you fund them in a deficit situation? It's fine to say you're going to clean house. It's another thing to know what you can do and what you can't do under the California Constitution and the laws that have been established to date. And I don't think people are going to fall for old cliches. I think most Californians understand what's happened with the economy, understand the need to provide some certainty and stability in the state. And a governor elected with 15 percent of the vote isn't really going to be able to do it.

WOODRUFF: Any chance you could change your mind?

FEINSTEIN: No, not at this time. Thank you.

WOODRUFF: Not at this time. All right, Senator Dianne...

FEINSTEIN: Well, no. The time closes on Saturday. It's kind of interesting that people won't accept no for an answer.

WOODRUFF: Senator Dianne Feinstein, we hear you. And they have been calling for you to run, but the decision sounds final now.

It's good to see you. Thank you for talking with us. We appreciate it.

FEINSTEIN: Thank you, Judy. See you soon. Bye-bye.

WOODRUFF: You, too. One other angle that we're following today, and that is, this afternoon, the California Supreme Court is expected to decide whether to hear several legal challenges to the recall. One petition comes from the Davis camp, which is asking the recall election be put off until next March. We'll bring you updates on the legal wrangling as we get them during this hour.

Still ahead in this special edition of INSIDE POLITICS: California's lieutenant governor, Cruz Bustamante, joins me to explain why he's done an about-face and has decided to run for the top job.

Plus: Movie stars have money. And Arnold Schwarzenegger is known as a smart businessman, to boot. We'll look at his financial assets and what they mean for his campaign.

And our own Charles Feldman was part of the media crush on hand for Arnold's announcement. He'll tell us what went on behind the scenes at "The Tonight Show" taping.

(COMMERCIAL BREAK)

WOODRUFF: So Arnold's in, but he's far from alone. Coming up: some of the other prominent people trying to get rid of Gray Davis; plus, shockwaves from the Schwarzenegger announcement being felt, from here in Hollywood all the way to Washington. We'll find out what President Bush and Congress have to say.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. DARRELL ISSA (R), CALIFORNIA: ... higher office. It was about higher obligation. And I appreciate the leadership that I have seen join the fight. I'm not endorsing another candidate today. Like all Californians, I will watch and I will listen as the candidates begin to lay out their vision.

(END VIDEO CLIP)

WOODRUFF: California Republican Congressman Darrell Issa making what appeared to be an emotional statement. We weren't able to hear the whole thing. We were told that he was dropping off the papers that would formalize his entry into the governor's race, but we do need to find out a little bit more to clarify exactly what he was saying there, because you heard him say, "I'm not endorsing another candidate" right now, which suggests to me that maybe he's not running after all. But we'll continue to pay attention here, figure out exactly what he said.

Well, now that Arnold Schwarzenegger has thrown his hat into the race for California governor, how will he pay for it?

Andy Serwer of "Fortune" magazine has some ideas. He joins us now from New York.

Andy, Schwarzenegger says he's going to pay for this completely by himself. Can he afford to do that?

ANDY SERWER, "FORTUNE": Yes, he sure does, Judy.

We're not exactly clear how much money Arnold has, but it's many tens of millions of dollars. And he really is just an American success story. There's no other way to put it. He came to the U.S. in 1968 with very little money and speaking very little English. He won some body-building contests and scraped together about $28,000, invested in some real estate, and everything sort of just took off from there.

Right now, he owns a couple shopping malls. He also has a 747 that he leases to an airline company. He has real estate in Santa Monica. And then he's paid very, very handsomely to be an actor. In fact, he made about $30 million in "Terminator 3." And the other movies that he's made over the past couple years, "Total Recall," "True Lies," "Kindergarten Cop," he basically gets paid $20 million to $30 million a pop, which is an interesting number, Judy, because that's how much money people have been spending on these super- gubernatorial races lately.

So if you think about it, he runs for the governorship, makes a movie and essentially pays for it himself.

WOODRUFF: It sounds like he might have enough spending money to make a campaign that runs about 60 days.

His wife, we know, is the NBC journalist Maria Shriver. She, of course, is the daughter of Eunice Kennedy Shriver, part of the Kennedy family. Is there money there as well, as if Arnold needed it?

SERWER: Well, there's speculation there. And, certainly, Maria Shriver has some money.

But you have to remember, Judy, that the patriarch of the Kennedy family, Joe Kennedy Sr., made the bulk of his fortune in the 1920s and 1930s. And there have been dozens and dozens of descendants that this money has gone to, so Maria Shriver probably not as wealthy as Arnold. Of course, she does have a nice career, as you alluded to. But I would say the bulk of Arnold's money really comes from him making movies and investing the money that he has made over the years into real estate and that sort of thing, primarily in California.

WOODRUFF: We're going to have to be looking for those shopping centers that he owns. I'm sure that's going to be in the press in the days to come.

Andy, thank you very much.

SERWER: Absolutely. OK, Judy.

WOODRUFF: We'll see you. Thanks for talking with us.

Well, millions got to see Schwarzenegger's appearance in front of the camera last night, but what was it like behind the curtain at "The Tonight Show"? Our Charles Feldman will take us backstage when we return.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

SCHWARZENEGGER: And the man that is failing the people more than anyone is Gray Davis.

(CHEERING AND APPLAUSE)

JAY LENO, HOST: OK.

SCHWARZENEGGER: He's failing them terribly. And this is why he needs to be recalled. And this is why I'm going to run for governor of the state of California.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

WOODRUFF: Well, by now, you've seen Jay Leno's interview, no doubt, with Arnold Schwarzenegger. Maybe you've seen it several times. What you haven't seen, though, is what it was like backstage.

Our Charles Feldman was there and he had a chance to talk with the actor inside the green room.

Charles, give us a little sense of what it was like behind the scenes last night and what the press was thinking.

CHARLES FELDMAN, CNN CORRESPONDENT: Well, it was total chaos.

I started calling it rumor central, Judy. Right before the taping of "Tonight Show", the rumors were running all over the map. He, Arnold Schwarzenegger, was going to come in before the show. He was going to come in after the show. He was going to announce on the program that he was not going to run. He was going to announce that he was endorsing former L.A. Mayor Richard Riordan. It was just all over the place.

But then, when he finally came out and made the announcement, there were a number of my colleagues who I saw, they had their heads down, typing the story into their computers while they were listening to his comments. But as soon as he said that he was announcing his candidacy for governor of California, which no one in that room, frankly, expected, a number of heads shot up to look at the TV monitor because they had disbelief all over their face.

And I said last night, the overall reaction in the press room was the same word. People went: Huh? And it was a total surprise. And one thought that came to mind, Judy, was, it was perfect media manipulation, perfect political theater. "The Tonight Show," as you could see, made sure they had a camera there recording what the press was doing. They were using us. We were using "The Tonight Show." Arnold Schwarzenegger was using everybody. It was brilliant political theater, A-plus in that effort -- Judy. WOODRUFF: And, as we reported, Charles, it wasn't just the press, but it was the people closest to Arnold Schwarzenegger who didn't know until the last minute.

All right, Charles Feldman reporting for us here in Los Angeles -- thank you, Charles.

FELDMAN: You're welcome.

WOODRUFF: Here's the question: Will Arnold Schwarzenegger terminate the rest of the field? Our Bill Schneider returns for a look at the race to replace Gray Davis.

Plus: Is it the end for California's governor? We'll take a look at how Davis can fight back to save his job.

And later: Haven't we been here before, a famous actor running for the top job in the Golden State? Our Bruce Morton compares and contrasts.

(COMMERCIAL BREAK)

(NEWSBREAK)

WOODRUFF: Well you know we call Arnold Schwarzenegger "The Terminator." And in fact, he's already terminated one of the other candidates in this race to recall and to replace Governor Gray Davis.

Just moments ago, California Republican Congressman Darrell Issa, you see here this is video of him just a few moments ago, talking to supporters in Sacramento, saying that he has decided not to run after all.

He was the first Republican to announce he's the Republican who bank rolled the recall effort, spending millions of his own money to get this recall accomplished, to get the signatures, 1.6 million signatures across the state of California. And now today making news by saying that he's decided not to run.

Without hearing what he has said we can only assume Schwarzenegger's announcement played an important role in Issa's decision. We will attempt to learn more about it, though, and bring you that as soon as we can.

Well, Arnold Schwarzenegger's run for governor is just one of the many surprises in the recall election here in California. Today Democratic Lieutenant Governor Cruz Bustamante said that he'll be on the ballot for Governor Davis' job. Now that's an about-face from what he said when questioned by reporters last month.

(BEGIN VIDEO CLIP)

QUESTION: Are you going to put your name on the list of successors?

LT. GOV. CRUZ BUSTAMANTE (D), CALIFORNIA: No, I'm not. QUESTION: Given all the likely...

BUSTAMANTE: And I will also oppose the recall in whatever form it may take in the future.

(END VIDEO CLIP)

WOODRUFF: California Lieutenant Governor Cruz Bustamante is with us now from Sacramento. Mr. Governor (ph), doesn't this suggest that Arnold Schwarzenegger has changed your mind?

BUSTAMANTE: No. No. Not at all. I've always said that I'm opposed to the recall, and I still am. I think that the reasons for having the recall are all the wrong reasons. I think that the voters probably are trying to express their disappointment with the leadership.

But the people who are organizing this thing are doing it for all the all wrong reasons. It's bad for the institution, it's going to cost taxpayers millions of dollars. But I don't see that the strategy that's working right now on behalf of Democrats is going to ensure the Democrats are going to maintain the Democratic governorship. And that's why...

WOODRUFF: You mean the strategy of keeping Democrats off the ballot?

BUSTAMANTE: Right.

WOODRUFF: Mr. Bustamante -- but by doing this, even though you say you're against the recall, aren't you really putting the final nail in Governor Davis' coffin?

BUSTAMANTE: I think I'm providing a new opportunity and a new option that -- I hope that the recall fails. And I will work very, very hard, I'm going to work like heck to defeat this recall. And I really do believe that it's a wrong thing to do.

But it doesn't look to me that the governor is moving aggressively in trying to defeat this recall, not himself personally, but I don't think his numbers -- and I saw some disturbing numbers over the weekend. It doesn't look like he's moving up at all.

And so just in case, just in case he doesn't make the recall, this is going to give Democrats another option. And I think it's important to have a serious Democratic candidate on there as an option. I mean, the voters have voted for me twice, over 5 million people have voted for me statewide twice in my career. And I think that they elected me step in the event that the governor was unable to continue. And I think that that's what I'm doing.

WOODRUFF: But it's not only you now, lieutenant governor of the state, Mr. Bustamante, but it's also the insurance commissioner, John Garamendi who's about to get in. Democrats are going to be divided. Doesn't that really end up helping someone like Republican Arnold Schwarzenegger? BUSTAMANTE: First of all, I don't think Democrats are going to be divided. I think that the Democrats are going to come together. And I think they're going to vote no on the recall.

And I think just to make sure, just in case, I think they're going to vote yes for Bustamante. I don't think that John Garamendi -- and I have nothing to say. I'm a kid who grew up in the Central Valley in a very large family of modest, modest means. And so I don't begrudge anybody from putting their name in, whether it's John Garamendi or Arnold Schwarzenegger.

WOODRUFF: But doesn't it make sense if the Democrats are going to stand the good chance of defeating this recall to have either no Democrats on the replacement ballot or one, at most? And now it's you, it's Mr. Garamendi. There could be others getting in.

BUSTAMANTE: I don't think that there'll be serious candidates getting in. I think that I have a clear shot of being able to clear the field. But even if it's not the case, I think that my being on the ballot will provide us two options, not just one.

WOODRUFF: But still, I'm going to get back to, I think, the question I asked you initially, the fact that you've waited to get in until just hours after Arnold Schwarzenegger jumped in. Doesn't that say that Democrats are afraid that Schwarzenegger could win?

BUSTAMANTE: No. I think that we've seen numbers over the weekend. And I come to this reluctantly. I don't come to this with a great amount of zeal. I was hoping that we were going to be able to stop the recall. People worked very, very hard to slow it down. I was hoping that all those activities would work. I was hoping that those strategies, including the governor's recent strategy to try to move beyond this recall would work.

But it hasn't. And I'm concerned that all those folks that we've said that we're going to defend, that we're going to fight for, I'm afraid that those folks will be at risk if I don't do something boldly. Yes, it's bold. It's something that is going to be criticized, yes.

But I think that there's going to be a lot of people in the coming days and weeks that will rally to my side. And I think that you'll see that there'll be a clear distance that will be put between their criticism and my candidacy. And I think you'll also find that people are going to support me in my effort.

WOODRUFF: Well, I'm sure that Governor Davis is not happy about it, without having talked to him, but we're going to be trying to talk to him.

BUSTAMANTE: I'll probably call him later today.

WOODRUFF: All right. Lieutenant Governor Cruz Bustamante, now in the race, thanks very much.

BUSTAMANTE: Thank you, Judy. WOODRUFF: Well, with Bustamante's decision, the ever-changing candidate field becomes even more complicated. Our senior political analyst Bill Schneider is here again with his take on who's in and who's out in this crowded race -- Bill.

SCHNEIDER: Well, we have a couple of Democrats who are going to get into the race. Gray Davis, of course, is on a separate ballot all by himself. It's a yes-no vote on Davis, up or down.

He hoped to have the Democratic field to himself. But as you just heard, Cruz Bustamante is running. John Garamendi, who is the state insurance commissioner, he's run statewide several times. He is also likely to be a candidate.

And the problem there is they could split the Democratic vote on that second ballot on which Gray Davis does not appear, which could endanger the possibility of this fallback idea that even if Gray Davis is turned down, if he is recalled as governor, the state could still elect a Democrat. But if Bustamante and Garamendi split the Democratic vote, that could be a problem.

There's also an independent candidate, Arianna Huffington, who's running. She is a left-wing populist candidate who could take a lot of liberal activist votes that Gray Davis might want to vote for him. They may vote to recall him or they could have otherwise gone to one of those other Democrats.

So at the moment the Democratic field looks like it's very, very much divided.

WOODRUFF: So, bill, what about the Republicans? We just reported Darrell Issa's decided not to run, after all, surprise move. But Bill Simon is in. He, of course, was a candidate last year. Are Republicans going to rally around Schwarzenegger?

SCHNEIDER: That's I think they will because they see Schwarzenegger as a meal ticket. Even though he's a moderate Republican, a lot of them don't agree with him, some conservatives will not rally, but I think most of the party say, Look, whatever. We are shut out of power in this state and we've got to get back somehow. And Schwarzenegger looks like he could be the way back.

There are a couple of conservatives. Tom McClintock, who's a big vote-getter in California, he is going to run as a conservative candidate as is the former gubernatorial candidate Bill Simon. And we hear talk about a moderate Republican possibly running, a fellow named Peter Ueberroth who used to be a baseball commissioner and chairman of the Los Angeles Olympics back in 1984.

So the Republican mainstream vote could also be divided.

WOODRUFF: So much to keep an eye on. Bill Schneider, who is out here in Los Angeles...

SCHNEIDER: Sure.

WOODRUFF: ... along with me. Thank you, Bill.

SCHNEIDER: Sure.

WOODRUFF: Well the California recall ballot may be several pages long when all is said and done. When we come back, we will continue our look at this extraordinary election, including an insider's take on Arnold Schwarzenegger.

(COMMERCIAL BREAK)

WOODRUFF: American pop culture knows Arnold Schwarzenegger well as the muscleman turned terminator. But who is this actor-turned politician? Kyra Phillips has a profile.

(BEGIN VIDEOTAPE)

KYRA PHILLIPS, CNN ANCHOR (voice-over): In the beginning, the muscles made the man. They took the policeman's son from small-town Austria to the big-time USA.

The seven-time Mr. Olympia made his first real silver-screen splash in the 1977 documentary "Pumping Iron." But Arnold the Actor came into his own with this classic.

SCHWARZENEGGER: And if you do not listen, then the hell with you.

PHILLIPS: "Conan the Barbarian" raked in $100 million in 1982. It spawned a sequel, and thus was born Arnold the franchise machine.

SCHWARZENEGGER: I'll be back.

PHILLIPS: Schwarzenegger's signature role, the Terminator, a character whose catchphrases still define the star's shtick.

SCHWARZENEGGER: First of all, congratulations for saying, "Hasta la vista, baby," to Saddam Hussein.

Thank you very much. Thank you. And I'll be back.

PHILLIPS: "Terminator" kicked off a string of shoot 'em up hits establishing the former bodybuilder as a Hollywood powerhouse, capable of commanding up to $25 million a picture.

Then in 1986, a love story. The Tinseltown icon married Maria Shriver and joined a political dynasty. Despite the Kennedy connection, the star has long been a proud Republican.

SCHWARZENEGGER: When it comes to the American future, Michael Dukakis will be the real Terminator.

PHILLIPS: He campaigned for George Bush and later chaired the President's Council on Physical Fitness.

But that was the extent of the star's political involvement for a while. He focused on his movies and business endeavors. Then his movie career began to wane. And in 2002, he officially entered the political scene as lead sponsor of an after-school funding initiative known as Proposition 49.

SCHWARZENEGGER: A study by the Rose Institute indicates that for every $1 spent on after-school programs, taxpayers save $3.

PHILLIPS: He laid low, until this year's recall rumblings began. And then he began to set the table for a campaign.

SCHWARZENEGGER: I know that you will help me recall him.

PHILLIPS: But that's all he'd say. He had, of course, a movie to promote.

SCHWARZENEGGER: I'm an obsolete design.

PHILLIPS: Then he shifted to a political script.

SCHWARZENEGGER: And this is why I'm going to run for governor of the state of California.

PHILLIPS: But for this script even doesn't yet know the ending.

Kyra Phillips, CNN.

(END VIDEOTAPE)

WOODRUFF: So Arnold Schwarzenegger has name recognition, he has plenty of money, he has an immigrant's past that Golden State voters can relate to. But will it all add up to a victory come October?

We want to pose that question to Sheri Annis. She is a political media consultant. She was part of Schwarzenegger's after-school initiative campaign. Sherry Anise, I want to ask you first about the surprise element in all this. It wasn't just the public and press, it was the people around Arnold Schwarzenegger and even the man he called his great, great friend, Dick Riordan, who didn't know he was going to run.

SHERI ANNIS, POLITICAL MEDIA CONSULTANT: Exactly.

WOODRUFF: What about all that?

ANNIS: Arnold tends to keep his decisions close to the vest. He asks people around him for advice, tries to get a variety of opinions, and then he ultimately makes the decision. Actually, he and Maria ultimately make the decision.

So this was a surprise to pretty much everyone around him. Most of us thought that Maria would have persuaded him to stay away from the scrutiny involved in a statewide campaign such as this.

But having said that, it's going to be a show to end all shows in California. You're out there helping the economy right now as are all the media who are out there. It's not -- once he decides something, he really goes after it. So I think he's going to put all his heart and soul into this.

WOODRUFF: No, no -- well, you and I have talked about this before, Sheri. How hard is it going to be for him to make the transition from -- of course, phenomenal movie star, a lot of media attention, but this is a kind of media he's facing now.

ANNIS: Absolutely. Arnold cannot run this campaign on "Entertainment Tonight" and via "Us" magazine. He has to engage the political press in a way he hasn't before. He's dealt with them, he's worked with them a bit through his after-school initiative last year.

But he really has to address them so they know that he's a serious candidate, he knows about policy, he understands politics. And he has to move away from a purely entertainment standpoint.

Certainly he announced on Jay Leno, which is an unconventional way to go for a political candidate. But he is an unconventional political candidate.

(CROSSTALK)

ANNIS: Go ahead.

WOODRUFF: I was just going to say the comment he made, this was his hardest decision since deciding to get a bikini wax?

ANNIS: Right, right. Actually, I think if he lets his wit and his humor show through, it will serve him extremely well.

Really, his handlers have to make sure not to shield him too much from himself, because that is what endears people to him. He's a regular guy, in terms of his sense of humor. He grew up without money. In many ways, he's the personification of the California immigrant. He was going after the American dream, and he happened to find it.

So I think the crossover between entertainment and political will be great, but he has to engage the political press. And we've only seen the beginning. It's only a 60-day campaign. But a lot of stones can be turned over, and I think he's ready for that.

WOODRUFF: Much of what you're saying picked up by Dianne Feinstein. Senator Feinstein saying he's going to have to answer serious questions about the budget. She called him a "gun-toting, musclely" guy.

All right. Sheri Annis, good to see you again.

ANNIS: Good to see you.

WOODRUFF: I know we're going to be talking to you again between now and October the 7th. Thanks again.

ANNIS: Have I have a feeling. Bye-bye.

WOODRUFF: Of course the biggest endorsement any recall candidate can get is from the White House. Arnold Schwarzenegger is certainly no stranger to the Bush administration. However, there's been speculation that National Security Adviser Condoleezza Rice might run as well.

Let's turn now to our White House correspondent, Dana Bash. Dana, has Dr. Rice officially ruled out the idea of running?

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Not quite, Judy. There has been a lot of speculation about Condoleezza Rice. She is still a resident of California, officially, she's still a tenured professor at Stanford.

Earlier today, though, at a speech in Dallas, she did not completely rule out running for elected office, but she did close the door more than she ever has before.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, NATIONAL SECURITY ADVISER: I don't think I'm of the particular breeds -- that those people are kind of are a special breed, who, I think, run for office. We've put them through an awful lot.

And it's a little difficult for me to imagine doing it. I'm not a very good long-term planner. I really don't say never to anything. But it is not on my radar screen to run for elective office.

(END VIDEO CLIP)

BASH: Now she was -- she said she's not a long-term planner, but what about short-term planning, particularly against running against Arnold Schwarzenegger, perhaps? She said that she is happy being national security adviser and that she does intend to vote by secret ballot in California just like everybody else -- Judy.

WOODRUFF: Well, whatever Condoleezza Rice does, Dana, what about the Bush White House? Are they going to get involved or not?

BASH: As of now, what they're saying is that this is a matter for the people of California to decide. I talked to a senior Bush strategist earlier today who said, Look, Arnold Schwarzenegger has charisma, he has fame, he has money. But right now, they realize that he's never run for office before, and these are traits that other people who have run in California have had and have lost.

So at this point, they're keeping their powder dry. And as senior strategist said to me right now, the field in California running for governor looks a lot like the bar in "Star Wars." So they're just going to wait and see what happens next.

WOODRUFF: Whoa! That's quite a comment. We'll have to dissect that. OK. Dana, thanks very much, reporting from Crawford, Texas.

When we come back, Bay Buchanan and Donna Brazile weigh in on Governor Gray Davis' strategy to try to stay in office. And the threat posed by Arnold Schwarzenegger. (COMMERCIAL BREAK)

WOODRUFF: Well, we don't know how many votes Arnold Schwarzenegger will get in October, but he's already drawing a lot of public attention. These are live pictures from outside the Los Angeles County Registrar's Office in Norwalk, California where people are gathered just to catch a look, a glimpse of the actor-turned politician as of last evening.

Schwarzenegger announcing he is going to jump into the governor's race. And he'll be showing up there any moment now to take out the papers that he will then file to make it official that he's in the race.

And we'll, of course, be going there live when he does show up.

With us now, former Gore campaign manager Donna Brazile, and Bay Buchanan, president of American Cause.

Donna, is Gray Davis toast? You've been saying he could survive this. What do you think now?

DONNA BRAZILE, FRM. GORE CAMPAIGN MGR.: Well, it looks like it's going to be a battle to the finish line.

Look, this is a national disgrace. I still hope that people vote no on the recall. But now with Cruz Bustamante and the insurance commissioner in the race, the Democrats will have an option.

I think for Republicans to have their (UNINTELLIGIBLE) someone who calls himself a Terminator, a heartless robot that destroys everything in his sight, that's a disaster for the Republicans. And they may not know the impact this recall will have on their party nationally.

WOODRUFF: Bay, a disaster for Republicans?

BAY BUCHANAN, AMERICAN CAUSE: This Terminator's focused on just one particular Democrat, not all of them. Many of them will be voting for him.

No, -- you know I have to say one thing, Judy. As much -- right now I think it's Arnold Schwarzenegger's to lose. I don't think Gray Davis is gone. I don't think you write him off. I've lived in California ten years, very involved in politics out there. He has come from behind too many times right off.

And I think what he needs to do is stop playing defensive. He is kind of not acting like a governor but like some poor guy who's been unfairly treated. He's got to act like a governor. He's 25 points down, if not more. In order to get 50 percent he's got to be very aggressive, explain to people why they should vote for him, what his plan is, how to get out of this crisis.

And the second thing he's got to do is take another national -- a statewide Democrat, very liked, and make him his running partner and say, Look at us. We need everyone to vote no on recall. But while you're doing that, vote for this guy for governor in case it doesn't work.

Then he'll be able to choose his own successor because if he gets 35, 40 percent of the vote, they'll vote for this other Democrat as well. And I think that's the only way you're going to beat Schwarzenegger.

WOODRUFF: Donna, is that the winning formula for Davis?

BRAZILE: No, I think he needs to continue to fight this recall with everything he has inside of him. At the same time, it's important that Democrats have another option on the ballot. But that ballot is going to be longer than the state of California. For the Democrats to go in there and just vote no without having something to say or vote for, Bay's right. It's going to be difficult to turn out the base of the Democratic Party.

I'm still concerned that at the end of the day, this election will probably violate the Voting Rights Act for the 58 counties under federal law with the Voting Rights Act, Section 5, pre-clearance. And many of those voters may face some hardship in trying to get to the ballot.

BUCHANAN: You know, Judy, it's very humorous. They're already trying to call a technicality here, and the game's not over yet. So that does suggests they're very, very nervous with the entrance of Arnold Schwarzenegger...

WOODRUFF: Well you do have the fact -- I want to ask you both about the fact we learned today that only maybe even 1/3 or less of the polling places in the state can even be open and operating on Election Day in October. They say they can't get enough poll workers to work. Is that going to be an issue?

BRAZILE: Absolutely. Remember the standard that was set in Florida in terms of equal treatment. I mean, here you have a situation where in some locations, you have these new machines that's never been taken out of the box. And the other polling locations we have the old punch ballot machines. What are we going to call Katherine Harris in to count the votes again?

So I really do think that we have a problem on our hands. And this is not a technicality. This is a fundamental right. And we should respect the right for people to vote in the political process.

BUCHANAN: Judy, everybody clearly should have that opportunity to vote. But you've got 60 days, and you've got California and all this technology out there and unemployment's high. You can't tell me you can't hire people, pay them a little bit of money and get the people out there to make certain you have the poll-watchers you need. That's just a big fat excuse that they're looking for us so they can reverse what's going to happen to them in two months.

(CROSSTALK)

BRAZILE: I say maybe Arnold will hire his extra friends to bring people out to the polls on election day.

BUCHANAN: Get the extras from Hollywood.

WOODRUFF: Democrats keep saying this election is going to cost $70 million. We need to find out what the money's going for. All right, Bay, Donna, thank you very much.

BRAZILE: Thank you.

BUCHANAN: Thanks, Judy.

WOODRUFF: See you next week.

Well, last night he announced. Just minutes from now Arnold Schwarzenegger takes the first steps in his campaign to replace Gray Davis. Our cameras are there, and I'm told his car has pulled up. Let's watch it as he gets out of the car and walks into -- this is the Los Angeles County Registrar's Office. It's located in the municipality of Norwalk, right next to the city of Los Angeles.

And you can see what a media crowd it is. CNN's Miguel Marquez is there. We're watching the car pull up. There he is. Let's see what he says.

Miguel, Miguel, you're there. Tell us about the crowd. Who are these people?

MARQUEZ: These are people who probably work here at the registrar's office, but it looks like a lot of people have come out throughout the day. It was about 50 people earlier today. Now And You can see it's a crush. On both sides of me there's probably 350 or 40 people here.

It looks like a movie premiere. It looks like a typical Hollywood event that he would be doing for "Terminator 3" or something. People have come us to up all day long asking about when he's going to get here, when's the Terminator going to get here? Offering to buy him lunch. I mean there's a lot of excitement about this actor now candidate who will be running for the governorship out here in California.

You see a lot of the people have signs that they're holding up.

WOODRUFF: Miguel, are people saying the fact that they like him means they're going to vote for him?

MARQUEZ: Well, that's certainly the question. And I think that's something that pollsters are going to try to figure out now after Saturday once all of the candidates have put their names in the ring.

Will the celebrity translate to votes? You know that some earlier polls showed former Mayor Richard Riordan, former L.A. Mayor Richard Riordan pulling ahead of Mr. Schwarzenegger. So it's not entirely clear if celebrity will automatically turn into votes. He's never been a candidate in this way before, and certainly it's going to open him up to a lot more scrutiny than he's ever for any sort of movie premiere. So that will be a factor as well -- Judy.

WOODRUFF: Well we see him signing as many autographs as anything else. And this is a crowd that, obviously, is wowed by the presence of the Terminator.

Again, he's showing up at the Los Angeles County Registrar's Office to so-call pull the papers, and I guess fill them out, turn them in, you pay $3,500 to run for governor and you have to get something like 60 signatures, which is hardly a challenge. Most people know 60 people in their neighborhood and their family, if nothing else.

All right. Arnold Schwarzenegger's in the building. We'll watch it for when he comes out. Our special edition of INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Fasten your seat belts. The Arnold for governor campaign is just beginning. And so is the Hollywood-style hoopla.

SCHWARZENEGGER: I can promise you that when I go to Sacramento, I will pump up Sacramento.

ANNOUNCER: This hour, Schwarzenegger takes a step towards putting his candidacy on paper.

SCHWARZENEGGER: It is time.

ANNOUNCER: He's been big at the box office. But will California voters see the Terminator's appeal?

UNIDENTIFIED MALE: I think he has to prove that he can actually run the state of California. That's different from handling a robot.

ANNOUNCER: A movie star running for California governor? Been there, done that. But is there anything Reagan-esque about Schwarzenegger?

RONALD REGAN, FORMER GOVERNOR OF CALIFORNIA: Win just one for the gipper.

ANNOUNCER: Live from Los Angeles, a special edition of JUDY WOODRUFF'S INSIDE POLITICS: "The Road to Recall."

(END VIDEOTAPE)

WOODRUFF: We are in the media Mecca of California, Los Angeles, where newly-declared gubernatorial candidate Arnold Schwarzenegger is hardly wanting for publicity after his made for TV campaign announcement last night.

But this hour the film star is drawing another crush of cameras and reporters as he picks up his filing papers. We watched him go into the registrar's office moments ago and we're hoping to see him there in a moment when he comes out.

Schwarzenegger isn't the only one springing surprises. Within the past hour, GOP Congressman Darrell Issa said he is pulling out of the race for governor. Now, Issa bankrolled the recall effort and was the first Republican to say that he would be running.

Also today, Lieutenant Governor Democrat Cruz Bustamante announced that he will run for the top job after all. His decision is a blow to Gray Davis' battle to keep his job, but a relief to some Democrats who fear that Davis will be removed, and Republicans will win the governor's office.

More now on the Schwarzenegger campaign and all of the media madness surrounding it. CNN's Miguel Marquez, as we said, is in Norwalk where Schwarzenegger has just gone in to pick up those papers -- Miguel.

MARQUEZ: Yes, madness is a pretty good word for it all there, Judy. It feels very sort of frenetic out here. there's certainly a lot of electricity in the crowd.

You know politicians try to figure out their whole lives how to draw big crowds to their events. This guy just signs up to run and he has a huge crowd out here already, about 300, 350 people. It's kind of thinned out a little bit since he came in the building just a few moments ago. We have pictures of that. We expect him to come down the stairs shortly when he makes a few remarks to the press.

Once he gets those papers, that paperwork to run for governor, he'll have to fill it out, pay 3,500 bucks, get 65 signatures -- which I'm sure he won't have a problem doing -- and then voila! He will be a candidate for governor, one of many, it seems. You can see that they're testing the sound system out here.

But it seems as though he will be one of many candidates for governor out here. Some politicals out here are saying as many as between 40 and 80 people -- Judy.

WOODRUFF: All right, Miguel Marquez over at the Los Angeles County Registrar's Office. And when Schwarzenegger comes out, we'll go back there live and follow his movements. Miguel, thank you.

So how are the surprising developments in the California recall race playing out back in Washington and on Capitol Hill? Our Jonathan Karl is live from Washington with the latest on that. What are they saying, Jon?

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Well, Judy, first on the Republican side, you're beginning to see an effort to coalesce around Arnold Schwarzenegger as the consensus candidate for Republicans. Now that Darrell Issa is out of the race, Schwarzenegger is the one Republicans up on the Hill seem to be moving towards.

We understand that David Dreier, the leader of the California Congressional Delegation, the Republican side of that delegation, will be endorsing Schwarzenegger shortly. And also, by the way, speaking of celebrities, so will Mary Bono, Republican of California, also will be endorsing him later today. So Republicans seem to have found their man to put in the California governor's race, at least Republicans on Capitol Hill have.

Now as for Democrats, pure chaos, Judy. The chairman of the Democratic National Committee, Terry McAuliffe, tried mightily to keep Cruz Bustamante out of this race. The strategy was keep all major Democrats out of the race and make this into a unified campaign against the recall period, not against the recall and then in favor of oh, by the way, if it succeeds, other candidate.

So that has failed. McAuliffe has put out a statement again reiterating his opposition of to the recall and using Cruz Bustamante's own words against the recall. So that's what's going on that side.

Meanwhile, the California delegation, Democrats here are not united. They're no more united here in Washington than they are in California. The California Congressional Democratic side of that delegation, Nancy Pelosi, has been trying to get all Democrats on board in a unified fashion.

Her goal, I am told by those familiar with her thinking, is to get Democrats against the recall, but in favor of a fallback candidate, should it succeed. There have been conversations of trying to get people behind Cruz Bustamante as the fallback candidate. That has not worked.

Now Nancy Pelosi is saying that she will wait until after the filing deadline has passed before working with the delegation to come up with a unified alternative candidate. That's a sign that Democrats are concerned there may well be more Democrats getting into this.

And by the way, Judy, some Democrats are still trying to get Dianne Feinstein to change her mind and to get into this.

WOODRUFF: Although you may have heard her say when I talked to her just exactly an hour ago on the program that she says she's closing the door, that there's no time. She's thought about it, and she's not getting in.

KARL: And they've seen people change their minds.

WOODRUFF: You're right.

KARL: They're still hopeful.

WOODRUFF: It's been known to happen.

KARL: Yes.

WOODRUFF: Jon, there is one Democrat, though, with a special relationship to Schwarzenegger. And that's, of course, his -- the uncle of Schwarzenegger's wife, Maria Shriver, Senator Ted Kennedy. What's he saying about all this?

KARL: Well, Senator Kennedy's in a very interesting position on this. He is, of course, very close to his niece, Maria Shriver Schwarzenegger. And he's put out a statement now. And look at this. This is not exactly a ringing endorsement for Gray Davis.

The statement reads, "I like and respect Arnold. I've been impressed with his efforts to promote after-school education in California, and his willingness to come to Congress and the administration to fight for that program. But, I'm a Democrat, and i don't support the recall effort."

Nothing in there about Gray Davis. Nothing in there very adamantly opposing the recall effort. But some very nice words for Arnold Schwarzenegger. I guess you'd call him his nephew-in-law.

One person close to Senator Kennedy said, Yes, of course he's against the recall. He has to be. But who do you really think he wants to win?

So that's kind of an interesting one as well -- Judy.

WOODRUFF: Well, it sure puts him in an interesting position. OK. Jon Karl, thanks very much. Much more to follow up there on Capitol Hill.

Well, we have much more ahead from California. Coming up, will Arnold Schwarzenegger's on-screen success guarantee that he has the political muscle to become governor?

And later -- and again, these live pictures at the registrar's office. We expect him to come out in just a moment. We'll follow that.

Later, shades of Ronald Reagan. But can Schwarzenegger measure up to the most famous actor-turned-politician so far?

And there is other political news today. Did Al Gore say anything today that might change the '04 presidential race? This is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

WOODRUFF: Not too far from where I'm sitting in Los Angeles, Arnold Schwarzenegger has showed up at the Los Angeles County Registrar's Office to pull the papers that he will need to fill out and then turn in with a $3,500 filing fee and 60 signatures at least in order to qualify him for the ballot to run for governor. Of course, he made big political news out here last night when he announced he's in the race.

In the 1970s, Arnold Schwarzenegger was known as Mr. Universe. In October, he hopes to become Mr. Governor. The question is, will California voters send him packing for Sacramento?

Candy Crowley takes a look at his chances. (BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT (voice-over): This is going to be so much fun.

SCHWARZENEGGER: I'll drive.

CROWLEY: The Terminator to the rescue.

SCHWARZENEGGER: The people of California want to have better leadership. They want to have great leadership.

CROWLEY: A rock 'em, sock 'em tough guy....

SCHWARZENEGGER: My mission is to protect you.

CROWLEY: ...on the side of beleaguered Californians.

SCHWARZENEGGER: All of the politicians are not any more making the moves for the people but for special interest, and we have to stop that.

CROWLEY: He's got fame, money, a story to tell, and he talks in bumper stickers.

SCHWARZENEGGER: I will pump up Sacramento.

CROWLEY: Arnold Schwarzenegger has just about two months to try out for this role.

TOM ARNOLD, ACTOR: Harry -- Harry, you do not have time to tango, buddy.

CROWLEY: Seriously, folks, who's going to vote for a political newbie who opened his latest movie latest month last month and now run wants to run a state with a bigger economy than most countries?

Acting is one thing. Politics is another, right?

UNIDENTIFIED MALE: It's a very interesting use of the machinery of celebrity to launch a political career. I mean, and it's, I think, not coincidental that he chose "The Tonight Show."

CROWLEY: "The Tonight Show" is native habitat for an actor, a place where Schwarzenegger could be seen as he is known, to begin courting his base, which is to say the people who watch his movies.

UNIDENTIFIED MALE: Mostly probably, you know, the people who go to action movies, which is to say young males, you know, males between 16 and 25, let's say.

CROWLEY: They are part of the disenfranchised, nonvoters cynical about politicians who don't think it matters which one gets elected, the same demographic which formed the core of political revolt which a wrestler straight from the ring and made him governor of Minnesota.

Schwarzenegger embraces his....

(END VIDEOTAPE)

(JOINED IN PROGRESS)

SCHWARZENEGGER: I'm glad to be here today. Very, very excited to pull the papers -- to pull the papers for our recall election on October 7. This is the next step in running for governor of California and to bring the government back to the people.

(CHEERING)

SCHWARZENEGGER: It is very important that we straighten out the mess that we're in. I have a very, very good agenda. The first and most important thing that we have to do is, we have to overhaul our economic engine in California. We have to bring back businesses to California and to make sure that everyone in California has a great job, a fantastic job. We want to make jobs available, quality jobs for every Californian.

The second most important thing is our children. We all know that I'm very passionate about children's issues. I've been involved in education and afterschool programs for the last 10 years. I've led a crusade about afterschool programs through the United States. So I think it is very important that our children have the first access to our state treasury and get the money so they can have great schools and great education.

It is also very important, and it's part of my agenda to reform Sacramento, to reform the whole system because we have to always have public interest first and self-interest is in the end. And what we have right now in Sacramento is self-interest first, self-interest of the politicians, self-interest of special interest groups, and we have to reverse all that. It's public interest first, and that's what I want to fight for.

So this is why I'm running for governor of California.

I want to thank all of the people that have encouraged me to run. I want to again thank all of you for coming out here. And now I will be more than happy to answer some questions if you have some questions.

QUESTION: What is your plan to cut the state budget?

SCHWARZENEGGER: We will have a plan very soon, a detailed plan on how to face those kind of problems and how to solve those kind of problems. The important thing to know is is that we have a crisis here in California; we have a $38 billion budget deficit that we have to deal with, and the only way we can deal with those issues is by bringing business back to California because businesses, when you bring them back to California, it brings revenue back to California, and when you have more revenue, you then can afford to take care of all those programs that need to be taken care of.

People are always talking about two things -- raising taxes or cutting programs. I think the third one is bringing business back to California and make California a business-friendly environment.

(CROSSTALK)

QUESTION: Yes, I have a question. What about the environment? California's always been very concerned about the environment, gas reduction, you know, cars, what do you think?

SCHWARZENEGGER: I have always been environment friendly, and I'll fight for the environment. Nothing to worry about that.

(CROSSTALK)

QUESTION: Arnold, top qualifications?

SCHWARZENEGGER: The most important thing is a lot of people are always asking about qualifications versus leadership. Let me tell you, the most important thing when you run a state is leadership. The qualifications we have seen -- Governor Gray Davis has campaigned and has said, "This is experience that you cannot buy." Well, look where he has gotten us. We now have been put into a situation that is worse than ever in the history of the state of California. So it's not something to concentrate on.

What you have to concentrate on is leadership. And everything I ever did, I showed great leadership. There were times when people said it could never be done, that an Austrian farm boy can come over to America and get into the movie business and be successful in the movie business. They said, we cannot pronounce your name, you cannot speak English well, and your body is overdeveloped. And you know what happened? I became the highest paid entertainer in the world, OK?

I always reached my goals because I always was very passionate about all those things. I'm passionate about California, to bring it back where it belongs, to bring -- to make it the Golden State of the United States. That's what this is about. I'm very passionate because I have been received by Californians with open arms in 1968 when I came here as an immigrant, when I had no money, and the Californians reached out and helped me to be where I am today, and now it's time for me to give something back to California. And this is what this is all about.

(CROSSTALK)

SCHWARZENEGGER: Thank you. One more question. Right here. One more question.

QUESTION: Sacramento politics are about deal-making, solving crisis, compromise. The Riordan campaign says they were blindsided by your decision to run. They thought they had a deal. What's your reply to that, and can Sacramento politicians trust you if you make a deal?

SCHWARZENEGGER: Well, I think you have two or three questions here. But let me just try to answer them.

Number one, I'm very happy that Mayor Dick Riordan is supporting my campaign. He has called me today at 8:00 in the morning while I was working out, while I was on the LifeCycle sweating -- he called me, and he says, Arnold, I was pleasantly surprised yesterday by your announcement, and he says, I told for the last week that you will be the best candidate, and I will support you. I've urged you, every day he has called me and said that. So I'm very honored to have Mayor Dick Riordan support my campaign and work for me to make sure that I will become the next governor of the state of California. That's question No. 1.

Question No. 2, I will never -- I will never have to sit down in Sacramento to make a deal with anybody because special interest cannot buy me. I have enough money that I don't have to take any money from special interest because right now we are in a situation that we are in because special interests are the ones that are ruling Sacramento. The politicians in Sacramento should be representing the people of California, not special interests of California. That's my answer to that.

UNIDENTIFIED MALE: Thank you!

SCHWARZENEGGER: No, I will never bow to special interests.

Thank you very much. Thank you. Good to see you.

WOODRUFF: Arnold Schwarzenegger talking to reporters and people, ordinary people as he leaves the Los Angeles County Registrar's Office.

Joining us now to talk a little about the Schwarzenegger candidacy, what it means for Governor Davis, Mickey Kaus who is with the online magazine "Slate." He's joined by Candy Crowley. Candy, our apologies. We were in the middle of hearing your report when Mr. Schwarzenegger had the temerity to go ahead and talk to the reporters there.

What about -- let me start with you, Mickey Kaus. What about Schwarzenegger's comment, "I'll never have to make a deal"?

MICKEY KAUS, "SLATE" MAGAZINE: Well, that's a common comment that wealthy candidates make. And it usually works. People usually buy it. They figure that if you're rich, you have money, you don't have to make a deal for campaign contributions, which is something Davis is often accused of doing.

I was a little worried about his egomania getting out of control at that conference. He was very good, but you could see sort of intimations of something could possibly go wrong if he starts boasting about being the highest paid entertainer in the world.

WOODRUFF: And, Candy, it wasn't only that. He talked about being the highest paid entertainer, but he also said, I always achieve my goals. I'm passionate about things. Where does this lead him?

CROWLEY: Well, it leads him into the leadership issue. If you haven't been in politics before, haven't had much to do with politics, what do you emphasize? You emphasize personal traits. And in this case, he's emphasizing leadership.

It sounds a lot like the George Bush campaign, earlier on. It's all about leadership. And frankly, in some ways, it is. It's about Gray Davis' leadership. So, you know, that's what you promote when your political resume is nonexistent.

WOODRUFF: Also joining us is Michael Finnegan of "The Los Angeles Times." He's been covering this contest. Michael, you wrote today, and this was something Schwarzenegger was asked about, the fact that the man he called his great, great friend, Los Angeles, former L.A. Mayor Dick Riordan didn't know that Schwarzenegger was going to run. And one of Riordan's aides was -- said this is the equivalent of being mugged. What's going on here?

MICHAEL FINNEGAN, "LOS ANGELES TIMES": Well, there was a lot of confusion about what exactly was happening behind the scenes between Riordan and Schwarzenegger. Schwarzenegger's advisers have been telling reporters for days that he was leaning against running for governor. And right up until yesterday morning, they were saying that. So it's unclear today whether he hid from his own advisers that he was going to run, or whether there was any kind of calculated strategy to manage the public relations machine very carefully so that it would be a surprise with a lot of drama. And where exactly Dick Riordan fits into that remains pretty unclear. But clearly he was surprised by the announcement.

WOODRUFF: We did hear Schwarzenegger say that Riordan called him today and said he was going to campaign for him or at least that was endorsing him and supporting him.

All right. We're going to come back to all three of you, Michael Finnegan, Mickey Kaus, Candy Crowley, right after the break. We'll talk to you some more.

(COMMERCIAL BREAK)

WOODRUFF: Back now with our three commentators, Candy Crowley of CNN, Mickey Kaus of the online magazine "Slate" and Michael Finnegan of the "L.A. Times."

Candy, what does this mean for Democrats? Are they in hopeless disarray out here?

CROWLEY: Well, aren't they always? It doesn't necessarily mean they'll, you know, be defeated.

Look, I mean, the key question still is whether people in the end will come out and vote to throw Gray Davis out of office. After that, I think it seems fairly certain, and certainly the other two guests would know better, that Arnold Schwarzenegger has a pretty good shot at the second question. So, you know, the key question still is, can Gray Davis do something in the next two months that stops him from this slide he's been in?

WOODRUFF: And Mickey Kaus, what are the prospects at this point that the Democrats can unite and defeat this recall? KAUS: Well, the Democrats seem to have the worst of both worlds because they have Bustamante as the alternative candidate. He's not strong enough to defeat Schwarzenegger, but he is an alternative to Davis that might encourage some Democrats to vote for the recall.

The obvious thing Davis could do is attack Schwarzenegger with a negative character campaign. There's certainly rumors that there is ammo for such an attack. Schwarzenegger himself referred to charges of womanizing on "The Tonight Show" last night. The problem is that if Davis attacks Schwarzenegger, that also makes Davis look bad. That's the problem he has.

WOODRUFF: And not only that, Michael Finnegan with "The L.A. Times," we had Dianne Feinstein tell us -- when I interviewed just a little more than an hour ago -- she said Schwarzenegger is going to have to answer some tough questions. What exactly is he going to do, for example, about the budget problem?

FINNEGAN: Well, he hasn't had to answer those questions along those lines at all. California's got huge, huge problems right now, not just budget problems -- smog, freeway, traffic congestion, race relations, all kinds of things -- and Schwarzenegger is essentially a blank slate on all kinds of serious issues facing the state.

WOODRUFF: All right. Well, we are going to have to leave it there for now. Michael Finnegan, Candy Crowley, Mickey Kaus, great to see all three of you. Thanks very much.

We're going to keep on talking about this story, you can be sure.

Well, there is one other story we want to share with you, and that is that Al Gore still says he will not seek a rematch against President Bush. But he is sounding more and more like a man who's running for office.

He addressed the Internet political group known as moveon.org today and he pulled no punches during his speech.

Maria Hinojosa was there.

(BEGIN VIDEOTAPE)

MARIA HINOJOSA, CNN URBAN AFFAIRS CORRESPONDENT (voice-over): Al Gore once again in the limelight after almost a year on the sidelines.

AL GORE (D), FMR. VICE PRESIDENT: Thank you.

HINOJOSA: Looking and even sounding like a presidential candidate.

GORE: And I've just about concluded that the real problem may be the president himself and that next year we ought to fire him and get a new one.

HINOJOSA: Until he said this about the Democrats who are in the race. GORE: I admire the effort and skill they are putting into their campaigns. I'm not going to join them, but later in the political cycle, I will endorse one of them.

HINOJOSA: So if he's not running, then what is Gore doing? The former vice president and presidential candidate was offering up some of the most searing criticism of President Bush heard so far.

GORE: The president ought to rein in John Ashcroft and stop the gross abuse of civil rights that have twice been documented by the inspector general of the Justice Department itself. And while he's at it, he needs to rein in Donald Rumsfeld and get rid of that total information awareness program that's right out of George Orwell's "1984."

HINOJOSA: Gore said President Bush has misled the American people with a series of what he called false impressions about the war in Iraq, the economy and the environment.

GORE: This administration hastened from the very beginning to persuade us that defending America can't be done without seriously abridging the protections of the Constitution for American citizens.

HINOJOSA: But if Gore isn't a candidate, then who reaps the benefits of his critiques?

ANN LEWIS, DNC SPOKESWOMAN: I think this is good for all the Democratic candidates because it extends the debate. These are the issues they're talking about. These are the issues that they're trying to call attention to. Sometimes that is hard to do when you're a candidate and so you really welcome it.

HINOJOSA: The audience, members after an Internet activist group called moveon.org say they want more Gore.

ELI PARISER, MOVEON.ORG: I think it validates the concern that so many Americans are feeling.

HINOJOSA: And there was at least one person still has hopes the former V.P. will change his mind.

SHERRI ROSEN, MOVEON.ORG MEMBER: I mean, Schwarzenegger just did it. He just changed his mind. And so did Jerry Springer. So why can't he change his mind and say he's going to run?

HINOJOSA (on camera): Even if he doesn't run for office, Al Gore may run as chief critic of President Bush, a thorn in the president's side. While most declared candidates seem to take a more tempered approach, perhaps to protect their poll numbers.

Maria Hinojosa, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: And that's it for this special edition of INSIDE POLITICS. I'm Judy Woodruff. I'll be right here in L.A. for the rest of the afternoon and evening to stay on top of the wild and wooly fast moving development in the California governor recall story.

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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