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JUDY WOODRUFF'S INSIDE POLITICS

Calfornia Recall Passes, Schwarzenegger Elected as New Governor

Aired October 8, 2003 - 15:00   ET

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

(BEGIN VIDEOTAPE)
ARNOLD SCHWARZENEGGER (R), CALIFORNIA GOVERNOR-ELECT: I will not fail you. I will not disappoint you. And I will not let you down.

(CHEERING AND APPLAUSE)

ANNOUNCER: History in California. So what happens next?

BILL SIMON, (R), FORMER CALIFORNIA GUBERNATORIAL CANDIDATE: We've got a very serious budget crisis facing California.

ANNOUNCER: Winning the election may be the easy act for Arnold Schwarzenegger.

GOV. GRAY DAVIS (D), CALIFORNIA: We've had a lot of good nights over the last 20 years.

ANNOUNCER: But last night wasn't one of them. What went wrong for Gray Davis?

Now that it's governor-elect Schwarzenegger, will it continue to be Arnold TV nonstop?

You've heard from the politicians and the pundits. But what do the people of California have to say about their new governor?

UNIDENTIFIED MALE: He's got his chance now and he's going to have to do the job.

(END VIDEOTAPE)

ANNOUNCER: Now, live from Los Angeles, a special edition of JUDY WOODRUFF'S INSIDE POLITICS.

JUDY WOODRUFF, CNN ANCHOR: Thank you for joining us out in Los Angeles.

Well, Arnold Schwarzenegger's victory came more easily than some had expected. And now the governor-elect says the hard work begins. But as his soon-to-be predecessor, Gray Davis, might tell him, hard work alone may not be enough to tame California's government and its budget. In the next 90 minutes we're going to look at the recall, at its ramifications, and at the challenges ahead.

We begin with CNN's Frank Buckley covering the Schwarzenegger transition -- Frank.

FRANK BUCKLEY, CNN NATIONAL CORRESPONDENT: Judy, some tremendous challenges ahead for the Schwarzenegger transition team, trying to do what normally takes a couple of months or more, cramming it into a two-week -- potentially a two-week period, or just a few weeks, to try to appoint many people. A budget is due January 10, many things to be done in a very short period of time.

And here to talk about that is Sean Walsh, the communications director for the campaign.

You'll obviously play a role in the transition. You've been part of a transition before between Wilson and Davis. Tell us what you're looking at today.

SEAN WALSH, SCHWARZENEGGER COMMUNICATIONS DIRECTOR: Well, Arnold was very, very thoughtful and strategic when he undertook this campaign.

Not only did he put together his task forces and his advisory committees to put policy proposals together for him, but he kept them intact. And they've been working throughout the entire campaign to make sure that these proposals are fleshed out. So we feel pretty confident that we have a very, very good group of people that can help get this budget, as you mentioned, that's coming right around the corner, together.

And what we're really encouraged about today is that the Democrats, Gray Davis reached out and said he's going to work cooperatively on the transition. We're hearing that the state chairman of the Democratic Party said that he's going to work cooperatively with us. And Mr. Burton apparently just held a press conference and said the same thing.

So when Arnold extended his hand out last night out to the Democrats, they seem to be reaching back. And Arnold knows that these problems are bigger than just Arnold. We need the legislature and the people's support. So we're feeling very, very good today about at least the morning after the election.

BUCKLEY: Arnold Schwarzenegger said during the campaign that the first order of business was to repeal the car tax increase. That puts you $4 billion more in the hole. Does he have specific, concrete proposal to deal with the budget immediately? Or is that something that's going to be worked on during the next few weeks?

WALSH: Well, first and foremost, we have to get a transition team in place, physical bodies to oversee the construct of a government. So that's right up front.

But the work on the budget and the work on the jobs and economy package will continue. But if you don't have the people in place to implement it, it really doesn't work. So first things first. Today, we'll be announcing our campaign -- or excuse me, our transition chairman. And so, once that occurs, then we can start putting the structures and the people in place to make this happen. BUCKLEY: And you said David Dreier is going to head the transition team, the congressman from Southern California, very involved, obviously, in this campaign.

Just finally, just on the political appointee level, some 2,700 political appointees, do they all lose their jobs?

WALSH: Well, the truth of the matter is, some people have raised concerns that the government will stop or appointees will leave their positions and government will go untended. That's not the case. There's a dedicated core of civil services out there that maintain government. So all the emergency services, state police, all those functions will continue.

With regards to appointees, though, we have some very critical positions that we need to deal with very quickly, the director of the California Department of Finance and the governor's staff. If we get those core people in place, the rest of those issues will come into line. And as we have stated as well, we're going to reach out across California and across this nation for the best and brightest talent to serve in these positions.

If we have someone right away of one of our task forces that can move into this position, so be it. If it takes a little bit longer to get them into a position, that's fine, too. But we have our eye on the ball. We have our eye on the budget. We have our eye on jobs and the economy. First and foremost, we will deal with those issues and we will be prepared to govern if it's two weeks from now or if it's 30 days from now when we take over as governor of the state of California.

BUCKLEY: OK, Sean Walsh, thanks very much on a very busy day for the Schwarzenegger team.

It's beginning today. Well, it really began yesterday. And they're going to be very busy throughout the day and for the next several weeks -- Judy.

WOODRUFF: All right, fascinating to hear what they're saying this morning after. Frank, thank you.

Stay with CNN for live coverage of Arnold Schwarzenegger's news conference. It's due to begin at 6:30 p.m. Eastern, 3:30 Pacific.

Well, Arnold Schwarzenegger was elected to replace Gray Davis with 48 percent of the vote, beating out his nearest rival, Democrat, Cruz Bustamante, by more than one million votes. That's according to the latest unofficial tally. The vote to remove Davis was not very close either; 55 percent approved of the recall; 45 percent opposed it.

So, what is next for Davis and for the Democrats?

Let's check in now with CNN's Bob Franken.

Bob, you've been talking to the Davis people and the Democrats. How do they regroup?

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: Well, what do you think? Maybe Gray Davis could star in the next "Terminator" movie.

But assuming that doesn't do that, he's now going to spend the next month or so apparently trying to appear classy. He's made it very clear that he wants to go out in a gentlemanly way, or at least be perceived that way. He's going to make the transition a painless thing, so he says. But, of course, there are going to be an awful lot of hard feelings. And Gray Davis is going to have to spend an awful lot of time licking his wounds.

This was fundamentally a repudiation of Gray Davis. And now about the only satisfaction that he might take is that Arnold Schwarzenegger is going to face the same problems, in fact, problems that may be even worse, because Arnold Schwarzenegger, as Republican governor, is going to have to deal with a legislature of a different party -- Judy.

WOODRUFF: And, Bob, it's not just the legislature. It's a lieutenant governor who ran against him to replace Gray Davis. What's the relationship between Bustamante and Schwarzenegger going to be like?

FRANKEN: Well, at the moment, everybody is making nice, because that's what you are going to have to do if you're going to operate in this political world.

And Cruz Bustamante has operated a long time in this political world. He may not be really great on television. He's certainly never going to be a movie star. But he's a great inside player. And although he edged his comments with humor when he came down to speak last night, he made it very clear that Schwarzenegger needs to be careful of him.

(BEGIN VIDEO CLIP)

LT. GOV. CRUZ BUSTAMANTE (D), CALIFORNIA: Arnold, you're very famous for making movies all over the world. I want you to feel free to continue doing that.

(LAUGHTER)

(CHEERING AND APPLAUSE)

BUSTAMANTE: Go where you like. Feel free to stay as long as you like. I'll be here keeping an eye on things.

(END VIDEO CLIP)

FRANKEN: Advice, Judy, that Governor Arnold Schwarzenegger would be well advised not to take.

(LAUGHTER)

WOODRUFF: Interesting to know what Mr. Schwarzenegger thinks about that advice, whether he thinks it's a joke as well.

All right, Bob, thank you.

Well, now let's get a better sense of what went wrong for Gray Davis and right for Arnold Schwarzenegger with the help of our senior political analyst, Bill Schneider, and all the exit polls.

All right, first of all, how did Arnold Schwarzenegger do it?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Times are tough. Voters want change. Outsiders are in. That was Schwarzenegger's message. He was also helped by the M word, not movie star, moderate.

Yesterday, California voters described themselves as pro-choice, rather than pro-life by better than 2-1. But among those pro-choice voters, the clear majority, Schwarzenegger and Cruz Bustamante were tied. Schwarzenegger neutralized the Republicans' abortion problem in this state.

Now, what about the charges of sexual misconduct? They came out in the last week of the campaign. Voters who made up their minds more than a week before the election voted for Schwarzenegger by a 12-point margin. The race was closer among voters who decided in the final week. But Schwarzenegger carried them as well. Only 15 percent of the voters made up their minds in that last week. The charges of sexual misconduct came too late to do much damage.

WOODRUFF: All right, but were there any surprises, Bill? There were a lot of numbers for you to look over. What did you see that surprised you?

SCHNEIDER: Well, certainly, Judy, the biggest surprise was the women's vote. It went for Arnold Schwarzenegger, 43 to 36 percent. Apparently, women voters didn't take the protests of those women's rights activists too seriously.

Now, look at the union vote on Governor Davis. Labor voters were supposed to be Davis' base. But they split. About half voted to fire him. His base abandoned him. Now, Cruz Bustamante was expected to rally his fellow Latino voters. Look what happened. Bustamante got a bare majority of the Latino vote yesterday. Schwarzenegger picked off nearly a third of Latinos. Latinos don't look like a block vote. They look like a swing vote.

WOODRUFF: Now, Bill, what about the actual vote count. What did you notice there? What struck you?

SCHNEIDER: Democrats were all set to argue that, if Schwarzenegger won, fewer Californians voted for him than to retain Governor Gray Davis, which wouldn't be surprising, because Schwarzenegger was running in a race with 135 candidates, while Davis was in a race all by himself.

But look at what actually happened yesterday: 3.6 million Californians voted for Schwarzenegger. That was slightly more votes than Davis got. In fact, Schwarzenegger got more votes than Davis got last year. Schwarzenegger's victory is what I would call a clean win.

WOODRUFF: Hmm, all right. Bill Schneider, thanks very much.

And those numbers, I know you're going to keep looking over them.

SCHNEIDER: Right.

WOODRUFF: And more answers will emerge as the hours and the days go by. Thanks, Bill.

Well, politicians across country are wondering what the outcome here in California may signal for their futures and for their parties with a presidential election year approaching.

We're joined now by a high-profile Democrat, New Mexico's Governor Bill Richardson.

Bill Richardson, really bad news for the Democrats out here.

GOV. BILL RICHARDSON (D), NEW MEXICO: First of all, Judy, this was a nonpartisan election. This was a protest movement.

Nonetheless, the fact that a Democratic governor is unseated -- and the Democratic governors basically control the party apparatus. That is no longer the case. So California somehow becomes a player up for grabs a little bit more in the next presidential election.

But we have to understand what happened. It was not a vote against the Democrat or for a Republican. It was a protest vote. I think Schwarzenegger deserves credit for a good campaign. But we must remember that both parties ignoring at their own peril movements like this that I suspect will start around the country of voter discontent, voter dissatisfaction -- this was not a Democrat vs. Republican. This was a protest vote against an existing governor who happened to be a Democrat.

(CROSSTALK)

WOODRUFF: But you had Gray Davis -- Governor, excuse me, but you had Gray Davis talking about a right-wing conspiracy, conservative Republicans trying to undo an election. You had a parade of Democrats coming through California making that argument.

RICHARDSON: That is the case.

But what happened, Judy, is, voters looked beyond the party labels. And they saw a state with a big deficit, with classrooms and other issues relating to education funding dropping. And so there was a huge movement against the existing establishment.

Now, I think Governor Schwarzenegger deserves credit. He ran a good campaign. He tapped into that protest. He got votes from an assembly of traditional Democratic constituencies. What was significant there is, he got a high percentage of Latino votes, which shows that the Democrats cannot take Latinos for granted anywhere. At the same time, what does appear is that a lot of union voters, a lot of traditional Democratic constituencies were upset at the way the state was being run.

(CROSSTALK)

RICHARDSON: So my only point here is, I don't want to diminish Arnold's victory. I do want to point out that this was more a nonpartisan protest movement, that it wasn't a traditional vote, Democrat or Republican.

WOODRUFF: But when you say this puts California in play for the Republicans, making it a little harder for Democrats, exactly what are you saying?

RICHARDSON: Well, what I'm saying is, it's going to depend on Governor Schwarzenegger, whether he tries to seize the party apparatus, the Republican Party apparatus, and put it at the disposal of President Bush. We don't know whether he's going to be a party man.

He got votes from pro-choice, Latino, gay constituencies that are not part of that Republican coalition. It's going to depend, first of all, on how he does, the way he performs and, secondly, whether he chooses to be a traditional Republican. I'm going to reach out to him as chair of the Western and border governors. I think we all need to help him. That state is an engine for the whole country. And it's important that we not use the party labels to say, all right, he's a Republican. We're not going to help him.

(CROSSTALK)

WOODRUFF: I was just going to say, very quickly...

RICHARDSON: Go ahead, Judy.

WOODRUFF: Why wouldn't he put the party apparatus at the disposal of President Bush? They're both Republicans.

RICHARDSON: Well, he might not. I don't know how he's going to govern.

He's not a party person. He might. If that is the case, I think it will help President Bush. But you got to remember, California is pretty much overwhelmingly Democratic. And I don't think Republicans should read into, now because Arnold has won, they're going to win California. They may get a leg up a little bit. But, again, a lot is going to depend on what happens in the next year and a half and how Governor Schwarzenegger performs as governor.

But I wish him well. I hope he does well. And the time for healing has come.

WOODRUFF: All right, Bill Richardson, governor of the state that is two states over from California, good to see you, Governor. Thanks very much for talking with us. We appreciate it. Well, as you might guess, many Republicans read the recall messages a little differently. Up next, I'll talk to Schwarzenegger campaign co-chairman Congressman David Dreier about the GOP's win and the tough transition ahead.

Plus: He was mobbed by the media right up until Election Day. Did that wind up helping Schwarzenegger more than it hurt him?

And Gray Davis joins the ranks of politicians who stumbled on the stump, but went out gracefully.

(COMMERCIAL BREAK)

WOODRUFF: With just a short time to go before Arnold Schwarzenegger is sworn in as California's new governor, his transition team has got to tackle some important issues very quickly.

California Congressman David Dreier was a co-chairman of the Schwarzenegger campaign. And he's with us now from Washington from Capitol Hill.

Congressman, we hear you're going to be heading up the transition team? Is that right?

REP. DAVID DREIER (R), CALIFORNIA: All I can tell you is that I will be in California by dinnertime tonight out there. And I hope you're enjoying Southern California. We're obviously ecstatic.

I'm having my fourth annual Dreier's ice cream party. Covered with ice cream right now. I just took my ice cream coat off to come over and talk to you. So it was planned six months ago, before the recall even qualified. But we're celebrating, as well as getting covered with our annual load of ice cream. I think you came one time, Judy.

(CROSSTALK)

WOODRUFF: So you're not confirming yet?

DREIER: What I'm saying is that I'm going to do anything that I possibly can to help this governor become successful and to help the people of California make sure that they take back their government.

WOODRUFF: We just heard Governor bill Richardson of New Mexico say, this was a nonpartisan election. He said it represented a protest movement. Is that how you saw the results?

DREIER: Well, I heard the last comments from my former colleague and great friend Bill Richardson.

And he's right in that -- his last line that I just heard at the end was, the time for healing is now. And it's clear from the speech that was delivered, the very gracious speech last night from Gray Davis, which I found very, very impressive, coupled with the very magnanimous acceptance speech from Arnold Schwarzenegger, that there is an opportunity to come together. Around Schwarzenegger is a proud Republican. He's a Republican who is very strongly conservative on fiscal issues, but has a more moderate view on social issues. Guess what? I find that to be the mainstream view of most Republicans in California. And many Democrats represent that view as well. So, he's a strong Republican, Judy, but I believe that he's going to clearly try to reach out to Democrats.

WOODRUFF: Well, the other point, though, Richardson made was, he said, it remains to be seen whether around Arnold Schwarzenegger is going to seize the party apparatus and put it at the disposal of President George W. Bush going into next year's election.

(CROSSTALK)

DREIER: Well, Judy, I don't know exactly what that means.

But I do know this. Through the campaign, when asked the question, Arnold Schwarzenegger said that he's a strong supporter of President Bush's and he would campaign with him. We're not focused on next year's election right now.

WOODRUFF: OK.

DREIER: Yesterday, he won this historic, historic recall election. And now the responsibility of governing and bringing Democrats, Republicans and independents together is the highest priority.

WOODRUFF: What are the first few things, in a nutshell, that he has got to do as governor to get the state...

(CROSSTALK)

DREIER: All I will say -- and I spoke with him last night just before he gave his speech. And I know that he is ready to, as soon as possible, tackle the priority of making sure that there is an audit of the state's books.

He said at the economic recovery council meeting that we had that he had gotten very, very diverse reports from a wide range of academic resources on exactly what the shape of the problem was. So he wants to have an independent audit. He's also said that he wants to make sure that we repeal the tripling of the car tax, which has been one of the key issues.

WOODRUFF: Right.

DREIER: So those are two things that he wants to do sooner rather than later.

WOODRUFF: Are you certain he can do what he needs to do to get the state's fiscal house in order and not raise taxes?

DREIER: I'm certain that we have the potential, if we can get the economy growing again with policies that will reform workers compensation, and focus on job creation. We have the ability to generate the revenues necessary, along with bringing about responsible cuts, which will be tough. I mean, I'm not going to say it's going to be easy.

But I believe that we have the potential to do that. He very much wants to do it. And I found that he's a disciplined person. It's not going to happen overnight. It's going to take an awful lot of work to make this happen. And the president of California

(CROSSTALK)

WOODRUFF: Not ruling out a tax increase?

DREIER: No. He said that he was opposed to a tax increase, except in the case of a great emergency. And he focused on a natural disaster as that emergency.

The people in California are overtaxed, he said. And take issues like the capital gains tax. It's significantly higher than most other states. We need to focus on creating jobs and economic growth.

(CROSSTALK)

WOODRUFF: David Dreier, congressman from the state of California.

(CROSSTALK)

DREIER: And spend money while you're out there, Judy. We need it to get our economy moving.

(LAUGHTER)

WOODRUFF: All right. Message received.

David Dreier, good to talk to you.

DREIER: Thanks.

WOODRUFF: Who wouldn't confirm that he's going to be running the Schwarzenegger transition, but we hear that that's exactly what he's going to do.

Well, the California recall has been must-see television. And now that it's governor-elect Schwarzenegger, is the show going to go on? The recall and the media when we return.

(COMMERCIAL BREAK)

WOODRUFF: There's no question that the new governor-elect of California is literally a media magnet. By one count alone, there were more than 80 television cameras trained on the Schwarzenegger speech last night, but only 50 of them recorded the Davis concession.

With me now from Washington to talk more about media coverage of the incoming administration, Howard Kurtz of CNN's "RELIABLE SOURCES." Howard, a lot of focus in the last days of the campaign on the negative coverage of Schwarzenegger and these charges from a number of women. But what about overall coverage of his campaign?

HOWARD KURTZ, "RELIABLE SOURCES": Well, I would say, Judy, that Arnold Schwarzenegger got a fair amount of negative coverage from the establishment press, and that this stemmed largely from a calculated decision made by the campaign early on, strategists tell me, to run a campaign of press avoidance.

They dealt with Oprah and Larry King and Howard Stern and granted a few interviews. But they decided to take the hit from reporters who were annoyed at the lack of access, from reporters who were writing about the lack of specifics on the budget, for example. They decided that they could basically go over the heads of establishment media. And it worked in part because of the rock star coverage that Schwarzenegger received from "Access Hollywood" and "Entertainment Tonight" and the dozens and dozens of TV cameras that followed him everywhere he went.

That sort of totally overrode whatever message might have been in print.

WOODRUFF: I think you're answering my next question, which was, can any candidate out there get away with that sort of strategy?

KURTZ: Ninety-nine-point-nine percent of candidates can't do that, nor can most candidates get away with the barrage that Schwarzenegger faced in the final days, the allegations by, I guess a total now of 15 women about groping and grabbing and sexual harassment.

But, again, Schwarzenegger there followed what we might call in Watergate days a modified limited hangout strategy. He apologized for having behaved badly on some occasions, denied others, never quite specified what was true, what wasn't true. And then he proceeded to attack "The Los Angeles Times," which was, of course, the principal carrier of these allegations, for dirty politics, for working with the Davis campaign.

There's no evidence of that. And I was surprised, even this morning, Schwarzenegger's spokeswoman, having won this great victory, was on television talking about yellow journalism by the "L.A. Times." So, particularly in Republican circles, the press can be a useful vehicle to run against.

WOODRUFF: Howard, very quickly, what about going forward? As he does the transition, as he becomes the governor, is this heavy media coverage going to continue?

KURTZ: The rock star coverage is going to continue, as it did with Jesse Ventura in Minnesota for at least next several few weeks, the inauguration. Everything he does will be seen as new and interesting.

But I think three, four months down the road, when he's grappling with the budget and having to deal with the meat and potatoes of the state legislature and so forth, "Access Hollywood" may not be there. I'm sure CNN will. But I think the coverage will drop off and become somewhat more normal. Of course, it can never be completely normal when we're talking about the Terminator.

WOODRUFF: All right, that's for sure.

Howard Kurtz of CNN's "RELIABLE SOURCES" and "The Washington Post" -- thanks, Howard

KURTZ: Thank you.

WOODRUFF: Well, a check of television ad spending during the recall campaign confirms what most California viewers probably already knew. And that is that the top candidates spent big money on television ads.

According to the Campaign Media Analysis Group, which tracks spending in the media's top 100 markets, the Schwarzenegger campaign and its direct supporter groups spent at least $17 million on TV ads. Governor Davis, along with his direct supporter group, spent more than $13 million. Total ad spending for the entire recall is being estimated at close to $50 million.

What went wrong for Gray Davis? What went right for Arnold Schwarzenegger. And will both men work together in what could prove to be a dicey transition?

Three reporters who closely covered the recall join me next.

(COMMERCIAL BREAK)

WOODRUFF: Well, with us now to talk a little more about the California recall election and around Schwarzenegger's big win, Carla Marinucci of "The San Francisco Chronicle" and Terry McCarthy of "TIME" magazine. Let me turn to you, Carla, first. Are you surprised?

CARLA MARINUCCI, "SAN FRANCISCO CHRONICLE": I think that the size of the win, Judy, is what is surprising. A lot of people felt in the final days it was going to come down to this. But the mandate, and the number of voters, the kind of voters that went for Schwarzenegger, that knocked everybody's socks off. And think we're still in a little bit of shock over that.

WOODRUFF: Terry McCarthy, are you in shock?

TERRY MCCARTHY, "TIME": Not so much, actually. We had heard the polling last week was holding up very well for Arnold. I knew "The L.A. Times" article put a blip in that, but it only last a day.

I spoke yesterday to a Republican Get Out The Vote person. She told me she took a 97-year-old lady with Macular Degeneration to the polls. And she felt badly that she wanted to get rid of Gray Davis. That shows the resentment that (UNINTELLIGIBLE) in the state to the governor. WOODRUFF: Carla, you write for "The San Francisco Chronicle." We know San Francisco is more Democratic. Arnold Schwarzenegger didn't get as large a margin there, didn't do as well. But what do these results say about California politics?

MARINUCCI: Well, I think what it says is I mean, Arnold Schwarzenegger hit a nerve when he said, we're mad as hell, we're not going to take it anymore. That was his mantra throughout the campaign. And Gray Davis basically delivered him the material.

He did a couple of things that really angered voters here. Increased -- tripled the car tax on them. They were getting those bills when they were getting ready to vote. That's to make up the huge deficit here. That turned a lot of voters over to Arnold. And he signed a bill that gave illegal -- allowed undocumented immigrants to get driver's licenses. That was another thing that did it.

And finally, if there was any hope of the Democrats surviving this, Cruz Bustamante was taken out by those ads that talked about Indian gaming interests, special interests. Arnold Schwarzenegger hit that very hard. That was the triple -- the trifecta, if you will, delivered him over the top, I think.

WOODRUFF: Terry McCarthy, are Californians realistic about what it's going to take to get the state straightened out?

MCCARTHY: Well, I think the bigger question is, how realistic is the Schwarzenegger team? They have got to present some kind of a program now. They haven't done that yet. They said they're going to audit the books before they tell the state what they're going to do.

If he goes ahead and rescinds the car tax increase, that's another $4 billion which he's going to have to find on top of another $8 billion deficit, which comes to January 1. So there's a lot of cuts that are going to have to be made. And until Schwarzenegger tells the Californians where he's going to cut it's very hard for the state to evaluate how it's all going to go.

WOODRUFF: Carla, there's literally no sense right now how's going to deal with the deficit, rescinding the car tax and so forth?

MARINUCCI: It's going to take more than an action hero, a Hercules to lift California out of the doldrums that it's in. And he said, I will not raise your taxes. I will not cut education. And I am going to get rid of that car tax.

So at this point, no, beyond this, we don't know much. We do know the transition team is assembling now. It's going to include people like George Schultz and John Cogan and a lot of the people that have helped him on the economic side all along. So a lot of people are interested to know, exactly what are the details. That's where the devil is in this whole thing.

WOODRUFF: Terry, where does this leave the Democrats in the state of California? MCCARTHY: That's a good question. The Senate Democratic leader John Burton (ph) was asked this morning how he would be working with the new governor. And he somewhat curtly replied, it depends how the governor wants to work with us. So at one level it's in the Democrats' interest to make this transition as hard as possible for the Schwarzenegger team.

However taking up on your last segment about the press attention on Arnold, you know, that's a great weapon for him. If he goes into his new term, he's trying to get things done and he's blocked at -- removed at every step by the Democrats, he can then go to the press. He'll have 50 cameras the moment he walks out of his office and he can say, listen, I tried to do all this, I'm just being blocked, it's politics as usual. I'm going back to the people.

So that could go both ways for the Democrats if they don't cooperate.

WOODRUFF: California press better brace themselves.

MCCARTHY: It will be stormy.

WOODRUFF: Terry McCarthy with "TIME" magazine, Carla Marinucci with "The San Francisco Chronicle." Thanks very much for talking with us.

MCCARTY: Thanks, Judy.

WOODRUFF: After battling for months to keep his job, Gray Davis issued a gracious concession last night saying the voters of California have made their decision. And there was no sign of the sore loser syndrome. CNN's Bruce Morton with thoughts on that.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): You know Gray Davis. Gray as his name, stiff, all the charisma of a dead fish. But last night after he knew he had lost, he seemed easier, more relaxed. His wife shed some tears. Davis ad libed a little joke.

DAVIS: I told my wife and mother before we came out here that this is a no-crying zone on this stage. We can cry later tonight, but this is a no-crying zone.

MORTON: And he was gracious toward the man who beat him.

DAVIS: And I pledge to Mr. Schwarzenegger tonight the full cooperation of my administration during the transition.

MORTON: So will defeat make Gray Davis less gray, more relaxed? Well, maybe.

Albert Gore as vice president was famous for being stiff. Dull. Conceding defeat to George W. Bush, he seemed at ease.

AL GORE, FORMER VICE PRESIDENT OF THE UNITED STATES: I say to President-Elect Bush that what remains a partisan rancor must now be put aside, and may God bless his stewardship of this country.

MORTON: Or this...

GORE: I do believe as my father once said that no matter how hard the loss, defeat may serve as well as victory to shake the soul and let the glory out.

MORTON: And look what happened. The man who, during the campaign hired a consultant to tell him what color clothes to wear, grew a beard, dressed casually like anybody else. Defeat can free you.

President Harry Truman wrote in his diary in 1947 about the ghosts he shared the White House with. The tortured souls who were and are misrepresented in history. For the ones who come back, it's a hell of a place. Truman chose not to run in 1952 and went happily back to Missouri. If you want a friend in Washington, he advised, get a dog.

So who knows? Arnold Schwarzenegger the winner, may find his troubles just beginning. Gray Davis, maybe a career in Hollywood?

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: That would be an about-face.

With a successful recall behind them, are California Republicans happy now and united? Our Bob Novak says, not so fast. We'll check in on relations between Arnold Schwarzenegger and Tom McClintock straight ahead.

(COMMERCIAL BREAK)

WOODRUFF: We've heard from the candidates, and we've heard from the activists, some of them. But what do ordinary Californians think about their next governor? CNN's Charles Feldman has been talking with a lunchtime crowd out in West Hollywood. And, Charles, what are they telling you?

CHARLES FELDMAN, CNN NATIONAL CORRESPONDENT: Judy, we've been camped out all day at Mel's Diner. And I want a hamburger already. You know, this is ridiculous.

OK, let's see. Do you mind if I join you for a second here?

UNIDENTIFIED FEMALE: Sure.

FELDMAN: Yes? Let me ask you, do you think Arnold Schwarzenegger is going to bring back the salad days -- I'm sorry for that pun -- for California?

UNIDENTIFIED FEMALE: Let's hope so. We need a change. And he is a driven man. And I hope he does.

FELDMAN: I take it you voted for him?

UNIDENTIFIED FEMALE: Yes, I did.

FELDMAN: And you voted for him because it was an anti-Davis or pro-Schwarzenegger vote?

UNIDENTIFIED FEMALE: It was a pro-change vote.

FELDMAN: Pro-change. OK. Go back to your salad. It looks good.

UNIDENTIFIED FEMALE: Thank you.

FELDMAN: All right, let's see. You're eating -- I'm getting really hungry now. I don't know what you're eating. Who did you vote for?

UNIDENTIFIED MALE: Arnold Schwarzenegger.

FELDMAN: You voted for Arnold Schwarzenegger?

UNIDENTIFIED MALE: Yes.

FELDMAN: Are you a Democrat or Republican?

UNIDENTIFIED MALE: Neither.

FELDMAN: Neither? OK. Why can did you vote for Arnold Schwarzenegger?

UNIDENTIFIED MALE: I think he's the best man for the job.

FELDMAN: Why?

UNIDENTIFIED MALE: You know why? Because I think he's going to be under a microscope his complete term. So that's good for the people of California.

FELDMAN: Were you troubled in the last days of the campaign by the dirt being thrown around? (UNINTELLIGIBLE) to the Democrats?

UNIDENTIFIED MALE: Negative. OK. And do you think he's going to do what he says he's going to do?

UNIDENTIFIED MALE: That's a good question. Do any of them ever do that? But I think he's going to try with all of his heart.

FELDMAN: OK, can I have a french fry? Let's see.

One more here. Excuse me, are you taking the order? Or no? Can I sit here.

UNIDENTIFIED MALE: Sure.

UNIDENTIFIED FEMALE: All right.

FELDMAN: Who did you vote for?

UNIDENTIFIED MALE: Well, I voted no on the recall.

FELDMAN: No on the recall. Why?

UNIDENTIFIED MALE: Because I feel like you should give Gray Davis a chance to do his job.

FELDMAN: What about all the other people that I've talked to all morning long here at Mel's who say they voted for Arnold Schwarzenegger because they think he's going to bring change to California and change is needed?

UNIDENTIFIED MALE: Well, I think here you are in actorland. I think a lot of these people just bought into, you know, his script. But time will tell. We'll see in three years if he's able to cut the mustard and make it work.

FELDMAN: He said last night, Schwarzenegger, that everybody has to now be united. Do you agree with that?

UNIDENTIFIED MALE: Well, I do agree in a way, that we do need to come together now because we've got to help California. So I think everyone needs to come together and Democrats and Republicans and try to work it out so that the economy is fixed and jobs come back.

FELDMAN: OK.

Judy, that's just a brief sample of some people eating lunch here at Mel's Diner. And I think I should get up because I think I moved somebody out of their lunch -- Judy.

WOODRUFF: You've managed to make me hungry. Thanks, Charles, very much. And thanks to all those folks you talked to.

Well Bob Novak is joining us with some "Inside Buzz." All right, Bob, who were the key people behind this Schwarzenegger victory?

ROBERT NOVAK, CO-HOST, "CROSSFIRE": There was a story about a triumvirate meeting frequently. It was Mr. Schwarzenegger, David Dreier who's going to head the transition team, congressman from California.

And Mike Murphy the Washington-based political consultant. Murphy did a terrific job in running that campaign. He was -- I'm told he was offered chief of staff in the governor's office. But turned it down. Didn't want to become a -- go to Sacramento.

However, Judy, the relationship between Schwarzenegger and Tom McClintock, the other Republican in the race, is not very good. The Schwarzenegger camp was not happy with McClintock raising the so- called Hitler issue at the end. And I don't think he's going to have a very important role in the administration. At least that's the way it looks right now.

WOODRUFF: McClintock even said if the allegations were true, that he should drop out of the race.

NOVAK: Yes. That didn't go over big.

WOODRUFF: Bob, back in Washington, apparently some sort of deal cut between a prominent Democratic senator and President Bush?

NOVAK: Harry Reid, the Senate Democratic whip, one of the savviest, smartest deal makers on Capitol Hill, got an aide of his, a man named Jaczko to be appointed to the National Regulatory Commission even though the nuclear industry was dead set against it. They're just furious that Gregory Jaczko was named.

Why did President Bush do that? Well, Harry Reid had been holding up 36 presidential appointments and released them, and 19 of them have already been confirmed, including the U.S. attorney for Oregon and ambassadors to Ireland, El Salvador and the Czech Republic. That's some deal. That's one of the biggest Washington deals I've seen in a long time.

WOODRUFF: Love to talk to Senator Reid about that, to get, you know, his take on what happened.

All right. Finally, Bob, it's no mystery that President Bush is raising a lot of money. But what's the latest on that?

NOVAK: If you want to be an Eagle, Judy, I like to make these opportunities available to you. For only $15,000, you get two big events. One of them is occurring in Washington, D.C. this week. There are Eagles from all over the country. They have two breakfasts, one today, one tomorrow. They have lunch with Mary Matalin tomorrow -- or rather today. And they have the big dinner with the president tonight at the Hilton Hotel.

But the piece de resistance, I think, was last night at the Willard Hotel. The Eagles had dinner with, guess who? Dick Cheney. That vice president who nobody gets to see. And they had dinner, not at an undisclosed location, but at the Willard Hotel. That's a pretty good deal for $15,000, wouldn't you think, Judy?

WOODRUFF: Sounds like a bargain. OK. Bob Novak, thank you. We'll see you very soon.

NOVAK: My pleasure.

WOODRUFF: Arnold Schwarzenegger's victory in California is drawing intense interest across the Atlantic Ocean. When we come back, we'll find out what the people in Schwarzenegger's hometown in Austria are saying about his new political role.

(COMMERCIAL BREAK)

WOODRUFF: Around Schwarzenegger's victory here in California was drawing cheers thousands of miles away from the Golden State. Crowds were gathering at Schwarzenegger's hometown in Austria to celebrate. Many in the crowd said they were proud, but not surprised.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's a pretty big deal. And I think people are proud for Schwarzenegger nowadays.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We're so proud of all that he has reached in his life. And -- because it's not only an American dream, it's also an Austrian dream.

(END VIDEO CLIP)

WOODRUFF: Schwarzenegger's victory speech was broadcast live in his hometown.

More INSIDE POLITICS in a moment.

(COMMERCIAL BREAK)

WOODRUFF: California's state controller, a man named Steve Westly -- he's a Democrat, he is the chief financial officer for the state. He's among those waiting for Arnold Schwarzenegger's plans to reform the state budget.

Steve Westly joins me from Sacramento.

Mr. Westly, is -- are you and other Democrats who were elected to your positions going to be able to work with this Republican governor?

STEVE WESTLY, CALIF. STATE CONTROLLER: Well, I think we absolutely are. I think the challenge for us is to put partisan differences aside, to roll up the sleeves, and to start putting California's fiscal house back in order.

WOODRUFF: Well, how do you do that? I mean, the state had an enormous deficit in the last fiscal year. That's been reduced somewhat. But you already have the incoming governor saying he's going to roll back the car tax. That's going to create an even larger deficit. How do you address these -- these tough problems?

WESTLY: Let me just give you some sense of scope.

First, we had a $38 billion budget deficit. I want to give the legislature some credit. They've cut that back to the point where we now have an ongoing structural deficit of what we anticipate this year will be in the $8 billion range. But we've also used a lot of the easy solutions and fixes, so that tough discussion now is going to be, how do we deal with the ongoing $8 billion structural gap? We're all eager to see what the governor puts forward in the budget that he'll have to send to the printers, just 70 days from now.

WOODRUFF: But won't that gap increase as soon as he repeals, rescinds the car tax by another $4 billion automatically? WESTLY: If he goes ahead with the campaign promise to rescind the vehicle license fee, that will decrease the budget deficit an additional $4 billion. And that's going to make it very hard, especially when he's promised not to raise taxes or to cut basic social services like education. So we're all eager to see just what cuts he plans to propose.

WOODRUFF: Are you going to try to talk him out of that repeal?

WESTLY: I certainly won't try to talk him out of that. But I will plan to work with him to talk about what options he does have. Because it's going to be, I believe, a lot tougher than he might anticipate.

WOODRUFF: We hear from David Dreier and others that Arnold Schwarzenegger plans to go through the state budget literally line by line, look at the audit. Do you think that there's 8, 10, 12, $15 billion worth of waste in the state budget right now? You're the state controller.

WESTLY: I've been through the state budget line by line, and it's going to be very difficult to find $8 billion in waste.

One of the things that was much discussed during the campaign is why don't we do more auditing of the state government? And the fact is, as controller, my office does the audits of state government. We have over 200 auditors that go out every day, and we'll uncover about $200 million in waste. We could probably do more if we had the authority to do performance audits as well. But you're not going to find $8 billion in any easy or magic way.

WOODRUFF: You're saying that may come as a surprise to the new governor?

WESTLY: I suspect it may. The simple fact is, he's going to have to make some tough choices. That's what being elected to public office is all about.

But I want to be the first person to say, I am prepared to work with him. Every Californian should want our governor to succeed

WOODRUFF: Steve Westly, who is the California state controller. Thank you very much for talking to us.

WESTLY: Thank you.

WOODRUFF: We appreciate it.

Well ,for his part, President Bush tried to stay out of the California recall. But how close might he get with Arnold Schwarzenegger now? We're going to have much more on the '04 implications of this recall ahead on this special edition of INSIDE POLITICS.

(COMMERCIAL BREAK)

(NEWSBREAK)

(BEGIN VIDEOTAPE)

SCHWARZENEGGER: Together, we can make this again the greatest state of the greatest country in the world.

ANNOUNCER: The victory party is over. Now Arnold Schwarzenegger may face a wake-up call as he begins the transition from actor to governor.

DAVIS: I am calling on everyone in this state to put the chaos and the division of the recall behind us, and do what's right for this great state of California.

ANNOUNCER: It's a tough time for California Democrats. But they're trying to turn the tables on Republicans, with an eye to 2004.

REP. NANCY PELOSI (D-CA), MINORITY LEADER: I think the message from California is a message to President Bush, stop your reckless economic policies.

ANNOUNCER: What's going on with WESLEY CLARK? We'll look at new questions about the state of his presidential campaign.

Now, live from Los Angeles, a special edition of JUDY WOODRUFF'S INSIDE POLITICS.

(END VIDEOTAPE)

WOODRUFF: Hello again from California.

Well, if there's any consolation for Democrats in this state, it may be this -- they are now more than eager to hold Governor-Elect Arnold Schwarzenegger accountable for his campaign promises. On this day after the recall vote, Schwarzenegger is expected to talk to reporters less than two hours from now about the political process ahead. We, of course, will carry his remarks live.

Meantime, CNN's Miguel Marquez is covering the transition already in the state capital of Sacramento.

And Miguel, after just listening to the state controller, Steve Westly, it sounds like they've got their work cut out for them.

MIGUEL MARQUEZ, CNN CORRESPONDENT: Oh, a lot of work, I'd say.

As we know, campaigns are all about promises. And governing is all about reality. The two sides seem to be talking nice for the most part right now. But it seems they're both due for a big reality check.

(BEGIN VIDEOTAPE)

MARQUEZ (voice-over): One side called it a fix for a state and a governor gone bad.

SCHWARZENEGGER: Davis always knows how to run a dirty campaign. But he doesn't know how to run the state.

MARQUEZ: The other side called it a circus and a right-wing conspiracy.

DAVIS: We will send a message from California to Crawford, Texas, to the White House, we are not going to stand for a Republican power grab.

MARQUEZ: But in the end, both sides called for unity, even if their foot soldiers didn't believe it.

SCHWARZENEGGER: Gracious phone call from Governor Davis, OK? I really appreciated that call because he promised me that he would work hard to make this transition smooth.

DAVIS: We've had a lot of good nights over the last 20 years. But tonight the people did decide it is time for someone else to serve. And I accept their judgment. I have placed a call to Mr. Arnold Schwarzenegger just....

(BOOING)

DAVIS: ... placed a call to Mr. Arnold Schwarzenegger just a few minutes ago to congratulate him on being elected governor.

MARQUEZ: Among the also-rans, Tom McClintock, the conservative state senator. He conceded by calling his campaign the conscience of the election, but is now ready to cooperate with his new political boss.

MCCLINTOCK: I have just spoken to Governor-Elect Arnold Schwarzenegger, and pledged to him my whole hearted support in undertaking the great responsibilities which the people have entrusted him with. This is a great day for California.

MARQUEZ: But Cruz Bustamante, who will remain lieutenant governor, and had little to do under Davis, isn't warming up to his new boss too quickly.

BUSTAMANTE: Go where you like, feel free to stay as long as you like, I'll be here keeping an eye on things.

MARQUEZ: So will those talking about unity walk in unison? They may have little choice for now because of a lightning-fast transition.

Candidates usually have about 60 days, but this time Schwarzenegger may only have a little more than a month. With a budget due in January and a shortfall already projected in the billions, unity may quickly give way to the same old, us against them.

TONY QUINN, POLITICAL ANALYST: In the next three months, he's got to prepare a state budget. We have court rulings now that say you're not going to able do the kind of borrowing that Davis did with his budgets. That's going to be very tough.

(END VIDEOTAPE) MARQUEZ: Now, maybe in a sign of things to come, Arnold Schwarzenegger and the Democratic leader of the Senate had a conversation today. They both agreed they have a tough job ahead. But neither seemed to extend a hand of cooperation. It's wait-and-see time in Sacramento -- Judy.

WOODRUFF: Well, at least they're already talking. All right. Miguel Marquez, thanks very much, in Sacramento.

Well, some top Democrats do seem to be moving on after the recall. California Senator Dianne Feinstein is urging fellow members of her party not to immediately launch a tit-for-tat recall drive against Schwarzenegger.

(BEGIN VIDEO CLIP)

SEN. DIANNE FEINSTEIN (D), CALIFORNIA: I'll tell you what I've heard is, there is an individual, or individuals who are willing to put up the money to begin a petition drive. I -- I think it's a mistake. I think Mr. Schwarzenegger has to be able to take office. He's got to be able to do what he said he would do. And everybody -- we all ought to help that job get done. We ought to try to break down the polarization in our society, and work together.

(END VIDEO CLIP)

WOODRUFF: Meantime, Schwarzenegger's uncle-in-law, Senator Edward Kennedy, says that he looks forward to working with the governor-elect.

On the recall outcome, Kennedy said, "What better proof could there be that America really is a nation of immigrants? The Kennedy family has its own big tent policy."

Well, some other Democrats are reacting to the recall with less talk about Schwarzenegger or Gray Davis, and more about President Bush.

(BEGIN VIDEOTAPE)

WOODRUFF (voice-over): The message seems to be morphing.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: This is about whether America is going continue to be a democracy or are we going to be dominated by the far right?

PELOSI: This was about jobs, and it was about the economy.

WOODRUFF: You could say the Democrats are working in an about- face, where weeks ago they denounced the recall as --

WILLIAM CLINTON (D), FMR. PRESIDENT: A laughing stock, a carnival, or the beginning of a circus in America.

WOODRUFF: They're now casting it as a popular uprising against the economic policies of the Bush administration, a local manifestation of national discontent.

Yesterday's vast Republican conspiracy is today's nonpartisan anti-incumbent populist revolt.

DAVIS: I have no better friend than the former president of the United States William Jefferson Clinton.

WOODRUFF: National Democrats trooped out en masse to help the flailing California governor.

WESLEY CLARK (D), PRESIDENTIAL CANDIDATE: I'm here to support all of you who agree with me that you must vote no on this recall.

WOODRUFF: But the '04 Dems had their own agenda -- to maintain their party's grip on California's 55 electoral votes, and thwart any Republican psychological gains that would surely accompany a recall win.

In 2000, Al Gore won the Golden State by more than 1 million votes after spending next to nothing.

AL GORE (D), PRESIDENTIAL CANDIDATE: Thank you.

WOODRUFF: But with a Republican and governor's in the mansion and a White House hungry to seize the ultimate electoral prize, Democrats won't be able to take the state for granted anymore, which could explain why Howard Dean is now saying that, "The voters in California directed their frustration with the country's direction on their incumbent governor. Come next November, that anger might be directed at a different incumbent -- in the White House." Yet another message to sell to California voters.

(END VIDEOTAPE)

WOODRUFF: And a perfect point to turn to the Bush administration's take on the recall and what it may mean for election 2004.

Here's our White House correspondent John King.

And John, we know the president has spoken to the governor-elect. Do we know what they said?

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Let's begin there, Judy, with the White House reaction. Suffice to say, a very different take here at the Bush White House than you're hearing from the Democrats there. The president of the United States did call the governor-elect, Arnold Schwarzenegger, this morning about noontime here in Washington, 9:00 a.m. out on the West Coast. You see Mr. Bush there making the phone call.

We are told by the White House that the president congratulated Arnold Schwarzenegger, said he was very proud of the campaign he had run and very much looked forward to working with him.

And on that note, Judy, Mr. Bush is headed to California next week, two fund-raisers for the Bush-Cheney re-election campaign. No official announcement as yet. But we are told plans already in the works for Mr. Bush and Mr. Schwarzenegger to get together next week out in California.

WOODRUFF: And John, what -- what is the White House saying about having a Republican governor in the biggest state in the country? Is it going to help them as the president looks for re-election?

KING: Judy, they think it helps, and they think it definitely does not hurt. They are looking at the election results and the exit polls, and they see things that they say put this state in play and rebut any Democratic criticism that California is not in play for the president next year.

Start here -- they're adding up Arnold Schwarzenegger's vote and State Senator Tom McClintock's votes. They say two Republicans in a predominantly Democratic state got roughly 60 percent of the vote last night. They say you have to look at that as proof that President Bush can compete in California next year.

And they also reject the idea that this is an anti-incumbent wave. They believe this was all about Governor Gray Davis, his effectiveness, or lack of it, they would say, running the state and his campaign strategy. They note Governor Davis in the exit polls had an approval rating of 25 percent. The president's approval rate just under 50 percent. And they say here also, California now already a source of a great deal of money for the Bush campaign, perhaps even more so because there is energy in a Republican Party.

The thing they want to look at most closely, Judy -- what kind of new voters did Arnold Schwarzenegger bring to the polls? Who were Tom McClintock's voter? How do they try to bring that together and form a coalition? They are about to put together a California campaign team for Bush-Cheney. They are studying the results very closely. But they are very happy at this White House.

And again, look for Mr. Bush and Mr. Schwarzenegger to appear together in public next week out on the West Coast.

WOODRUFF: Very interesting. Meaning it's going to be more complicated for whoever the Democratic nominee is. OK.

KING: That's right.

WOODRUFF: John, thank you very much.

KING: Thank you.

WOODRUFF: We're going to talk more about what the recall may mean for Republicans, and President Bush's reelection bid. Republican National Committee Chair Ed Gillespie joins us next.

Speaking of '04, has Wesley Clark's presidential campaign hit a rough patch after all the hoopla about his late entry into the race?

Plus, who bugged the Philadelphia mayor just weeks before the election?

(COMMERCIAL BREAK)

WOODRUFF: Both major political parties of course, had a keen interest in the outcome of the California recall election. Democratic Governor Bill Richardson of New Mexico spoke with me just a short time ago, and he had this to say about the election and its possible impact on his party.

(BEGIN VIDEO CLIP)

GOV. BILL RICHARDSON (D), NEW MEXICO: This was not a Democrat v. Republican, this was a protest vote against an existing governor, who happened to be a Democrat.

(END VIDEO CLIP)

WOODRUFF: Well, with us now from Washington, Republican National Committee Chairman Ed Gillespie. Is that what it was, a nonpartisan election? A protest movement?

ED GILLESPIE, REPUBLICAN NATIONAL COMMITTEE CHAIRMAN: No, I don't think it was nonpartisan. In fact if you look at the numbers and not only Arnold Schwarzenegger's vote but Bill McClintock's (sic) vote, if you look at there was 60 percent of the voters who voted in an election where the turnout was higher than we saw in the governor's race in 2002, voted for a Republican. And they did that knowingly, obviously.

I do think that -- I give Governor Richardson credit. I do think that this is somewhat unique. And I think extrapolating national implications is -- there's a risk to that here. This was a lot about Gray Davis' failure of leadership as a governor.

But it was also a lot a candidate in Arnold Schwarzenegger who run (sic) a positive campaign and who talked the issues, who provided solutions, said he was going to get results in contrast to the campaign that Gray Davis ran which was very negative and blame game, an attack game campaign that we see in the Democratic Party all the time.

I have to tell you, Judy. I've seen the Democrats saying that this -- the fact that they just lost the incumbent governor in the most populous state in the country is somehow a problem for Republicans. I do find myself watching that and wondering what color the sun is their planet.

(LAUGHTER)

GILLESPIE: Well I don't want to overstate the significance. For our side, it's a positive development, clearly to have a Republican governors not only in California and New York but -- and Florida and Texas as well. the four most populous states now.

WOODRUFF: Well are you saying this is a shoo-in for the Republicans? For the next presidential campaign? GILLESPIE: No, no. That's why I'm saying I don't want to overstate it. That's my point. But I do believe that it is an indication that if you run a campaign based on solutions and getting things done and getting results, that people like to hear that, they want to learn more about the candidate and they tend to be supportive.

That's what -- President Bush is providing strong and principled leadership here.

(CROSSTALK)

GILLESPIE: ... they're similar to what Gray Davis did. They're running very bitter personal attacks, they are (UNINTELLIGIBLE) hate speech. And I think they voters are going to reject that. And so I think we do have -- we are competitive in California. It is not a reliably blue state today.

WOODRUFF: Let me ask you about something else Bill Richardson said. He said it's all going to depend here on whether Governor Schwarzenegger seizes, in his words, the party apparatus, Republican Party apparatus in the sate of California and puts it at the disposal of President Bush. Is that what you expect from the new governor out here?

GILLESPIE: Look, Judy, the California state party did a fantastic in the course of this. And the chairman there, Duf Sundheim, deserves a lot of credit. As you know, the Republican National Committee we said all along, this is matter for the California voters, the California voters decided emphatically yesterday.

But the California state party did get involved. The register 135,000 new Republicans in the course of this recall campaign. They got a lot of new volunteers, a lot of new voters into the party that they identified. If you notice, the numbers for Governor-Elect Schwarzenegger, he's got a strong showing amongst Latino voters, a strong...

(CROSSTALK)

WOODRUFF: But what about my question...

(CROSSTALK)

GILLESPIE: We're not seizing anybody's state party. The state party in California is run by the people of California. They showed that they did a great job doing it in this recall election. I think the process they ran through here and the equipment they put in place will be beneficial to President Bush in 2004.

WOODRUFF: Well, you certainly expect it to be, right?

GILLESPIE: I do expect it to be, yes.

WOODRUFF: All right. One other thing, Ed Gillespie, I want to read to you from the Howard Dean statement that came out last night when the results were clear that Arnold Schwarzenegger was winning. He said, "Tonight, the voters in California directed their frustration with the current direction of the state on their incumbent." But he said, "Come next November the anger might be directed at a different incumbent in the White House."

GILLESPIE: Again, this is -- look, we all have our job to do. And I know that the Democrats have an obligation to try to spin this loss of the most populous state in the union, and losing their incumbent Democrat governor as somehow being a harbinger that's bad for Republicans.

But it's just not there. And like I say, you wonder what color the sun is on their planet. The fact is that the president's approval ratings are higher than Gray Davis. This was a failure of leadership on the part of Gray Davis.

If you look at the other governors (UNINTELLIGIBLE) by the way, Judy, in Kentucky and Louisiana and Mississippi, Republicans are running strong in all three of those states. I think we might run the table here and pick up four governorships in 2003. That's a pretty strong harbinger going into '04.

WOODRUFF: Spoken like a loyal Republican Party chairman.

GILLESPIE: Thank you.

WOODRUFF: Ed Gillespie, talking up his candidates all across the country. Thanks very much, Ed. Good to see you.

GILLESPIE: Thank you, Judy.

WOODRUFF: We appreciate it.

GILLESPIE: My pleasure.

WOODRUFF: A staff shake-up for presidential hopefully Wesley Clark? We're going to tell you who's out and why. And find out why some campaign experts say the retired general may have violated federal election laws.

(COMMERCIAL BREAK)

WOODRUFF: Checking the headlines in our "Campaign News Daily."

President Bush will attend the Republican National Committee's annual gala later this evening in Washington. We heard it from Bob Novak. About 2,000 Bush backers are expected at the event, which is expected to raise about $10 million. Last year's dinner hauled in $30 million, but that was before the ban on soft money took effect. The gala is normally black tie, but donors have been told that business attire is acceptable.

Well, Democrat Wesley Clark has made a big splash in a short time since getting into the presidential race. Now, Clark is facing questions about whether he may have violated federal election laws.

Our Jonathan Karl is standing by at the Capitol with more on this -- Jon.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Well, Judy, what's at stake here are a series of speeches that Wesley Clark has given, paid speeches that he has given continuing his work on that lucrative lecture circuit since he became a candidate for president. Speeches like he gave on September 23 at DePaul University, which netted him about $30,000. This speech, some election officials are telling us, may be a violation of campaign finance laws.

Campaigns -- his rival campaigns are going further. Dick Gephardt's spokesperson said it was clearly a violation of campaign law. And Joe Lieberman, speaking a little while ago in Arizona, said this was a very troubling development.

As for Clark, he would not take any questions on this today, at an event out in Arizona, refused to answer all questions. But his campaign spokespeople are saying that these are contractual obligations. These were speeches he agreed to give long before he decided to run for president. And -- quote -- "our attorneys have assured us that they are completely appropriate as long as they are not campaign speeches."

Now, these speeches -- we've looked at the one at DePaul University. He does talk about his campaign. He talks about what he would do as president. And he is critical of the president. So it is a question -- it's a question of how you define a campaign speech.

Now we talked to the FEC as well. They said they have received no complaints on this yet, Judy. But they say it may be a violation if one of three conditions was met.

First, there is a ban on money from corporations. So this was a political contribution. A university is a corporation. They cannot give money to a campaign. They can also not give contributions over $2,000. This was a $30,000 speech.

Also, there is a ban on using campaign funds for personal use. Clark, however, has two more speeches next week, paid speeches, that he intends to continue to give, at least at this point. They say he has done nothing wrong, Judy.

WOODRUFF: So we'll wait to hear more from his campaign about this.

And speaking of campaign, Jon, what are you hearing about what's going on inside the Clark campaign?

KARL: Well, last night the campaign manager for Clark, Donnie Fowler, resigned. He told people on the way out that he had a disagreement with the direction of the campaign. He said the campaign was becoming too Washington-centered, and had not done enough with the Draft Clark movement, the grassroots movement.

Now I've spoken to several people still with the Clark campaign. They say this was really a personnel dispute, that Fowler was simply told he was no longer going to be campaign manager. He was going to have a reduced role.

By the way, the Clark campaign is bringing in someone else, Dick Sklar. He used to be the U.S. ambassador to the United Nations, will now the chief operating officer for the campaign -- Judy.

WOODRUFF: And we saw another couple of other names familiar from the Clinton and Gore campaigns and administration that have been working in the Clark effort.

KARL: Including Eli Siegel, who is the chairman, yes.

WOODRUFF: Right there. All right. Jon, thanks very much, at the Capitol.

A troubling political development in Philadelphia. Who put a hidden listening device in the mayor's office? The story just ahead.

(COMMERCIAL BREAK)

WOODRUFF: With less than a month to go in the mayor's race in Philadelphia, a new discovery has set off a political frenzy. During a routine sweep, police found a listening device hidden in Democratic Mayor John Street's office. An FBI spokeswoman says the device was not connected to campaign spying. But she refused to say whether Street is being investigated or whether the FBI planted the device. Street's campaign officials suggest that the bugging is politically motivated.

Well, that is it for this special edition of INSIDE POLITICS.

Tomorrow, we're going to come to you from Phoenix, Arizona, the site of CNN's Democratic presidential debate. Candy Crowley will be bringing you all the pre-debate politics and I will be moderating the face-off at 8 p.m. Eastern, 5 Pacific. All nine Democratic candidates will be there. We expect a lively exchange.

I'm Judy Woodruff. Thanks for joining us.

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



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