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CNN LARRY KING LIVE

Panel Discusses California Recall

Aired October 7, 2003 - 21:00   ET

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

LARRY KING, CNN HOST: Tonight, will Arnold Schwarzenegger be California's next governor? Will voters recall Governor Gray Davis? Decision day in California.
We get all the latest with former Los Angeles Mayor Richard Riordan, a co-chair of the Schwarzenegger campaign.

Pete Wilson, the former Republican governor of California, also a Schwarzenegger campaign co-chair.

Another former governor of California, Jerry Brown, now mayor of Oakland.

Dianne Feinstein, Democratic senator of California, who beat Gray Davis in a '92 bitter Senate primary, now supports him and opposes the recall.

Maybe the referee is David Gergen, who served in the Nixon, Ford, Reagan and Clinton administration.

Later, columnist Arianna Huffington, who dropped out of the recall race last week on this program.

They're all live next on a special California recall edition of LARRY KING LIVE.

One note before we start, an exclusive appearance, tomorrow night, Siegfried of Siegfried and Roy will be our special guest tomorrow night on LARRY KING LIVE. Siegfried, his first appearance since that terrible accident.

Before we meet our panel, let's get quick updates. We'll go to the Gray Davis campaign at the Biltmore hotel in downtown Los Angeles. Candy Crowley is standing by for a quick update.

What's the mood there, Candy?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, Larry, you know, every campaign has an own pulse, especially on election night and the pulse here is very bad. We have talked to campaign officials inside of those near Gray Davis, who all day long have gotten increasingly bleaker. There is the most optimistic assessment we got from those inside the campaign was -- well, it's an uphill battle. They're hoping that union members, some of the very strongest supporters of Gray Davis, who are now -- just about now getting off work, will go to the polls and make a difference in a big way. But it's awfully late and it may not, in fact, be enough, given all of the glum faces around here. But you know what they say. Not over until it's over -- Larry.

KING: Thank you, Candy. We'll be checking back with you and Candy be on duty, of course, all night long. We'll have complete coverage at starting 11:00 eastern with Wolf Blitzer anchoring the post.

How does it look from your standpoint, Mayor Riordan?

FMR. MAYOR RICHARD RIORDAN, LOS ANGELES: We're optimistic in the Schwarzenegger campaign. We were a little scared when this "L.A. Times" article came out last week and the blips went down for a day. But then they came right back to where they were on our internal polling.

Because I think people ultimately want to have somebody who can govern the state of California. The best person to govern the state, to get through our budget problems, our educational problems, our transportation, housing problems, and I believe and I think the people believe that Schwarzenegger's the man.

KING: Senator Feinstein, from your perspective up there in San Francisco.

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: Well, from my perspective, it's been uphill all the way. This has been a tough one. The time has been short. The recall proposition, in my view, is deeply flawed. I think it needs to be reformed. I think you really need to have cause for recall, not just because somebody didn't like this or that.

I don't believe this governor deserves to be recalled. I know what the numbers are. I also know the polls are still open. They're going to be open for two hours. And Californians actually can vote in any precinct in their county. So if they can't get right to their poll, they can vote in any precinct. And so it's really important to get out and do this.

KING: How do you see it, Pete Wilson, former governor?

FMR. GOV. PETE WILSON (R), CALIF., SCHWARZENEGGER CAMPAIGN CO- CHAIR: Larry, I think that the recall will be successful. I think it should be. It's a drastic remedy, but then we have never had a $38 billion deficit.

And people are angry. There's no question about it. Justifiably. I think they feel that they were deceived last year when Gray Davis attacked in the Republican primary, attacked Dick Riordan, trying to knock out an opponent that he thought would defeat him. I think they began to get a clue, and then, even though, they grudgingly voted, and obviously it was -- the statistics are very interesting. You just said the largest turnout in history. Last fall, I think it's significant, that there was a drop-off from governor. All the downtick at offices had a higher vote than that for governor.

KING: And there's an amazing vote today.

WILSON: That's right.

KING: And again, you can still vote if you're watching in California. You still have two hours to vote.

Mayor Brown -- he's in New York tonight. What do you make of this story so far?

MAYOR JERRY BROWN (D), OAKLAND, FMR. GOV. OF CALIF., 1975-83: Well, I make of it that there's some anger out there. That's what gets them to vote. That certainly brought them in during the Proposition 13 vote in 1978, June. Highest vote in the primary probably in 70 years.

I see this not so much -- it's being viewed and probably will for a number of months as personality. But we are still -- when you stand back a bit, the issue of what's government supposed to do? What's it doing now? It doesn't have the revenue to do what the majority of people, at least a significant group of people in California, expect it to do. And these adjustments could be very painful.

Arnold's coming in -- no taxes. Now, I know that the people in this panel are very experienced. And they know that you can -- you know, what is there to cut? We don't want more felons let on the streets of Oakland. We don't want to see college tuition jacked up 100 percent. We don't want the 600, 000 kids put on -- poor kids on health care, half a million of whom came on under Davis. What are we going to do to deal with this gap between public perception in this campaign that we just cut our way to a better California and the reality that millions of Californians are implicated in a much higher level of spending? That, to me, is what's going to determine what this next governor does and how it all works out over the next couple of years.

KING: Major problems.

David Gergen, would you tell us, if Arnold Schwarzenegger were not in this race, would every network be here tonight? Would there be this massive coverage?

DAVID GERGEN, SERVED IN NIXON, FORD, REAGAN, CLINTON, ADMINS.: No, I don't think so. And...

KING: So this is all about him?

GERGEN: No. It's not all about him. I think that this is a major and dramatic story and I think for most people, there's been a sense of carnival to it outside California. And the largest reaction tonight is thank goodness it's over. But where it goes from here, I don't know.

The perception and your other panelists now far closer to the scene than I am, but my sense is -- and I think a lot people outside of California share this sense -- that Governor Davis is responsible, he's the architect of his own demise here. I'm reminded of something Richard Nixon once told David Frost some years after he left office. He said, I gave my enemies -- I gave my enemies a sword, and they ran me through. And that's what's been happening here.

KING: Mayor Riordan, was it a little personal on your part since the governor did ran -- run a race that involved your primary race?

RIORDAN: I like to believe that it's not. I've got -- I'm not a vindictive person. I love Los Angeles. I love California. And my goal is to see this state return to its past glory.

KING: So you think you left that out of this?

RIORDAN: I really do think I left it out.

KING: And you would have run if Arnold didn't, right?

RIORDAN: Absolutely I would have run if Arnold didn't. But I was very happy when Arnold decided to run.

KING: Senator Feinstein, how would you write the law to allow for a recall? How would you have it read?

FEINSTEIN: Well, I would have some qualifications for recall.

KING: Like?

FEINSTEIN: Like, gross malfeasance in public office and some definition of it, because I think 14, 15 states have recall laws. We are now in an era of professional petition gatherers, so that anyone who's willing to spend 1.5 to $2 million really can go out and get the signatures for a recall -- and then you have what we have right now which is a certain dynamic, no matter how you choose to define that dynamic, whether it's a governor that people see as an unpopular governor, or not fighting hard enough, or doing some things that they don't like -- plus you've got the overlay of what has been typical all across the United States of an economic downturn that has been substantial and the beginning of a recovery where all the indicators are now positive except in the job area. And you create this -- this tension and I think David Gergen was right. You -- and I think Jerry Brown was right. You create this tension and people want their program.

Now, if Arnold Schwarzenegger is the victor tonight, he's got to come out right away with his policies vis-a-vis this budget. Because this budget for the next fiscal year is now in the making. It's due in January. And, he's -- he said he's going to restore the car tax. Excuse me. In other words, cut it back.

KING: End it.

FEINSTEIN: That's 3 to $4 billion on top of the $10 billion that's there in terms of a short fall. If he's not going to add to taxes, he's going to have to make 12 to $13 billion worth of cuts and where he takes those cuts -- when you have a budget that says 50 percent of all of the general fund revenues must go to schools -- you even had a proposition on the ballot -- Proposition 53 -- that took another 3 percent of the budget. That's a really dilemma for Californians.

KING: Yes. I got to interrupt you. I got to take a break.

FEINSTEIN: And they have to take a look at it.

KING: We'll take a break and get the thoughts of Pete Wilson. We got four mayors on this panel with Mr. Gergen -- four mayors. How many governors do we have here?

RIORDAN: Two.

KING: Two governors. And two guys who ran for governor.

RIORDAN: Yeah.

KING: Hitting heavy, heavy load here tonight. We'll be right back. Don't go away.

(BEGIN VIDEO CLIP)

ARNOLD SCHWARZENEGGER (R), CALIFORNIA GUBERNATORIAL CANDIDATE: What you don't know is it's up to the gods now. It's up to God now for the decision. (UNINTELLIGIBLE).

GOV. GRAY DAVIS (D), CALIFORNIA: Life has a lot of surprises, but Sharon and I are people of faith and we know that all we can do is respond to the challenges confronting us. We've done that. I'm proud of the campaign we've run.

(END VIDEO CLIP)

KING: Before we resume with our panel, let's go back to the Biltmore Hotel in downtown Los Angeles, where we're joined by Governor Gray Davis. We've received reports tonight from Candy Crowley of gloom in your camp. Others saying we still have to wait. There's two hours more to vote. How do you feel?

DAVIS: Well, put me in the second camp, Larry. I was out thanking volunteers today, people phoning around the state to get the vote out, and a lot of the Democratic vote comes out after work, so we're going to fight down to the very end. This has been an uphill battle from the beginning, but we're going to fight to the end.

KING: Was it difficult to walk into that booth and see your name listed among should the Governor Gray Davis be recalled?

DAVIS: Well, it wasn't my happiest moment, but I knew it was coming for a long time, so we put on the best campaign we could in 77 days, and even though California has problems, we've made some progress. The tax scores are up five years in a row. And we have a million more children with health insurance. We have the best environmental record in the country, and we're the strongest defenders of a woman's right to choose. So I know the critics complained, but some good things have happened in this state, as well.

KING: Are you surprised at the turnout?

DAVIS: Pleasantly, because I think the bigger the turnout, the more legitimate the results. If it's a big turnout, then everyone had a chance to have their say, and I obviously will abide by the results.

The voters have been good to me, electing me twice as governor, allowing me to serve 35 million people. I'm very grateful to them, very grateful for the opportunity to try and move the state forward, and whatever their judgment is tonight, I will accept it.

KING: So, if you lose, no deep regrets or bitterness?

DAVIS: No. I mean, you have to deal the cards -- play the cards you're dealt. I came in. We had a wonderful economy. We created 1.2 million jobs, everyone was happy. And 300,000 of those jobs we lost the last three years because the national economy has been in a recession, which has affected all 50 states. So it's been tough governing these last three years, but tougher on the people I represent. So I work every day doing whatever I can to improve their lives.

KING: If you do go down tonight, will you cooperate with the governor-elect?

DAVIS: Yes. That's an obligation, I believe. Governor Wilson cooperated in my transition from him to me, and I'll cooperate in the transition, if that's the voters' will, with whoever they choose tonight.

KING: Thank you very much, governor.

DAVIS: Thank you, Larry.

KING: See you soon. Governor Gray Davis.

Pete? What do you make of what the governor had to say that he's been kind of a victim here?

WILSON: Well, there's no question there's been a recession. On the other hand, that's not the first time there's been a recession. But it is the first time we have ever seen anything like this kind of unconstitutional deficit spending. When your revenues shrinks, because you lose jobs as they did when I was governor in 1991, we had three times the job loss that he's described.

KING: Can you imagine what it would have been like, recall Pete Wilson?

WILSON: There were a couple of efforts, but they didn't amount to anything.

KING: But you can imagine what it would have been like, though, right, emotionally? WILSON: Well, I'm sure it's unpleasant. And I take no joy in Gray's discomfort here. What does bother me is that I spent eight years working hard to rebuild the economy of this state. And by the time we left, we left him a $12 billion surplus. And he said, just now very graciously, that we helped in his transition. We did. He was publicly grateful.

He said to me, do you have any counsel? And I said, well, since you have asked, there's one piece of advice I would give you that I think is of critical importance. And it's just this: You have to remember that the only thing standing between financial ruin for this state and an utterly irresponsible legislature who could achieve it and will if you don't stop them is you as governor of California. You have the power. You can do it, but you have got to do it; otherwise, they'll spend right through this surplus of $12 billion. They'll spend every penny of revenue and they'll spend money you don't have.

KING: Jerry Brown, if it's Governor Schwarzenegger tonight, must he act immediately? Must things happen fast, as was pointed out by Senator Feinstein, due to the budget in January?

BROWN: Well, he ought to move fast. I think if I'm not mistaken, Ronald Reagan inherited a little bit of a deficit from my father, and he moved to raise some taxes. And I noticed that Pete Wilson had the same challenge, and raised taxes about $9 billion.

The trouble is, we have a very elastic income tax. It's called progressive. What it means is that you get a heck of a lot of money from very wealthy people, but they also have a variable income in terms of stock options and capital gains. And when that goes in the tank, you run out of money fast, and as Pete said, the legislature will spend every dollar and then even more.

So you have got to stop it somehow, and the political will to build up a rainy day fund really ended with Earl Warren. I built up a surplus of about six billion, and the Democratic treasurer at the time called, Jess Unrer (ph), called it "the obscene surplus," and it just -- from that time until now, it's very hard to have a hedge fund, to save, to spend when things go into the hole.

So California, let me just say this. There's always plenty of blame to go around, but this -- politics is about timing and being in the right place at the right time, and it may turn out that Gray Davis had been in the right place at the right time until tonight.

KING: David Gergen, what is the effect of this in national politics? What is the effect of this on the White House?

GERGEN: Well, let's assume Arnold Schwarzenegger wins. It's clearly...

KING: Again, the polls are still open. We remind our viewers, still vote, no votes are counted. We're not giving you any exit polls. We're just doing a little assumptive talk here -- David.

GERGEN: In a remote possibility that Arnold Schwarzenegger wins, that would be an enormous lift for the White House. And clearly, you know, they want -- I think they've been wise, the president has been wise to hold back and not get engaged with this, but everybody knows that with Arnold Schwarzenegger in there, and I think he will, Arnold Schwarzenegger will wisely turn to Pete Wilson's people and want to bring them in, help set up his governing team.

That's going to help them enormously in preparing for 2004. And, California will now be in play, I think, whereas it wasn't seen to be in play recently, and that means the Democrats, for example, will have to spend money to defend California. They'll still be favored, or at least they should be, but that makes it a tougher race for the Democrats nationally.

Now, this is a two-edged sword for the president, at the same time. There are -- these allegations against Arnold Schwarzenegger that have come up in the last few days will not disappear with this election. There are 15 women out there, so far, who come forward and I would think that the Republican party has to wrestle with it very hard. It's difficult.

After all, the Republican Party prided itself on the moral stance toward private life and made much of that in recent years and there's sort of been a, you know, they've been very indignant about Bill Clinton behavior. How do they come to grips with that now? Will they showcase Arnold Schwarzenegger, for example, at the Republican National Convention in New York? Is that a wise idea?

I think they have tough questions ahead. I do think one thing that Schwarzenegger will benefit from is Pete Wilson's team. I think, they've been very helpful in the campaign. They'll be very helpful in governing. And a lot of Republican business people will now rally to him and help him solve this budget problem. As difficult as it is, that will help him.

KING: We'll take a break. We'll be back with the panel and more thoughts, an update, too, from Judy Woodruff whose at Schwarzenegger headquarters at the Century Plaza Hotel. Don't go away.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: We don't know. It's up to the God now. Up to God for the decision, you know. We did all the work and worked hard and campaigned hard. Try to get the message out there.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: A couple of quick reminders. Siegfried is with us tomorrow night. In a little while, Arianna Huffington will be with us for a segment. And before we get back with our panel, let's go to Schwarzenegger campaign headquarters at L.A. Century Plaza Hotel. For out own Judy Woodruff. What is the mood there, Judith?

JUDY WOODRUFF, CNN CORRESPONDENT: Well, Larry, you know, there aren't many people here in terms of Arnold Schwarzenegger supporters, but if I could just get the camera can pan over to the press corps, would you look at the size of this press corps? I would guess maybe 60, 70 camera crews here with reporters producers.

I just had a leading Republican in the state who was here the night Ronald Reagan was elected president back in 1980. He said the press was nothing like what the press that Arnold Schwarzenegger is getting.

You know, I heard Candy Crowley tell you it was glum at Davis headquarters. It's just the opposite here. People are feeling up. They know the polls open for another hour and a half. Almost two hours, but having said that, they're feeling very good, indeed.

They say it's been a tough campaign, but they feel very confident about the campaign that Arnold Schwarzenegger has run. It's been very tailored to the state of California. To his strengths. They've given limited media exposure. Only a few interviews. Larry, you were one of the few that got an interview with Arnold Schwarzenegger. Bottom line, they're feeling very good at this point.

And I have to tell you one thing before I go, Larry, I just talked to one of the top Republicans in the state Senate that said, you know, if Dianne Feinstein had ran, she would have killed us.

KING: I think everybody is saying that, even the Republicans here on the panel. Thank you, Judy. That's a compliment to you, Dianne. Everyone says, had you entered you would have won.

By the way, did you think about entering?

FEINSTEIN: Well, I was probably the closest thing I have had to a draft was to run. The more I thought about it, the more I thought that the whole recall thing was so deeply flawed. The shortness of the campaign, you know, vote no on recall, but as an insurance policy, vote yes for me. I didn't like that. I couldn't do it.

But I wanted to say something else, because I think to a great extent what Pete Wilson just said about the budget is correct, and times have changed in Sacramento since Pete's day. In this sense, you now have term limits which has been very much strengthened the hand of lobbyists. I mean, I hear stories out of Sacramento that I'm not very proud to hear, to be candid with you.

The Democrats elected are more liberal. The Republicans elected are more conservative. This makes it very difficult for a governor, let's say a governor in the center, to knock heads together to put together a budget deal.

And that's exactly what happened here. You couldn't do it. And in the old days, there was a powerful speaker, there a powerful president pro tem and they knew they had to compromise toward the end to put together something that everyone could live with. And, that's what has changed. And, I for one am not a great believer that term limits really is best thing for the people of the state.

KING: Richard Riordan are you going -- if Schwarzenegger were to be elected, would you work for this administration?

RIORDAN: Absolutely. Particularly on educational issues. Arnold and I believe that every child that comes into this world has a god given right to a quality education.

But let me just say one thing. Pete Wilson and I were talking a minute ago is, we're running out of cash in the state of California. It's very likely the courts will not let us issue anymore bonds this year and we won't have the cash to run the state of California.

KING: Someone asked me, what happened with the Lottery money?

WILSON: There isn't a lot of Lottery money to begin with, Larry.

KING: I thought there was a fortune.

WILSON: There's not a fortune. Frankly, it's peanuts relating to.

KING: Really?

WILSON: Yes.

RIORDAN: It's a fraud.

WILSON: Ironically, it is the reason that there's any gambling in California. The Federal Indian Gaming Regulatory Act, FIGRA, says that the tribes can conduct that gaming as permitted by the state.

KING: Right.

WILSON: If there were none, then the only thing they could do is run horse races.

KING: We'll take a break and come back with more of the panel. Then in the segment after that, we'll be joined or rather we'll spend a segment with Arianna Huffington. And then we'll close it out with the panel and joined by Wolf Blitzer who will anchor the coverage tonight starting at 11:00 Eastern. We'll be right back.

(BEGIN VIDEO CLIP)

DAVIS: I feel absolutely terrific. I have always trusted the voters of California. I know they're going to do the right thing today. This is a big day for Californian. It's particularly a big deal for working families.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: Welcome back to LARRY KING LIVE.

Our panel, Richard Riordan, the former Republican mayor of Los Angeles. He'll be involved if there's an Arnold Schwarzenegger governorship, he'll be involved in it. Pete Wilson, the former Republican governor of California, also a statewide co-chair.

In New York, Jerry Brown, the Democratic Mayor of Oakland.

In San Francisco, one of the major Democrats in the United States Senate, Dianne Feinstein. And in Boston, David Gergen, editor-at- large "U.S. News and World Report" and professor of public service.

And director of the Center for Public Leadership at the J.F. School For Government.

Jerry Brown, is the state governable?

BROWN: Well, of course it's governable. This is an economy -- the fifth largest in the world. A $1.4 trillion gross state product. There is just an imbalance here that way against the to totality of wealth and wealth potential is relatively small. But weighed against the political constraints it's extremely large. And I think guess listening to this, the point I come to is the issues of California, the influx of immigrants and the family and kids, the growing inequality, the assault on the environment, the failure of the prison system to reform hundreds of thousands of dangerous felons, the tax system. All of that will not be solved by a Democratic plan or Republican plan. It takes the leadership of the state, business and political to come together and really reflect on how do we get out of this mess and long term, what are the tough decisions?

And I think when people say or some at least hope you can get out of this without sacrifice, I don't think that's true. We have to really look to a sense of restraint, as well as a vision of the tremendous potential of California.

KING: David Gergen, why is this campaign important in Illinois?

GERGEN: Well, it's very important, Larry, if we all think that California is, you know, the harbinger of the future, it often has been in the past. Now for many Americans watching politics, as they unfolded in Florida in the year 2000 and Texas more recently and now California, there's a sense of the system becoming unhinged?

Is political system working the way we thought it should, the way the founders thought it should or is this something we're into a sense of chaos?

I think now if it is and I underline again if, if it's Arnold Schwarzenegger, there are a lot of people -- there will be a lot of people outside of California do not know him well who do not, perhaps, appreciate him the way that Californians have come appreciate him who are just sort of throwing up the hands saying what in the world is happening here. That this fellow, drops in from the movies and doesn't face a single debate with real questions, why is he being elected governor of our largest state?

I think for the rest of the country, it is harder than for Californians to understand the dynamics of this race. KING: Why, Richard, for Arnold is elected, why didn't grope-gate work?

Grope-gate.

RIORDAN: Well, I think because first of all, what he did, he admitted to very quickly. He got back on message talking about health care, education, about the budget crisis. And I think people feel that California's in desperate shape and they want a new leader. They don't -- they know that Gray Davis failed this state for a number of years.

KING: Personal things aside then?

RIORDAN: Personal things really aside and you had president Clinton, you know, being unfaithful to your wife in the Oval Office is a little bit different than what Arnold did. Not that I would accept what Arnold did as good, but the bottom line is, people want a leader who's going to run the country, run the state well and I think that's why they'll go for Arnold.

KING: Senator Feinstein, do you have to work with the governor?

FEINSTEIN: Well, of course. You know, my position is this. I'm a lifelong Californian, born and bred. I love this state and I'll do anything I can to be of help. All he has to do is ask. And I'll do everything I possibly can. But let me make one comment about what's just happened in response to what you called grope-gate, Larry. I think there are a couple of things. One, I think the allegations came out very late. I think secondly the Schwarzenegger campaign was very lucky in being able to translate those into being campaign rhetoric, campaign allegations. Not true. Not important. I agree with what David Gergen said, this is a little different.

This isn't having a relationship that's consensual with someone. This is actually being pretty much a predator, and going at women that you don't know and doing certain things to them. And if that stands up, it can be very serious and it can really undermine his effectiveness in the long run. For California's sake, I hope that doesn't happen because there's so many big problems that we really need, as Jerry Brown said, to come together to solve. Because as the state gets bigger, its demand for new things, just the water infrastructure, the electricity infrastructure, the basics to run a country which is a state but the size of most countries. California is bigger than 21 states, and the District of Columbia all put together. That's how big it is. So its needs are tremendous.

KING: Pete Wilson, will you serve or advise in this administration if Schwarzenegger were elected tonight.

WILSON: Well, if he asks, I'd be delighted. I would feel it duty to do that. I think what you have heard from Diane and Jerry and others is that the contest is about over. And assuming that we do have a new governor, he's going to need all the help from everyone that can possibly be given to him, because the state is enormous. It is an enormous challenge. It was for me and Jerry. It was for Ronald Reagan. It was for Pat Brown. It is for anyone because this is a large, complex, diverse state. And, the one thing that you have to remember in trying to govern it is that the governor has power that is the legislature does not. He has to work with them. He has to work with members of the Congressional Delegation. I worked with Diane, I must say it was easy to work with her.

But, the point is, you do have as governor the soul sole obligation that no one else really shares with you to keep the spending in check. Yes, there are obviously thing that is you must do. You have got to educate children. You have got to provide health care. You have to provide for prisons. You have to do all the things that we are familiar with as taxpayers but you can't spend money you don't have.

KING: We are going to take a break. And we thought it appropriate to run with someone that ran in this race and then, a week ago, pulled out on this program, the well know, Arianna Huffington. I am going to spend some moments with Arianna. Then our panel will reassemble and Wolf Blitzer who will anchor the CNN's coverage tonight will join us.

We'll be right back don't away. Don't go away.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: I want to make sure that we stop Gray Davis from changing businesses and changing jobs out of the state. It is time, it is time that we change Gray Davis out of Sacramento!

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ARIANNA HUFFINGTON (I), CALIF. GOV. CANDIDATE: This is the way you treat women. We know that. But not now.

UNIDENTIFIED MALE: On that point -- excuse me -- let me -- excuse me. Excuse me. Excuse me. Lady, candidates, candidates please let me take control of this for a moment. I'm going -- I'm going to decide as the privilege of a moderator that that was a direct and personal attack on Mr. Schwarzenegger. So would you respond?

SCHWARZENEGGER: I would just like to say that I just realized that I have a perfect part for you in "Terminator 4."

(END VIDEO CLIP)

KING: We thought it proper that we have one of the candidates who was on that humongous ballot here today. And again, if you're in California, the polls are open until 8:00 California time. That's still an hour and 20 minutes to go. What do you make of it, Arianna Huffington.

HUFFINGTON: Well, as Diane said and as everybody has said on the panel, the polls are still open. So we have to speak in hypotheticals.

But if Arnold Schwarzenegger is governor, it will be because he co-opted the message of running against the special interest, running as an outsider, running against the broken system. And remember...

KING: And it worked, if it works.

HUFFINGTON: And it worked, yes. If it works, it works. And it also worked George Bush.

Remember, when John McCain was doing extremely well in the primaries, George Bush co-opted that same message and ran as a reformer against -- reformer with results. And he run as an outsider. He actually compared himself to John McCain being the chairman of the Senate committee.

So when you have million of dollars to spend on advertising, it's easy to co-opt whatever message your pollsters tell you the electorate will respond to. And that's what happened here if Schwarzenegger wins.

KING: And this was a very unhappy electorate, right? I mean...

(CROSSTALK)

KING: Look at the turnout.

HUFFINGTON: Look at the turnout. But also, you know, the electorate has been very unhappy for a while with a broken political system. It's unhappy with both political parties. That's why although Arnold Schwarzenegger has been embraced by the Republican establishment. He run as an outsider.

Now the problem is going to be that he cannot governor as an outsider because he's beholden to all the Republican special interest that funded his campaign, you know, from the big developers to the big polluters to the other business interests. And also, because his agenda is really against any kind of tax increases and in favor of balancing the budget. And how he's going to perform this magic trick, he never said during the campaign.

KING: But it would appear also very difficult to govern in a situation where the legislators, the Republicans are very conservative, the Democrats are very liberal and moderates don't have a strong voice, right?

HUFFINGTON: But it's a bigger problem than that, which is that, really, to govern effectively, you have to be willing to take on the special interest. You have to close corporate tax loopholes which would bring in $5 billion in revenue. You have to be willing to take the prison industrial complex that actually at the moment, you know, draining huge resources, even at the time when the inmate population is going down.

So there are many fundamental problems that you would have to address, which you cannot address if you are basically an insider running as an outside in order to win.

So it's going to be a very difficult few years if he wins.

KING: Sorry you ran?

HUFFINGTON: No. I love that I ran because we were able to put on the table the key issues of this campaign, which is the power of money in politics and the incredible influence of special interests to influence public policy. And I have this initiative that I actually filed in Sacramento for public financing of campaigns and I really believe in the end nothing is going to change the system except that. And I'm going to be working to get it actually on the ballot.

KING: You brought up the woman thing in the debate. "L.A. Times" breaks a story on groping. If that fails tonight to have affected the vote, why did it fail, if it fails?

HUFFINGTON: Well, I brought up the women thing not in relation to the sexual misconduct. I brought it up in relation to the statements Schwarzenegger had made about how great is to stick a women's head in the toilet in "Terminator 3" and statements like that, because he didn't have women on the economic team. I wasn't referring to any sexual misconduct stories.

But nevertheless...

KING: All right.

HUFFINGTON: Nevertheless....

(CROSSTALK)

HUFFINGTON: The stories were out there. I think they just broke too late. You know, the fact that the stories appeared in "The L.A. Times" on Thursday made people feel uneasy. I mean, I'm sure we're going to see some erosion in his numbers if he wins because, clearly, a lot of people, a lot of women were very, very troubled by them, especially because when you don't have a track record, Larry, then all you have is your word and trust and credibility are really at the core of who you are as a candidate.

KING: Were you surprised -- surprised at the national attention?

HUFFINGTON: No. Because, you know, celebrity is sort of what drives the media. And it's not just when it comes to politics. I mean, you have, you know, J.Lo and Ben Affleck. We have also a tendency in the media for obsessing about stories. It could be Laci Peterson. It could be Gary Condit. It doesn't matter, really, how significant the story is. This was a significant story, but it's almost irrelevant.

KING: Do you think in the public's mind around the country California has become the new Florida?

HUFFINGTON: No. Not yet.

KING: I mean for making fun of it, though.

HUFFINGTON: No. You know what? I really feel that California is sort of, again, at the forefront of this huge voter discontent, which I think is across the board. It's across the country. I mean, Howard Dean was a beneficiary of it and continues to be the Democrat Party needs to address it. It cannot to be tone deaf at the fact that there is huge disaffection.

Now, if more voters turned out today than in the last election, that is an incredibly positive development, whatever their reasons they turned out for, because we need to reengage all those 13 million Californians who were eligible to vote in the last election and didn't.

KING: You have an independent. Is Bush happy tonight or not happy if Schwarzenegger is governor?

HUFFINGTON: Oh, of course he is happy.

KING: Happy.

HUFFINGTON: You know, he kind of tried to stay out of it.

KING: He stayed away.

(CROSSTALK)

HUFFINGTON: That is a -- that is a very deliberate decision they made. But of course it's kind of a very good news for the Republicans to have a Republican governor for 2004.

KING: So -- what? -- are you going back to column writing now?

HUFFINGTON: I'm going back to finishing a book that I'm writing called "Fanatics and Fools," the fanatics being the Republicans running Congress and the White House in Washington and the fools being a lot of the Democratic leaders who remain tone deaf when it comes to the public discontent.

KING: You take them both on? When is that coming out?

HUFFINGTON: I hope to finish it in six months.

KING: And you going to go back to the columns?

HUFFINGTON: Not until I finish the book because I have a very imminent deadline. But I'm going also to continue fighting for this initiative, Larry, and hope to put it on the ballot.

KING: Thank you, Arianna.

HUFFINGTON: Thank you, Larry.

KING: Arianna Huffington, who was a candidate in this extraordinary election which now has an hour and 10 minutes to go.

We'll be right back with our panel and Wolf Blitzer will join us to give us a preview of our coverage tonight.

Don't go away.

(COMMERCIAL BREAK)

KING: I have about five minutes left of the program. I want to get some final comments from our outstanding panel, but we also wanted to get a word from Wolf Blitzer, who one hour from now, will take over anchoring all this tonight. You have had no experience with this type of election, because we ain't never had one.

WOLF BLITZER, CNN ANCHOR: We didn't. In 1920s, there was one time one governor was recalled...

(CROSSTALK)

BLITZER: It was a long time ago...

KING: You were not there, Wolf.

BLITZER: It was even before your time. Right, Larry?

KING: Keep it up, Wolf. What are we planning tonight?

BLITZER: We are going to have extensive coverage starting exactly at 11:00 p.m. Eastern, 8:00 p.m. California time, once the polls close. Once the polls close, we'll be able to report to our viewers the results of our exit polls. And we've been having extensive exit polling throughout the day. Our commitment to the people of California, we don't report any of those results until the polls close. We certainly don't want the results to influence people, to suggest to people, don't go vote, at 7:58 local time because it might be (UNINTELLIGIBLE).

KING: You've got to wait a little while because they're standing in line, right?

BLITZER: No, we'll wait exactly at the top of the hour...

KING: Eight o'clock?

BLITZER: ... and if we have anything to report, we'll report it then from our exit polls. Otherwise, we'll wait for the rest of the country, the actual hard numbers to come in from Sacramento.

KING: David Gergen, is that responsible?

GERGEN: Absolutely. And a good thing for everybody down doing that. Maybe we'll get back into -- we really need these exit polls. They're very helpful after elections to look at the entrails and understand what's going on with the American public, and to cut them out was a loss. I'm so glad networks are now respecting them, CNN is doing a good service doing that.

KING: Jerry Brown, do you think your party will go down tonight?

BROWN: Well, I'm not talking until the polls close.

KING: OK.

BROWN: But I will say this, I think there is a connection between the vote in California, the anger at what is, and what we have in Washington, where we have a $500 billion deficit and a tremendous extension out throughout the world.

The question I would just pose and leave with all of you, you know, how do we adjust, you know, what we should be doing, what we're capable of, and how do we work that out through politics? I think there's some real disjunctions, disconnections, and I think tonight what we're hearing from California, if it turns out in a way that it appears to be going, there is a lot of people saying, just change, do something different, and now it's up to the leadership to really divine what that is and how we bring it about.

KING: Thank you, Jerry, and thank you, David. We'll get a final word here from Dianne Feinstein before we check in with Pete and Richard. Dianne, it's a big night in California. Will it have an effect on national politics?

FEINSTEIN: Oh, I think so. I think in a very big way. I think leading this was -- is the budget situation. And I think there is a continuum on a federal level. I think, you know, obviously, the federal government is spending a lot of money it doesn't have and does so year after year, and I think another thing. I think there's been a growth of partisanship in the last 20 years like I have never in my life seen, and an inability of people to come together across the aisle, and that's a real problem and it needs to change.

KING: Thank you, Dianne. Pete, would you concur with that?

WILSON: Sadly, I do.

KING: It is sad.

WILSON: It is very sad, because it prohibits the kind of honest debate that really produces the solutions that can work. I think that the budget did cause this more than the electricity crisis. I don't think that Governor Davis could have rescued himself, but I think what he tried to do in order to do that hurt him. I think...

KING: If he loses?

WILSON: Yeah. If he loses, and I think he will, and I think one of the key reasons is that he lost a great deal of credibility when he signed a bill that he had twice vetoed, which was weaker than the bills that he had vetoed. It conferred...

KING: The driver license.

WILSON: ... the driver's license privilege upon illegal immigrants.

KING: And this night? RIORDAN: Well, it's going to be a challenge for the years ahead. California is the most anti-business state in the union, particularly for small to medium-sized business. We have the highest workers' comp cost, three times what other states do, highest electricity costs, higher health care. And the state has to change this, to be pro- business. We're losing tens of thousands of high-tech jobs every month.

KING: We only got 30 seconds, Wolf, is this tough when it's just centered in one state? And two votes, and you are going to have an apparent -- you're going to make an announcement a little after 8:00...

BLITZER: Well, we're not sure we are.

KING: If you are.

BLITZER: We're going to see what the results are, what the exit polls show us, but look, this is news. If you're a political news junkie, as you and I are, Larry, we love this kind of story, whether it's one state or the whole nation.

KING: We thank you all. Richard Riordan, Pete Wilson, Jerry Brown, Senator Dianne Feinstein, David Gergen, Wolf Blitzer, and of course Arianna Huffington as well, and our reporters, and Governor Davis.

We'll be back to tell you about tomorrow night right after this.

(COMMERCIAL BREAK)

KING: Exclusive tomorrow night, when we come back. Siegfried of Siegfried & Roy will be with us, with an update on the condition of Roy, and Siegfried's first -- Siegfried's first interview since this tragedy occurred.

Right now, it's time to turn it over to the podium in New York, where sitting by -- I was going to say standing by, but he's sitting by -- is Aaron Brown, one of my favorite people. He will anchor the next hour superbly and guide us right into election results in the wonderful state of California.

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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