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JUDY WOODRUFF'S INSIDE POLITICS

Gore Endorses Dean; Interview With Governor Schwarzenegger

Aired December 9, 2003 - 15:30   ET

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

(BEGIN VIDEOTAPE)
AL GORE, FMR. VICE PRESIDENT OF THE UNITED STATES: I want to do everything I can to convince you to get behind Howard Dean, and let's make this a successful campaign as a group.

ANNOUNCER: The endorsement that rocked the Democratic presidential race. We'll have complete coverage of the new Al Gore- Howard Dean alliance. What were they thinking, and what do Dean's rivals do now?

SEN. JOSEPH LIEBERMAN (D-CT), DEMOCRATIC PRESIDENTIAL CANDIDATE: I'm more determined than ever to continue to fight for what's right.

ANNOUNCER: Arnold Schwarzenegger, unscripted. The governor talks at length about his early political setbacks, the future of his budget plan and the sexual harassment allegations still hanging over him.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I consider those kind of pre-election things.

JUDY WOODRUFF, HOST: It's just put aside?

SCHWARZENEGGER: There's no investigation.

(END VIDEOTAPE)

ANNOUNCER: Now, live from Sacramento, California, JUDY WOODRUFF'S INSIDE POLITICS.

WOODRUFF: Thank you for joining us from the California state capital.

When Arnold Schwarzenegger recently agreed to sit down with me for an extended interview, none of us would have predicted that on the very day of our meeting, Al Gore and Howard Dean would spring the biggest political surprise since, well, since Arnold Schwarzenegger entered the recall race here. We're going to devote much of the next hour to my conversation with Schwarzenegger and the early ups and downs of his tenure as governor.

But for right now, let's turn to Howard Dean, because he's heading right now to New Hampshire for yet another Democratic debate tonight, with Al Gore's endorsement under his belt, and you might say greater security in his status as his party's frontrunner.

CNN's Kelly Wallace was there when Gore made the announcement this morning in New York.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN INTERNATIONAL CORRESPONDENT (voice-over): In Harlem, Al Gore, the man who wanted to be president, tries to pick the next one.

GORE: I'm very proud and honored to endorse Howard Dean to be the next president of the United States of America.

WALLACE: Why Dean? Why now? Gore said the former Vermont governor is the candidate with the most grassroots momentum and the best chance to win back the White House. The one he encouraged the Democratic Party establishment to rally around.

GORE: We need to keep our eyes on the prize. This nation cannot afford to have four more years of a Bush-Cheney administration.

WALLACE: And there was a very blunt message to those Democratic presidential candidates who supported the war with Iraq, a war Dean and Gore have rallied against.

GORE: It was a mistake to get us into a quagmire over there. So don't tell me that because Howard Dean was the only major candidate who was right about that war, that that somehow calls his judgment into question on foreign policy.

WALLACE: Dean saluted his biggest endorser yet and vowed to focus his campaign first not on swing voters, but on the Democratic base.

HOWARD DEAN (D), DEMOCRATIC PRESIDENTIAL CANDIDATE: We made a conscious decision to start with women, to start with the African- American community, to start with the Latino community, to start with the trade union movement.

WALLACE (on camera): It is no coincidence that the endorsement happened here in Harlem. Al Gore won 90 percent of the African- American vote back in 2000, and he can help attract African-American voters who so far have not rallied behind hind the Dean candidacy.

UNIDENTIFIED MALE: Dean is aware of the fact that a lot of us don't know him. Having someone like Al Gore embrace his candidacy says to us those values that we entrusted to Al Gore and we felt were maintained in good keeping can be transferred.

WALLACE: Gore's running mate in 2000 showed signs of being betrayed. Senator Joseph Lieberman says he was caught totally off guard by Gore's decision. Gore called Lieberman Tuesday morning before endorsing Howard Dean.

Gore's endorsement is the most sought after by Democrats, besides of that former President Bill Clinton and Senator Hillary Rodham Clinton, widely viewed as a possible Democratic presidential candidate in 2008.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: I want to see how the process plays out. And I will support whoever the nominee is.

DEAN: It's great to be back in Iowa.

WALLACE: The Dean-Gore road show wrapped up in Iowa, where the vice president's popularity could bring Dean to victory in the kickoff contest of the presidential campaign, a win that could further propel he his frontrunner status.

Kelly Wallace, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: We'll have much more on the Gore-Dean story later in the program, including some analysis from Donna Brazile.

Now to my interview with Governor Arnold Schwarzenegger. During his only three weeks as governor, Schwarzenegger has enjoyed some early legislative successes. He suffered a major setback for his economic recovery plan, and a libel lawsuit by one of the women who claim to have been groped by the actor years ago.

I began a little while ago by asking Schwarzenegger if he's enjoying his new job as much as he thought he would.

(BEGIN VIDEOTAPE)

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I'm having a great time. I mean, it's very challenging, and it's kind of refreshing, also, at the same time, because it's so new, it's so different than being 25 years on movie locations and doing scenes and doing stunts and all those things. So this is something new, a new challenge.

And the other thing is just that every time you make a decision here, it has an effect on millions and millions of people, rather than just making decisions that has an effect on yourself or maybe your family. So, to me, this has become a very interesting kind of a thing. And, like I said, very challenging, hard work. But I enjoy it.

WOODRUFF: Now, here you are, you're still on your honeymoon, you had a great election victory, you had an inauguration that was broadcast all over the world. People were watching from everywhere. But three weeks later, or last Friday night, the legislature turns around and hands you a big defeat on these budget questions and the spending cap.

What happened?

SCHWARZENEGGER: Well, first of all, I mean, you maybe look at the glass half empty. I look at it half full. So it was not really a defeat.

It was, basically, we're in the middle of negotiations right now. And I think that there is a way of reaching a compromise. And if -- and if there is a defeat, then it is a defeat for the people of California. It's not my defeat. It's not their defeat. It's the people of California that really lose, because we are in an emergency right now, and this is the problems that Governor Davis faced, you know, in his last year. And I think there's just such a huge budget deficit, there was such an enormous amount of overspending. And the whole thing is totally out of control.

And what we have to do is, we have to take this inherited debt that we have, roll it into one, and offer the bond, and let the people vote on it, the $15 billion bond. But at the same time, have a budget -- a spending limit on that so that it never happens again. That's the idea. And, of course, it's very tough for legislators to do, because they like to spend.

They like to spend. And so for them to now say, let's put a cap on that, let's put a spending limit on it, let's restrain ourselves, is almost impossible. And this is why I compare it with addiction and intervention. That if they cannot stop themselves, then we have to get outside intervention, which will be the ballot on November. So that's what the other alternative is.

WOODRUFF: Well, do you think you're close to working something out in the next day or so?

SCHWARZENEGGER: Yes.

WOODRUFF: Because I know you're talking to Democrats and Republicans right now. They were prepared to go -- or close to being prepared to going along with you on the bond, the borrowing. But it was that spending cap. Are you prepared to compromise, are they prepared to compromise?

SCHWARZENEGGER: Well, I think that they know that there has to be a spending limit. The only thing is, it's a question of, what is the definition of spending limit? And so we're working on that language so that it is restraining them from spending money, but at the same time, gives certain flexibility that they're concerned about. So that's what we're negotiating right now.

WOODRUFF: So it sounds like you're willing to now give on this point of flexibility. So that if conditions change, if fiscal conditions, economic conditions change, maybe they can spend more than...

SCHWARZENEGGER: Well, no, it's much more. How do we increase the spending? Should it be -- there's just simple definitions of what should be an increase of population and inflation, or should it be an increase in population and wages or there's different definitions. So one works in those kind of things. But there's a lot of little details that have to be worked on.

But we always were ready and flexible and ready to negotiate. And so were they. We didn't meet yet.

And remember, when you have first strikes like we had in Los Angeles, they negotiate sometimes for three months. We only had literally a week to negotiate. So what their complaint was, you know, we don't have enough time because the election was so late. Therefore, Arnold, you were sworn in so late. And then, all of a sudden, you're faced within a week or two with all these enormous problems and challenges, including preparing the budget, including having to make the state of -- the state address beginning of January.

So there's a lot of challenges that are thrown at me. But, as I said, I'm positive. I think we can do it.

Let's just work around the clock and do it. And I think there's a good chance that we can do it.

WOODRUFF: All right. I want to ask you some more about that. But Governor, I also want to ask you about a story that is out there in the last few days, and that is the announcement by your own staff yesterday that you've decided not to pursue an independent investigation of these allegations by a number of women, as many as 16 women, that you either groped them or in some way sexually handled them.

Why is your office not going to pursue an investigation?

SCHWARZENEGGER: I think it's because the people have spoken. Their voices have been heard. They elected me to be governor. They sent me up here to do the job.

They sent me to Sacramento to straighten out the mess. And there's such enormous challenges ahead, as you were talking about, the budget crisis that we have, and major decisions have to be made in order to straighten out the mess, that, you know, that's what I'm here to do. And so that's why I'm concentrating on this right now.

WOODRUFF: And yet, you said before the election -- in fact, you told Tom Brokaw in an interview -- that all of the details would come out after the election. So do you feel you're breaking a promise?

SCHWARZENEGGER: No, it was -- I meant much more for me, that I wanted to look into it myself. And so that doesn't mean that I won't do that. But, I mean, the bottom line is right now, I'm focusing on this and there's no investigation.

WOODRUFF: How, then, do you think there will be closure on these? Because right now, these charges are just out there. How will this come to be closed as an issue? Or are these just going to be hanging out there, indefinitely, do you think?

SCHWARZENEGGER: Well, no. I mean, I consider those kind of pre- election things because, remember, I've been here for 35 years in this country. And I've never had any complaints filed against me, never any complaints made to me. So it was rather odd, I would say, that just a few days before the election that all of a sudden there was 16 that had, you know, complaints.

WOODRUFF: So it's just put aside?

SCHWARZENEGGER: There is no investigation. WOODRUFF: All right. Governor, one other thing. This lawsuit that was filed in the last few days by Rhonda Miller, a woman who had named you as fondling her on two movie sets in the early 1990s, '91 and '94, now she is suing you, your campaign, saying that she was maligned because your campaign staff told the press that she was guilty of -- had been convicted of prostitution.

Is it possible that -- you staff apparently made a mistake and misidentification here. What do you think you can do about this?

SCHWARZENEGGER: I'm not familiar with the case, so I cannot comment on that at all.

WOODRUFF: Is it possible -- if it happened that your staff made an error here and identified, connected this Rhonda Miller with another Rhonda Miller, what would you do about that?

SCHWARZENEGGER: I have to find out more about it, because this is all news to me. I really don't know anything about that case.

WOODRUFF: So -- but if it did happen, would you act?

SCHWARZENEGGER: I will look into it, yes, absolutely.

(END VIDEOTAPE)

WOODRUFF: There is much more of my interview with Governor Schwarzenegger ahead. Does he think he has spent too much time on PR and not enough negotiating with lawmakers?

Plus, as Al Gore's former campaign manager, our own Donna Brazil has special insight into his endorsement of Howard Dean. We'll talk to her ahead.

And we'll find out who former NBA star Charles Barkley is cheering for in this presidential race.

(COMMERCIAL BREAK)

WOODRUFF: More now on my conversation with California Governor Arnold Schwarzenegger.

We spent time today talking about the state budget crunch and the governor's efforts to rally public opinion behind his proposals. I asked the governor about those who say that his rallies amounted to going behind the backs of state lawmakers.

(BEGIN VIDEOTAPE)

SCHWARZENEGGER: Well, I was here every day, 10 to 12 hours. I was always available, day and night, to negotiate and to talk. So I don't think that was a problem.

I think there are certain legislators who don't like me to be out there in their neighborhoods and talking about the policies because they feel threatened by it. But in order to tone that down, I even took the legislators, Democrats and Republicans, with me on those trips to have them be with me there when I did my appearances and my speeches. And they were very happy about that and delighted to come with me and be part of the campaign and all that.

So I didn't see that as a problem at all. I will continue doing the things that I've promised the people to do, which is that I always will include the people. Because the people are always -- have this feeling the wool is pulled over their eyes and the politicians are doing backroom deals. They don't know what's going on in Sacramento, they're not filled in.

They want the politicians to be out there. They want them to talk to the people and include them in the decision-making process and let them know what's going on. That's what I want to do. I was successful in doing that during the campaign, and I will continue doing that, to do those stops and go to different cities, villages, shopping malls and talk to the people.

WOODRUFF: But the way politics works in California, as you know, the two parties have created pretty safe districts for almost every member of the legislature. You've got districts that are safe for Republicans, districts that are safe for Democrats. Some people are saying, is it -- isn't it, to some extent, a waste of your time to go out to campaign, to threaten these lawmakers, when, in reality, these are districts that were drawn to protect them?

SCHWARZENEGGER: If, in fact, I go out and threaten them. But that's not what I did.

I go out and talk to the people and communicate to the people of what the policies are, what are we facing right now. And I ask them to call the legislators and to let their voices be heard.

I said, "If you want to have the bond issue on the March ballot, call your legislators and let them know." That's what I'm doing. I am directly in touch with the people and reach out and communicate with the people.

WOODRUFF: But isn't there an unspoken statement there that, if you don't go along with me, then I'm going to campaign for an opponent in the future?

SCHWARZENEGGER: If that's the way they take it, then so be it. But my way of doing things is to reach out and be in touch with the people, because it's the people that put me in power. It's the people that flexed their muscles on October 7 and let their voices be heard, and that's why I'm governor.

And I want to let them know that I will keep my promises, that I will always let them know what we're doing. That there's no such thing as behind hidden doors or special deals or so. They always will be included. And they should let their voices be heard.

What happened on October 7 is, for the first time, you had 70 percent of the people vote. That means that there is an enormous energy out there of people now being interested in politics all of a sudden, interested in issues.

What are they doing in Sacramento? Reading the papers, wanting to know, tuning into television. They're interested for the first time. And it is very important to keep that alive and to increase it, to not make it only 70 percent, but to take it to 80 percent, 85 percent, 90 percent. Let the people know that, you should participate.

WOODRUFF: But, in fact, California is now facing a very real fiscal crisis. You know that better than anybody. The bond rating of California was again lowered today as a result of what's going on out here.

You now face a situation where you've got to come up with a budget for next year in just a matter of a few weeks. How do you -- do you plan to spend -- if you don't come up with something this week, do you plan to just spend the whole year campaigning against the state legislature?

SCHWARZENEGGER: Well, it's not that much campaigning. It's that, no matter what happens, I will always let the people know what happens. They should know because we're dealing here with money that is not our money. It is their money.

Every dollar that we have here is the people's money, it's taxpayers' money. And therefore, we have the obligation to let the people know. And the time for secrecy and the time for making backroom deals and all this stuff is over. That's why during my campaign, I said that we should open up the government.

We should let the people have the chance to look inside, have sunshine go in there behind those hidden doors. And that's what I'm doing, is I'm opening it up to let them know what the situation is.

(END VIDEOTAPE)

WOODRUFF: I'll have much more of my interview with Governor Schwarzenegger in our next half-hour. He talks more about the sexual harassment allegations, about budget cutting and about the difference between governor and being in the movies.

N. A minute, we turn our attention back to al gore's endorsement of Howard Dean. I'll be joined by Donna Brazile.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DEAN: The value in this endorsement is that Al Gore brings his extraordinary experience, his moral leadership, and his deep thought about issues, which happen to be very similar to my thinking about issues, to a campaign that is doing very well already, and now I hope will do better.

(END VIDEO CLIP) WOODRUFF: Why did Al Gore endorse Howard Dean and how much weight will his decision carry? Donna Brazile was Gore's campaign manager during the 2000 presidential race. She joins me now from Washington.

Donna, why did Gore do this?

DONNA BRAZILE, FMR. GORE CAMPAIGN MANAGER: You know, Al Gore last year, Judy, said that he wanted to have an impact in the race. He wanted to endorse early, and he believed his endorsement would be significant.

Look, Al Gore, like other Democratic leaders, would like to see the party back in the White House, back in control of Congress. He understands that Howard Dean has put together a phenomenal campaign team, a grassroots effort across the country. And, of course, like Al Gore, Howard Dean has been consistently opposed to the war on Iraq.

I believe for all of those reasons, Al Gore came out early. And it was a strategic move on his part.

WOODRUFF: So Donna, what does this do it for Dean? And maybe the more important question is, how much does it hurt the other people in the race?

BRAZILE: Well, for Dean, of course, he gets enormous boost from having the frontrunner and the guy who had the most popular votes in 2000. This also allows Howard Dean to broaden his base perhaps with African-Americans and others. It gives Dean an opportunity to go down South and to try to reach out to those NASCAR dads and others.

For other candidates, look, it's quitting time for some of them. They need to coalesce around one or two other candidates. And the other candidates should just find some time this holiday season to put together an exit strategy.

WOODRUFF: Donna, I'm having a hard time hearing you, because right this moment, fire trucks going by in Sacramento. But does this mean, in essence, that Dean is unstoppable for the nomination?

BRAZILE: No, it doesn't mean that. Al Gore's support will help Howard Dean reach out to a lot of those undecided voters. But, ultimately, the voters in Iowa and New Hampshire will get an opportunity to look at all of the candidates and make up their own minds.

Al Gore, of course, has enormous reach across the country, a lot of respect from people all across the party. And I do believe that the other candidates must take a deep look in the mirror and decide if they have enough resources and fuel in their tank to go the distance.

Howard Dean can go the distance. But I believe that only two or three other Democrats can go the distance.

WOODRUFF: Sounds like you're saying the handwriting is getting written as we speak. All right. Donna Brazile, who was Al Gore's campaign manager back in 2000. Donna, thanks a lot.

BRAZILE: Thank you, Judy.

WOODRUFF: Still ahead, we're going to go live to CNN's election express in Durham, New Hampshire, the site of tonight's Democratic debate.

Plus, Howard Dean isn't the only one who picked up some backing today. Another presidential candidate got the nod from a big star in the sports world. Find out who we're talking about when we return.

This is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

AL GORE, FORMER VICE PRESIDENT OF THE UNITED STATES: Howard Dean really is the only candidate who has been able to inspire at the grassroots level.

ANNOUNCER: Why is the Democratic insider endorsing the party's outsider? We'll look at the story behind this political odd couple.

One on one with Arnold Schwarzenegger. California's governor opens up about his plans to get the Golden State out of the red.

SCHWARZENEGGER: So what I'm trying to do is straighten out this mess.

ANNOUNCER: Now, live from Sacramento, California, JUDY WOODRUFF'S INSIDE POLITICS.

(END VIDEOTAPE)

WOODRUFF: Welcome back. We're here in Sacramento, and across the nation, political junkies literally transfixed today by a surprising convergence of Democratic forces. Al Gore's endorsement of presidential hopeful Howard Dean caught many people off-guard, including Dean's primary rivals. One can only imagine the backstage chatter before the '04 Democrats debate tonight in New Hampshire. CNN's Dan Lothian is outside the debate site in Durham, along with our campaign coverage bus. We're calling it the CNN "Election Express." Dan, this is livening things up.

DAN LOTHIAN, CNN CORRESPONDENT: It really has livened things up. I just got back from a press availability with Joe Lieberman at a local restaurant here in Durham, New Hampshire, and as you can imagine all the questions were about Al Gore. He said that he had a four to five minute conversation with the former vice president today. He would not say -- characterize what took place in that conversation, but as you can imagine it, they were not exchanging greetings about the upcoming holidays. Here's what he had to say.

(BEGIN VIDEO CLIP) SEN. JOSEPH LIEBERMAN (D-CT), PRESIDENTIAL CANDIDATE: I would not care to characterize it, with all respect. It was -- I would say that it was about four or five minutes in length and too late.

(END VIDEO CLIP)

LOTHIAN: Lieberman says that he did, on two other occasions, after he decided to run for president, ask Al Gore to endorse him. He would not say, though, what Al Gore -- how Al Gore responded to both of those attempts. He said now is not the time to look back, but the time to look forward so he's trying to put all of this behind him, but as you can imagine, that's the big question. That's the story here in New Hampshire -- Judy.

WOODRUFF: Some pretty raw comments from Joe Lieberman. All right, Dan, thank you very much. I know you'll be there, you're going to be there for that debate tonight. Thank you.

Well, the full impact of Gore's endorsement won't be known, of course, until the early primary season contests and after that, but as our Bill Schneider explains, Gore already has rewritten the script for the 2004 race.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): The script for 2004 said Howard Dean would run as an insurgent, not just against President Bush, but also against the Democratic Party establishment.

DEAN: I want to take back the Democratic Party so we stand for something again.

SCHNEIDER: The script said Dean would win New Hampshire. That would alarm the party establishment, many of whom see Dean as a disaster waiting to happen, someone who insulted true Democrats like Al Gore.

LIEBERMAN: And I want to say to Howard, I hope he wasn't referring to the 2000 election, because Al Gore and I certainly stood up for what we believed.

SCHNEIDER: According to the script, the party establishment would rally around a "stop Dean" candidate, most likely in South Carolina. That would set the stage for a month-long showdown. Dean versus "Stop Dean," to be decided on super Tuesday, March 2.

But Gore tossed away that script.

GORE: Thank you very much.

SCHNEIDER: His endorsement is a signal to the party establishment. "Don't try to stop this guy. We've got to close ranks behind him."

Why did Gore do it? He knows the two great rules that govern the nominating process. Rule one, the winner of the invisible primary almost always gets the nomination. That's the candidate who raises the most money and comes in first in the polls at the end of the year before the race starts. And the winner is Howard Dean.

DEAN: Unbelievable.

SCHNEIDER: Rule two, the longer it takes to choose a nominee, the worse the nominee is likely to do in the fall. Which is exactly why the Democrats changed the calendar so their primaries would come earlier and faster. Iowa caucuses, January 19. The latest poll shows Dean leading. New Hampshire primary, a week later. The latest poll shows Dean leading.

But South Carolina looks wide open, and it comes a week after New Hampshire. If the other candidates split the vote in South Carolina, all Dean would need is a little momentum coming out of New Hampshire and he could win South Carolina, too.

(END VIDEOTAPE)

SCHNEIDER: You could say the Democrats did this to themselves. They created this calendar to close down the process quickly. Gore is just trying to get with the program and shut it down a little faster -- Judy.

WOODRUFF: All right, Bill, what do you think is the secret of Dean's success here?

SCHNEIDER: Very simple. Liberals feel bullied. They feel bullied by the Bush White House and the Republican Congress and the radio talk show hosts and what they see as the growing conservative influence in the press. Look at how CBS got bullied into canceling its miniseries on the Reagans. Liberals are looking for a candidate who will stand up to the bullies, and that's what Dean promises to do.

WOODRUFF: All right, Bill Schneider with his take. Thank you, Bill.

Well, it is not exactly the former vice president, but we have another endorsement of sorts to report in our "Campaign News Daily." John Edwards has picked up the support of an outspoken public figure from the sports world. Former basketball star Charles Barkley says the North Carolina senator is the only presidential candidate so far who, quote, "floats my boat."

The liberal interest group Moveon.org, meantime, has another new TV ad. This one portrays President Bush as a Santa Claus for political special interests.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Now George Bush is pushing a huge spending bill that will eliminate overtime pay for millions of workers and give media corporations even more control of the airwaves. Yes, big contributors, there is a Santa Claus, but he's not at the North Pole. He's in the White House.

(END VIDEO CLIP)

WOODRUFF: Moveon.org is spending $300,000 to run that ad on all of the major cable news networks.

The audience for tonight's New Hampshire debate could include the man many Democrats blame for keeping Al Gore out of the White House. Ralph Nader is expected to attend the event as the guest of Democratic hopeful Dennis Kucinich. Nader publicly encouraged Kucinich to get into the presidential race, but as we've reported, Nader is now considering a White House run of his own in 2004. He says he'll make up his mind at the start of the year.

Meantime, back here in the capital of California, some assembly Democrats say they are feeling less optimistic about reaching an agreement with Governor Schwarzenegger on a proposed spending cap, less optimistic than a day ago.

In my extended interview with the governor today, we talked about lawmakers worse budget fears.

(BEGIN VIDEOTAPE)

WOODRUFF: The Democrats have said one of the reasons they were reluctant to go along with the spending cap originally was they were worried about the programs you were going to cut.

You're already proposing in a separate package of cuts, to cut, for example, programs for the developmentally disabled. Some of those programs created by former Governor Ronald Reagan, former President Reagan. Some of those programs presumably supported by your own family. You've been involved as a spokesman for the Special Olympics.

How difficult is it for you to see these kinds of programs literally on the chopping block?

SCHWARZENEGGER: Well, first of all, no final decisions have been made. But one thing I can tell you, that it's very difficult to make any cuts because all of those programs are, you know, important to those people.

And -- but the fact of the matter is that we have no money. As you could see the credit rating went down just this morning. You know, California has no money. And so when you have no money, then you can't spend any money.

But what the politicians have done here is continue spending money. So now we have this enormous debt and the people, really, in the financial community feel like California is not able to pay the bills.

And so what I'm trying to do is straighten out this mess and the only way to straighten it out is by really going in there and saying, We have to be disciplined. If we have $71.5 billion in revenue, we can only spend $75.5 billion. Now I'm not going to be that strict (UNINTELLIGIBLE) because they've already spent, you know, $84, $85 billion dollars. So I'm not going to cut it back to 71.5, but we have to cut some of it because we cannot pay for it.

So that's what I'm going through right now. And I'm also, you know, putting together the budget for next year, also.

WOODRUFF: But you've also taken education off the table. Are you still saying there will be no cuts in education whatsoever?

SCHWARZENEGGER: Well, we're working with, you know, the education community to see how we can work together in order to -- for them to help with us this budget crisis. So we're again in the middle of negotiating with them also.

WOODRUFF: In other words, it sounds to me like you're saying you could end up...

SCHWARZENEGGER: To maybe have a suspension or to have some relief there so we can pull out of these next two years and then pay bay it back, maybe.

WOODRUFF: Meantime, the car tax which you did get the repeal of the increase of the car tax, added $4 billion to the state deficit.

Now we read in the newspapers this morning there is panic on the part some of local governments around the state of California because they don't have a way to make up this revenue that they're losing that the state is giving back to individuals. What are you saying to these local governments?

SCHWARZENEGGER: They should put pressure on their state legislators because they've spent their money. It's not me taking anything away from them, it's they've spent their money.

The way it works is that the only way to increase the car tax is if there's an emergency. There was no emergency. The legislators knew a year ahead of time that they were spending money they don't have. So they could have stopped themselves, and there would have never been an increase in the contacts. It was not right to punish the people because they cannot stop spending money.

And that's why I've said to the people, I said, We've got to stop them. That's whey we need a spending limit. You cannot go out with a bond, with a $15 billion bond for the people and say, You know something? In two years from now we come back with another $15 billion. And then two years later with another $15 billion.

It is not fair to the people. Why punish the people? All they have to do here in this capital is discipline themselves and say, We only can spend $71.5 billion. We cannot spend $85 billion. Is it not right to do that. It's their money, not our money.

WOODRUFF: But it sounds like you may be willing to compromise on that number or the way that ceiling is defined? SCHWARZENEGGER: Yes, because you have to kind of, you know, make cuts that are reasonable, even though every cut is tough for people to take because it take, because, like I said, you know it takes money away from programs.

So I will be reasonable, but the fact is that we have to discipline ourselves and we have to cut back and we have to cut down the spending.

WOODRUFF: Tax increases. If the people of California indicate in a public opinion poll that they'd be willing to look at some tax increases, would you, as governor, be willing to look at that as well as part of the mix?

SCHWARZENEGGER: Well as I said many times, you know, I represent the people. Right now the people are very clear they don't want to have a tax increase. Therefore, I say to them I will not increase their taxes.

If there's a change of mood in the state all of a sudden, you know, that's fine. Then I'll look at that. But I mean we should always look at that as the last resource because why, again, punish the people for something the legislators have done?

(END VIDEOTAPE)

WOODRUFF: And this story just in to CNN. And that is that former Democratic presidential candidate, former Illinois United States senator, Paul Simon, has died.

Simon had checked himself into a hospital in Springfield, Illinois just last week because of a heart condition. He was facing heart surgery, a bypass, and also replacement of a heart valve.

Word now today that the senator, 75-years-old, has passed away. Paul Simon, prominent, long-time member of the Democratic Party.

More questions for Arnold Schwarzenegger ahead. Is he harboring a political grudge because of allegations of past sexual harassment?

Plus, we'll get another side of the story here in Sacramento from Democratic State Senate President John Burton.

And the political upheaval in South Dakota now that Congress Bill Janklow has been convicted of second degree manslaughter.

(COMMERCIAL BREAK)

WOODRUFF: More now of my conversation today with Governor Arnold Schwarzenegger.

I returned to the topic of those sexual harassment allegations that surfaced just before the recall election day. I asked the governor if he thinks, as he said before, that all these claims were politically motivated, or if he thinks any of them were genuine?

(BEGIN VIDEOTAPE)

SCHWARZENEGGER: I'm not about to guess. I just know that it is politically motivated and some genuine complaints. I mean I think that I cannot give you what the percentage is. But common sense will tell you that the whole thing was very odd, how it all came about just before the election.

But at the same time, I said many times, none that I offended, I apologize, because it was not intentional.

WOODRUFF: But now that there's no investigation, is this truly going to go away?

SCHWARZENEGGER: I have been elected by the people to come up here and do the job. That's what I'm doing now.

WOODRUFF: Last question. Everybody wants to know, how is it different this job from being an actor?

(LAUGHTER)

SCHWARZENEGGER: There's -- the interesting thing is there's a lot of similarities. And the other interesting thing is that it is totally different, you know, because like I say, there's -- in acting, when I make decisions it's usually based on what is right for me and what are the choices in acting and so on. What kind of deals do you make (UNINTELLIGIBLE) all about you.

But in entertainment, it is about entertainment. Like I say (UNINTELLIGIBLE) it's about affecting the people. And what you're trying to do here is work together with all these legislators. And then there's the special interests out there trying to have an effect on you. And of course I try not to have them have an effect on me.

But you deal with a lot of elements and you move a lot of pieces around. It's like a chess game to get through there and to get things done.

The important thing is, in both cases, is you have to have a vision. You have to have a very clear vision. Where do you want to be for California? What should it look like ten years from now? And you always keep that vision in mind.

And I always was very good with that because I had a very clear vision to become a body building champion, the very clear vision to be at the top in the entertainment business, very clear vision of when it comes to business and all those things.

So I have a very clear vision about California. And so the key thing is not to get sidetracked but just keep on that vision.

(END VIDEOTAPE)

(AUDIO GAP)

(COMMERCIAL BREAK) (AUDIO/VIDEO GAP)

JOHN BURTON (D), CALIF. STATE SENATE: ... developmentally disabled kids get taken care of, that senior citizens get eye glasses and hearing aids and false teeth, that kids graduating from high school have a right to go to institutions of higher education. We may well be addicted to that.

WOODRUFF: You make it sound like he's potentially a real ogre in all of this. Is that what you mean to do?

BURTON: No, but that's what his program does. I don't think the governor's an ogre. His director of finance, who knows?

But when you put an artificial cap on where spending has been low, as it's been from the base year they want, you're basically telling kids they can't get into college, you're telling parents they have developmentally disabled kids they won't get cared for. The record of his director of finance in Florida was taking away eye glasses, taking away false teeth...

WOODRUFF: You're speaking of Donna Ardewin (ph)...

(CROSSTALK)

WOODRUFF: What the governor says, though, Senator Burton, is that California has no money, it owes money. And that in a situation like this everybody's going to have to give.

BURTON: Yes, so he gave back $4 billion to people with cars, including the vast majority of that went to people that own cars, $80, $90, $100,000 a year. So if you're broke, the first thing you do is don't go around giving away money.

WOODRUFF: So you're saying that there's no way out this? That the two sides are too far apart?

BURTON: Well it's kind of difficult. When you talk to the governor alone, you say these programs need to be protected, he agrees with you. Then when you he talks to Donna Ardewin, she said, No, we can't do that.

And it should be made clear, this is not a budget bill. The budget hasn't been introduced. This is a bill that would allow him to put $15 billion worth of bonds on for anywhere from 15 to 30 years, which we think mortgages our future. And then come up with a spending cap so people vote for the bond.

But this is not budget. This is irrelevant to the budget.

WOODRUFF: Yes or no. Do you think you're going to reach an agreement?

BURTON: You can't answer yes or no, but hopeful. Let's say hope springs eternal. WOODRUFF: Very quickly, one other matter. The governor and his staff have announced that they will not pursue their own independent, separate investigation into allegations by 16 women that they were groped by the governor some years ago. Smart move on their part politically or is this something that Democrats would look at and say this is going to be a problem for the governor?

BURTON: Whether it's a problem for the governor, it's not with Democrats or Republicans but how the people look at it. I've never thought of it as a political issue.

You know, the governor's people gave him advice. His lawyers, he took it. I'm not going to second guess that. It's up to the people as to whether or not they think it's a big deal.

And I have told our members in the Senate that we don't even raise that issue, because it is not relevant to, you know, spending caps and bonds and cutting programs for people who need them.

WOODRUFF: John Burton, who is the president pro tem of the California State Senate, very good to see you again.

BURTON: Thanks, good to see you, Judy. Don't you ever get tired of this stuff?

WOODRUFF: Thank you. Never.

Meantime, a jury's decision in South Dakota could have an effect on the United States Senate. I'll explain why in a minute.

We will also check in on San Francisco where voters may give the Green Party its biggest victory ever.

(COMMERCIAL BREAK)

WOODRUFF: Congressman Bill Janklow's political career will soon be over. The Republican and former South Dakota governor has notified House leaders that he will resign his seat as of January 20.

Yesterday, a jury convicted him of manslaughter and other charges stemming from an August traffic accident that killed a motorcyclist.

Janklow's resignation could have wide repercussions, especially if former Republican Congressman John Thune decides to run for Janklow's open seat rather than challenge Senate Minority Leader Tom Daschle next year. We'll keep you posted.

Separately, San Francisco voters could be making history. One of the candidates in today's runoff for mayor is Matt Gonzalez of the Green Party. Polls say that he has a real shot at winning the highest ranking office ever held by that party. The other candidate is Democrat Gavin Newsom. He is the choice of outgoing Mayor Willie Brown. Whoever wins will be San Francisco's youngest mayor in more than a century.

Well, that is it for this edition of INSIDE POLITICS from Sacramento. Be sure and tune in tomorrow, though, because I'll be live from the campaign trail in New Hampshire. I'll be talking to Senator Joe Lieberman to get his reaction to today's surprise endorsement by Al Gore.

I'm Judy Woodruff. "CROSSFIRE" starts right now.

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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