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CNN LIVE EVENT/SPECIAL

Kerry Captures Iowa Prize; Edwards Strong Second; Dean Finishes Third; Gephardt To Drop Out

Aired January 20, 2004 - 01:00   ET

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

(BEGIN VIDEO CLIP)
SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: Last night, the New England Patriots won. Tonight, this New Englander won and you've sent me on the way to the Super Bowl.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D-NC), PRESIDENTIAL CANDIDATE: Tonight, we started a movement to change this country that will sweep across America. Tonight we began it....

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: Not only are we going to New Hampshire, Tom Harkin, we're going to South Carolina and Oklahoma and Arizona and North Dakota and New Mexico. We're going to California and Texas and New York. And we're going to South Dakota and Oregon and Washington and Michigan! And then we're going to Washington, D.C., to take back the White House. Yaaaaaaaaa! (ph)

(END VIDEO CLIP)

(BEGIN CLIP)

REP. RICHARD GEPHARDT (D-MO), PRESIDENTIAL CANDIDATE: Life will go on because this campaign was never about me. It was about all of us. It was about our future. And it was about our children and the America ahead of us.

(END VIDEO CLIP)

CAROL LIN, CNN ANCHOR: To the victors goes the momentum. Tonight, John Kerry and John Edwards are riding a big wave into New Hampshire. They finished first and second in the Iowa caucuses.

Good evening. I'm Carol Lin. In the next hour, I'm going to give you all the great moments of this dramatic opening night of the election year. You - if you're now just tuning in, we're going to show you everything you missed.

Let's begin with the shocking results. Senator John Kerry wins with 38 percent of Iowa's convention delegates. This is huge for a man who was trailing just two weeks ago.

Now, the bigger story may be John Edwards, who finished a strong second.

Howard Dean finished a distant third.

Dick Gephardt wound up in fourth place. It was a fatal blow to his campaign. He dropped out of the race a couple of hours ago.

Let's start with the Kerry campaign. Just last week, Howard Dean was upstaging the senator from Massachusetts. But something happened on the way to the caucuses. Tonight, the Massachusetts senator is the man with the mo.

(BEGIN VIDEO CLIP)

KERRY: Thank you, Iowa, for making me the comeback Kerry.

(END VIDEO CLIP)

LIN: What a line.

CNN's Kelly Wallace has been covering the Kerry campaign. She filed this report a short time ago.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: The mood inside this room electric earlier this evening as John Kerry thanked Iowans for making him the - quote - "comeback Kerry." Aides described this as a very, very big victory, especially for a campaign that the pundits had written just a few months ago.

John Kerry telling the crowd that he has just begun to fight for them, and that now it is off to New Hampshire. He was surrounded by his wife and his two daughters. One of his two daughters telling me that this was the most nerve-wracking night of her life.

Also on hand, the senior senator from Massachusetts, Ted Kennedy, as well as other Vietnam veterans that Kerry served with back in Vietnam.

Aides say the key to victory - they believe that Iowans got serious about electing a president. In the words of one top adviser, he believes that Iowans saw that Kerry was the right man with the right message with the political capitalist (ph) that he could beat President Bush in November.

But now, as John Kerry says, it's off to New Hampshire. He leaves in the middle of the night. And as soon as he gets there, he goes right to work with a rally with his supporters in New Hampshire at the airport.

I'm Kelly Wallace, CNN, reporting from Des Moines.

(END VIDEOTAPE)

LIN: Senator Kerry, who so hoarse he could barely speak - well, he gave his victory speech just a couple of hours ago. He put the White House on political notice and borrowed a phrase from the president.

(BEGIN VIDEO CLIP)

KERRY: And now you send me on to New Hampshire and to the other contests ahead in this country, and I make you this pledge: I have only just to begun to fight.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

KERRY: We came from behind, and we came for the fight. And now I have a special message for the special interests that have a home in the Bush White House: we're coming, you're going and don't let the door hit you on the way out.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

KERRY: George Bush, to put it quite simply, has run the most arrogant, inept, reckless and ideological foreign policy in the modern history of our country and we are going to turn it around by joining the community of nations. We will go back to the United Nations and we will turn over a new chapter in America's relationship with the world.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

KERRY: If George Bush wants to make national security the central issue of this campaign, I have three words for him we know he understands: bring it on. Bring it on! Bring it on!

CROWD: Bring it on! Bring it on! Bring it on!

(END VIDEO CLIP)

LIN: All right. Now, let's look at the man who's thrilled to be in second place. John Edwards says his positive campaign produced positive results in the Hawkeye State. He finished four points behind John Kerry and 14 points ahead of Howard Dean.

The North Carolina senator addressed a jubilant group of supporters.

(BEGIN VIDEO CLIP) EDWARDS: We have a moral responsibility to lift these families out of poverty. We have children in the country of our wealth going to bed hungry. We have children who don't have the clothes to keep them warm. We have millions of America who are working hard every single day for minimum wage, living in poverty. In the America you and I will build together, we will say no to kids going to bed hungry, no to kids who don't have the clothes to keep them warm, and no forever to any American working full time and living in poverty. Not in our America. Not in our America.

(END VIDEO CLIP)

LIN: CNN's Suzanne Malveaux spent the evening with the Edwards camp. Here's her report/

(BEGIN VIDEOTAPE)

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: I'm Suzanne Malveaux at the headquarters of Senator Edwards, where he thanked his supporters. He is absolutely thrilled with exceeding all expectations, coming in a strong second place. He says that he believes that Americans as well as Iowans are responding to his message, a positive message of a one America, a united America.

The next stop, on to New Hampshire. That is where he is hoping to build on the momentum that he has established here. He hoped, of course, to create the same type of upset. Polls show him now at 9 percent. The big challenge here, of course, is that he'll face a more crowded field of contenders.

Suzanne Malveaux, CNN, Des Moines, Iowa.

(END VIDEOTAPE)

LIN: In the meantime, Howard Dean acted as if he'd won the caucus. He was so pumped up in front of his supporters you would hardly notice that he was giving a concession speech.

(BEGIN VIDEO CLIP)

DEAN: We will not give up! We will not give up in New Hampshire! We will not give up in South Carolina! We will not give up in Arizona or New Mexico, Oklahoma, North Dakota, Delaware, Pennsylvania, Ohio, Michigan! We will not quit now or ever! We want our country back for ordinary Americans!

(END VIDEO CLIP)

LIN: Shall I say it again? Dean says he's "just begun to fight."

More now from CNN's senior political correspondent, Candy Crowley, at Dean's Des Moines headquarters.

(BEGIN VIDEOTAPE) CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Howard Dean did not go quietly into the Iowa night. In fact, his crowd was revved up and so was he. He told them it was on to New Hampshire, on to South Carolina and New Mexico. More pointedly, he said on to Massachusetts and North Carolina, the homes, respectively, of John Kerry and John Edwards.

Aides admit they are disappointed with this third-place. They believe a couple of things went wrong.

First and foremost, they say, their death match with Richard Gephardt in the final three weeks obliterated Dean's message.

Then, too, the young people, 17 and up, that they expected to arrive at the caucuses, did not come out in droves.

There will be no particular retooling of this campaign. In fact, aides say, in a curious way, Dean feels somewhat liberated now that he is no longer the front-runner.

Still, there has to be some question this evening as to whether the much vaunted, Internet-driven campaign can effectively turn it into a grassroots organization that actually gets out the vote. The next test, of course, a week from Tuesday in New Hampshire.

Candy Crowley, CNN, Des Moines.

(END VIDEOTAPE)

LIN: Just a little before 10:00 p.m. Eastern, CNN reported that Richard Gephardt would drop out of the race. He came in a dismal fourth place. Gephardt spoke to his supporters a short time later.

CNN's Dan Lothian has more on why he decided to bow out.

(BEGIN VIDEOTAPE)

DAN LOTHIAN, CNN CORRESPONDENT: After having so much confidence in this race here in Iowa, believing that he had the organization on the ground that would make him win in this campaign, Representative Dick Gephardt all but conceded that his fight for the White House is now over.

Thanked those in his district in Missouri, he thanked the supporters here in Iowa and he thanked all the union groups that have been behind him his entire political career.

(BEGIN VIDEO CLIP)

GEPHARDT: Of every labor union in this country who has stood by my side throughout my career....

(APPLAUSE)

GEPHARDT:....your fight is my fight, and it will always be that way. The fight for working people is in my bones, and I will never leave your side, fighting for justice, for America's workers and America's workers are what make this country what it is.

(END VIDEO CLIP)

LOTHIAN: Representative Gephardt congratulated the other candidates in this race. He said he would do whatever it took to get behind the eventual nominee.

Dan Lothian, CNN, Des Moines.

(END VIDEOTAPE)

LIN: Still ahead, stunning victory and shocking defeat.

(BEGIN VIDEO CLIP)

CROWD: Kerry! Kerry! Kerry! Kerry! Kerry!

(END VIDEO CLIP)

LIN: The first round is over, the votes are in, but who's really leading the race to the Democratic nomination? The toughest battle is still to come. We'll take a look at how the candidates stack up against President Bush.

And later, it was a race left up to the Iowans. We know who won, but how did they decide? A look inside a caucus, when our special coverage continues.

(BEGIN VIDEOTAPE)

ANNOUNCER: Since 1972, the Iowa caucuses have played a major role in the presidential primaries. IN fact, since then, the eventual nominee of each party has always finished in the top three. But the candidate who wins the Democratic Party nomination often does not finish first in the caucuses. Since 1972, it has happened only four times.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

KERRY: ...place in America as unfair as it is today. Never. It's tilted, and people are working harder. They can't afford their health insurance. They can't afford tuitions that are going up 18, 20 percent a year. Wages just don't rise that way.

LARRY KING, CNN HOST: All right.

KERRY: And we've lost jobs overseas like crazy.

People want leadership; real leadership that tells the truth, says what it means, means what it says and takes America to a better place.

KING: Were you surprised tonight at all by the size of it?

KERRY: Actually, I was, yes. It was an enormous - I mean, 40 delegates is a huge win.

(END VIDEO CLIP)

LIN: A huge win eluded Howard Dean, but that didn't damped his spirited speech to his supporters. Dean's effervescence was too much for former Republican Senator Alan Simpson.

(BEGIN VIDEO CLIP)

ALAN SIMPSON (R-WY), FMR. SENATOR: Dean would be the guy that we all kind of looked for - it's kind of like the doc would like to just put the tongue dispenser (sic) down our mouths and go "Ahhh," but the doc is here today to give you the business. And I don't think he's going to - I don't think he's going to come through. And tonight - my, he looked like a prairie dog on speed. I thought it was quite remarkable.

KING: (LAUGHTER)

(END VIDEO CLIP)

LIN: (LAUGHTER)

Well, if history is our guide, tonight's caucuses are hardly a predictor of who will the nomination. Since 1972, the eventual Democratic nominee has finished first only four times.

Let's get some perspective on tonight's results. We're joined now by "CROSSFIRE" co-hosts Bob Novak, Democratic strategist Donna Brazile, and CNN political analyst Carlos Watson. All three have been following tonight's caucuses from Des Moines.

Good morning to now all three of you. It's been an exciting night.

John Kerry, obviously a huge victory he in Iowa. But looking forward to New Hampshire, he's running third in the polls out there. So, is this likely to change as a result of tonight?

ROBERT NOVAK, CNN "CROSSFIRE" CO-HOST: I think he - I think Kerry, you're going to find him running first pretty soon in those polls. I think it will change. I think General Clark is going to suffer a little bit because he wasn't here. He was trying in New Hampshire, but I think that's going to hurt him.

The guy who we really wonder about is Dean, who was running way ahead. At one point, he was over 20 points ahead in New Hampshire at one point.

And, Carol, with all due respect, I wouldn't call that spirited speech. I would call that a rant. I thought he was raving.

LIN: (LAUGHTER)

I thought he was going to have a heart attack.

NOVAK: I was very afraid when he started making animal sounds and ripping off his clothes. You know, I didn't know what....

LIN: I didn't see that part, Bob.

NOVAK: I thought he was going to get on the floor - well, he is. He went, "Arrrrr!" (ph) like that.

The other question is, is John....

LIN: (LAUGHTER)

NOVAK: Is John Edwards, who really ran a terrific campaign here, and he is - he is not going to pass New Hampshire. No way. He is going to go there and try to pull another miracle there.

LIN: Donna....

DONNA BRAZILE, DEMOCRATIC STRATEGIST: I agree with Bob.

LIN: Yes. We kept hearing about organization, organization, organization. But organization seemed to have failed Howard Dean here.

BRAZILE: It did. No question.

Howard Dean only captured two counties. John - John Kerry ran a quintessential Democratic campaign. He went out there, he received the endorsement of local county officials, state legislators - and you know what? They pulled it off because at the last minute, the surge, they were able to capture it and bring it home.

And John - John Edwards also had an impressive number of counties that he took in tonight, especially in areas where Dick Gephardt should have ran a strong race.

Look, I think Howard Dean is in trouble. He had a lot of support going into caucus night, and his campaign was unable to capitalize on that early momentum. He's in real serious trouble.

LIN: Why do you think that is? And voters turned so suddenly on Howard Dean? What happened?

CARLOS WATSON, CNN POLITICAL ANALYST: I think that what happened, Carol, was that that eight or 10 days ago, around the Black Round debate here in Iowa and around the Des Moines Register's endorsement of John Edwards, I think people started to take another look at Howard Dean. And when he began to portrayed as angry and careless, instead of responding with a compelling personal ad that said, I'm a doctor, I'm a father, I'm a proven governor, several terms in Vermont - instead, he had more negative ads and, frankly, more endorsements. And I'm not sure that happened.

LIN: Do you think...

(CROSSTALK)

LIN: I'm sorry. Go ahead, Carlos. WATSON: I was actually going to move on to New Hampshire and say something interesting about New Hampshire, tying into what Bob said earlier.

I think we're going to see a significant bump - 10 or 15 points. I agree with him that I think by the time we wake up Wednesday morning - so not tomorrow morning, but Wednesday morning, I think we'll see polls that put Kerry in the lead.

But Edwards has a chance here to do something that he did again in Iowa, which is watch Clark and Kerry fight it out, and sit back and kind of reap the benefits and run this quote - unquote positive campaign.

The other thing is that in a state like in New Hampshire, some of the very detailed policy proposals that John Edwards has put together actually might play well.

NOVAK: Don't forget that in New Hampshire, the independents get to vote in the Democratic primary or the Republican primary - but there isn't on this year. And they are very much attracted to the personality of somebody.

I remember very much Gary Hart came out of a second-place performance in Iowa in 1984 and he really captured the imagination of New Hampshire, upset Mondale. I would say that John Kerry ought to be very, very careful of John Edwards because the voters there - they all think that - if you think that the Iowa voters think they're all political experts, wait until you get to New Hampshire, because they all think they're Karl Roves there. And they're - they're going to - they look at all the candidates and say, Who is electable and who is the person who can beat Bush? And they - I think Edwards is a very dangerous factor for Kerry.

LIN: So how do you...

BRAZILE: They gave us a lot of....

LIN: So how do you see the strategy changing?

BRAZILE: They gave a - I'm sorry. I didn't hear that.

LIN: How do you see the strategy, then, changing between these different campaigns and candidates once they hit the ground in New Hampshire?

BRAZILE: Well, General Clark and Joe Lieberman have been on the ground now for a couple days. They're going to find some really enthusiastic candidates who will land there in a couple hours.

I think what's going to happen over the next 24 hours is that the Kerry campaign will begin a very interesting surge. The Dean campaign will probably come down a notch or two.

But I agree, John Edwards was an impressive closer here in Iowa and he is going to be able to go into New Hampshire with a new energy, a new focus and this guy is going to pick up a little bit of momentum.

NOVAK: Joe - who did you mention? Joe - who was that?

BRAZILE: Joe Lieberman, who won....

NOVAK: Oh!

BRAZILE: Who received the endorsement today from the Union Leader.

NOVAK: (LAUGHTER)

WATSON: Hey, Carol, two points of attack that I would expect to see in New Hampshire against John Kerry:

One, I think Wesley Clark will raise the electability question, something that Kerry used against Dean here, in saying that Kerry is going to have a tough time going down to the South. And Clark will, of course, say that he's from the South; he's from Arkansas. And Edwards will say the same thing. So I think you'll hear that.

The other thing - I think you'll start to see more personal attacks. In the same way that Howard Dean's character was called into question here - they said he was angry, that he was careless, that he shot from the hip. I think, again, they'll bring up the old charge again about John Kerry that he's patrician and that he's aloof. And I think you'll see that played out. May not work, but I think you'll at least those charges.

NOVAK: But I would say that General Clark is not yet even begun to imagine the attacks that can be levied to him, depending how strong he is in the polls because - don't forget, this guy was going to Republicans fund-raisers just about a year ago.

WATSON: Bob, do you think there's any chance we'll see some of that footage? Maybe just a little?

NOVAK: Just a little bit. And I know for a fact that a year and a half ago he was telling people that he was a Republican but he was thinking of changing parties.

So, you know, it's - the old - there was an old saying, when Wendell Wilkie in 1940 changed from Democrat to Republican - it's one thing for the local prostitute to become a true believer, but should she be leading the choir?

(LAUGHTER)

WATSON: Are you putting down prostitutes when you say that?

NOVAK: Well, you know...

WATSON: You know, one key turning point and one key date, I think, to think about here will be the one-and-only in New Hampshire, which is on Thursday. And I think that at that point, we'll probably see Kerry under heavy attack, and I think a lot of voters - a lot of undecided voters - will get their first chance to look at a reformed candidate group.

BRAZILE: Look, I do believe that the New Hampshire Democrats will take a strong look at all of these candidates. But, in the end, they're going to decide like the Iowa Democrats on electability and who can go up against George Bush in the fall. And they're looking for someone who will stand and fight. And I'm telling you, John Kerry came out of here - this state tonight as a fighter, looking like a real fighter.

NOVAK: Well, you know, Democrats always talk about fighting. Republicans never talk about fighting, because Republicans aren't fighter - they're lovers, you know? They....

(LAUGTER)

(CROSSTALK)

NOVAK: It's a different kind of thing.

But I don't think that John Kerry won here because he's a fighter. I think they thought he was somebody who could protect the people of Iowa from terrorism and from threats. And that's - when he had the firefighters with him and the veterans - I think he gave them a reassurance.

The guy who looks like a fighter was Dean, and he - had a catastrophe here.

BRAZILE: Well, let me also say that I think the women's vote played a key role in John Kerry's victory. Christie Vilsack came out there, embraced John Kerry, and I believe that brought a lot of undecided voters as well.

NOVAK: Are you talking about the women's vote? I took (UNINTELLIBLE).

Let me just say one other thing - that I really do that the catastrophe that really started the beginning of the end of Dean's campaign was when he said Osama bin Laden deserved a fair trial. The American people don't think Osama bin Laden deserves a fair trial. They think - they think he ought to be executed.

WATSON: You know, what of the - I agree that some of the foreign policy questions in December certainly had a ripple effect as we started looking at the polls in January.

One of the other interesting subtexts here, and when we look back at other campaigns to put into perspective - while Edwards comes out of this with a significant bounce and bump, a real question is how much money does he have to compete? And we saw before with Dick Gephardt in '88, where he came out of here with a win - granted, it was his home state (sic) - he didn't really have the money to compete.

Now, Edwards obviously has some personal wealth that he could draw upon if he so decided. But I think that's going to be an underlying subtext in what will be a short eight-day campaign. NOVAK: I'll bet he can raise money where poor Dick Gephardt couldn't raise money.

BRAZILE: I totally agree. I think John Edwards will raise the money he needs to not only compete next week in New Hampshire, but to go on and compete in those seven states on February 3.

NOVAK: I was talking to one of Kerry's advisers tonight, and he told me if he was advising John Edwards, he'd tell him not to go to New Hampshire. It's too steep a hill. I got the message that Kerry doesn't want him to go to New Hampshire.

BRAZILE : Well, the other thing is the New Hampshire media market is so expensive because that's, of course, the Boston media market, and I'll never forget those decisions are real tough.

I would go down South as well. That's his base. He can really - now that Dick Gephardt's not - is out of the race, he can also go to Missouri and he can lock down some of those key states.

NOVAK: You know, Edwards - Edwards has already put on some TV ads in New Hampshire. You know that.

WATSON: Let's talk - lastly, about two other people.

(CROSSTALK)

LIN: Actually, we're running out of time folks. So, Carlos, if you don't mind wrapping up on that point.

WATSON: Well, we saw Al Sharpton attack Howard Dean significantly in the debate on January 11, and that changed, in many ways, the tone and complexion. Once again, he and Joe Lieberman may not rack up the votes, but they could change the nature of the race. So stay tuned for that, particularly on Thursday's debate.

NOVAK: But Sharpton's my man. He didn't do very well tonight, though, did he?

LIN: (LAUGHTER)

WATSON: The numbers weren't good for him.

LIN: Eight days to go. Thank you for very much, Robert Novak, Donna Brazile, Carlos Watson. Great coverage tonight.

When this special edition of CNN returns: they weren't in Iowa tonight, but they sure had a lot to say about it. Next, from New Hampshire, we are going to hear from Wesley Clark and Joe Lieberman. They are making their big push in a state they each hope to win.

And how do the Democratic candidates stack up against President Bush? We are going to have the results of a recent poll, and you may be surprised.

(BEGIN VIDEOTAPE) ANNOUNCER: Who holds the record for earliest visit by a candidate to Iowa? Dick Gephardt, twice. In both 1985 and 1997, Gephardt visited the Hawkeye State on March 25, more than three-and-a- half years before the caucuses.

GEPHARDT: These wonderful people in Iowa....

ANNOUNCER: He also set the record for most visits, with 148 days in 1988.

GEPHARDT: This is your victory too!

ANNOUNCER: Former Governor Howard Dean and Senator John Kerry led the pack for most visits for this year's caucus.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

LIN: The numbers from the Iowa caucuses are in, and John Kerry and John Edwards are savoring them.

Here are the totals:

Senator John Kerry of Massachusetts, who looked like an also-ran just a few weeks ago, won Iowa with 38 percent of the vote.

Senator John Edwards of North Carolina, an even darker horse until the last few days, came in a healthy second at 32 percent.

Former Vermont Governor Howard Dean's front-runner status took a blow. He ran third at 18 percent.

Congressman Dick Gephardt straggled in fourth place at 11 percent. Gephardt has decided to drop out of the race and end his run for the White House.

The contest in Iowa ended up with John Kerry and John Edwards playing tortoise to Howard Dean's hare.

Judy Woodruff recaps the contest, its surprises and what it means in the next leg of the race.

(BEGIN VIDEOTAPE)

KERRY: Thank you, Iowa, for making me the comeback Kerry.

JUDY WOODRUFF, CNN CORRESPONDENT (voice-over): A come-from- behind victory that will send John Kerry roaring toward his New England home turf.

KERRY: And now you send me on to New Hampshire and to the other contests ahead in this country, and I make you this pledge: I have only just begun to fight. In the months and years ahead....

WOODRUFF: Trailing for months after a strong start, the senator from Massachusetts snatches victory from the jaws of defeat in the Hawkeye State.

But the caucuses delivered a deathblow to Missouri Congressman Richard Gephardt, who plans to drop out of the race tomorrow.

GEPHARDT: Life will go on, because this campaign was never about me. It was about all of us. It was about our future and it was about our children and the America ahead of us.

WOODRUFF: Gephardt, who won the caucuses here in 1988, has said he would have to win them this year to stay in the game. But despite a massive organization of labor supporters, the candidate's effort fell far short.

Kerry wasn't the only candidate crowing tonight. Senator John Edwards of North Carolina powered to a strong second-place finish likely to bring new momentum to his campaign.

EDWARDS: I came here a year ago with a belief that we could change this country, with a belief that the politics of what was possible, the politics of hope could overcome the politics of cynicism.

WOODRUFF: Sounding anything but humbled, one-time front-runner Howard Dean, who despite shattering fund-raising records and flying thousands of volunteers into Iowa, placed a disappointing third, far behind Kerry and Edwards.

DEAN: We will not quit now or ever! We want our country back for ordinary Americans!

WOODRUFF: It's a whole new ball game.

Judy Woodruff, CNN, Iowa.

(END VIDEOTAPE)

LIN: The two contenders who didn't take part in the Iowa caucuses spoke to Larry King tonight from New Hampshire.

Retired General Wesley Clark said Iowa reinforced what his camp knew from the beginning.

(BEGIN VIDEO CLIP)

RET. GEN. WESLEY CLARK (D), PRESIDENTIAL CANDIDATE: I think it shows that the voters make the decisions, and, you know, I think - I congratulate John Kerry and John Edwards and, you know, I'm really excited to be up here in New Hampshire. We're having a great time here. I was down in South Carolina today. And let's get going.

(END VIDEO CLIP)

LIN: Clark said he entered the race too late to mount a campaign in Iowa.

Senator Joe Lieberman of Connecticut also passed on Iowa to concentrate on his neighboring state of New Hampshire (sic). Now, in his view, Iowa has changed everything.

(BEGIN VIDEO CLIP)

SEN. JOE LIEBERMAN (D-CT), PRESIDENTIAL CANDIDATE: Well, the most thing from my point of view, since I didn't participate there, is Iowa's over and we're now to New Hampshire. New Hampshire is a whole new ball game.

What I have seen from Iowa validates what I've seen here in New Hampshire. The people are going to make up their minds. They're not going to listen to the pundits.

(END VIDEO CLIP)

LIN: Lieberman says his front-page endorsement by New Hampshire's largest newspaper, the Manchester Union Leader, is another sign that he's the best candidate to beat President Bush in November.

So how would each of the top four candidates in the Iowa caucuses match up against President Bush if the election were held today?

Well, here's a CNN/USA Today/Gallup poll taken January 9th through the 11th shows:

The voters prefer George W. Bush to Howard Dean 56 percent to 41 percent.

The president leads John Kerry by slight less, 55 percent to 43 percent.

Almost the same for Wesley Clark. The president tops him 56 percent to 42 percent.

John Edward (sic) wasn't included in the poll because he had been running far behind in previous national polls.

Now, the poll's margin of error is plus or minus 4 points.

Still ahead, making it count. The votes are in, but what issues counted most in the first crucial test for candidates?

And, it's on to New Hampshire. Candidates face a new kind of landscape in the Granite State. We are going to look ahead to what's next in the battle for the White House as our special coverage continues.

(BEGIN VIDEOTAPE)

ANNOUNCER: 1972 was the first time the Iowa caucuses really kicked off the election cycle. An underdog candidate, South Dakota Senator George McGovern, took the advice of his young campaign manager, Gary Hart, to compete in Iowa. McGovern's strong showing brought national media attention to his candidacy. He went on to win the Democratic nomination.

SEN. GEORGE MCGOVERN (D-SD), PRESIDENTIAL CANDIDATE: I accept your nomination with a full and grateful heart.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

LIN: CNN's senior political analyst has been busy looking behind tonight's numbers, including the entrance polls. Now, that's where people were asked before they went into their caucuses which candidate they might vote for and how they felt on deciding the issues.

CNN's Bill Schneider joins us now from Des Moines with more on his research.

Bill, such a surprising result today. Have you figured out what happened?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, I think I have, because what our entrance polls showed is that this campaign in Iowa turned around a month ago, back in mid-December.

Among caucus participants who made up their minds before then, Howard Dean was the top choice, as you see here, 32 percent. But compare them with those who decided within the last month. And among that group, Dean's supporter fell by half and Kerry and Edwards moved to the top of the list.

What happened? Saddam Hussein was captured and the anger fueling the anti-war issue diminished very sharply.

Now, the cornerstone of John Kerry's victory was seniors, the Greatest Generation. Kerry's a veteran and a Vietnam War hero. He made his military record a major feature of his campaign, and those voters include a lot of veterans a veteran's families. They delivered for John Kerry.

The voters in Iowa are strongly critical of the war in Iraq, but that wasn't the issue that drove their votes. Here are the issues that they said were most important:

The economy and jobs, 29 percent. Health care, 28 percent. Just 14 percent said their vote was determined by the war in Iraq. And those who said the economy was the top issue - jobs, jobs, jobs - they were voting for Kerry and Edwards. Only 16 percent for Howard Dean, who was the anti-war candidate, but not to a lot of voters the candidate who would deliver jobs - Carol.

LIN: All right. So what your predictions for New Hampshire and how the strategies might change as a result?

SCHNEIDER: Well, New Hampshire is going to be a real free-for- all, Carol, because you've got Howard Dean - Howard Dean's strength has never been in Iowa. He says he's pleased to have come in third -- t was a very poor third - because this is not his kind of state. Iowa's not, New Hampshire is. It's more technical and professional workers, a state with a very well-educated, very affluent Democratic Party, the kind of people who vote for Howard Dean, very liberal Democrats, rather than blue collar workers and farmers.

So he should do better there, and it should be a real race between Dean and Kerry, who comes from neighboring New Hampshire (sic) - Dean from Vermont, Kerry from New Hampshire (sic) - either side of New Hampshire. I mean, Kerry from Massachusetts.

Plus, Wesley Clark. Wesley Clark has been moving ahead of John Kerry. So John Kerry's going to get some momentum coming out of Iowa, and it's going to be a real three-way race, with Joe Lieberman thrown in as well, and John Edwards.

LIN: Now what do you think about the dynamic of two war veterans, John Kerry going to New Hampshire, Wesley Clark campaigning hard there? Are they likely to nix each other out and would John Edwards then be the benefit?

SCHNEIDER: It's entirely possible, because, you know, both Dean and Kerry appeal to the more upscale, better-educated Democratic voters. Wesley Clark has a lot of appeal to the old Clinton constituency. They're really competing for the very same voters. Kerry and Clark both have that credibility on national security.

It's possible that they could all split up that vote and allow a guy like Joe Lieberman, who's a more moderate Democrat, to get a foothold, to get some traction there. Maybe he could come in first. Or even a Southerner, John Edwards, could come in with his economic populist message.

I think it's a free-ball. It's a jump ball in New Hampshire, and a real five-way contest.

LIN: Hmmm.

Now, all the campaigns have said that New Hampshire is a completely different playing field. How so, Bill?

SCHNEIDER: How what?

LIN: How so? I mean, how is - I know it's a primary process, but just the nature of the people in New Hampshire? Are they very different in terms of their issues, what they are going to be looking for out of these candidates than the Iowans?

SCHNEIDER: Well, generally, it's a very liberal state. As I say, it has a lot of professional and technical workers. It has a lot of people who used to live in Massachusetts, in the Boston area. Very well educated. Just as anti-war as the voters in Iowa, but the question is, they may vote the war in a way that the Iowa voters didn't.

Iowa has a fairly stagnant economy. It has not been growing very fast in population. To make a comparison, Iowa gained just 6 percent in the last decade. New Hampshire grew 19 percent. So New Hampshire has a more prosperous economy. If the economy and jobs were the major issue in Iowa, the war could be the major issue in New Hampshire, and that could give a boost to Howard Dean. LIN: Hmmm.

In the meantime, we did see perhaps an end to a political career with Dick Gephardt tonight. Any thoughts on that?

SCHNEIDER: Well, that's a very sad end.

You know, he's been frustrated for a long time. He's fought the good fight. He want to become speaker of the House. He made it to majority leader under Speaker Tom Foley and just when he was about to become speaker of the House, he had to turn the gavel over to Newt Gingrich back in 1995. And now, of course, for the second time he's frustrated in his presidential ambitions. He won Iowa in '88. Now he's been forced to pull out of the race.

What we saw tonight was Dick Gephardt's last hurrah. To a lot of people he was yesterday's man. He had a strong message and a good message. But even the labor unions, whom he's suffered and sacrificed for and bled for and voted for for all these years, they didn't deliver for him. Among voters from union households, John Kerry was their top choice.

LIN: Interesting. Yes. And a very gracious speech by Dick Gephardt tonight.

SCHNEIDER: It was indeed. Contrast that with Howard Dean, who seemed a little hypercharged tonight.

LIN: (LAUGHTER)

SCHNEIDER: That was quite a speech.

LIN: That's a story in and of itself. Yes, it certainly was.

All right. Thanks so much, Bill Schneider.

SCHENIDER: Sure.

LIN: It's been a long night for you.

SCHNEIDER: It has.

LIN: All right.

Still ahead, candidates take the first step in the battle to face President Bush this fall. The next stop? New Hampshire. We've been talking about. What can we expect? We've got more on that.

And it doesn't end there. It's a long road to the White House. A look at what candidates will be up to this busy political season as our special coverage continues.

(COMMERCIAL BREAK)

LIN: Obviously, we've been talking a lot about the Iowa caucuses. But now all the attention focuses on who might win next week's New Hampshire primary.

A poll conducted by the American Research Group between January 16 and 18th puts Howard Dean in the lead of Democratic contenders with 28 percent. Wesley Clark had 20 percent, followed by John Kerry with 19 percent. John Edwards garnered only 8 percent.

Right now, many of the candidates are in the air heading to New Hampshire. And last night's big upsets will certainly change the dynamics of what comes next.

With more on what's happening in the Granite State and the two candidates already there, let's check in with CNN's Jeanne Meserve.

(BEGIN VIDEOTAPE)

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT (voice-over): At John Kerry's New Hampshire headquarters, elation and hope that his win in Iowa will turbo-charge his campaign here.

CLARK: The strategy is, eat, drink, be merry and keep your energy level up.

MESERVE: General Wesley Clark didn't make a stand in Iowa, concentrating on New Hampshire instead. The strategy appears to be paying off for him, but not for Joe Lieberman. Not yet, at least.

LIEBERMAN: Look, I feel like there's a rising tide happening here in New Hampshire. People are listening.

MESERVE: There are still a lot of undecided New Hampshire voters. A Monday tracking poll from The American Research Group showed Dean still the man to beat at 28 percent, Clark at 20, with Kerry on Clark's heels with 19. John Edwards, Lieberman and Dennis Kucinich were all in the single digits.

Experts say the impact of Iowa caucuses on the New Hampshire primary is uncertain.

DANTE SCALA, POLITICAL SCIENTIST, SAIN ANSELM COLLEGE: Iowa has affected New Hampshire the most when it's narrowed the field down to two. When it doesn't do that, then the results are much more mixed.

MESERVE (on camera): New Hampshire voters say this is a different state with a different process and they'll make up their own minds, thank you very much. They say what they want most of all is an individual who can beat George W. Bush in the general election. Has John Kerry persuaded them that he's the man to do that with his performance in Iowa? We'll see in a week.

Jeanne Meserve, CNN, Manchester, New Hampshire.

(END VIDEOTAPE)

LIN: Now, let's take a closer look at the political road ahead in this year's election process. As we've pointed out tonight, the Iowa caucuses are setting the tone for next year's New Hampshire primary. Both states are shown in blue. New Hampshire's primary is scheduled to take place January 27.

The next important date is February 3, with races in seven states shown in yellow.

Several more primaries and caucuses will take place in 11 states, show here in red during a period between February 7 and the 24th.

After that, the attention focuses on 10 more states shaded now in green. All of those states are holding races on the same day, March 2.

That's followed by the March 9 primaries in four states, Florida, Louisiana, Mississippi and Texas. They are now shaded in tan. You can see how they're all bunched up.

Still ahead, you saw some of it live tonight, and it was fascinating. Up next, we are going to take you behind the scenes, inside some of those Iowa caucus meetings to really get a feel of what is was like to be there - democracy in action.

(COMMERCIAL BREAK)

LIN: So now you know the remarkable results of the 2004 Iowa caucuses. But the curious, intensely democratic process that produced those results is just as remarkable.

CNN national correspondent Bruce Morton looks at how they chose candidates in Iowa, where politics is all about as being - as retail as it can get.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): It's a pretty state. Not as flat as they told you, not really a farm state anymore - full of literate people and good schools. And every four years, they speak their minds about who ought to be president. They do it in precinct caucuses, where they count votes, argue and horse trade.

I was at Greenwood Elementary School in Des Moines, high class trading.

UNIDENTIFIED FEMALE: We only need five. So we'd love to have some of your guys....

UNIDENTIFIED MALE: Well, we're only...

UNIDENTIFIED FEMALE: It is not a damn numbers game!

UNIDENTIFIED MALE: What the focus here is getting rid of the president who is in right now.

UNIDENTIFIED FEMALE: I believe in Dean, and nothing you say is going to move me. Go talk to somebody who is willing to be flexible. I'm not.

MORTON: Winners sing.

(SINGING)

MORTON: Or cheer.

(CHEERS AND APPLAUSE)

MORTON: Losers want more time.

UNIDENTIFIED MALE: All of the preference groups want to keep - want to keep the count open.

MORTON: But finally, the results of this caucus.

UNIDENTIFIED MALE: Edwards, 132, which would give them four delegates.

(CHEERS AND APPLAUSE)

UNIDENTIFIED MALE: Kerry, 122, which would give three delegates.

(CHEERS AND APPLAUSE)

UNIDENTIFIED MALE: And Dean 54. You got two delegates.

(CHEERS AND APPLAUSE)

MORTON: It is democracy, neighborhood style, sleeves rolled up. It wouldn't work in California. Is it what the Athenians did in their forum?

Whatever. It's very Iowan.

DENNIS GOLDFORD, DRAKE UNIVERSITY: The caucuses are distinctly Iowan in that they really are almost an innocent throwback to grassroots politics. You can cover politics for a long time as professional observers, as reporters, and get fairly jaded and cynical. But you can go to a caucus, even to this date, and actually almost be moved by how seriously everyday people take this process.

MORTON: Hmm. Another four years, and they'll do it again.

Bruce Morton, CNN, Des Moines.

(END VIDEOTAPE)

LIN: Thanks for sharing this wonderfully exciting night of politics with us.

John Kerry takes the top spot, finishing ahead of John Edwards, Howard Dean and Dick Gephardt.

We are going to continue our extensive coverage of the road to the White House and take you back to the hour where Senator John Kerry reveled in his victory.

More on tonight's Iowa caucuses, next on CNN.

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



Finishes Third; Gephardt To Drop Out>


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