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JUDY WOODRUFF'S INSIDE POLITICS

GDP Surges More Than Expected; Are Democrats Spooked?

Aired October 30, 2003 - 16:00   ET

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

(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Happy Halloween.

ANNOUNCER: A Halloween Eve surprise. The economy surged more than expected, a political treat for the Bush campaign.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We're laying the foundations for greater prosperity.

ANNOUNCER: Could Democrats be a little spooked?

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: I think every single American is far more interested in J-O-B than GDP.

GOV.-ELECT ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I think this is the wrong time to talk about politics.

ANNOUNCER: But the Bush camp apparently thinks it can learn a few things from Arnold Schwarzenegger.

Keeping the faith, the president opens up about religion and his past.

Now, live from Washington, JUDY WOODRUFF'S INSIDE POLITICS.

(END VIDEOTAPE)

JOHN KING, CNN ANCHOR: Thanks for joining us. I'm John King. Judy is off today.

Listen closely and you just might hear sigh of relief from the Bush White House and grumbles of "now what?" from the Democrats' campaign warroom.

Here's why. The economy grew at a surprisingly strong 7.2 annual rate from July through September. That's the best showing in nearly two decades. Let's talk about the politics of that number now with Dana Bash at the White House and Jon Karl on Capitol Hill.

Dana, let's begin there. They must be happy.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: You can say that again, John. This was the most welcome news you can imagine for the Bush White House, these new economic figures. As you know, the president has been crisscrossing the country talking about the fact that he does still believe that the nearly $2 trillion in tax cuts that he signed into law while in office will have a good effect on the economy and he used the new news 7.2 percent if growth, surprisingly high in number, to bolster that claim to in Ohio today talking about the that this is proof that his policies, his economic policies, are in fact working.

And he used the new number to take a swipe at his opponents who have been talking about raising taxes or even repealing some of his tax cuts.

(BEGIN VIDEO CLIP)

BUSH: Just as the economy has come around some over in Washington say now is the time to raise taxes. Be fair, they think, any time is a good time to raise taxes.

(LAUGHTER)

BUSH: At least they're consistent.

I strongly disagree. Tax relief put this nation on the right path and I intend to keep America on the path through prosperity.

(END VIDEO CLIP)

BASH: And as good as these numbers are, John, the White House and Bush aides do admit that there is one number that is still lagging, a key political issue, I should say, and that is jobs. Especially in the key swing industrial states like Ohio where the president was today.

This is essential and potentially a huge liability for the president. Look at the job losses since he's been in office just in Ohio -- 220,700 total lost and 151,800 in manufacturing alone. That is a number the White House is still looking at. Certainly a number that Democrats are still looking at.

That is why you hear the president and his top aides continue to say even with these great numbers they are not going to rest until more jobs are created during his administration -- John.

KING: Dana Bash at the White House.

Jon Karl on Capitol Hill. The Democrats, of course, can't say 7.2 percent growth is a bad thing. How do they get at this?

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Well, John, as you know, for Democrats in a very real sense, good economic news is bad news for Democrats.

So Democrats have been largely focusing on the negative here. Sure, 7.2 percent economic growth, 7.2 growth in the gross domestic product, they acknowledge that is good. But as Tom Daschle said today, it's not GDP that matters, it's J-O-B-S. And Democratic leaders on Capitol Hill were talking about the president's record not on economic growth, but on jobs.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), MINORITY LEADER: I say to the president, Mr. President, on your watch, we have lost more than 3.2 million private sector jobs. You have the worst record of job performance since Herbert Hoover.

Mr. President, where are the jobs? The American people will not settle for -- nor should the Republicans celebrate, a jobless recovery.

(END VIDEO CLIP)

KARL: Democratic presidential candidate Joe Lieberman was on Capitol Hill today echoing that theme although acknowledging there was a little bit of good economic news out there.

(BEGIN VIDEO CLIP)

SEN. JOSEPH LIEBERMAN (D-CT), PRESIDENTIAL CANDIDATE: The growth numbers are impressive. But the question is are going to last? And the other question is will they be linked with what really matters most to middle class America, which is jobs? The recovery remains not just jobless, but job loss.

(END VIDEO CLIP)

KARL: Other Democratic presidential candidates including John Edwards and Howard Dean put out statement reacting to the news, again focusing on the job loss figures under the leadership of President George Bush.

One of those statements came from Howard Dean saying that the president has, quote, "The worst economic record since the Great Depression." And Dean went on to say it's going to take a lot more than one quarter of economic growth to clean up that mess.

So that's the message from Democrats up here. But, John, I can tell you, Democratic strategists privately acknowledge that one thing that is certainly going to affect the election next year is the economic growth figures, the job figures. This is very critical for next year's election. If the economy is roaring, Democrats know they have an uphill battle in terms of unseating George W. Bush.

KING: Jon Karl on Capitol Hill, thank you very much. I think both parties agree a good day for the president today but this debate hardly over.

Arnold Schwarzenegger is heading back to California to tour the wildfires after cutting short his trip to the nation's capital. He met with Vice President Cheney earlier today at the White House. They talked about the ways the Bush administration can help California and wildfire victims. They also talked about Homeland Security. But not about ways Schwarzenegger could help the president's re-election campaign in California. (BEGIN VIDEO CLIP)

SCHWARZENEGGER: I think this is the wrong time to talk about politics. You know? The Vice President never brought it up and I never brought it up. Because we both were talking about how can we help California in the fastest possible way?

(END VIDEO CLIP)

KING: Perhaps no political talk today, (AUDIO GAP) the president, Mr. Bush's campaign manager will meet with the governor- elect's top political advisers in California on Saturday. Officials say Ken Mehlman is hoping to build on the enthusiasm created by Schwarzenegger's campaign and transfer it to Mr. Bush and the Republican Party for the 2004 campaign.

Checking the headlines now in "Campaign News Daily." Howard Dean stands to pick up a strong labor endorsement at the political expense of presidential rival Dick Gephardt. The president of the Service Employees International Union, the largest in the AFL-CIO says the endorsement is not a done deal, but it's clear his union members support Governor Dean.

A dean endorsement would be a blow to Congressman Dick Gephardt who has staked his campaign in large part on support from organized labor.

Senator Bob Graham has set a date to announce his decision about running for reelection from Florida. Graham will announce his future plans on Monday in Tallahassee and will be guest on this program later that same day.

Graham's potential retirement could complicate Democrats efforts to retake the Senate by creating another open Senate seat in 2004.

Georgia Democratic Senator Zell Miller has already announced his retirement, but he's holding on to his reputation as a political maverick. Miller says he does not trust the Democrats running for president to make the tough decisions about the country's future. He said while has no plans to switch party, quote, "This Democrat will vote for George Bush."

You can't say it too many times. The '04 election could very well ride on the economy. Coming up, we'll talk to a top Bush economic adviser about the latest numbers and the states for the president. And we'll look at what's missing from the economic picture.

Plus, Bay Buchanan and Donna Brazile will spar over the Bush flap some have dubbed "Banner-gate."

This is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

KING: Today's word that the nation's economy went on a third quarter tear would appear to be just what the Whit House ordered.

Our Bill Schneider reports when it comes to political appeal, though, a strong economy is good, but strong job growth is better.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): New figures show the nation's economy has been growing at the fastest pace in nearly 20 years. Wonderful! Whoopie!

So where are the jobs?

ANDREW LAPERRIERE, POLITICAL ANALYST, ISI GROUP: Are people being laid off or hired where I work? Is my brother being laid off or hired? That's how people measure how well the economy is doing.

SCHNEIDER: The second President Bush knows what happened to the first President Bush. The economy started to recover in early 1991. But job growth didn't pick up, and that doomed his dad's re-election in 1992.

BUSH: I won't be satisfied until every American who is looking for work can find a job. So I propose additional measures to keep the economy on the path to greater job creation.

SCHNEIDER: The problem is, there's not a lot more than the government can do. The deficit is high and interest rates are already low.

Consumers are doing their part. Americans have been on a buying spree, driven by tax cuts, mortgage refinancing and a stock market comeback. But businesses have been reluctant to invest and hire.

JOHN CHALLENGES, CEO, CHALLENGER GRAY AND CHRISTMAS: The companies are continuing to operate on a basis of, Let's get the work out any way we can, but let's not go out and hire new people.

SCHNEIDER: Until that change, Democrats have their issue.

And history is on their side. When Herbert Hoover was president during the Great Depression, the country suffered massive jobs losses. Every president after Hoover saw job growth. Even presidents who couldn't get re-elected saw job growth -- Gerald Ford, Jimmy Carter and the first President Bush.

But under this President Bush, there's been a net job loss for the first time in more than 70 years.

How account president defend himself? With two arguments -- it's not my fault and things are looking up.

BUSH: Shocks of the stock market decline, recession, terrorist attack and corporate scandals, our economy is showing signs of broad and gathering strength.

SCHNEIDER: In other words, stay the course. To which Democrats respond, try another course -- ours.

REP. DICK GEPHARDT (D-MO), PRESIDENTIAL CANDIDATE: I led the fight for the Clinton economic program in 1993. It created 22 million new jobs.

(END VIDEOTAPE)

SCHNEIDER: The new economic figures do show business investment picking up, which may mean new hiring is just around the corner. For the president, the question is how long it takes to round that corner -- John.

KING: Bill, thank you very much.

And the need for job creation -- new job creation was among the topics of my conversation today with Gregory Mankew. He's the chairman of the president's Council of Economic Advisers. I started by acknowledging that while it's hard to criticize 7 percent growth, some Democrats are already asking this question -- where are the jobs?

(BEGIN VIDEOTAPE)

GREGORY MANKEW, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: There's no question that jobs are the important missing puzzle -- piece of the puzzle.

I expect jobs to be coming back. We started seeing that in the last month. Going forward, I think we'll see a lot of job creation.

Historically, jobs are a lagging indicator. But the president is very focused on that and that's what we need.

KING: Ari Fleischer said when the last installment of the tax cut passed, it would create a million new jobs. Treasury Secretary Snow was quoted recently as saying 200,000 jobs a month. Are those realistic figures looking forward into a campaign year?

MANKEW: Well, we don't have an official administration forecast. We're in the process of doing that, of putting one -- getting ready for the budget.

But if you look at private sector forecasts, they're forecasting a lot of job creation. I think John Snow's comments were referring to what those private sector forecasts were saying. So we're expecting a lot of job creation over the next 12 months.

KING: Do you have a forecast for where you anticipate the unemployment rate will be by the middle of this year? Or, more importantly, maybe by this time next year when the president is just weeks away from the election?

MANKEW: I don't have a specific number. But I think it's going to come down. It's already starting coming down. It was at 6.4 at the peak. It's now down at 6.1. I think it will keep coming down over the next year. KING: I'm sure you're also familiar with another Democratic criticism. They say one reason there's growth in the economy is because the government is, they say, writing bad checks, that we have all this deficit spending -- that we've gone from a surplus to a deficit. They blame the president for that.

MANKEW: Well, the deficit's a concern. There's no question about that. And reducing the deficit is a priority. But creating jobs is also a priority. In fact, the No. 1 priority right now. If we hadn't cut taxes, the deficit might have been smaller, but we'd also have fewer people working. In fact, we estimate about 1.5 million fewer people would be working today if we hadn't cut taxes.

KING: Some Democrats on Capitol Hill today saying, Sure this is good news for the economy. They are trying to make the case that under their approach, which would have been smaller tax cuts, that things would be even better. How would you answer that?

MANKEW: Oh, I don't agree. I think tax cuts stimulate growth. I think bigger tax cuts stimulate more growth.

We need to get the deficit under control. There's no question about that. That's why we need spending restraint. But creating jobs is the president's No. 1 priority and cutting taxes will do that.

KING: If you say jobs are the missing indicator -- so far, the missing ingredient, anyway, in this recovery so far -- what can the administration do to create more jobs?

MANKEW: Well, first, we have a lot of stimulus already in the pipeline. So tax cuts are still going to have an effect going forward. It's not just a one-quarter phenomenon.

But the president is also focused on (AUDIO GAP) going through Congress. The president's very focused on that. He wants to end frivolous lawsuits. He wants to open up foreign markets abroad. The president's put forward an ambitious agenda to get the economy growing and that's what he's focused on right now.

KING: Why not another tax cut? If the Bush tax cuts have been so successful, why not another bug tax cut? Is the reason the president has all but ruled that out because the country can't afford it or because politically he does not want to walk into the deficit argument with the Democrats?

MANKEW: Well, ultimately, that's a call for the president, whether if he wants to cut taxes some more. The president's already made clear, though, he wants to make the current tax cuts permanent, and it's part of his six-point plan.

So there's still tax cuts on the table. It's taking the current tax cuts and making them permanent.

KING: And what about the politics of the economy? Do you-- is it your sense that voters will look at these numbers, or do voters tend to focus more on that unemployment numbers, something that's easy to understand?

MANKEW: Well, I think voters do care a lot about unemployment, as does everyone in the administration. I think economic growth and rising unemployment go hand in hand. So tax cuts are not just to stimulate GDP growth, which is sort of an abstract economists way of viewing -- viewing the world. It's also to stimulate the job market, and to get more people working. And the tax cuts will do that, and have already started to do that.

(END VIDEOTAPE)

KING: Some tough language today from the Senate Intelligence Committee, which is sending bluntly worded letters to the White House, the State Department and the Pentagon. The committee is demanding that documents relevant to its investigation into intelligence on Iraqi weapons before the war be turned over by noon tomorrow.

Our national security correspondent, David Ensor, tells us the letters were sent to National Security Adviser Condoleezza Rice, Secretary of State Colin Powell and the Defense secretary, Donald Rumsfeld. Today's letters follow a similar one sent yesterday to CIA Director George Tenet.

The famous flight that just won't go away. Up next, Donna Brazile and Bay Buchanan on the president's visit to the USS Lincoln and the banner that is still making headlines.

(COMMERCIAL BREAK)

KING: With us now former Gore Campaign Manager Donna Brazile and Bay Buchanan, president of the American Cause.

Ladies, let's start on the economy. Third quarter number out today, 7.2 percent growth. Pretty remarkable for this president. Let's try to put them into context. Right now, 7.2 percent in the third quarter. Back in 1995 when a man you supported, Bill Clinton, was gearing up for reelection, the third quarter number was 3.1 percent.

Back, in 1991, when your brother, Bay, was challenging an incumbent Republican president, third quarter growth was just 1 percent. Bay Buchanan, this president, what does this number mean today?

BAY BUCHANAN, AMERICAN CAUSE: He has a right to be very excited. It's not only good news for the country, but it's particularly good news for the president. He has pushed tax cuts through three years in a row. He's had to defend them. The Democrats have said it's irresponsible and it wasn't the way to go and he said no.

This is the medicine the economy needed. And he's worked. He can now claim -- or he has a right to claim credit for this incredible job growth -- not job growth, economic growth.

(CROSSTALK) DONNA BRAZILE, FRM. GORE CAMPAIGN MGN.: With 3.3 million Americans who've lost their jobs since the president has taken office, 9 million Americans still seeking work.

Look, I think we're a long way from the finish line in terms of providing economic growth that will create jobs, good jobs in this country. I think what the president and his administration should be careful is that we have a huge deficit out there now, $525 billion operating deficit. And so thus far, what we're doing is writing hot checks. And that might come back to bite this economic recovery.

BUCHANAN: You know, people don't vote on deficits. That won't move them. But this joblessness, it will be a concern of the president's.

The good news from this 7.2 news is that 15 increase in the business spending which is critical. They have to start spending and feel confident. That's when they'll start hiring. So that's why this is a really -- in particularly good news that it's moving in the right direction, but there's no question joblessness is his soft underbelly.

KING: Do Democrats have to keep their fingers crossed and hope that the jobs never come back or do they need to retinker their approach to the economy?

BRAZILE: I think Democrats need to continue to focus on the economy, on job growth and job creation, helping small businesses and come up with a plan that will help fuel this growth and bring that deficit back down because I do believe deficits matter.

And you can't just wash it away when you've got a growing deficit in this country. And I don't understand why conservatives don't believe in...

(CROSSTALK)

BUCHANAN: ... out there talking about increasing taxes. And they've proved that is the not way to go. Cutting them was.

(CROSSTALK)

KING: Let's move on quickly to this debate over the banner. "Mission Accomplished."

The president lands on the USS Abraham Lincoln May 1. He is giving this speech, above him is this giant banner that says "Mission Accomplished."

The president making the case this week that he did not mean mission accomplished in Iraq, that that banner was hung there at the request of the crew to say "Mission Accomplished" for the men and women on that ship, for that purpose and that purpose only.

Bay Buchanan, when you saw that banner May 1, what did you think the White House was saying? BUCHANAN: I thought they were saying "Mission Accomplished." It's clear. I'm sure whatever happened was whomever put that is an advance man up there thinking it was very clever, a powerful statement. And what they're trying to say is that the war, that part of the war was over.

And they obviously were very optimistic this part of the operation would be quicker and not be -- cost so many American lives. And it is. The president is in this bit of a difficult situation right now. He's got to start moving troops out if he doesn't want it to be an issue next year.

BRAZILE: Well, another one of those mistakes by the White House where they put the spin behind them and not ahead of them. And they should take responsibility and not blame it on our brave men and women, the soldiers on that, what you call that, big boat, that ship.

(LAUGHTER)

BRAZILE: But there's no question that we still have a lot of work to do and hopefully this is not an issue.

KING: Very quickly you just said take the troops out so it's not an issue next year. If he takes the troops out couldn't it be a bigger issue if Iraq collapses into chaos?

BUCHANAN: There's no question he has to take them out cautiously. But I believe he has he has 130,000 American troops there that you'll start to see that number drop, 120, 180. And so the American people will see that, sure, we still have troops there a year from now, and a lot of them, but it's moving in the right direction (UNINTELLIGIBLE).

(CROSSTALK)

BRAZILE: Let them stay until they can train the Iraqis to take over their own country, again.

KING: Thank you both very much.

BUCHANAN: Thank you.

BRAZILE: Thank you.

KING: President Bush doesn't talk about it much but he did last night. Up next, the president's rare reflections on his younger and wilder days.

(COMMERCIAL BREAK)

KING: President Bush makes no secret about the fact that he was a heavy drinker in his younger days. But it's not something he usually brings up during campaign appearances.

At a Christian youth center in Dallas last night thought, he apparently felt like opening about the role religion played in his recovery.

(BEGIN VIDEO CLIP)

BUSH: A lot of time the best way to help the addict, person stuck on drugs and alcohol, is to change their heart. See, you change their heart then they change their behavior. I know.

(END VIDEO CLIP)

KING: President Bush speaking last night in Dallas.

That's it for INSIDE POLITICS. I'm John King. Thanks for joining us. "CROSSFIRE" starts right now.

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