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JUDY WOODRUFF'S INSIDE POLITICS

New Presidential Polls; On the Dean Team: Bill Bradley's Endorsement

Aired January 6, 2004 - 15:30   ET

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

(BEGIN VIDEOTAPE)
ANNOUNCER: Who's flying high? Our New poll offers striking contrast between the Republican incumbent and the Democratic frontrunner.

BILL BRADLEY, FMR. PRESIDENTIAL CANDIDATE: The Dean campaign is one of the best things that's happened to American democracy in decades.

ANNOUNCER: The Dean-Bradley love fest, does it move the divided Democrats any closer together?

The Iowa caucus countdown, then and now.

UNIDENTIFIED MALE: There's a different dynamic about every election cycle. And this cycle is really very different.

(END VIDEOTAPE)

ANNOUNCER: Now, live from Los Angeles, JUDY WOODRUFF'S INSIDE POLITICS.

JUDY WOODRUFF, HOST: Thank you for joining us.

While most of the '04 Democrats have been racing around Iowa and New Hampshire, it is a relatively low-key business as usual day for President Bush in Washington. The non-campaign campaign that he's been running seems to be working out rather nicely for him, according to our just-released poll.

Our senior political analyst, Bill Schneider, looks at the numbers and how they add up for Mr. Bush and the Democrats.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): It's election year. Do you know where your President is? We do, 60 percent. That's President Bush's job rating right now.

How good is that? Let's look at where previous presidents facing reelection have been at this point.

Bush's father was at 46 percent in January 1992. He lost. But so did Jimmy Carter, who started out his 1980 re-election campaign on a high of 56 percent because of the Iran hostage crisis. Ronald Reagan was at 52 percent going into his re-election in 1984. He made it. But so did Bill Clinton, even though he started 1996 at 42 percent.

If you're a Republican, you look at these figures and say, look at that, Bush is doing better than all of them, woo-hoo, to which a Democrat might respond, oh, it's just a temporary bounce Bush is getting from the capture of Saddam Hussein. In fact, President Bush gets his highest marks on Iraq, 61 percent approval. The president's overall rating on world affairs is the highest it's been since the major fighting in Iraq last spring.

And the president's ratings on domestic issues are not far behind. Fifty-four percent approve Bush's handling of the economy, the highest in more than a year.

Is the President vulnerable on anything? Yes. Only 43 percent give the President good marks on healthcare.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm pleased that all of you are here to witness the greatest advance in healthcare coverage for America's seniors since the founding of Medicare.

SCHNEIDER: But seniors are not all that thrilled with the Medicare Reform Bill, or the prescription drug plan. And the frontrunner for the Democratic nomination is a physician. Speaking of Howard Dean, let's see how he's doing.

Dean is still the frontrunner, but not by much. General Wesley Clark is catching up with him. Clark is the only Democratic candidate to show momentum in the past month. The attacks on Dean from his fellow Democrats could be taking a toll on the frontrunner.

Here's where the presidential race stands right now: a blowout. President Bush leads Howard Dean by more than 20 points.

(END VIDEOTAPE)

SCHNEIDER: Ever hear the Latin phrase, "Vox Populii, Vox Dei?" It means the voice of the people is the voice of god. Well, this poll backs up what Pat Robertson said the lord told him would happen in this election. Reverend Robertson has his sources, we have ours -- Judy.

WOODRUFF: All right, Bill. Bill, you talked there at the end about a 22-point spread between President Bush and Howard Dean. Both of us know that it was just a few days ago that the CNN-"TIME" Magazine poll showed Bush just five points ahead of Howard Dean. How do you explain the discrepancy?

SCHNEIDER: Well, we were wondering about that. So we looked at the two polls, and here's what happened. Republicans have closed ranks behind President Bush. In the last poll, the Republican vote was about 12 percent for Howard Dean. Now it's virtually disappeared. Just three percent of Republicans say they would imagine supporting Governor Dean in the election. You know, it may be those terrible things that Howard Dean has been saying about President Bush, or here's another possibility. The last poll was taken over the New Year's holiday. It could just be that, at least among the Republicans, the holiday spirit has worn off.

WOODRUFF: All right. Bill Schneider explaining it all. Thanks very much. See you later, Bill.

Exactly three weeks before the New Hampshire primary, Howard Dean made a quick stop in the Granite State today to stand side by side with his latest high-profile supporter. Bill Bradley's endorsement may not pack the wallop that Al Gore's endorsement did, but, as CNN's Dan Lothian reports, the Dean team suggests it's a slam dunk.

(BEGIN VIDEOTAPE)

DAN LOTHIAN, CNN CORRESPONDENT (voice-over): Saying that the Dean campaign offers America "new hope," former Senator Bill Bradley became the second high-profile Democrat to endorse the former Vermont governor. Towering over Howard Dean, the former professional basketball star turned senator, is now trying to deliver the voters who supported him in his failed 2000 presidential bid to the Dean campaign.

BRADLEY: He has tapped into the same wonderful idealism that I saw in the eyes of Americans in 2000. And he has nourished it into a powerful force.

LOTHIAN: Dean, glowing from yet another key endorsement, said it was about more than just a big name on his team.

HOWARD DEAN (D), DEMOCRATIC PRESIDENTIAL CANDIDATE: This is the endorsement of a thoughtful, careful person who sought to lead this country with honor and integrity and who stood up against the same forces.

LOTHIAN: The head of New Hampshire's Democratic Party says it's unclear what the full value of the endorsement will be.

KATHLEEN SULLIVAN, CHAIR, NEW HAMPSHIRE, DEMOCRATIC PARTY: I think voters will still just look at it as a factor, and they will look at other things when they make their minds up.

LOTHIAN (on camera): Some of the issues?

SULLIVAN: Well, they will look at the issues. Issues are very important. I think they're also going to look at who is the best candidate to beat George Bush.

LOTHIAN: When news of the endorsement first broke, Dean's Democratic opponents tried to downplay its importance, many of them saying it's not about the endorsement but about the voters.

Dan Lothian, CNN, Manchester, New Hampshire.

(END VIDEOTAPE) WOODRUFF: And from New Hampshire, Dean and Bradley travel to Iowa to show their united front to potential Democratic caucus-goers there. So the question is, does this Bradley endorsement really do very much for Howard Dean?

Jim Vandehei of "The Washington Post" joins us now from Des Moines.

Jim, what about what we heard Dan Lothian saying, Dick, Gephardt, John Kerry, they say this really doesn't add up to anything. Bill Bradley doesn't vote in Iowa or New Hampshire. It's what the voters do that counts.

JIM VANDEHEI, "WASHINGTON POST": I think they're right. Endorsements don't mean a whole heck of a lot at this point in the election. It does give Howard Dean that sort of front that he has a lot of establishment support and that he has momentum. It's sort of all Dean, all day now, when you look at the news.

So in that respect, it helps him. But as far as on the ground here in Iowa, he needs more than endorsements. He needs these caucus- goers to show up in the cold to vote.

WOODRUFF: In essence, is this a blank? I mean, does it mean nothing for him?

VANDEHEI: Oh, like I said, I think it definitely gives him a little bit of momentum and it shows that he can rally both of the candidates from 2000 behind his campaign. And that's the point that he made in today's debate. But I think there are things that mean a lot more than endorsements at this point in the process. It does give him positive day news cycle, but I think even his aides privately admit that it's not going to bring a lot of votes to his side because there's not a huge Bradley following out there that's going to flock behind him now.

WOODRUFF: Jim, you're writing in "The Washington Post" today that you're seeing a little change in Howard Dean's demeanor out in the trail and in the debate over the weekend. What are you seeing that's changing?

VANDEHEI: Right. This guy now looks like a candidate who thinks he's going to win the nomination. He's really changing his tone. He seems a little more conciliatory towards some of his rivals.

His rhetoric isn't as sharp as it used to be. And he's telling voters how he would run in a general election, and really sounding like a centrist at some of these stops, talking about balanced budgets, talking about his support for guns, which is big in North Dakota, where we stopped yesterday. And also talking about some sort of tax reform proposal that he's going to roll out at some point. All of these he thinks can help moderate his image in a general election fight and give him a better chance at running against Bush, which I guess is an uphill fight given that poll you're just talking about.

WOODRUFF: But doesn't Dean continue to rail against what he calls Washington Democrats and all of the bad decisions they've been making? We heard him on Sunday talking about how his Democratic colleagues have been coopted by George W. Bush. Could some of that come back to haunt him later as he tries to pull the Democrats together?

VANDEHEI: I think so. There's definitely a lot of damaged feelings in this party right now. It's been a real nasty primary. And I think whoever gets the nomination is going to have a hard time bringing the party together.

But it's funny, because he's starting to try to do that now before a vote has been cast. And it's not even clear that he will win Iowa. So I think that's why you see this confidence in a man when we're still several weeks from things really happening here.

WOODRUFF: You said it's not even clear he'll win Iowa. Could he be a victim...

VANDEHEI: I don't hear anything.

(COMMERCIAL BREAK)

MARTIN SAVIDGE, CNN ANCHOR: Hello. I'm Martin Savidge in Atlanta. Due to technical difficulties for Judy Woodruff out there in Los Angeles, I'm in her place right now. We'll pick up as soon as that is fixed.

At this hour, in Des Moines, Iowa, six of the Democratic presidential candidates are debating on National Public Radio. Our Candy Crowley will have a live report on the face-off in the Iowa campaign later on INSIDE POLITICS.

And checking the Iowa headlines in the "Campaign News Daily," the anti-tax group Club for Growth has produced a TV ad attacking Howard Dean. The ad begins airing tomorrow in the Des Moines market and it goes straight for the jugular. "Howard Dean should take his tax- hiking, government-expanding, latte-drinking, sushi-eating, Volvo- driving, "New York Times"-reading, Hollywood-loving, left-wing freak show back to Vermont where it belongs."

Meanwhile, Howard Dean has launched his own new TV ad in Iowa today. The spot is running statewide and it highlights Dean's antiwar stance and his opposition to the Bush tax cuts.

Senator John Kerry is receiving a little help from his friends on the Iowa campaign trail. Former Ambassador Joe Wilson and Kerry's fellow Massachusetts senator, Edward Kennedy, are heading to Iowa to campaign for Kerry. Wilson's wife, you'll recall, had her CIA cover blown by an alleged White House leak which is still under investigation.

Earlier today, John Kerry took his campaign to Ames, Iowa, where he met with party activists. Later tonight, he makes a stop in Cedar Rapids.

In Texas, a federal court has dealt a blow to Democrats. That story ahead.

Plus, the view from the Bush White House of the president's new poll numbers in his campaign and where it wants to be.

And then later, Governor Schwarzenegger prepares to take the stage. What is he likely to say about the state of his state?

(COMMERCIAL BREAK)

WOODRUFF: I'm back now from Los Angeles. Sorry about that technical glitch a minute ago. And thanks to Martin Savidge for filling in.

Well, a three-judge federal panel upheld a congressional map in Texas, dealing a serious blow to Democratic Party efforts to retake control of the Congress. The judge's rule that state Democrats failed to prove that the new map violates the Constitution or the Voting Rights Act. Democrats currently hold a 17-15 edge in the Texas delegation, but the new district lines are expected to give Republicans up to seven new seats in the Congress.

The president's re-election team has said repeatedly that they expect a close race come November, but our new poll gives them some reason for optimism. As we told you, Mr. Bush currently enjoys a 60 percent approval rating. And when we asked voters if they think Mr. Bush will definitely be reelected, an even 50 percent said yes, while 44 percent said they think that a Democrat could win.

For more on how the Bush-Cheney team views all these new poll numbers, we join our Dana Bash at the White House.

Hi there, Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Hi there, Judy. Well, the people running the president's re-election campaign, as you can imagine, are quite happy about these numbers, that they're strong across the board. Particularly happy about the way they look on key issues like the war and the economy.

But as you know, Judy, the people running the president's campaign are quite a cautious bunch, and they are being very careful to try to lower expectations, playing that so-called expectation game. Careful to say that they still think that the country is closely divided and that they are expecting a competitive challenge once the Democratic nominee is settled on.

But there is one number in this new poll, Judy, that does make a -- you can hear on audible sigh of relief from the Bush camp, and that is on the question of whether people are satisfied with the way things are going in this country. If you take a look at that number, right now 55 percent say they are satisfied. You can see there it has steadily climbed since September, where it was just at 40 percent.

And this plays into a strategy that the Bush political team has already started to devise to really try to paint the Democrats as pessimistic and as negative. It is something that we have heard RNC chairman Ed Gillespie already start to test drive over the past few weeks, most recently just yesterday on INSIDE POLITICS. And really what Bush campaign officials feel is that the better people feel about the way the country is going, the more optimistic they are, the more difficult it will be for Democrats to expand beyond their base once it gets to the general election.

And Judy, this is definitely part of the strategy that they're already starting to cook up when it comes to any campaign that may run against Howard Dean if he is the Democratic nominee -- Judy.

WOODRUFF: And Dana, no doubt those numbers about how people feel about the country is doing are tied a great deal to what people see and read about how the economy is doing. I do have a question, though. The president, Dana, was in St. Louis last night. He raised well over $2 million for his campaign. What else does he have on the political agenda this week?

BASH: Well, he's got more fundraising on the agenda. On Thursday, he's got two more fundraisers in Tennessee and also in Florida. And tomorrow we're going to find out how much money exactly he raised in 2003. I'm being told right now that the ballpark is between $120 and $130 million for 2003.

But also, Judy, he has a very important speech politically that he will give tomorrow. It will be his first initiative, major policy initiative tomorrow, and it will be on the issue of immigration. This is something that the White House really hopes will appeal to a key voting block. And that is the Hispanic-voting block.

The president will give principals to change the way the immigration policy is right now. And it's something that they really hope will help when it gets toward the election in that key swing voting group -- Judy.

WOODRUFF: No question, Latinos making a big difference in states from California to Texas to Florida and New York and beyond. All right. Dana, at the White House, thanks very much.

Iowa's Democrats get another 13 days in the political spotlight. Coming up, Bruce Morton looks back at the caucuses of 2000 and what has changed in the Hawkeye State.

(COMMERCIAL BREAK)

WOODRUFF: Well, the Iowa caucuses are famous, we all know, for having put, among other things, Jimmy Carter on the road to the White House back in 1976. But in other years, the caucuses hardly mattered. As Bruce Morton reports, there were no surprises in 2000, but Iowa may be vital this time.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): Four years ago in Iowa, Georgia W. Bush won the Republican caucus with 41 percent of the vote, but his toughest opponent, John McCain, didn't campaign in the state. He concentrated on New Hampshire and won there.

Democrat Al Gore thumped Bill Bradley, 63 percent to 35, a defeat from which Bradley, the outsider, never recovered. This time is different. The outsider is the frontrunner.

UNIDENTIFIED MALE: This cycle is really very different. Who would have predicted a year ago that a little former governor of Vermont would be the powerhouse that he is today? I don't think anybody could have predicted that.

MORTON: And while Gore won easily four years ago, this time it's close.

UNIDENTIFIED MALE: A lot of people are kind of seeding this thing to Howard Dean right now. Howard Dean's the frontrunner, they say, Howard Dean is ahead in the national polls, Howard Dean is the inevitable nominee. I think that's a bit quick. I think we'd better step back and take a long look at what Dick Gephardt has done in putting together what is a pretty darned good traditional Democratic voter turnout operation.

MORTON: One other difference, John Kerry and John Edwards are competing for third, and that for once may matter heading into New Hampshire. A good third might help Kerry, a bad fourth would probably hurt him. Edwards needs something to stay alive until South Carolina.

UNIDENTIFIED MALE: Both of them are coming on. That will be an interesting race to watch. We care about who finishes third this time.

MORTON: And one other thing. The state has changed. Hispanics are now the largest and fastest-growing minority in Iowa, and they'll be caucusing, and they'll be something new. History may sometimes repeat itself, but not in Iowa this caucus season.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: And we have a story just into CNN, and that is the United States Department of Agriculture, a spokesman there, the chief veterinarian, saying today that DNA tests show, verify "with a high degree of certainty" that the cow in Washington State found to have had mad cow disease originated from a dairy farm in Alberta, Canada. Again, the U.S. Department of Agriculture saying that it now is quite certain that the cow found to have mad cow disease in the state of Washington was a cow that came -- originated from a dairy farm in Alberta, Canada.

We'll be getting more information and more details. And as we have that, we will share them with you.

Well, much more to come from Iowa and elsewhere this election year. The presidential hopefuls face off. But this time there were no cameras. Were there any fireworks? We're going to go live to Des Moines for a report on a radio debate just ending. Plus, some people call him the governator. Well, somebody's taking Arnold Schwarzenegger's nickname to a whole new level. We'll explain.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: Countdown to the caucuses. We're live in Iowa, as the presidential hopefuls clash on the campaign trail.

It's his first major speech since inauguration day. What will Arnold Schwarzenegger say about the state of his state? And is California's new governor making the grade so far?

He's the Democrat Republicans would love to kick out of Congress. We'll speak with the candidate who is taking on Senate Minority Leader Tom Daschle.

(END VIDEOTAPE)

ANNOUNCER: Now, live from Los Angeles, JUDY WOODRUFF'S INSIDE POLITICS.

WOODRUFF: And welcome back. Another Democratic presidential debate has just wrapped up in Iowa. It was less combustible than some of the other previous debates they've held, even though the leadoff caucuses in Iowa are less than two weeks away.

Our senior political correspondent, Candy Crowley, is with us now from Des Moines, where this National Public Radio debate took place.

Candy, first of all, what are the headlines coming out of it?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, you know, a couple of things. On the domestic side, both John Kerry and Joe Lieberman took Howard Dean to task for wanting to take back all of the George Bush tax cuts. No (UNINTELLIGIBLE) ground. But clearly both of them going after Howard Dean, saying, look, you're going to take away thousands of dollars from people who really need that tax cut.

They also talked -- you know, subjects ranging from snowmobiles in national parks -- they're all against that -- to gay marriages and gay unions, as well as a lot of talk, Judy, about foreign policy. In particular, they were very rough here on President Bush. All of that conversation was aimed at him. We wanted to play you a little bit from Governor Dean, talking about U.S. policy towards North Korea.

(BEGIN AUDIO CLIP)

DEAN: And this president is not defending this country the way he ought to be by refusing to engage in those kinds of deliberations, because the hard-liners in this administration believe somehow North Korea is going to fall. Well, if they don't fall of their own accord, and they end up with nuclear weapons, that's a pretty serious security risk for the United States of America. (END AUDIO CLIP)

CROWLEY: Democrats also taking the president to task for fumbling an issue in Taiwan and China for not doing enough to keep Pakistan and India apart. So basically that part of the program all aimed at George Bush. The domestic part of the program aimed pretty much at Howard Dean -- Judy.

WOODRUFF: Candy, Howard Dean had a little bit of good news in an endorsement from former Democratic presidential candidate Bill Bradley, endorsing him today in New Hampshire. They then flew west to Iowa. How is it playing there? Has it been known long enough to have any effect?

CROWLEY: You know, it's been known long enough to have an effect but it's -- it's very, very hard to calculate. Look, this is more, I think, aimed at a broader audience. That is, a national audience. Bill Bradley, a well-known face.

As a matter of fact, in this debate today, Judy, Joe Lieberman said that he thought that some of the things Howard Dean was saying were divisive in the party and weren't very helpful. Dean said, wait a second, wait a second, I brought together Al Gore and Bill Bradley. Those were two people at odds with each other in 2000.

Certainly Bill Bradley is useful as an endorsement. Not surprising as an endorsement. And insofar as it sends a symbol of traditional mainstream Democrats and be that Howard Dean is unstoppable, that certainly helps the Dean campaign. But in terms of really turning votes here in Iowa, who knows.

WOODRUFF: Candy, last I want to ask you about some new poll numbers. As you know we have this new poll out today suggesting President Bush is at a pretty good place politically, including his having an approval rating at 60 percent. But we know the numbers are not adding up as well in this poll for Howard Dean.

A little over 1/4 of Americans say they view him favorable. More than a 1/3 say they have an unfavorable opinion of Howard Dean and another 1/3 say they're not sure. And among Democrats who currently do support Dean, 65 percent of them say they might change their mind. Candy, I want to ask you, you've been on the ground for days now in Iowa. What are you picking up there in terms of the strength of support for Howard Dean?

CROWLEY: Look, as far as Iowa is concerned, this is clearly the day of the undecided. These next two weeks. And what we are picking up and when you talk to people, whether it's at a Kerry event or whether it's -- not so much of a Dean event because they are the real party faithful who aren't going to move from Dean.

We have talked to a number of undecideds and the questions we're getting about Dean, when you say, look, why would you pick X over Dean, they say, well, it's just -- he opens his mouth too often, he doesn't seem to think about what he's saying. Maybe what we're seeing here is the result of a couple of what Dean's rivals have seen as missteps that have bubbled up into the national headlines.

Generally, what I'm hearing and what our producer Sasha Johnson heard when she was at a Kerry event were people who said, here's the problem. You know, I think John Kerry and Gephardt are very experienced but I don't see the passion. On the other hand, I see Dean and I see the sort of novice candidate in him. So they're struggling with that and I think those negatives that you're seeing going up on Dean may just be a result of some of those slips of the tongue.

WOODRUFF: And all those opinions on the part of the undecideds and even on the part of voters supporting other candidates is significant because we know in Iowa that second choice can make a big difference.

Each candidate has to have 15 percent in any particular caucus. All right, Candy, reporting for us from Des Moines again today. Thanks a lot. We'll be checking in with you every day this week. Thanks.

WOODRUFF: Taking another look now at our "Campaign News Daily." Joe Lieberman running a new TV ad that makes what some consider a not so subtle reference to Howard Dean who has been accused of using angry rhetoric on the campaign trail

(BEGIN VIDEO CLIP)

SEN. JOE LIEBERMAN (D-CT), PRESIDENTIAL CANDIDATE: I love America but I hate the direction in which George Bush is taking us.

AD ANNOUNCER: How do we defeat George Bush's extreme agenda? It will take more than extreme anger. Joe Lieberman has spent 30 years rejecting the extremes of both parties, fighting against discrimination...

(END VIDEO CLIP)

WOODRUFF: This Lieberman ad hit the airwaves yesterday in both South Carolina and Arizona. Dick Gephardt started his day with a rally in the Iowa city of Mount Pleasant. Gephardt told the Countdown to Victory rally, in his words, if you like the Bush tax cuts, vote for him. If you like healthcare, vote for me.

Gephardt also launched a new TV ad that is airing statewide in Iowa. The spot focuses on Gephardt's opposition to NAFTA and other trade deals and his support for an increase in the minimum wage.

Out here in California, Governor Arnold Schwarzenegger marks another milestone in his fledgling political career this evening when he delivers his first state of the state address. CNN's Rusty Dornin joins us from Sacramento with a preview. Rusty, hello.

RUSTY DORNIN, CNN CORRESPONDENT: Well, Judy, it's a 25-minute speech. He's expected to be very upbeat about California's economy and expected to drive home the message about creating new jobs. You might say how can he do that facing a $14 billion budget deficit and is expected not to raise taxes.

Well, it's massive spending cuts and also reform in workers' compensation. In California the rate for workers' compensation is twice the national average. Employers site that as the main reason that people take their companies and leave California. Schwarzenegger said he wants to keep jobs here in California.

As far as cuts go, education. There is a law here in California that lawmakers are not allowed to touch education K-12 called Proposition 98. But those increases this year of 3 1/2 billion. Apparently Schwarzenegger has brokered an incredible deal with the California Teachers Association that will cut $2 billion from those increases this year sort of just decreasing the raise they get this year, with promises to restore it next year.

That's in return for not touching that very sensitive Proposition 98. He's also expected to talk about bipartisanship. You have to remember, this is a legislature that is not really very popular in California. The governor is very popular. He's trying. He's been trying to get them to work together. This is an election year. You can bet that a lot of them are going to try at least work with him on many different topics.

Also the environment, he's been very pro environment. He's expected to talk about some other environmental issues. The real details of this budget are not really going to be announced until this Friday. That's when he releases the budget for this year.

Now, the coverage of this has really been pretty incredible. 250 journalists applied to be on the floor inside the capital for this speech. Only about a quarter of them were given credentials.

And while he's addressing lawmakers, he's also addressing the world. There's journalists from Japan and from around the country and around the world here to hear this speech. Even, Judy, I've been covering California politics in northern California for 13 years for CNN. This is the first time that we have come here to cover a state of the state message -- Judy.

WOODRUFF: You mean not every state legislature state of the state speech gets this kind of -- you don't think it has anything to do with who it is...

DORNIN: Exactly.

WOODRUFF: Rusty, a very quick question. Is it expected that Schwarzenegger is going to be able to close California's $15 billion deficit with this budget he's putting out this week?

DORNIN: Well, apparently it's supposed to be a balanced budget. We'll have to see but it might still hedge on some promises. Of course, he's putting forth a bond measure in March that will go before voters. It's going to try to stop gap some issues. There's still the question of what's going to happen with this vehicle registration fees. The state lost $4 billion when Schwarzenegger told voters they were going to have that money returned to them. So now they're going to have to figure out ways to close the gap there. It's going to be interesting to see how he does that and how many promises he has to make to do that.

WOODRUFF: OK. Rusty Dornin reporting for us today from Sacramento along with, as she put it, a raft of other reporters from all over the world, literally.

We're going to talk some more about Governor Schwarzenegger's next move in California politics ahead. Plus, the man who hopes to take down Senator Tom Daschle. I will talk with former South Dakota Congressman John Thune.

And later, could it be the perfect brew of politics and profits?

(COMMERCIAL BREAK)

WOODRUFF: As we just heard from our reporter Rusty Dornin, California Governor Arnold Schwarzenegger's State of the State address is expected to be mostly upbeat. However, reports say the governor is getting ready to propose massive cuts to deal with the state's on going budget crisis.

Joining me now from Sacramento to talk California politics is Dan Walters of "The Sacramento Bee." And in San Francisco of Carla Marinucci of "The San Francisco Chronicle." Good to see both of you.

Carla, let me start with you. What is it that the Governor Schwarzenegger need to accomplished tonight in this state of the state address and also with the budget that comes out later in the week?

CARLA MARINUCCI, "THE SAN FRANCISCO CHRONICLE": Judy, in his six weeks he's had a number of successes. He needs tonight to layout that vision. He's going to be talking about successes he's had legislatively. He's going to talk about immediate goals, getting voters to approve that $15 billion bond measured that's on the ballot next month. And talk about the future, restructuring in California, long-term goals.

He's got to get across the message -- this is the job that he was elected to do. California's budget crisis is job one for Arnold Schwarzenegger. And today the sound you hear is the rubber hitting the road. He's got to come up with the goods.

WOODRUFF: Dan Walters, you've been covering state government for a long time in California. What are you hearing? Is he going to produce the goods, the kinds of things that Carla's describing?

DAN WALTERS, "THE SACRAMENTO BEE": I don't think we'll see a lot of those goods in this speech today. I think it's going to be more platitudes and vision, if you will. The details, the nitty-gritty, dirty details that were coming out on Friday when he releases the budget. There's going to be some cutting, I think particularly in health and welfare programs. As you heard before, a deal on education. It'll save a couple billion dollars, at least for a year. And probably some whacks to higher education as well and perhaps even the prison system, which has long been sacrosanct in Sacramento.

But closing a $14 billion gap is going to be trickier than just a few budget cuts. It's going to take a lot more than that. I think they're really planning -- going to have kind of a rosy scenario of rising economy producing a bounty of new revenues, perhaps money from the Indian gambling casinos.

It'll balance on paper, but then all governors' budgets balance in January. It's when the real budgets are done in June and July and sometimes in August and September that the real imbalances come into place.

So, yes, this budget he produces on Friday will balanced on paper, but that's not necessarily the same budget that's going to be enacted six months or eight months from now.

WOODRUFF: We've seen those rosy scenarios both at the state level all over the country and nationally.

Carla, what are the main roadblocks going to be for the governor? Is it going to be -- we saw that he's apparently cut a deal with the teachers union to get them to agree to some cuts for teachers. But where is he going to run into the greatest opposition?

MARINUCCI: The governor's really having to walk a tightrope between the Democrats in the legislature who want to raise taxes and Republicans in the legislature who want to cut programs. He's run a centrist's course and been good about doing it so far. The question is there are so many special interests and he's talked about getting rid of them in Sacramento.

Look, education, the deal that he cut with the teacher's union, if, in fact, that comes to pass, is no small thing. California teachers have been a very strong lobby. And he mentioned on your program, Judy, the fact that he may be willing to look at Proposition 98 funding.

I mean, these kinds of things, if he can create some kinds of consensus, get people to give up, and it looks like in every level of state government, people are going to have to start giving up favored programs, he's going to have a success. But that is going to be, as Dan said, a very tough job.

WOODRUFF: Dan, is this turning out to be tougher, do you think, than Governor Schwarzenegger expected? Or did he know going in just how hard this was going to be?

WALTERS: I think he understood the dollars and cents part of the problem in the depth of the deficit. I don't think he really understood the complexity of the politics and the capital where interest groups, thousands of interest groups, really, employing hundreds and hundreds of lobbyists, can kind of tie each other up in knots and prevent anything from happening. I think that's the thing that he's finding to be the most difficult.

And each interest group has a stake in something, particularly in the budget. And they are able to marshal their troops, both in the legislature and out on the streets, to stop anything. He's already had a taste of that when he proposed cuts to aid to autistic children and developmentally disabled children. They just came out of the woodwork, so to speak. And he had to retreat on that.

So that's the kind of thing I think he wasn't really prepared for.

WOODRUFF: Carla, how much good will does he have just because of who he is, Arnold Schwarzenegger, very famous actor?

MARINUCCI: You know, Judy, as Rusty's report mentioned the very fact that 250 reporters from around the world have been credentialed for tonight's speech shows this guy has got the stage, the legislators up there know it and they know the kind of focus that he commands. That gives him enormous clout right now.

As Dan said, you know, the budget comes out Friday. And that's where the action hero may turn into a villain to a lot of people in California depending on where the cuts are made. He's going to have to get through that. But right now he has got center stage.

WOODRUFF: Dan, very, very quickly. You agree he's got some good will, though, that gives him the kind of boost that his predecessor, Gray Davis, didn't have?

WALTERS: He's got good will and he also has a pretty good ability, I think, to kind of crack heads. He's already shown that with the teachers union. He said, Take this deal or you might get a worse deal. He's already working with the very, very powerful prison guards union, just saying basically, If you don't want to renegotiate your contracts, we'll start releasing prisoners and you'll lose your jobs.

(CROSSTALK)

WALTERS: He can play hard ball.

WOODRUFF: We're going to be watching that, too. Dan Walters of "The Sacramento Bee," Carla Marinucci of "The San Francisco Chronicle." Great to see both of you. Thank you very much.

All the way on the other side of the country, embattled Connecticut Governor John Rowland says he has no intention of resigning. That's the word after the governor's 90-minute meeting today with leaders from both political parties. One describes the meeting as serious and candid.

Rowland who is a Republican is in the middle of a controversy over who paid for improvements to his summer home. After first saying that he had paid the bill, the governor later admitted some renovations were gifts from friends, from state employees and a politically-connected contractor. Roland, however, denies any wrongdoing.

When we return, athletes turning his attention to politics.

Plus, I'll talk live with John Thune about his decision to challenge Senate Minority Leader Tom Daschle.

(COMMERCIAL BREAK)

WOODRUFF: Former South Dakota Congressman John Thune's decision to run for the Senate instantly creates major challenge for incumbent and Senate Minority Leader Tom Daschle.

Thune announced his plans last night in Sioux Falls. Two years ago Thune lost a race for the state's other U.S. Senate seat by just 524 votes. Senator Daschle said today that he goes into every race believing that, quote, "Only the paranoid survive." He also is released a new TV ad showcasing his work to restore a woman's health insurance coverage.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: It just made us all the more determined to confront the insurance company on her behalf, to get them to understand how big a mistake it would have been to drop her from their health insurance. We got them to change their mind.

UNIDENTIFIED FEMALE: What Tom Daschle did for me was wonderful, above and beyond the call of duty.

(END VIDEO CLIP)

WOODRUFF: Former Republican Congressman John Thune is with me now from Sioux Falls, South Dakota. Mr. Thune, good to see you. Thanks for talking with me.

JOHN THUNE, FRM. CONGRESSMAN: Thank you, Judy. It's nice to be with you.

WOODRUFF: We know that a lot of Republicans in your state urged you to run for that single House seat that you once occupied in your home state. They argued that it would have been an easier battle for you because there's no incumbent. Why then decide to run for the Senate?

THUNE: Well, really it came down -- it's one of those decisions that in your heart and in your gut you just have to decide, you know, where can I make the biggest difference? And as I assessed going back to the House and I love the House, I -- serving with my colleagues there was the greatest experience of my life.

But ultimately it came down to where I thought I could make the biggest difference. And clearly, there is no place in my mind right now there's more need of new bold leadership and people who can work in a constructive way on a positive agenda for the future of America than the United States Senate.

So it was a decision that was a process that I came to, obviously with a lot of input from my family and my constituents a cross South Dakota. There was some encouragement to run for the House.

But I think ultimately the people are going to rally around my bid for the Senate. And I'm obviously very excited about it. I think it's going to be a great year.

WOODRUFF: What about from the White House, national Republicans, that Republican National Committee? Were they in their arguing urging you to run for the Senate instead of the House?

THUNE: Well, you know, there have been some discussions over the past year about that. But truthfully, this has been a decision that I came to on my own. I think that the White House in a large measure, and to their credit, really has sort of stayed out of the way and just said, You know, let John make up his own mind in his own time.

And this was a decision that was made -- informed by my constituents in South Dakota, by my family and by where I felt my heart was headed.

WOODRUFF: So when we read today that Karl Rove's cousin, a gentleman named John Wood, is joining your campaign, you're going to say that's not a direct coordination with Karl Rove of the White House?

THUNE: No, it's not. I think Karl Rove has a big family and probably a lot of cousins in my guess. But his cousin John is somebody who's worked on a lot of campaigns around the country. He's done a lot of work with Dick Wattums (ph) who is managing my campaign here in South Dakota.

And so that -- yes, I wouldn't read into that any more than that.

WOODRUFF: I want -- I'm sure a lot of Republicans are supporting you. I want to read a quote, though, from one Republican in South Dakota, Don Frankenfeld, a former state Republican senator who said, "John Thune has contributed to our state and nation but this is not the time for him to be running." He says, "I think he will be defeated by Senator Daschle. And I hate to see that happen. While I don't agree with Senator Daschle on all of the issues, I don't think there's any doubt that he's a courageous leader" and so on. What do you say to Mr. Frankenfeld?

THUNE: Well, you know, I think that Don Frankenfeld along with a lot of other people across South Dakota, both parties, Republicans and Democrats, probably look at this and say, You know, this is an uphill battle.

But that doesn't deter me. I realize going into this race that I'm an underdog. But I think that it's worth it. I believe that things that we can accomplish, the things that I can accomplish as a member of the United States Senate are worth the sacrifice and the challenge and the risks that's involved in running a race like this. And I go into it with no delusions about the challenge that's in front of me.

But I really believe that the people of South Dakota need to have a clear choice as they head into this next election and need to have an opportunity to look at who is going to be the best leader for them heading into the future.

WOODRUFF: You say it's going to be an uphill battle. Do you go into this race confident that you will win?

THUNE: Absolutely. I don't think you get into a race unless you believe you can win. And as I looked at the circumstances here in South Dakota, you know obviously, I ran a race last time, was a very close race. At that time, Daschle and Johnson campaigned, used the argument about clout. Well That argument has been completely turned on its ear and I would argue to the people of South Dakota...

WOODRUFF: And seniority.

THUNE: ... the person with the clout in the United States Senate is going to be one that can work in a constructive way with the majority party, with the White House, with the House.

And I really believe that that argument makes us a very different race. I think the dynamics are different this time around. And I think it's going to be a very exciting race for the people of South Dakota and for the entire country.

WOODRUFF: So losing the Senate minority leader not something to worry about for South Dakotans. OK.

WOODRUFF: Well, I think...

(CROSSTALK)

WOODRUFF: We're going to have to leave it there. I'm sorry.

THUNE: All right. Thanks, Judy.

WOODRUFF: I didn't mean to throw that out there. To be continued in our next conversation.

John Thune, good to see you. Thanks very much.

THUNE: Thanks, Judy.

WOODRUFF: We'll be talking to you through the year.

THUNE: Very good.

WOODRUFF: And one more note on Republican challengers to Democrat incumbents, football player turned author and TV analyst Tim Green is among the latest names floated as a Republican challenger to New York Senator Charles Schumer. "The New York Daily News" quotes GOP sources who say that the former Atlanta Falcon and Syracuse Law School graduate is considering the race. Tim Green. Move over, Samuel Adams and Billy Beer. Coming up, the governor of California inspires a new candidate for political junkies and beer aficionados, shelves of collectibles.

(COMMERCIAL BREAK)

WOODRUFF: You could say that beer and politics go together about as well as beer and pretzels. Is it any wonder that Californians can now talk politics over a bottle of ice cold Governator Beer? The brand comes from a Portland, Oregon brewing company. We're told it tastes like a bitter ale with a smooth finish with a bite of a bite. Or in the words of the CEO of the beer company, "It's no girly man beer," end quote. That's what if CEO says.

That's it for INSIDE POLITICS. Thanks for joining us. 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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