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Inside Politics

Kerry Fires Back; Battleground Pennsylvania

Aired August 23, 2004 - 15:30   ET

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

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


(BEGIN VIDEOTAPE)
ANNOUNCER: A not so swift response.

UNIDENTIFIED MALE: Instead of solutions, George Bush's campaign supports a front group attacking John Kerry's military record.

ANNOUNCER: Will the Kerry camp's new ad help him counter the controversy or prolong it?

From the CIA to Capitol Hill, some scathing reaction today to Senator Pat Roberts' intel bombshell.

SEN. PAT ROBERTS (R), INTELLIGENCE COMMITTEE CHAIRMAN: Well, we think it's real reform.

ANNOUNCER: A Keystone for Kerry or Bush? On the road to the GOP convention, we're stopping in the showdown state of Pennsylvania to take a snapshot of the race.

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

(END VIDEOTAPE)

JUDY WOODRUFF, HOST: Thank you for joining us at this local landmark, the Philadelphia Museum of Art. We are making our way to New York City, along with the CNN Election Express bus -- you can see it behind me -- for the Republican National Convention, which begins one week from today. What better place to stop than here in Pennsylvania, one of the most competitive and coveted states in the race for the White House.

We're going to take a closer look at this showdown here throughout the next hour. But we begin with a new round of political fire over ads attacking John Kerry's war record.

In Texas today, President Bush again called for an end to all political commercials by so-called independent 527 groups. But he did not directly condemn the anti-Kerry ads by the group calling itself Swift Boat Veterans for Truth. Still, during questioning by reporters, Mr. Bush did go a step farther in directly including the Swift Boat ads in his broader complaint about unregulated third-party spots.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: When you say that you want to stop all...

GEORGE W. BUSH (R), PRESIDENT OF THE UNITED STATES: All of them.

UNIDENTIFIED FEMALE: So, that means...

BUSH: That means that ad, every other ad.

UNIDENTIFIED FEMALE: (INAUDIBLE)?

BUSH: Absolutely. I don't think we ought to have 527s. I can't be more plain about it. And I wish -- I hope my opponent joins me in saying -- condemning these activities of the 527s.

It's -- I think they're bad for the system. That's why I signed the bill, McCain-Feingold.

(END VIDEO CLIP)

WOODRUFF: Meantime, the Bush campaign itself is accusing team Kerry of launching a new campaign ad that it says is false and libelous. Howard Kurtz of CNN's "RELIABLE SOURCES" has more on that ad, the charges and countercharges.

(BEGIN VIDEOTAPE)

HOWARD KURTZ, CNN'S "RELIABLE SOURCES" (voice-over): After six months of generally positive ads, John Kerry is taking a page from his Vietnam days and counterattacking on the airwaves. Not against a negative ad from President Bush, but one for which he's trying to hold Bush responsible.

UNIDENTIFIED MALE: Instead of solutions, George Bush's campaign supports a front group attacking John Kerry's military record.

KURTZ: Hold on. There's no proof that the president's team is supporting the Swift Boat Veterans for Truth, which has roiled the presidential campaign with a modest ad-buy accusing Kerry about lying about his decorated Vietnam service. The group's backers have ties to various Bush aides, but Kerry also has links to the outside liberal groups that have poured tens of millions of dollars into anti-Bush ads, one of which employs former Kerry campaign chief Jim Jordan.

UNIDENTIFIED MALE: Attacks called smears, lies. Senator McCain calls them dishonest. Bush smeared John McCain four years ago.

KURTZ: The ad cites editorials denouncing the Swift Boat Veterans' charges in the "Portland Oregonian" and "Toledo Blade." McCain has likened the ad to a fringe veteran group's charges against him during the 2000 campaign, which he blamed candidate Bush for not repudiating.

UNIDENTIFIED MALE: George Bush, denounce the smear. Get back to the issues. America deserves better.

KURTZ: The White House and the Bush campaign have repeatedly refused to criticize the first of two ads by the Swift Boat group, a question that surfaced yesterday when campaign manager Ken Mehlman appeared on "Meet the Press."

TIM RUSSERT, "MEET THE PRESS": Here's you're chance. Is this ad dishonest and dishonorable? Do you condemn it?

KEN MEHLMAN, BUSH-CHENEY CAMPAIGN MANAGER: Tim, I'm not focused on this specific ad.

KURTZ: Earlier today, the president was asked a similar question about the Swift Boat ad in Crawford.

BUSH: I'm denouncing all the -- all the stuff being on TV, all the 527s. That's what I've said. I said this kind of unregulated soft money is wrong for the process.

KURTZ: The Swift Boat group is now airing a second ad slamming Kerry for his antiwar testimony in the Senate after returning from Vietnam. And now the senator's campaign has filed a complaint with the Federal Election Commission over the earlier ad on his military record.

(on camera): Kerry aides privately blame the media for giving so much attention to a $500,000 ad-buy in three states, especially when the "Boston Globe," "Chicago Tribune," "New York Times" and "Washington Post" have uncovered numerous inconsistencies in accounts by some of the Swift Boat Veterans. But they admit they were late in returning fire over an issue that goes to the emotional heart of Kerry's candidacy. The Kerry response is also airing in just three states, but like the original attack ad, is guaranteed to get plenty of free media airtime.

Howard Kurtz, CNN's "RELIABLE SOURCES."

(END VIDEOTAPE)

WOODRUFF: Democratic vice presidential candidate John Edwards says President Bush failed to do the right thing today when he refused to directly denounce the ad attacks by John -- attacking John Kerry's military records. During a campaign stop in Wisconsin this morning, Edwards again urged Bush to tell the Swift Boat Veterans for Truth to pull their ads.

And now, the Swift Boat Veterans have put out a statement, responding to the Kerry camp's charge that they are a front for the president. The group behind the anti-Kerry ads says it is "totally an independent organization, and members would speak out about Kerry's Vietnam record whether he were a Republican, Democrat or Independent."

Well, Ron Brownstein of the "Los Angeles Times" is following all this and the rest of the presidential campaign.

Ron, at this point, what effect does this controversy over swift Boats and John Kerry's record in Vietnam having on the campaign?

RON BROWNSTEIN, "LOS ANGELES TIMES": Well, in terms of the campaign itself, it is consuming the campaign. Rather than arguing about where we are today in Iraq or on the economy, we really have been dominated by this debate over what John Kerry did in Vietnam and, to some extent, what George Bush did during the Vietnam era 30 years ago.

I think the sign -- the clearest indication that the Democrats are worried about the impact of this so far is the fact John Kerry is on the air with those ads. As you know, Judy, they wanted to stay off the air in August, save their money for September and October, when they will -- thought they would need to husband those resources to compete with President Bush. But the fact they've gone on the air shows that they are concerned, and it is having at least some impact on them.

WOODRUFF: Do candidates, Ron, have any choice but to jump on a story like this when the news media is all over it, as this one is, as we just saw on that report by Howard Kurtz?

BROWNSTEIN: Well, that was the strategic choice the Kerry people faced in the beginning and really the reason they're facing some second-guessing now among Democrats. The feeling in the Kerry camp, I believe, was that they did not want to get involved in this story or to try to come out and counter it when it first appeared because they felt that would only give it more attention.

Well, it turned out it got plenty of attention without their intervention. And now they are catching up.

They organized a conference call today with veterans, adding to the list of people refuting the charges in the first ad, that about Kerry's combat service. And of course, they are on the air themselves.

WOODRUFF: Ron, it's -- we assume that voters would like to hear about other issues, the economy, the war in Iraq, how that's going, among other things. Are they going to have a chance to hear about those things?

BROWNSTEIN: Not right now. I mean, you know, the media is as complicit as the candidates. I mean, we've been lavishing enormous attention on this.

A perfect example, Judy, this Thursday the Census Bureau releases the most important report cards on how the economy is performing for average families, the annual reports on the median income, the poverty level and the number of people without health insurance. Are we going to be talking about that on Thursday or are we going to be talking about John Kerry's Silver and Bronze Star? I don't know. But the responsibility is with the media as well as the candidates.

One quick point. The president's supporters themselves, there's some concern that they don't want this story dominating this week because, as we move into the convention, the president has been hoping to have more attention focused on his own ideas for a second term, which has been kind of the thinnest spot in his campaign argument so far. So, it's not clear that in can sustain focus on this benefits even the president, although it probably has hurt Kerry so far.

WOODRUFF: All right. We are going to have to leave it there. Ron Brownstein of the "Los Angeles Times," thanks very much.

BROWNSTEIN: Just for now.

WOODRUFF: Thank you. That's right.

Well, both the Bush and Kerry camps are trying to a gauge the fallout from the Swift Boat controversy, particularly in battleground states, including this one, Pennsylvania. This is one of the bigger prizes on Election Day, and a place where the Bush camp is eager to get some momentum.

(BEGIN VIDEOTAPE)

WOODRUFF (voice-over): For George W. Bush, Pennsylvania is turning into this year's great white whale.

BUSH: A lot of people are wondering why I'm coming so much. It ought to be obvious to you. I like my cheese steaks...

WOODRUFF: Once almost within his grasp. Now looking just out of reach.

Al Gore won Pennsylvania in 2000 by fewer than five percentage points. The president hoped to make up ground this year.

CHUCK TODD, EDITOR, "THE HOTLINE": Of all the states they lost, it's one they thought they should be able to pick off.

WOODRUFF: Since taking office, Bush has visited Pennsylvania more than any other state, logging more than 30 trips. Will it make the difference?

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: We deserve a president that worked just as hard for your job.

WOODRUFF: Polls have consistently put John Kerry ahead in the Keystone State, a crucial showing for the Democrat because, although Bush really wants Pennsylvania, Kerry really needs it.

TODD: John Kerry can't win the presidency without Pennsylvania. George Bush can, because he already has.

WOODRUFF: And so, both campaigns go according, wooing swing voters in the Philadelphia suburbs, once reliably Republican, but trending Democratic of late. Launching appeals in western Pennsylvania and Pittsburgh, areas hit hard by the economic downturn.

LAURA BUSH, FIRST LADY: Here in Pennsylvania, you created 20,000 new jobs in the month of June alone.

WOODRUFF: Team Kerry is also playing a wildcard.

TERESA HEINZ KERRY, SENATOR KERRY'S WIFE: We need to turn back some of the creeping un-Pennsylvanian and sometimes un-American traits. WOODRUFF: Teresa Heinz Kerry has a long history in Pennsylvania as the wife of its late senator, John Heinz. She calls Pittsburgh home. And Pennsylvania is where the Kerry-Edwards ticket made its official debut.

Will it matter in the end? The Kerry campaign hopes so. It's got a lot riding on Pennsylvania.

(END VIDEOTAPE)

WOODRUFF: There's plenty more to say about Pennsylvania. Up next, the state Republican Party chairman gives us his view on Keystone State politics and the race for the White House.

And later, I'll get the Democratic perspective from Pennsylvania Governor Ed Rendell.

Plus, an inside look at the Republicans' Madison Square Garden party next week.

With 71 days until the election, this is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

WOODRUFF: As we focus on the battle for Pennsylvania's 21 electoral votes, I'm joined from the state capital, Harrisburg, by Alan Novak. He is the chairman of the Pennsylvania Republican Party.

Alan Novak, the public opinion polls we've seen in the last many weeks show John Kerry staying ahead despite the fact President Bush has been in this state campaigning 32 different times. Why is this such a tough nut to crack for the president?

ALAN NOVAK, PENNSYLVANIA GOP CHAIRMAN: Well, I think, Judy, the situation is Pennsylvania's been through some tough times with jobs, with some job loss a year ago. Those jobs have come back in this past year. We're now a net 36,000 more jobs gained than jobs that had been lost previously.

I think what we have is a closely-divided state, with the trend moving ever so slowly and slightly in there direction of President Bush. We haven't been to our convention yet. President Bush has not had the opportunity to present his plan, his vision, his plan to govern America for the next four years. So, we're very enthusiastic as we head into the national convention, and we feel that it's the right time for us to begin our final push in Pennsylvania.

WOODRUFF: So, even though during the month of July, Pennsylvania was, what, one of 22 states reporting a drop in payroll jobs, a decrease in jobs during the month of July, you don't see that as a problem?

NOVAK: Well, that was July. But for the previous 11 months, each month was a gain in jobs. And if you look at the net figure of jobs created in Pennsylvania over the past year, we not only have figures that show all the people who are out of work are back at work, but an additional gain of 36,000 jobs. So, Pennsylvania mirrors the country in that job growth situation, as well as real economic income situation.

WOODRUFF: We hear a lot, Alan Novak, about the Philadelphia suburbs, about swing voters there, about -- you know, this is an area I'm told that used to be more Republican, it's no moving more Democratic. How do you see the suburbs of Philadelphia right now?

NOVAK: Well, first of all, I live in the Philadelphia suburbs. I live in one of those counties within the Philadelphia region. I think they're close. A recent survey -- we've seen a recent poll has the president slightly ahead in the four suburban counties.

We need to increase that number additionally. But again, it's a trend. The last poll we saw a month out had the president tied with Senator Kerry. Now he has moved ahead slightly in the Philadelphia suburbs.

That, coupled with the mid-state, which is strongly Republican and which most of our voter registration organizational activities are going very well, and the western part of Pennsylvania, which is registered Democrat, but which the president won last time -- it's mostly conservative Democrat territory -- our volunteer efforts and our surveys are showing the president doing very well in western Pennsylvania. So, I think Pennsylvania is a margin of error state right now. And in the Philadelphia suburbs, the president has nosed slightly ahead.

WOODRUFF: All right. We're going to have to leave it there. But we thank you for that picture of the state. Alan Novak, chairman...

NOVAK: Oh, you're very welcome. Thank you.

WOODRUFF: ... of the Republican Party in Pennsylvania, we appreciate it.

NOVAK: Thank you.

WOODRUFF: Coming up, in the last couple of months before Election Day, Pennsylvania will be getting a lot of attention from both the Bush and Kerry campaigns. We'll find out about the battle here in the Keystone State from Dick Polman. He is with the "Philadelphia Inquirer" -- just ahead.

(COMMERCIAL BREAK)

WOODRUFF: Well, as we said, Pennsylvania is one of those make- or-break states for both the Bush and the Kerry campaigns. Dick Polman of the "Philadelphia Inquirer" is with me now to talk more about the race here in the Keystone State.

Dick, I was just listening to the state Republican Party chair say this is basically -- what did he call it? A margin of error state, but trending in the president's direction. How do you see it right now?

DICK POLMAN, "PHILADELPHIA INQUIRER": Well, I'm not -- you know, he has to say that because he's certainly -- he's a partisan and he's paid to say it as well. I don't necessarily buy that at the moment.

The Philadelphia suburbs, the three counties in the Philadelphia suburbs, are in some ways -- in Pennsylvania, the Philadelphia suburbs are really the most important part of the state in terms of winning the election. And I don't necessarily see what he's talking about, because those counties have been trending Democratic since Clinton in 1992 -- 1992, 1996 and 2000.

A lot of the people from the cities have moved -- have moved out to those suburbs. And a lot of people out there are not happy about just sort of the social conservatism of the Republican Party in the 1990s since sort of the South and the West took over the party.

It's making a lot of the suburbanites uncomfortable. And a lot of Republicans I've talked to out there, average voters, are going to vote for Kerry this time. And they basically told me that they have a lot of discomfort about the war, primarily.

WOODRUFF: The war in Iraq?

POLMAN: The war in Iraq. Not the war in Vietnam.

WOODRUFF: Right.

POLMAN: The war in Iraq.

WOODRUFF: Right, which is what we've been talking about the last few days.

POLMAN: Yes.

WOODRUFF: What about this whole Swift Boat controversy, Kerry's record in Vietnam? Do you think that's having an effect on voters as far as you can tell?

POLMAN: Well, you know, the polls seem to indicate that people are now aware of the controversy. I talked today to a couple -- John Zogby, who's a national pollster, has just done a survey in 20 states in the last week and a half, and he says he really hasn't seen the numbers move on that.

But I think the problem for Kerry might be there that, the more that it dominates the news, the less he's able to put out his own -- his own message and talk about the current war. And there's a lot of parts -- Pennsylvania, for example, there's parts of Pennsylvania, there's a lot of socially conservative voters, sort of conservative Democrats who think conservatively on social issues, mostly not so much here, but outside of Pittsburgh and what is part of the state called the T, in the middle. And those people may, you know, have a -- if they have a visceral reaction to those Swift Boat ads and they think perhaps that Kerry should not have been protesting the war when he returned in 1971, that may play into some doubts they may have about him.

WOODRUFF: If the Bush campaign, though, is able to get out its voters wherever they are in this state, is that enough to counteract the vote that you describe trending Democratic of Philadelphia suburbs and elsewhere?

POLMAN: Well, yes. When I think what the Bush campaign seems to be doing is not necessarily banking on the Philadelphia suburbs, which is actually in some ways the most vote-rich area.

But they have -- you know, they have this -- this plan to try to gen up as much of their core supporters or potentially core supporters as they can. So, there's other parts of the state where -- where they can spend a lot more time on those voters.

The problem is, is that you've got also action on the other side. America Coming Together, one of these so-called independent groups that's helping the Democrats, they are very, very much here in the Philadelphia area, doing turnout, knocking on doors every single day in August. That's pretty early.

WOODRUFF: Dick Polman, a veteran reporter, political reporter for the "Philadelphia Inquirer." Good to see you.

POLMAN: Thank you, Judy.

WOODRUFF: Thanks very much for talking with us.

And coming up, the battle over Vietnam -- we've been talking about it -- continues to raise. The president weighs in on those outside TV ads that attacks John Kerry's war record. We'll have a live update from Crawford, Texas.

Plus, a look ahead to the GOP convention. We'll preview the setup inside Madison Square Garden.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: John Kerry under fire on two fronts. Could criticism of anti-war activities hurt him more than attacks on his record of valor in Vietnam?

The presidential race heads into overtime.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL CANDIDATE: And along comes the president and changes the rules and laws that have been protecting our overtime for potentially millions of Americans.

ANNOUNCER: Can the Democrats make this a profitable campaign issue?

Philly color. A city in the thick of the 2004 campaign has a history of political characters and controversy.

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

(END VIDEOTAPE)

WOODRUFF: Welcome back to Philadelphia, our first stop on the road to the Republican National Convention in New York City. This state and this city have been magnets for the presidential candidates and their running mates. Vice President Cheney is due back here, right here in the Philadelphia area on Wednesday. Another testament to this state's pivotal role in election 2004.

Both President Bush and John Kerry are off the campaign trail today. But in Crawford, Texas, Bush managed to get in a few words about the Kerry swift boat controversy.

CNN's Jill Dougherty is with the president in Texas. Hello, Jill.

JILL DOUGHERTY, CNN CORRESPONDENT: Hi, Judy.

Well, you know, Judy, this has really already become a point of confusion and maybe even debate over what exactly the president said, but -- today, to put it in context, he came out, talked to reporters, after meeting with his top national security and military, to talk about long-term issues.

They asked him immediately about the swift boat ad controversy. And specifically, the first question about that was concerning the ads that have been funded by the Swift Boat Veterans for Truth. And the president said two words that were new, and that's where all this debate is.

Let's hear exactly what the president said.

(BEGIN VIDEO CLIP)

BUSH: That means that ad, every other ad. Absolutely. I don't think we ought to have 527s. I can't be more plain about it. And I hope my opponent joins me in saying, condemning these activities of the 527s.

I think they're bad for the system. That's why I signed the bill, McCain-Feingold. I've been disappointed that, for the first, you know, six months of this year, 527s were just pouring tons of money, billionaires writing checks.

(END VIDEO CLIP)

DOUGHERTY: So, the White House is downplaying those two words, "that ad," and saying essentially this is what the president has previously said: that he is against all those 527 ads and that he wants the Kerry campaign to join him and condemn them.

Also, Judy, on the subject of these ads and how the -- and on the Kerry campaign, et cetera, he said that Senator Kerry has served admirably, ought to be proud of his record. But the president would argue, the question really is who's better qualified to be the leader in this war on terror, and he would argue, obviously, that he is the man.

WOODRUFF: All right, Jill Dougherty with the president today in Crawford, Texas. Jill, thank you very much.

Well, Vice Presidential Candidate John Edwards says that President Bush passed up what he called a moment of truth, in which he could have gone further and condemned the swift boat ads. Also today, the group behind the spots is again declaring its independence from the Bush campaign.

But in all the back and forth, another angle of this story has gotten less attention: the possible fallout for John Kerry for what he did after returning from Vietnam.

Here now, our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): John Kerry is running for president as a war hero. But Kerry was also an anti-war hero. This week, his critics are putting out a new ad attacking not his war record but his anti-war record.

J. KERRY: ... razed villages in fashion reminiscent of Genghis Khan.

PAUL GALANTI: John Kerry gave the enemy for free what I and many of my comrades in North Vietnam -- in the prison camps -- took torture to avoid saying. It demoralizes...

SCHNEIDER: Kerry was actually quoting other veterans' reports of wartime atrocities, but he endorsed those accusations at the time and he still does.

J. KERRY: All I know is that it happened as matter of course.

SCHNEIDER: Kerry's anti-war statements could become a serious problem for him.

ROBERT DOLE (R), FMR. PRESIDENTIAL CANDIDATE: I think this ad's going to take -- you know, it's going to be tough on Kerry, because -- and he says, well, this is all hearsay what he picked up from other veterans, but he said it.

SCHNEIDER: Kerry's defenders called his anti-war testimony an act of courage.

JIM RASSMANN, VIETNAM VETERAN: We knew by this time that the war was a mistake. John was the one with courage to come out and say it.

SCHNEIDER: But it remains a source of deep resentment to other veterans, and the issue that set off their attacks against him. DAVID WALLACE, SWIFT BOAT VETERANS FOR TRUTH: He told every one I knew and everyone I'd ever know that I and my comrades had committed unspeakable atrocities, that we tortured people, raped women, burned villages without any reason.

SCHNEIDER: Kerry insists he was stating well documented facts.

J. KERRY: I can assure you that, you know, in fact all I did was tell the truth about some of the things that had happened over there.

SCHNEIDER: And he claims he never blamed the soldiers.

J. KERRY: I asked: Where's the leadership of the country? I asked where the leaders were, not the soldiers, because it was the leaders in Washington who left the soldiers.

(END VIDEOTAPE)

SCHNEIDER (on camera): The issue is relevant, because Americans are once again fighting overseas, and some of them resent criticism of their mission.

A Marine major serving in Iraq writes in the "New York Times," quote, "I believe that when Americans say they support our troops, it should include supporting our mission. They should not denigrate it. That only aids the enemy in defeating us strategically" -- Judy?

WOODRUFF: All right. We're listening well. Bill Schneider, thank you very much.

Well, now to another flash point in the first presidential election after the September 11th attacks. A top Republican in Congress has raised the stakes in the debate over how to reform U.S. intelligence operations.

Here now, our Congressional correspondent Ed Henry.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): After weeks of hearings on Capitol Hill, a senior Republican is urging his colleagues to stop the talk and finally take some dramatic action.

ROBERTS: But these are times that I think demand real reform and bold action. It's right for the country. It doesn't just move boxes around and protect turf.

HENRY: Colleagues knew Roberts wanted a strong national intelligence director, but the actual legislation includes a shocker: He wants to dismantle the Central Intelligence Agency.

The Roberts plan would break the CIA into three parts: a National Clandestine Service, an Office of National Assessments, and an Office of Technical Support. The reaction has been swift and scathing from the intelligence community and from Democrats on Capitol Hill. SEN. CARL LEVIN (D), MICHIGAN: Well, he hasn't shared those documents with me or with Senator Rockefeller, who's the ranking Democrat on the Intelligence Committee.

I believe it's a mistake to lay down a proposal that only has the support of members of one party.

HENRY: Senator Jay Rockefeller, who normally enjoys a cordial relationship with Roberts, expressed frustration with being left out of the loop. Rockefeller added of the substance, quote, "disbanding and scattering the central intelligence agency at such a crucial time would be a severe mistake."

An aide to Roberts insisted to CNN that the chairman had shared the details with Rockefeller. Democrats chose not to act, said the aide, so Roberts did.

(END VIDEOTAPE)

(on camera): Roberts is also facing heat from fellow Republicans such as the powerful Senate Armed Services Chairman John Warner. He released a statement expressing concern about any plan that curbs the Pentagon's power over programs that, quote, "support our men and women in uniform."

Meanwhile, President Bush was non-committal when he was asked about the Roberts legislation today -- Judy?

WOODRUFF: All right. Ed Henry with the very latest from Capitol Hill. Ed, thank you very much.

HENRY: Thank you.

WOODRUFF: Well, back here in Pennsylvania, both the Bush and Kerry campaigns are fighting hard for votes. Up next, I'm going to talk with the Democratic governor of this state, Ed Rendell, about the state of play (ph).

Also ahead, the economy remains a campaign staple on the airways. And out on the trail, we'll have the latest sparring.

Plus, fresh concerns that Florida will relive its election 2000 nightmare in 2004.

(COMMERCIAL BREAK)

WOODRUFF: Democrats in Louisiana are celebrating a legal victory under a state judge's ruling the qualifying period for the November 2 election in the state's 5th Congressional district must be reopened.

Earlier this month, Congressman Rodney Alexander infuriated Democrats by switching to the Republican party just minutes before the qualifying deadline. That left Democrats with little time or no time to enter a strong candidate in the election. A date for the new sign- up period is expected to be set after appeals run their course.

INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: Earlier, we talked about the political battle for Pennsylvania with the state's Republican party chairman. With me now from Harrisburg also to offer the Democratic perspective is the commonwealth's current governor and a former mayor of this city, Philadelphia, Ed Rendell. Governor, thank you for joining me. We just heard from Allen Novak that things are trending up for President Bush in Pennsylvania, even though he's a little behind in the polls right now. How do you see it?

GOV. ED RENDELL (D), PENNSYLVANIA: Well, I think it's pretty static right now. Senator Kerry's had a substantial lead in the last six or seven polls. That's at six points in two recent polls with Ralph Nader getting four in one and 3 percent in the other. I don't think Ralph Nader will get nearly that high a percentage come November.

So I think Senator Kerry's real lead is 7 or 8 points and that's a substantial lead. As you recall, Judy, Al Gore carried the state by about 4 points in 2000.

WOODRUFF: Governor, what Allen Novak and others are saying in President Bush's favor, is that even though Pennsylvania has been through some tough economic times, in the last number of months, jobs are coming back on stream and the economy is not the issue that it would have been for John Kerry last year at this time.

RENDELL: That's basically incorrect. This month in July we lost nearly 3,000 non-farm jobs. We went down. Our manufacturing sector after three straight months of gain lost 1,600 jobs. We have lost 160,000 manufacturing jobs since President Bush became president. That's one out of every five manufacturing jobs in Pennsylvania has disappeared.

And what's worse for the president, if you want to look at this in political terms, is that the jobs we're creating in Pennsylvania pay about $10,000 less in wages than the jobs we've lost. So we're dummying down the economy. No one in Pennsylvania feels very secure right now. Our manufacturing sector remains challenged, we don't see much help at all coming from the federal sector in fighting for our manufacturing jobs in terms of foreign competition.

There's a lot of resentment here about the economy. The only part of the state, in a recent poll it said the economy was doing well, is where you sit, southeastern Pennsylvania. But in the rest of the state, particularly in small and mid-size towns, our manufacturing base is continually getting killed despite all the efforts we're making to try to resuscitate it.

WOODRUFF: Governor, you've been watching politics for a long time from the inside. How do you rate John Kerry's handling of the whole controversy in recent weeks over his record in the Vietnam war?

RENDELL: It's tough thing to do because you're sort of chasing a ghost in responding to this stuff. Frankly, I think Senator Kerry did very well when he condemned the ad running about President Bush's war activity. President Bush should do the same thing about the ads running against Senator Kerry.

Look, John McCain, probably the most decorated war hero in public life in America, he said that the ads against John Kerry are dishonest and false. That ought to be enough. President Bush should join him and frankly, I think the effect that this is having is Pennsylvanians want all this stuff to stop. They want to start talking about real issues like what are we going to do to resuscitate our manufacturing sector? What about the cost of tuition? What about all of the thing that are making middle-class life so difficult in Pennsylvania.

Those are the things that they want answers from both the president and from Senator Kerry. And this stuff has just got to stop. Does President Bush really want the election to be decided by who did more to help the country during Vietnam, Senator Kerry or himself, I think not. I don't think they want to...

WOODRUFF: But it's Kerry's own campaign that's run the latest ad, Governor. It's Kerry's own campaign that's run the latest ad...

RENDELL: Only because we've got this incredible group of lies and distortions. You have men signing up, this recent anti-Kerry ad, who in the '70s, in their reports praised John Kerry and as recently as 1996, are on record as having said good things about Senator Kerry's service. Now, there's a presidential election and they seem to have shifted position.

But the bottom line is let's talk about real stuff. I think the media is at fault, too, for giving this type of stuff so much coverage instead of covering the real issues. The average American citizen does not want to have this election based on whose service was best for the country in Vietnam. That clearly was Senator Kerry's. I mean, that's beyond dispute. He went, he volunteered. You know what President Bush did. We don't want to even discuss that.

Let's discuss the real issues. What about companies getting tax breaks to take jobs overseas? Shouldn't that end? Senator Kerry says yes, President Bush is not taking any action to do that. Those are the real issues that Pennsylvanians want to hear about.

WOODRUFF: Governor Ed Rendell, complaint duly registered. Thanks very much. It's a pleasure to talk to you. We appreciate it.

RENDELL: Well, the city looks great behind you.

WOODRUFF: Thank you. Your city.

Coming up, a check on political money matters from taxes to overtime pay. That's when we come back.

Also, Palm Beach County, Florida, tries to get it right. Election officials have a new absentee ballot but some say it will cause more voter confusion.

(COMMERCIAL BREAK)

WOODRUFF: Debates over Vietnam make headlines but money still matters, especially in states like Pennsylvania, which are struggling, as we've been telling you, to bring their economic engines back to full-speed. The latest TV ad for the Bush/Cheney ticket focuses on the economy. Democrats also see a new opportunity for political gain.

(BEGIN VIDEOTAPE)

AD ANNOUNCER: Here's what Kerry says, and then there's what Kerry does.

WOODRUFF: This week, a familiar arrow finds its mark. The economy.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: We won't raise taxes on the middle class.

AD ANNOUNCER: Really? John Kerry's voted to raise gas taxes on the middle class ten times.

WOODRUFF: The latest Bush campaign ad, rolling out today in the showdown states is an effort to shore up a weak spot in the president's portfolio. Democrats continue to stake their claim to the dollars and cents agenda.

SEN. JOHN EDWARDS (D), VICE PRESIDENTIAL CANDIDATE: A third of the benefit of the Bush tax cuts went to the group of Americans whose average earnings are $1.2 million.

WOODRUFF: John Edwards on the stump in battleground Wisconsin, blasting the administration's new overtime regulations, which kicked in today. The middle class, he says, will feel the hurt.

EDWARDS: If you're a line cook, you could lose your overtime, your right to get overtime pay, when you work overtime. If you're a police sergeant out working to keep our neighborhoods safe, you could lose your overtime pay. If you're a computer programmer, you could lose your overtime pay.

WOODRUFF: Camp Kerry claims up to six million Americans will lose overtime pay as a result of the rules change. Team Bush disputes that number and says 1.3 million workers will be eligible for overtime benefits for the first time. A bipartisan group concludes, a greater proportion of the workforce overall will no longer be eligible for overtime.

(END VIDEOTAPE)

WOODRUFF: Several hundred union workers protested the new overtime rules today outside the Labor Department in Washington. Also opposed to the new rules, Republican Arlen Specter. He is a senior senator from right here in Pennsylvania.

We're checking the Monday headlines in our "Campaign News Daily." Three new presidential polls, including one from a showdown state, are out this Monday. A new research 2000 survey in Nevada finds Bush and Kerry neck and neck, separated by a single point. Kerry appears to be in much better shape in New Jersey. The latest poll there gives him an 11-point lead over Bush: 52 percent to 41 percent. Kerry also appears to be running well in Illinois. A "Chicago Tribune" and WGN poll gives Kerry a 14-point lead.

Meanwhile, a media investigation has found that about 48,000 people are registered to vote in both New York and Florida. The "New York Daily News" reports that while actual voter behavior is difficult to document, as many as 1,000 people may have voted in both states in at least one election. Florida, as we all know, was decided four years ago by just 537 votes.

The absentee ballot being used this year in Palm Beach County, Florida, is drawing unfavorable comparisons to that county's infamous butterfly ballot. Just like the butterfly ballot of four years ago, election officials say the new ballot was tested and found to be easier for voters. The new absentee ballot is similar to this one used four years ago in Florida's Orange County. But instead of asking voters to fill in bubbles, it requires people to connect a broken arrow in order to cast a vote.

Well, Republicans all across the country are about to turn their attention to New York City and the party's national convention, which begins one week from today. Unlike delegates, President Bush apparently will not be spending much time in the Big Apple. "The New York Times" reports that the unofficial plan has Mr. Bush arriving in Manhattan sometime on the last day of the convention and leaving right after for this state of Pennsylvania.

CNN got a sneak peek today inside Madison Square Garden at the convention stage -- a smaller, more intimate backdrop than you've seen in recent years. In a dig at the Democrats, RNC convention planners tell us that their balloons will drop on time.

In New York City today, officials are facing a problem eerily similar to the one that Boston leaders were facing just days before the Democratic convention. That story now from CNN's Jason Carroll in New York.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN CORRESPONDENT (voice-over): For the past several weeks they showed up wherever New York's Mayor Michael Bloomberg did, threatening to strike, shouting slogans outside his home. All to pressure Bloomberg back to the bargaining table with what the city's police and fire unions call "a fair contract."

They hoped it would happen before the Republican Convention takes place here next week. But nothing so far.

Their next tactic? Take their cause to the top.

PATRICK LYNCH, NY PATROLMAN'S BENEVOLENT ASSOCIATION: So we respectfully ask the president of the United States, if he did not know what's going on in this city, we want him to know when he comes to town.

CARROLL: In a bold move, the city's police and fire unions wrote directly to President Bush, saying "we, the front-line domestic troops in the global war on terrorism have been disrespected by Mayor Bloomberg's collective bargaining policies."

STEPHEN CASSIDY, PRESIDENT, NY FIRE UNION: It seems clear us to us that people around the country aren't aware that the heroes of September 11 have not been treated with respect by this mayor.

CARROLL: Mayor Bloomberg says the city is financially tapped and cannot pay beyond the 5 percent of a three-year already made.

MAYOR MICHAEL BLOOMBERG (R), NEW YORK CITY: The city just doesn't have any more money. And the federal government is not going to give us any money for those kinds of expenses.

CARROLL: But rank-and-file firefighters and police officers like Joe Johnson don't buy that.

JOE JOHNSON, NYC POLICE OFFICER: We literally put our lives on the line. And the mayor is telling us we, you know, he doesn't care about us, he doesn't want to pay us -- that hurts.

CARROLL: So for now, an impasse. Timing could not be worse. Threats of a blue flu loom over the convention. The unions say security will not be compromised.

(on camera): Police and fire unions are seeking arbitration, which the city opposes. No word yet on the White House's response to the unions' letter.

Jason Carroll, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: In Boston, they pretty much split the difference between the city and the unions. We'll see what happens in New York.

Well, the City of Brotherly Love here has a colorful political past. Coming up, our Bruce Morton gives us a political history lesson.

(COMMERCIAL BREAK)

WOODRUFF: When you think of Philadelphia, you may remember this famous scene -- "Rocky," the character made famous by Sylvester Stallone, trained on the steps behind me, right here, at the Philadelphia Art Museum.

And this is what the museum looks like on the inside. It is among the largest and most important art museums in the United States, and it is one of this city's best known landmarks.

Philadelphia is also well known for its political past as well. Here's CNN's Bruce Morton. (BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): City of Brotherly Love? Well, you have to wonder. For two terms back in the 1970s, they had Frank Rizzo, Mr. Law and Order, who urged an audience when he was trying to change the laws so he could run for a third term "vote white," and was voted "racist of the month" by a Klan group. You have to wonder.

Wilson Goode was the city's first African-American mayor. Rizzo was still trying to run.

FRANK RIZZO, MAYOR OF PHILADELPHIA: Let me tell you something, so you will understand, I will never concede to him. OK?

MORTON: But Goode's real problem was people like this man. He was a member of MOVE, a group so radical it objected to using plumbing. Mayor Goode ordered their house bombed, but it was a wooden house, in a row of wooden houses. Eleven people, five of them children, died; 61 houses were destroyed. And Goode took the city to the edge of bankruptcy.

Ed Rendell brought the city back from that, made Philadelphians feel better about themselves, announced a cleanup, and personally scrubbed a washroom in City Hall, and, though, a Democrat, brought the Republican Convention to the city.

His successor was John Street. And he might almost have had a normal reelection campaign -- charges about Philly's famous pay-to- play system of politics and so on -- until it turned out the FBI had planted a bug in Mayor Street's office. It didn't matter. He won anyway, it's a very Democratic town, but City of Brotherly Love? Maybe they meant those old guys, you know. Benjamin Franklin, Bill Penn, that lot.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: If you like politics, you got to like Philadelphia.

Well, that's it for INSIDE POLITICS this Monday. I'm Judy Woodruff. Have a good evening. My friends at "CROSSFIRE," Tucker and Paul, we're turning it over to them 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


Aired August 23, 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: A not so swift response.

UNIDENTIFIED MALE: Instead of solutions, George Bush's campaign supports a front group attacking John Kerry's military record.

ANNOUNCER: Will the Kerry camp's new ad help him counter the controversy or prolong it?

From the CIA to Capitol Hill, some scathing reaction today to Senator Pat Roberts' intel bombshell.

SEN. PAT ROBERTS (R), INTELLIGENCE COMMITTEE CHAIRMAN: Well, we think it's real reform.

ANNOUNCER: A Keystone for Kerry or Bush? On the road to the GOP convention, we're stopping in the showdown state of Pennsylvania to take a snapshot of the race.

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

(END VIDEOTAPE)

JUDY WOODRUFF, HOST: Thank you for joining us at this local landmark, the Philadelphia Museum of Art. We are making our way to New York City, along with the CNN Election Express bus -- you can see it behind me -- for the Republican National Convention, which begins one week from today. What better place to stop than here in Pennsylvania, one of the most competitive and coveted states in the race for the White House.

We're going to take a closer look at this showdown here throughout the next hour. But we begin with a new round of political fire over ads attacking John Kerry's war record.

In Texas today, President Bush again called for an end to all political commercials by so-called independent 527 groups. But he did not directly condemn the anti-Kerry ads by the group calling itself Swift Boat Veterans for Truth. Still, during questioning by reporters, Mr. Bush did go a step farther in directly including the Swift Boat ads in his broader complaint about unregulated third-party spots.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: When you say that you want to stop all...

GEORGE W. BUSH (R), PRESIDENT OF THE UNITED STATES: All of them.

UNIDENTIFIED FEMALE: So, that means...

BUSH: That means that ad, every other ad.

UNIDENTIFIED FEMALE: (INAUDIBLE)?

BUSH: Absolutely. I don't think we ought to have 527s. I can't be more plain about it. And I wish -- I hope my opponent joins me in saying -- condemning these activities of the 527s.

It's -- I think they're bad for the system. That's why I signed the bill, McCain-Feingold.

(END VIDEO CLIP)

WOODRUFF: Meantime, the Bush campaign itself is accusing team Kerry of launching a new campaign ad that it says is false and libelous. Howard Kurtz of CNN's "RELIABLE SOURCES" has more on that ad, the charges and countercharges.

(BEGIN VIDEOTAPE)

HOWARD KURTZ, CNN'S "RELIABLE SOURCES" (voice-over): After six months of generally positive ads, John Kerry is taking a page from his Vietnam days and counterattacking on the airwaves. Not against a negative ad from President Bush, but one for which he's trying to hold Bush responsible.

UNIDENTIFIED MALE: Instead of solutions, George Bush's campaign supports a front group attacking John Kerry's military record.

KURTZ: Hold on. There's no proof that the president's team is supporting the Swift Boat Veterans for Truth, which has roiled the presidential campaign with a modest ad-buy accusing Kerry about lying about his decorated Vietnam service. The group's backers have ties to various Bush aides, but Kerry also has links to the outside liberal groups that have poured tens of millions of dollars into anti-Bush ads, one of which employs former Kerry campaign chief Jim Jordan.

UNIDENTIFIED MALE: Attacks called smears, lies. Senator McCain calls them dishonest. Bush smeared John McCain four years ago.

KURTZ: The ad cites editorials denouncing the Swift Boat Veterans' charges in the "Portland Oregonian" and "Toledo Blade." McCain has likened the ad to a fringe veteran group's charges against him during the 2000 campaign, which he blamed candidate Bush for not repudiating.

UNIDENTIFIED MALE: George Bush, denounce the smear. Get back to the issues. America deserves better.

KURTZ: The White House and the Bush campaign have repeatedly refused to criticize the first of two ads by the Swift Boat group, a question that surfaced yesterday when campaign manager Ken Mehlman appeared on "Meet the Press."

TIM RUSSERT, "MEET THE PRESS": Here's you're chance. Is this ad dishonest and dishonorable? Do you condemn it?

KEN MEHLMAN, BUSH-CHENEY CAMPAIGN MANAGER: Tim, I'm not focused on this specific ad.

KURTZ: Earlier today, the president was asked a similar question about the Swift Boat ad in Crawford.

BUSH: I'm denouncing all the -- all the stuff being on TV, all the 527s. That's what I've said. I said this kind of unregulated soft money is wrong for the process.

KURTZ: The Swift Boat group is now airing a second ad slamming Kerry for his antiwar testimony in the Senate after returning from Vietnam. And now the senator's campaign has filed a complaint with the Federal Election Commission over the earlier ad on his military record.

(on camera): Kerry aides privately blame the media for giving so much attention to a $500,000 ad-buy in three states, especially when the "Boston Globe," "Chicago Tribune," "New York Times" and "Washington Post" have uncovered numerous inconsistencies in accounts by some of the Swift Boat Veterans. But they admit they were late in returning fire over an issue that goes to the emotional heart of Kerry's candidacy. The Kerry response is also airing in just three states, but like the original attack ad, is guaranteed to get plenty of free media airtime.

Howard Kurtz, CNN's "RELIABLE SOURCES."

(END VIDEOTAPE)

WOODRUFF: Democratic vice presidential candidate John Edwards says President Bush failed to do the right thing today when he refused to directly denounce the ad attacks by John -- attacking John Kerry's military records. During a campaign stop in Wisconsin this morning, Edwards again urged Bush to tell the Swift Boat Veterans for Truth to pull their ads.

And now, the Swift Boat Veterans have put out a statement, responding to the Kerry camp's charge that they are a front for the president. The group behind the anti-Kerry ads says it is "totally an independent organization, and members would speak out about Kerry's Vietnam record whether he were a Republican, Democrat or Independent."

Well, Ron Brownstein of the "Los Angeles Times" is following all this and the rest of the presidential campaign.

Ron, at this point, what effect does this controversy over swift Boats and John Kerry's record in Vietnam having on the campaign?

RON BROWNSTEIN, "LOS ANGELES TIMES": Well, in terms of the campaign itself, it is consuming the campaign. Rather than arguing about where we are today in Iraq or on the economy, we really have been dominated by this debate over what John Kerry did in Vietnam and, to some extent, what George Bush did during the Vietnam era 30 years ago.

I think the sign -- the clearest indication that the Democrats are worried about the impact of this so far is the fact John Kerry is on the air with those ads. As you know, Judy, they wanted to stay off the air in August, save their money for September and October, when they will -- thought they would need to husband those resources to compete with President Bush. But the fact they've gone on the air shows that they are concerned, and it is having at least some impact on them.

WOODRUFF: Do candidates, Ron, have any choice but to jump on a story like this when the news media is all over it, as this one is, as we just saw on that report by Howard Kurtz?

BROWNSTEIN: Well, that was the strategic choice the Kerry people faced in the beginning and really the reason they're facing some second-guessing now among Democrats. The feeling in the Kerry camp, I believe, was that they did not want to get involved in this story or to try to come out and counter it when it first appeared because they felt that would only give it more attention.

Well, it turned out it got plenty of attention without their intervention. And now they are catching up.

They organized a conference call today with veterans, adding to the list of people refuting the charges in the first ad, that about Kerry's combat service. And of course, they are on the air themselves.

WOODRUFF: Ron, it's -- we assume that voters would like to hear about other issues, the economy, the war in Iraq, how that's going, among other things. Are they going to have a chance to hear about those things?

BROWNSTEIN: Not right now. I mean, you know, the media is as complicit as the candidates. I mean, we've been lavishing enormous attention on this.

A perfect example, Judy, this Thursday the Census Bureau releases the most important report cards on how the economy is performing for average families, the annual reports on the median income, the poverty level and the number of people without health insurance. Are we going to be talking about that on Thursday or are we going to be talking about John Kerry's Silver and Bronze Star? I don't know. But the responsibility is with the media as well as the candidates.

One quick point. The president's supporters themselves, there's some concern that they don't want this story dominating this week because, as we move into the convention, the president has been hoping to have more attention focused on his own ideas for a second term, which has been kind of the thinnest spot in his campaign argument so far. So, it's not clear that in can sustain focus on this benefits even the president, although it probably has hurt Kerry so far.

WOODRUFF: All right. We are going to have to leave it there. Ron Brownstein of the "Los Angeles Times," thanks very much.

BROWNSTEIN: Just for now.

WOODRUFF: Thank you. That's right.

Well, both the Bush and Kerry camps are trying to a gauge the fallout from the Swift Boat controversy, particularly in battleground states, including this one, Pennsylvania. This is one of the bigger prizes on Election Day, and a place where the Bush camp is eager to get some momentum.

(BEGIN VIDEOTAPE)

WOODRUFF (voice-over): For George W. Bush, Pennsylvania is turning into this year's great white whale.

BUSH: A lot of people are wondering why I'm coming so much. It ought to be obvious to you. I like my cheese steaks...

WOODRUFF: Once almost within his grasp. Now looking just out of reach.

Al Gore won Pennsylvania in 2000 by fewer than five percentage points. The president hoped to make up ground this year.

CHUCK TODD, EDITOR, "THE HOTLINE": Of all the states they lost, it's one they thought they should be able to pick off.

WOODRUFF: Since taking office, Bush has visited Pennsylvania more than any other state, logging more than 30 trips. Will it make the difference?

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: We deserve a president that worked just as hard for your job.

WOODRUFF: Polls have consistently put John Kerry ahead in the Keystone State, a crucial showing for the Democrat because, although Bush really wants Pennsylvania, Kerry really needs it.

TODD: John Kerry can't win the presidency without Pennsylvania. George Bush can, because he already has.

WOODRUFF: And so, both campaigns go according, wooing swing voters in the Philadelphia suburbs, once reliably Republican, but trending Democratic of late. Launching appeals in western Pennsylvania and Pittsburgh, areas hit hard by the economic downturn.

LAURA BUSH, FIRST LADY: Here in Pennsylvania, you created 20,000 new jobs in the month of June alone.

WOODRUFF: Team Kerry is also playing a wildcard.

TERESA HEINZ KERRY, SENATOR KERRY'S WIFE: We need to turn back some of the creeping un-Pennsylvanian and sometimes un-American traits. WOODRUFF: Teresa Heinz Kerry has a long history in Pennsylvania as the wife of its late senator, John Heinz. She calls Pittsburgh home. And Pennsylvania is where the Kerry-Edwards ticket made its official debut.

Will it matter in the end? The Kerry campaign hopes so. It's got a lot riding on Pennsylvania.

(END VIDEOTAPE)

WOODRUFF: There's plenty more to say about Pennsylvania. Up next, the state Republican Party chairman gives us his view on Keystone State politics and the race for the White House.

And later, I'll get the Democratic perspective from Pennsylvania Governor Ed Rendell.

Plus, an inside look at the Republicans' Madison Square Garden party next week.

With 71 days until the election, this is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

WOODRUFF: As we focus on the battle for Pennsylvania's 21 electoral votes, I'm joined from the state capital, Harrisburg, by Alan Novak. He is the chairman of the Pennsylvania Republican Party.

Alan Novak, the public opinion polls we've seen in the last many weeks show John Kerry staying ahead despite the fact President Bush has been in this state campaigning 32 different times. Why is this such a tough nut to crack for the president?

ALAN NOVAK, PENNSYLVANIA GOP CHAIRMAN: Well, I think, Judy, the situation is Pennsylvania's been through some tough times with jobs, with some job loss a year ago. Those jobs have come back in this past year. We're now a net 36,000 more jobs gained than jobs that had been lost previously.

I think what we have is a closely-divided state, with the trend moving ever so slowly and slightly in there direction of President Bush. We haven't been to our convention yet. President Bush has not had the opportunity to present his plan, his vision, his plan to govern America for the next four years. So, we're very enthusiastic as we head into the national convention, and we feel that it's the right time for us to begin our final push in Pennsylvania.

WOODRUFF: So, even though during the month of July, Pennsylvania was, what, one of 22 states reporting a drop in payroll jobs, a decrease in jobs during the month of July, you don't see that as a problem?

NOVAK: Well, that was July. But for the previous 11 months, each month was a gain in jobs. And if you look at the net figure of jobs created in Pennsylvania over the past year, we not only have figures that show all the people who are out of work are back at work, but an additional gain of 36,000 jobs. So, Pennsylvania mirrors the country in that job growth situation, as well as real economic income situation.

WOODRUFF: We hear a lot, Alan Novak, about the Philadelphia suburbs, about swing voters there, about -- you know, this is an area I'm told that used to be more Republican, it's no moving more Democratic. How do you see the suburbs of Philadelphia right now?

NOVAK: Well, first of all, I live in the Philadelphia suburbs. I live in one of those counties within the Philadelphia region. I think they're close. A recent survey -- we've seen a recent poll has the president slightly ahead in the four suburban counties.

We need to increase that number additionally. But again, it's a trend. The last poll we saw a month out had the president tied with Senator Kerry. Now he has moved ahead slightly in the Philadelphia suburbs.

That, coupled with the mid-state, which is strongly Republican and which most of our voter registration organizational activities are going very well, and the western part of Pennsylvania, which is registered Democrat, but which the president won last time -- it's mostly conservative Democrat territory -- our volunteer efforts and our surveys are showing the president doing very well in western Pennsylvania. So, I think Pennsylvania is a margin of error state right now. And in the Philadelphia suburbs, the president has nosed slightly ahead.

WOODRUFF: All right. We're going to have to leave it there. But we thank you for that picture of the state. Alan Novak, chairman...

NOVAK: Oh, you're very welcome. Thank you.

WOODRUFF: ... of the Republican Party in Pennsylvania, we appreciate it.

NOVAK: Thank you.

WOODRUFF: Coming up, in the last couple of months before Election Day, Pennsylvania will be getting a lot of attention from both the Bush and Kerry campaigns. We'll find out about the battle here in the Keystone State from Dick Polman. He is with the "Philadelphia Inquirer" -- just ahead.

(COMMERCIAL BREAK)

WOODRUFF: Well, as we said, Pennsylvania is one of those make- or-break states for both the Bush and the Kerry campaigns. Dick Polman of the "Philadelphia Inquirer" is with me now to talk more about the race here in the Keystone State.

Dick, I was just listening to the state Republican Party chair say this is basically -- what did he call it? A margin of error state, but trending in the president's direction. How do you see it right now?

DICK POLMAN, "PHILADELPHIA INQUIRER": Well, I'm not -- you know, he has to say that because he's certainly -- he's a partisan and he's paid to say it as well. I don't necessarily buy that at the moment.

The Philadelphia suburbs, the three counties in the Philadelphia suburbs, are in some ways -- in Pennsylvania, the Philadelphia suburbs are really the most important part of the state in terms of winning the election. And I don't necessarily see what he's talking about, because those counties have been trending Democratic since Clinton in 1992 -- 1992, 1996 and 2000.

A lot of the people from the cities have moved -- have moved out to those suburbs. And a lot of people out there are not happy about just sort of the social conservatism of the Republican Party in the 1990s since sort of the South and the West took over the party.

It's making a lot of the suburbanites uncomfortable. And a lot of Republicans I've talked to out there, average voters, are going to vote for Kerry this time. And they basically told me that they have a lot of discomfort about the war, primarily.

WOODRUFF: The war in Iraq?

POLMAN: The war in Iraq. Not the war in Vietnam.

WOODRUFF: Right.

POLMAN: The war in Iraq.

WOODRUFF: Right, which is what we've been talking about the last few days.

POLMAN: Yes.

WOODRUFF: What about this whole Swift Boat controversy, Kerry's record in Vietnam? Do you think that's having an effect on voters as far as you can tell?

POLMAN: Well, you know, the polls seem to indicate that people are now aware of the controversy. I talked today to a couple -- John Zogby, who's a national pollster, has just done a survey in 20 states in the last week and a half, and he says he really hasn't seen the numbers move on that.

But I think the problem for Kerry might be there that, the more that it dominates the news, the less he's able to put out his own -- his own message and talk about the current war. And there's a lot of parts -- Pennsylvania, for example, there's parts of Pennsylvania, there's a lot of socially conservative voters, sort of conservative Democrats who think conservatively on social issues, mostly not so much here, but outside of Pittsburgh and what is part of the state called the T, in the middle. And those people may, you know, have a -- if they have a visceral reaction to those Swift Boat ads and they think perhaps that Kerry should not have been protesting the war when he returned in 1971, that may play into some doubts they may have about him.

WOODRUFF: If the Bush campaign, though, is able to get out its voters wherever they are in this state, is that enough to counteract the vote that you describe trending Democratic of Philadelphia suburbs and elsewhere?

POLMAN: Well, yes. When I think what the Bush campaign seems to be doing is not necessarily banking on the Philadelphia suburbs, which is actually in some ways the most vote-rich area.

But they have -- you know, they have this -- this plan to try to gen up as much of their core supporters or potentially core supporters as they can. So, there's other parts of the state where -- where they can spend a lot more time on those voters.

The problem is, is that you've got also action on the other side. America Coming Together, one of these so-called independent groups that's helping the Democrats, they are very, very much here in the Philadelphia area, doing turnout, knocking on doors every single day in August. That's pretty early.

WOODRUFF: Dick Polman, a veteran reporter, political reporter for the "Philadelphia Inquirer." Good to see you.

POLMAN: Thank you, Judy.

WOODRUFF: Thanks very much for talking with us.

And coming up, the battle over Vietnam -- we've been talking about it -- continues to raise. The president weighs in on those outside TV ads that attacks John Kerry's war record. We'll have a live update from Crawford, Texas.

Plus, a look ahead to the GOP convention. We'll preview the setup inside Madison Square Garden.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: John Kerry under fire on two fronts. Could criticism of anti-war activities hurt him more than attacks on his record of valor in Vietnam?

The presidential race heads into overtime.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL CANDIDATE: And along comes the president and changes the rules and laws that have been protecting our overtime for potentially millions of Americans.

ANNOUNCER: Can the Democrats make this a profitable campaign issue?

Philly color. A city in the thick of the 2004 campaign has a history of political characters and controversy.

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

(END VIDEOTAPE)

WOODRUFF: Welcome back to Philadelphia, our first stop on the road to the Republican National Convention in New York City. This state and this city have been magnets for the presidential candidates and their running mates. Vice President Cheney is due back here, right here in the Philadelphia area on Wednesday. Another testament to this state's pivotal role in election 2004.

Both President Bush and John Kerry are off the campaign trail today. But in Crawford, Texas, Bush managed to get in a few words about the Kerry swift boat controversy.

CNN's Jill Dougherty is with the president in Texas. Hello, Jill.

JILL DOUGHERTY, CNN CORRESPONDENT: Hi, Judy.

Well, you know, Judy, this has really already become a point of confusion and maybe even debate over what exactly the president said, but -- today, to put it in context, he came out, talked to reporters, after meeting with his top national security and military, to talk about long-term issues.

They asked him immediately about the swift boat ad controversy. And specifically, the first question about that was concerning the ads that have been funded by the Swift Boat Veterans for Truth. And the president said two words that were new, and that's where all this debate is.

Let's hear exactly what the president said.

(BEGIN VIDEO CLIP)

BUSH: That means that ad, every other ad. Absolutely. I don't think we ought to have 527s. I can't be more plain about it. And I hope my opponent joins me in saying, condemning these activities of the 527s.

I think they're bad for the system. That's why I signed the bill, McCain-Feingold. I've been disappointed that, for the first, you know, six months of this year, 527s were just pouring tons of money, billionaires writing checks.

(END VIDEO CLIP)

DOUGHERTY: So, the White House is downplaying those two words, "that ad," and saying essentially this is what the president has previously said: that he is against all those 527 ads and that he wants the Kerry campaign to join him and condemn them.

Also, Judy, on the subject of these ads and how the -- and on the Kerry campaign, et cetera, he said that Senator Kerry has served admirably, ought to be proud of his record. But the president would argue, the question really is who's better qualified to be the leader in this war on terror, and he would argue, obviously, that he is the man.

WOODRUFF: All right, Jill Dougherty with the president today in Crawford, Texas. Jill, thank you very much.

Well, Vice Presidential Candidate John Edwards says that President Bush passed up what he called a moment of truth, in which he could have gone further and condemned the swift boat ads. Also today, the group behind the spots is again declaring its independence from the Bush campaign.

But in all the back and forth, another angle of this story has gotten less attention: the possible fallout for John Kerry for what he did after returning from Vietnam.

Here now, our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): John Kerry is running for president as a war hero. But Kerry was also an anti-war hero. This week, his critics are putting out a new ad attacking not his war record but his anti-war record.

J. KERRY: ... razed villages in fashion reminiscent of Genghis Khan.

PAUL GALANTI: John Kerry gave the enemy for free what I and many of my comrades in North Vietnam -- in the prison camps -- took torture to avoid saying. It demoralizes...

SCHNEIDER: Kerry was actually quoting other veterans' reports of wartime atrocities, but he endorsed those accusations at the time and he still does.

J. KERRY: All I know is that it happened as matter of course.

SCHNEIDER: Kerry's anti-war statements could become a serious problem for him.

ROBERT DOLE (R), FMR. PRESIDENTIAL CANDIDATE: I think this ad's going to take -- you know, it's going to be tough on Kerry, because -- and he says, well, this is all hearsay what he picked up from other veterans, but he said it.

SCHNEIDER: Kerry's defenders called his anti-war testimony an act of courage.

JIM RASSMANN, VIETNAM VETERAN: We knew by this time that the war was a mistake. John was the one with courage to come out and say it.

SCHNEIDER: But it remains a source of deep resentment to other veterans, and the issue that set off their attacks against him. DAVID WALLACE, SWIFT BOAT VETERANS FOR TRUTH: He told every one I knew and everyone I'd ever know that I and my comrades had committed unspeakable atrocities, that we tortured people, raped women, burned villages without any reason.

SCHNEIDER: Kerry insists he was stating well documented facts.

J. KERRY: I can assure you that, you know, in fact all I did was tell the truth about some of the things that had happened over there.

SCHNEIDER: And he claims he never blamed the soldiers.

J. KERRY: I asked: Where's the leadership of the country? I asked where the leaders were, not the soldiers, because it was the leaders in Washington who left the soldiers.

(END VIDEOTAPE)

SCHNEIDER (on camera): The issue is relevant, because Americans are once again fighting overseas, and some of them resent criticism of their mission.

A Marine major serving in Iraq writes in the "New York Times," quote, "I believe that when Americans say they support our troops, it should include supporting our mission. They should not denigrate it. That only aids the enemy in defeating us strategically" -- Judy?

WOODRUFF: All right. We're listening well. Bill Schneider, thank you very much.

Well, now to another flash point in the first presidential election after the September 11th attacks. A top Republican in Congress has raised the stakes in the debate over how to reform U.S. intelligence operations.

Here now, our Congressional correspondent Ed Henry.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): After weeks of hearings on Capitol Hill, a senior Republican is urging his colleagues to stop the talk and finally take some dramatic action.

ROBERTS: But these are times that I think demand real reform and bold action. It's right for the country. It doesn't just move boxes around and protect turf.

HENRY: Colleagues knew Roberts wanted a strong national intelligence director, but the actual legislation includes a shocker: He wants to dismantle the Central Intelligence Agency.

The Roberts plan would break the CIA into three parts: a National Clandestine Service, an Office of National Assessments, and an Office of Technical Support. The reaction has been swift and scathing from the intelligence community and from Democrats on Capitol Hill. SEN. CARL LEVIN (D), MICHIGAN: Well, he hasn't shared those documents with me or with Senator Rockefeller, who's the ranking Democrat on the Intelligence Committee.

I believe it's a mistake to lay down a proposal that only has the support of members of one party.

HENRY: Senator Jay Rockefeller, who normally enjoys a cordial relationship with Roberts, expressed frustration with being left out of the loop. Rockefeller added of the substance, quote, "disbanding and scattering the central intelligence agency at such a crucial time would be a severe mistake."

An aide to Roberts insisted to CNN that the chairman had shared the details with Rockefeller. Democrats chose not to act, said the aide, so Roberts did.

(END VIDEOTAPE)

(on camera): Roberts is also facing heat from fellow Republicans such as the powerful Senate Armed Services Chairman John Warner. He released a statement expressing concern about any plan that curbs the Pentagon's power over programs that, quote, "support our men and women in uniform."

Meanwhile, President Bush was non-committal when he was asked about the Roberts legislation today -- Judy?

WOODRUFF: All right. Ed Henry with the very latest from Capitol Hill. Ed, thank you very much.

HENRY: Thank you.

WOODRUFF: Well, back here in Pennsylvania, both the Bush and Kerry campaigns are fighting hard for votes. Up next, I'm going to talk with the Democratic governor of this state, Ed Rendell, about the state of play (ph).

Also ahead, the economy remains a campaign staple on the airways. And out on the trail, we'll have the latest sparring.

Plus, fresh concerns that Florida will relive its election 2000 nightmare in 2004.

(COMMERCIAL BREAK)

WOODRUFF: Democrats in Louisiana are celebrating a legal victory under a state judge's ruling the qualifying period for the November 2 election in the state's 5th Congressional district must be reopened.

Earlier this month, Congressman Rodney Alexander infuriated Democrats by switching to the Republican party just minutes before the qualifying deadline. That left Democrats with little time or no time to enter a strong candidate in the election. A date for the new sign- up period is expected to be set after appeals run their course.

INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: Earlier, we talked about the political battle for Pennsylvania with the state's Republican party chairman. With me now from Harrisburg also to offer the Democratic perspective is the commonwealth's current governor and a former mayor of this city, Philadelphia, Ed Rendell. Governor, thank you for joining me. We just heard from Allen Novak that things are trending up for President Bush in Pennsylvania, even though he's a little behind in the polls right now. How do you see it?

GOV. ED RENDELL (D), PENNSYLVANIA: Well, I think it's pretty static right now. Senator Kerry's had a substantial lead in the last six or seven polls. That's at six points in two recent polls with Ralph Nader getting four in one and 3 percent in the other. I don't think Ralph Nader will get nearly that high a percentage come November.

So I think Senator Kerry's real lead is 7 or 8 points and that's a substantial lead. As you recall, Judy, Al Gore carried the state by about 4 points in 2000.

WOODRUFF: Governor, what Allen Novak and others are saying in President Bush's favor, is that even though Pennsylvania has been through some tough economic times, in the last number of months, jobs are coming back on stream and the economy is not the issue that it would have been for John Kerry last year at this time.

RENDELL: That's basically incorrect. This month in July we lost nearly 3,000 non-farm jobs. We went down. Our manufacturing sector after three straight months of gain lost 1,600 jobs. We have lost 160,000 manufacturing jobs since President Bush became president. That's one out of every five manufacturing jobs in Pennsylvania has disappeared.

And what's worse for the president, if you want to look at this in political terms, is that the jobs we're creating in Pennsylvania pay about $10,000 less in wages than the jobs we've lost. So we're dummying down the economy. No one in Pennsylvania feels very secure right now. Our manufacturing sector remains challenged, we don't see much help at all coming from the federal sector in fighting for our manufacturing jobs in terms of foreign competition.

There's a lot of resentment here about the economy. The only part of the state, in a recent poll it said the economy was doing well, is where you sit, southeastern Pennsylvania. But in the rest of the state, particularly in small and mid-size towns, our manufacturing base is continually getting killed despite all the efforts we're making to try to resuscitate it.

WOODRUFF: Governor, you've been watching politics for a long time from the inside. How do you rate John Kerry's handling of the whole controversy in recent weeks over his record in the Vietnam war?

RENDELL: It's tough thing to do because you're sort of chasing a ghost in responding to this stuff. Frankly, I think Senator Kerry did very well when he condemned the ad running about President Bush's war activity. President Bush should do the same thing about the ads running against Senator Kerry.

Look, John McCain, probably the most decorated war hero in public life in America, he said that the ads against John Kerry are dishonest and false. That ought to be enough. President Bush should join him and frankly, I think the effect that this is having is Pennsylvanians want all this stuff to stop. They want to start talking about real issues like what are we going to do to resuscitate our manufacturing sector? What about the cost of tuition? What about all of the thing that are making middle-class life so difficult in Pennsylvania.

Those are the things that they want answers from both the president and from Senator Kerry. And this stuff has just got to stop. Does President Bush really want the election to be decided by who did more to help the country during Vietnam, Senator Kerry or himself, I think not. I don't think they want to...

WOODRUFF: But it's Kerry's own campaign that's run the latest ad, Governor. It's Kerry's own campaign that's run the latest ad...

RENDELL: Only because we've got this incredible group of lies and distortions. You have men signing up, this recent anti-Kerry ad, who in the '70s, in their reports praised John Kerry and as recently as 1996, are on record as having said good things about Senator Kerry's service. Now, there's a presidential election and they seem to have shifted position.

But the bottom line is let's talk about real stuff. I think the media is at fault, too, for giving this type of stuff so much coverage instead of covering the real issues. The average American citizen does not want to have this election based on whose service was best for the country in Vietnam. That clearly was Senator Kerry's. I mean, that's beyond dispute. He went, he volunteered. You know what President Bush did. We don't want to even discuss that.

Let's discuss the real issues. What about companies getting tax breaks to take jobs overseas? Shouldn't that end? Senator Kerry says yes, President Bush is not taking any action to do that. Those are the real issues that Pennsylvanians want to hear about.

WOODRUFF: Governor Ed Rendell, complaint duly registered. Thanks very much. It's a pleasure to talk to you. We appreciate it.

RENDELL: Well, the city looks great behind you.

WOODRUFF: Thank you. Your city.

Coming up, a check on political money matters from taxes to overtime pay. That's when we come back.

Also, Palm Beach County, Florida, tries to get it right. Election officials have a new absentee ballot but some say it will cause more voter confusion.

(COMMERCIAL BREAK)

WOODRUFF: Debates over Vietnam make headlines but money still matters, especially in states like Pennsylvania, which are struggling, as we've been telling you, to bring their economic engines back to full-speed. The latest TV ad for the Bush/Cheney ticket focuses on the economy. Democrats also see a new opportunity for political gain.

(BEGIN VIDEOTAPE)

AD ANNOUNCER: Here's what Kerry says, and then there's what Kerry does.

WOODRUFF: This week, a familiar arrow finds its mark. The economy.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: We won't raise taxes on the middle class.

AD ANNOUNCER: Really? John Kerry's voted to raise gas taxes on the middle class ten times.

WOODRUFF: The latest Bush campaign ad, rolling out today in the showdown states is an effort to shore up a weak spot in the president's portfolio. Democrats continue to stake their claim to the dollars and cents agenda.

SEN. JOHN EDWARDS (D), VICE PRESIDENTIAL CANDIDATE: A third of the benefit of the Bush tax cuts went to the group of Americans whose average earnings are $1.2 million.

WOODRUFF: John Edwards on the stump in battleground Wisconsin, blasting the administration's new overtime regulations, which kicked in today. The middle class, he says, will feel the hurt.

EDWARDS: If you're a line cook, you could lose your overtime, your right to get overtime pay, when you work overtime. If you're a police sergeant out working to keep our neighborhoods safe, you could lose your overtime pay. If you're a computer programmer, you could lose your overtime pay.

WOODRUFF: Camp Kerry claims up to six million Americans will lose overtime pay as a result of the rules change. Team Bush disputes that number and says 1.3 million workers will be eligible for overtime benefits for the first time. A bipartisan group concludes, a greater proportion of the workforce overall will no longer be eligible for overtime.

(END VIDEOTAPE)

WOODRUFF: Several hundred union workers protested the new overtime rules today outside the Labor Department in Washington. Also opposed to the new rules, Republican Arlen Specter. He is a senior senator from right here in Pennsylvania.

We're checking the Monday headlines in our "Campaign News Daily." Three new presidential polls, including one from a showdown state, are out this Monday. A new research 2000 survey in Nevada finds Bush and Kerry neck and neck, separated by a single point. Kerry appears to be in much better shape in New Jersey. The latest poll there gives him an 11-point lead over Bush: 52 percent to 41 percent. Kerry also appears to be running well in Illinois. A "Chicago Tribune" and WGN poll gives Kerry a 14-point lead.

Meanwhile, a media investigation has found that about 48,000 people are registered to vote in both New York and Florida. The "New York Daily News" reports that while actual voter behavior is difficult to document, as many as 1,000 people may have voted in both states in at least one election. Florida, as we all know, was decided four years ago by just 537 votes.

The absentee ballot being used this year in Palm Beach County, Florida, is drawing unfavorable comparisons to that county's infamous butterfly ballot. Just like the butterfly ballot of four years ago, election officials say the new ballot was tested and found to be easier for voters. The new absentee ballot is similar to this one used four years ago in Florida's Orange County. But instead of asking voters to fill in bubbles, it requires people to connect a broken arrow in order to cast a vote.

Well, Republicans all across the country are about to turn their attention to New York City and the party's national convention, which begins one week from today. Unlike delegates, President Bush apparently will not be spending much time in the Big Apple. "The New York Times" reports that the unofficial plan has Mr. Bush arriving in Manhattan sometime on the last day of the convention and leaving right after for this state of Pennsylvania.

CNN got a sneak peek today inside Madison Square Garden at the convention stage -- a smaller, more intimate backdrop than you've seen in recent years. In a dig at the Democrats, RNC convention planners tell us that their balloons will drop on time.

In New York City today, officials are facing a problem eerily similar to the one that Boston leaders were facing just days before the Democratic convention. That story now from CNN's Jason Carroll in New York.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN CORRESPONDENT (voice-over): For the past several weeks they showed up wherever New York's Mayor Michael Bloomberg did, threatening to strike, shouting slogans outside his home. All to pressure Bloomberg back to the bargaining table with what the city's police and fire unions call "a fair contract."

They hoped it would happen before the Republican Convention takes place here next week. But nothing so far.

Their next tactic? Take their cause to the top.

PATRICK LYNCH, NY PATROLMAN'S BENEVOLENT ASSOCIATION: So we respectfully ask the president of the United States, if he did not know what's going on in this city, we want him to know when he comes to town.

CARROLL: In a bold move, the city's police and fire unions wrote directly to President Bush, saying "we, the front-line domestic troops in the global war on terrorism have been disrespected by Mayor Bloomberg's collective bargaining policies."

STEPHEN CASSIDY, PRESIDENT, NY FIRE UNION: It seems clear us to us that people around the country aren't aware that the heroes of September 11 have not been treated with respect by this mayor.

CARROLL: Mayor Bloomberg says the city is financially tapped and cannot pay beyond the 5 percent of a three-year already made.

MAYOR MICHAEL BLOOMBERG (R), NEW YORK CITY: The city just doesn't have any more money. And the federal government is not going to give us any money for those kinds of expenses.

CARROLL: But rank-and-file firefighters and police officers like Joe Johnson don't buy that.

JOE JOHNSON, NYC POLICE OFFICER: We literally put our lives on the line. And the mayor is telling us we, you know, he doesn't care about us, he doesn't want to pay us -- that hurts.

CARROLL: So for now, an impasse. Timing could not be worse. Threats of a blue flu loom over the convention. The unions say security will not be compromised.

(on camera): Police and fire unions are seeking arbitration, which the city opposes. No word yet on the White House's response to the unions' letter.

Jason Carroll, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: In Boston, they pretty much split the difference between the city and the unions. We'll see what happens in New York.

Well, the City of Brotherly Love here has a colorful political past. Coming up, our Bruce Morton gives us a political history lesson.

(COMMERCIAL BREAK)

WOODRUFF: When you think of Philadelphia, you may remember this famous scene -- "Rocky," the character made famous by Sylvester Stallone, trained on the steps behind me, right here, at the Philadelphia Art Museum.

And this is what the museum looks like on the inside. It is among the largest and most important art museums in the United States, and it is one of this city's best known landmarks.

Philadelphia is also well known for its political past as well. Here's CNN's Bruce Morton. (BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): City of Brotherly Love? Well, you have to wonder. For two terms back in the 1970s, they had Frank Rizzo, Mr. Law and Order, who urged an audience when he was trying to change the laws so he could run for a third term "vote white," and was voted "racist of the month" by a Klan group. You have to wonder.

Wilson Goode was the city's first African-American mayor. Rizzo was still trying to run.

FRANK RIZZO, MAYOR OF PHILADELPHIA: Let me tell you something, so you will understand, I will never concede to him. OK?

MORTON: But Goode's real problem was people like this man. He was a member of MOVE, a group so radical it objected to using plumbing. Mayor Goode ordered their house bombed, but it was a wooden house, in a row of wooden houses. Eleven people, five of them children, died; 61 houses were destroyed. And Goode took the city to the edge of bankruptcy.

Ed Rendell brought the city back from that, made Philadelphians feel better about themselves, announced a cleanup, and personally scrubbed a washroom in City Hall, and, though, a Democrat, brought the Republican Convention to the city.

His successor was John Street. And he might almost have had a normal reelection campaign -- charges about Philly's famous pay-to- play system of politics and so on -- until it turned out the FBI had planted a bug in Mayor Street's office. It didn't matter. He won anyway, it's a very Democratic town, but City of Brotherly Love? Maybe they meant those old guys, you know. Benjamin Franklin, Bill Penn, that lot.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: If you like politics, you got to like Philadelphia.

Well, that's it for INSIDE POLITICS this Monday. I'm Judy Woodruff. Have a good evening. My friends at "CROSSFIRE," Tucker and Paul, we're turning it over to them right now.

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