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JUDY WOODRUFF'S INSIDE POLITICS

Critics Keep at Rumsfeld; Bush, Kerry Campaign Managers Revisit Election '04; Sex Scandal Rocks British Politics

Aired December 16, 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: Republicans versus Rumsfeld. Criticism of the Pentagon chief keeps coming.

Bush versus Kerry revisited. Their campaign managers sit down with Judy to talk about high points, low points and how the other guy did.

UNIDENTIFIED MALE: I think in a lot of ways the Kerry campaign ran an excellent campaign.

UNIDENTIFIED FEMALE: They have hit very hard in the press and they've kept at it.

ANNOUNCER: A made for the tabloids tale. No, not that one. The sex scandal rocking British politics.

UNIDENTIFIED MALE: We just found out that he made a mistake. He has to go and he's done the honorable thing.

UNIDENTIFIED FEMALE: It's still such a mess, isn't it?

ANNOUNCER: Now, live from Washington, Judy Woodruff's INSIDE POLITICS.

(END VIDEOTAPE)

JUDY WOODRUFF, HOST: Thank you for joining us.

The Bush administration wants to talk about the economy today but some members of the president's own party are talking instead about Donald Rumsfeld. Senator, Armed Services Committee member Susan Collins has sent the defense secretary a tough letter describing his recent remarks about the shortage of armored vehicles in Iraq as troubling. The Maine Republican says "I am very concerned that it appears the Pentagon has failed to do everything in its power to increase production of up-armored humvees."

Senator and Former Majority Leader Trent Lott is quoted today as telling the Biloxi Chamber of Commerce that he is not a fan of Secretary Rumsfeld and that he doesn't believe Rumsfeld listens to his uniformed officers. The Mississippi Republican says he does not think that Rumsfeld should resign immediately but he does think he should be replaced sometime in the next year.

Well, let's find out now if any of this criticism is registering with the president. Here now our White House correspondent Dana Bash.

Dana, what are they saying.

DANA BASH, CNN CORRESPONDENT, INSIDE POLITICS: Well, Judy, both privately and publicly, no officials here at the White House yet are saying that Secretary Rumsfeld's job is in jeopardy. Officials here say that the president is well aware of that growing tide of Republican criticism of his defense secretary. But they also say that Secretary Rumsfeld is a friend of the president. That Mr. Bush understands the enormous challenges that he faces and appreciates the way he approaches those challenges and that's why White House Spokesman Scott McClellan said again today the president is pleased that the secretary agreed to stay on.

(BEGIN VIDEO CLIP)

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: I think that Secretary Rumsfeld continues to do a great job while we're at war. We are a nation at war. We're a nation at war on terrorism. The audiotape that came out earlier this morning reminds us that we are a nation at war. We must continue to use all means on all fronts to defeat the terrorists. And Secretary Rumsfeld is an important person in our efforts to prevail in this global struggle of ideologies.

(END VIDEO CLIP)

BASH: Now, while one senior official here called this typical Washington chatter, they also do understand that there are some legitimate questions that Secretary Rumsfeld will have to answer about the situation in Iraq and about what the army does or does not have or didn't have to deal with for what's going on in Iraq. But they essentially say that perhaps there is some griping to get attention from Capitol Hill.

One official, though, I talked to, Judy, did concede that in terms of the political ramifications here, that this is not a good time at all to get rid of Secretary Rumsfeld. That that is essentially a tacit admission of defeat or error in Iraq. That's not something that they want now, particularly before the election's - the upcoming Iraqi elections at the end of January.

WOODRUFF: Dana, a different subject. The economic summit that's been going on at the White House yesterday and today, what has come out of that?

BASH: Well, you know, it was interesting to listen to the president today, Judy. He essentially addressed the politics of Social Security head on. Of course, a long time, for a very long time, Social Security has been consider the third rail of politics. And he essentially said today he gets it. That historically politicians who have addressed this issue say that they want to confront this issue, as he put it, have gotten clobbered politically for it.

But he put members of Congress on notice today that he does believe there is a crisis in Social Security. That crisis is now. And he said that his re-election should be proof to them that moving forward on this is no longer political suicide.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The crisis is now. You may not feel it, your constituents may not be overwhelming you with letters demanding a fix now but the crisis is now. And so why don't we work together to do so. I can also assure members of Congress that this is an issue on which I campaigned and I'm still standing. In other words, it's a...

(END VIDEO CLIP)

BASH: Now the president did not, at the conclusion of this summit, give very many, if any, specifics on how he intends to reform Social Security. He did, Judy, give a rare nod to his predecessor Bill Clinton, of course a Democrat, on the fact that he made Social Security or at least said he wanted to make it a priority. Perhaps a signal to Democrats that they should be careful in their accusations against President Bush that he's exaggerating the problem.

One more thing, Judy. The president also made very clear today, he said point blank, that Congress should be aware that there will be fiscal discipline in the oval office. Maybe an early Christmas present to some fiscal conservatives in this party who are really hoping that the president addresses the deficit this coming year.

WOODRUFF: Sounds like a little shot across the bow. We'll see.

All right, Dana, thanks very much.

BASH: Thank you.

WOODRUFF: And we'll talk more about the economic challenges ahead for the president later. We will talk with White House Budget Director Josh Bolten.

Well, a month and a half after Election Day, the managers of the Bush and Kerry campaigns appear to have put much of their political animosity behind them. But not all of it. Yesterday before a conference on the campaign at Harvard, I sat down for an exclusive joint interview with Ken Mehlman and Mary Beth Cahill. Some sparks flew when Mehlman suggested that the Kerry camp could have offered more of a look at the future during the Democratic Convention.

(BEGIN VIDEO CLIP)

MARY BETH CAHILL, FORMER KERRY CAMPAIGN MANAGER: I think that John Kerry talked about his plans for the economy, for health care throughout the entire year. President Bush relatively rarely spoke about what he wanted to do in the future. And the convention for me was notable because it was so negative about John Kerry. That was the very real difference, I think, between the two conventions.

KEN MEHLMAN, FORMER BUSH CAMPAIGN MANAGER: I would respectfully disagree with that. I think that as evidenced by the polling changes that occurred, the lack of a bounce in their convention and the big bounce in our convention, I think our convention was specific and was filled with policy detail.

(END VIDEO CLIP)

WOODRUFF: We'll bring you much more of that exclusive interview with Ken Mehlman and Mary Beth Cahill in a little while on INSIDE POLITICS.

Well, now we turn to a political bombshell involving nanny problems, illicit affairs, a central figure who rose above adversity and the bad judgment that did him in. Now, to some, that might sound like the Bernard Kerik nomination embarrassment in this country. But it is actually the story of a British cabinet member whose scandal- tainted resignation has embarrassed Prime Minister Tony Blair.

Our Bill Schneider has been watching it all unfold in London.

(BEGIN VIDEOTAPE)

DAVID BLUNKETT, FORMER HOME SECRETARY: It's very difficult. I've had the worst three weeks of my life.

BILL SCHNEIDER, CNN CORRESPONDENT, (voice over): Like all good British scandals, this one involves sex. A three-year illicit affair between British Home Secretary David Blunkett and a married woman. A wealthy American publisher. The affair ended badly a few months ago with an unusual paternity suit.

ROBIN OAKLEY, CNN EUROPEAN POLITICAL EDITOR: He's involved in a bitter paternity battle trying to prove that he is the father of her 2-year-old and indeed of the child she has yet to bear because she is pregnant at the moment.

SCHNEIDER: As home secretary, Blunkett's job combined attorney general and homeland security. His tough law and order policies were controversial.

UNIDENTIFIED FEMALE: I think he's very far from a libertarian. So, in a way, I'm quite glad that he's gone.

SCHNEIDER: Blunkett was blunt. In a recently released biography, he harshly criticized several cabinet colleagues. Oh, my. He was also revealed to have provided his mistress with free first- class train tickets. My, oh, my.

UNIDENTIFIED FEMALE: It's all such a mess, isn't it?

SCHNEIDER: But none of that brought Blunkett down. What did was a nanny problem.

OAKLEY: The most damaging accusation against him was that he had misused his office as home secretary to further the interests of his former lover, Mrs. Kimberly Quinn (ph), by fast-tracking a visa for her nanny.

SCHNEIDER: In politics, they say the one thing worse than a crime is a mistake. UNIDENTIFIED MALE: As soon as it was found out that he had made a mistake, he had to go and he's done the honorable thing.

SCHNEIDER: A terrible fall for a man who was born blind, in poverty and fought his way up to high office.

UNIDENTIFIED FEMALE: I love him very much. Did he have to go?

SCHNEIDER: A Shakespearian tragedy some are calling it.

BLUNKETT: It's better to stand down, to rebuild, to learn a lot about myself because people have called me arrogant and I have been.

(END VIDEOTAPE)

SCHNEIDER: Blunkett's disgrace is a serious setback for Tony Blair, who repeatedly expressed confidence in his home secretary. And not only that, but Blunkett's tough anti-terrorism policies, which were expected to be at the center of Blair's re-election campaign in a few months, have just been declared unlawful by Britain's highest court.

Judy.

WOODRUFF: What a story.

Bill Schneider, thank you very much.

SCHNEIDER: Sure.

WOODRUFF: Bill in London this week. We appreciate it.

Well, back here in the United States, lawmakers of both parties are venting about Donald Rumsfeld. Bay Buchanan and Donna Brazile will join the should Rumsfeld go debate.

Also ahead, the glitches in the '04 election. Have they stirred up new calls for reform?

And later, a national disaster. Is Washington blowing its chance at getting a Major League Baseball team?

(COMMERCIAL BREAK)

WOODRUFF: With me now, former Gore Campaign Manager Donna Brazile and Bay Buchanan, president of American Cause.

All right, it's no surprise that Democrats would criticize Donald Rumsfeld but now you've got Republicans. It's not just John McCain. It's Susan Collins. It's Trent Lott.

Bay, is Donald Rumsfeld's job in jeopardy?

BAY BUCHANAN, PRESIDENT, AMERICAN CAUSE: Well, it depends on what the president wants to do. There's no question he made a mistake. You cannot defend what Donald Rumsfeld said, in my opinion. I thought it showed a certain insensitivity to the - certainly to the parents and to the troops as well. He did not have a good answer.

And so what do you do? Do you fire him because he didn't have a good answer? I don't think so. I don't think that's grounds. He's done a fine job. The president's very pleased with that.

But I think the key here is not exactly what he said but what are we doing? The question was an excellent one I've heard for 12 months. Why are we not giving the troops what they need to make certain that they're as safe as possible. And that's what I think has to be addressed and quickly and I understand they are.

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Well, Bay, Norman Schwarzkopf, as well as Bill Crystal and a number of other Leton Neal (ph) kinds have also come out and said that Donald Rumsfeld is not up to the job. Trent Lott said that perhaps not now but in the new year that Mr. Rumsfeld should look for employment somewhere else.

And there are a number of things that people complain about. Yes, the Democrats have complained about the troops and the equipment. But also the prison scandal. There's also been some concern in terms of the post-Iraqi planning. So I think this is really the tipping point for Donald Rumsfeld.

BUCHANAN: You know what I don't understand is, the troops should have had this. I've heard this complaint. You've heard this complaint for 12 months, Judy. So why hasn't something been done? Now Congress says it's a terrible thing. Congress is oversight. I do not think that Donald Rumsfeld is totally responsible. I think that Congress says they've heard it and why hasn't something been done? Why didn't they make certain, why did it take a member of the . . .

WOODRUFF: So Congress should have taken the lead on this?

BUCHANAN: Of course they should have. If Donald Rumsfeld and the Defense Department wasn't giving the troops what was authorize by Congress to get them, to make certain they were safe, what have they been doing? What do they do for work other than cover their back sides when something like this happens?

BRAZILE: Well, that's why Democrats should be put back in control because we would have oversight hearings and we would look into these matters. But, look, the troops have been complaining, General Shinseki and others have been complaining. People have been complaining. Donald Rumsfeld is not listening.

WOODRUFF: Let's talk about a completely different subject and that is Social Security today at the economic summit. The president made it clear yet again that he wants to push and he wants to move quickly to overall Social Security.

What's to stand in his way, Bay?

BUCHANAN: There's going to be a national debate on this. I think that he has been enormously successful when he decides what's the cornerstone of his agenda and he gets out there and he crosses this country and he really makes the case for it. And that's what he's going to do with this privatization of Social Security. I think you'll have the Democrats who will come up against it. They'll be kind of like the tax battle. You'll have the one group on one side, the other group on the other. But I think there will be a modest program that will eventually come through Congress.

BRAZILE: Well, not only the Democrats, but I think some of the fiscal fault (ph) will start to speak up and really question whether or not we have the resources to privatize, partially privatize this great program. Look, $2 trillion, where are we going to get the money from. The president has already ruled out raising taxes. Where are we going to borrow it when we're already up to our you know what in debt.

So I think this program is a successful program. I don't think the president will have the votes in the first three months. Perhaps if he can sell it better and if he can really allay some of the concerns that this will really hurt the program long term, he may be able to get some parts of it?

WOODRUFF: Can the country afford this?

BUCHANAN: Well, clearly, they're going to look at this, the devil's in the details here. I think the program is a great idea and I think to encourage investment is terrific. But there's no question that it's going to be costly. And the fiscal conservatives I think will say to the president, we'll give you this, because they want it, but we want to see a much, much movement towards a balanced budget.

BRAZILE: There's no question the deficit halts on both sides of the aisles. CBO, Wall Street, everyone will have a say into this, including workers and future retirees.

WOODRUFF: And your saying it's both parties?

BRAZILE: Absolutely.

BUCHANAN: The key, though, is the first six months. You say it's not going to get through in these first couple months. The president's greatest clout is going to be the first six months of this administration and . . .

BRAZILE: And I think he'll have his hands . . .

BUCHANAN: If he doesn't get it through then, he will not get it through.

BRAZILE: He'll have his hands full with Iraq.

WOODRUFF: He says he's moving quick on it, as in January. We'll see.

BRAZILE: Well, he may put the proposal to...

BUCHANAN: It's a great debate that should be had now and it will impact two years from now.

WOODRUFF: Bay, Donna, always a great team to have on INSIDE POLITICS. Thank you very much.

BRAZILE: Thank you.

WOODRUFF: We'll see you next week.

Views of an all New York presidential race in 2008 lead off our political bites on this Thursday. Quinnipiac University surveyed registered voters nationwide about a potential White House showed between Republican Rudy Giuliani and Democrat Hillary Clinton. In a hypothetical match-up, former New York mayor leads Senator Clinton 45 percent to 43 percent.

Retiring Democratic Senator Zell Miller of Georgia has agreed to present an award to the anti-Kerry campaign group Swift Boat Veterans for Truth. Miller, who blasted Kerry at the Republican Convention, will appear at the Conservative Political Action Conference here in Washington in February to present what the American Conservative Union calls its Courage Under Fire Award.

Another legal challenge in the works in Washington state as the recount continues in the governors race. That story and questions about election reform ahead.

(COMMERCIAL BREAK)

WOODRUFF: In the Washington state recount, Republicans announced today that they are suing King County over 573 newly discovered ballots that could change the outcome of the governors race. The county's canvassing board voted yesterday to prepare the absentee ballots for inclusion in the hand recount that is now under way. The board will decide on Monday whether to actually go ahead and count ballots with verifiable signatures. At last report, Republican Dino Rossi was 121 votes ahead of Democrat Christine Gregoire in the hand recount. King County is a Democratic stronghold and so the disputed ballots there could turn the race in Gregoire's favor.

A recount of the presidential vote in Ohio continue with election workers holding punch card ballots up to the light and searching for hanging chads. Democrats and other challengers of President Bush's victory in Ohio are paying for the recount. So far it reportedly has not produced much change in Mr. Bush's margin of victory in that important state.

Well, with me now to talk more about the 2004 elections and the calls for election reform, CNN political analyst Carlos Watson.

Carlos, these elections just won't die, will they, in some of these states?

CARLOS WATSON, CNN POLITICAL ANALYST: Not a chance. You know, Judy, since the Civil War, every 40 years we seem to change the rules of the game, at least how election law works here in this country. And I think over the next four years, we're likely to see at least four significant areas enjoy some pretty big changes. Voter registration, you know, that each of the states, as a result of the HAVA, congressional legislation to Help America Vote Act, by 2006 will have to have a statewide registration database. So that will create some changes.

You'll see more early voting in a number of states. You saw Florida, among others, experiment with that this last time. You'll start to see there will be more conversation around local election department resources. How many voting machines per voters. And you'll see a push for greater uniformity around that.

You'll also, by the way, see more conversation around the voting machines, not just electronic voting, but you'll also start to see a conversation around Internet voting. Remember we talked about that a little bit in Michigan, in their primary, earlier in the year. So all four areas you'll see some pretty significant changes between '04 and '08.

WOODRUFF: Carlos, are there other parts of the electoral system that could be affected, though, as well?

WATSON: There are, Judy. Interestingly enough, two other areas will probably see some pretty big fights, both in the legislature and in the courts. One is redistricting. We saw that Texas kind of reopened how they measure out or kneaded out, if you will, their congressional seats and that led to some big changes this last time.

But in my home state, here in California, this next year, there's a chance that Governor Arnold Schwarzenegger will offer a ballot initiative that may create, if you will, an impartial commission to decide and redraw the lines. If this succeeds in California, it will be yet another new movement that starts with a ballot initiative process here in California, not unlike some of the tax revolts.

The other area where we'll see a lot of activity is on fund- raising. And, remember, John McCain, this may be another area of tension with the White House where we talk about 527s and whether or not we'll fundamentally change presidential public financing, as well as what happens to the FEC.

WOODRUFF: Were there some developments this year specifically in the '04 election, Carlos, that could affect future elections?

WATSON: You know, Judy, I really think so. Interestingly enough, some of it was not just what happened again in the courts or what happened in terms of laws that were passed, but interestingly enough, the campaigns. You saw the campaigns become much more strategic in their get out the vote efforts, creating much more sophisticated voter databases and putting a lot more money towards those election day efforts. And, obviously, for the Republicans, it worked out particularly well. I think you'll continue to see whether it's through groups like Moveon.org, whether it's home schoolers who start to play a role or whether it's others on the Internet, I think you'll see more of that happen in 2008.

The other thing I think that will be interesting will be to watch the role of the attorney general, Al Gonzales. How aggressive will he be if Congress decides to make changes to the Help America Vote Act? What will he say about the 2007 re-authorization of the Voting Rights Act? And will he, if at all, have additional comments to make about the FEC. So he'll be a key player in all these conversations.

WOODRUFF: Much to keep on talking about even though it's been, what, over six weeks since the election.

WATSON: Over six weeks but there will be activity in this new Congress. You know it.

WOODRUFF: Oh, but who's counting? We are.

OK, Carlos, thank you very much.

WATSON: Judy, good to see you.

WOODRUFF: And you.

Well, it has been said that there is no such thing as a free lunch but that is exactly what some critics accuse the president of floating in his still un-spelled out plan to partially privatize Social Security. I'll ask White House Budget Director Josh Bolten about that and the Bush economic conference. And perhaps we'll find out if Fed Chairman Alan Greenspan reportedly said thanks but no thanks.

More INSIDE POLITICS in a minute.

(COMMERCIAL BREAK)

WOODRUFF: Just before 4:00 on the East Coast and as the markets get set to close on Wall Street, I'm joined as I am every day by Lou Dobbs in New York with "The Dobbs Report." Hi, Lou.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Hi, Judy. It's a big week for corporate deal-making. Three more mergers announced today worth more than $40 billion. The biggest of those deals, Johnson & Johnson buying medical device maker Guidant, paying more than $25 billion. In the software industry, Symatec is buying Veritas, paying $13.5 billion. United Technologies buying the smoke alarm maker Kidde for $2.8 billion.

On Wall Street, shares of Johnson & Johnson up rallying as a result of that deal, nearly $3 a share and helping lift the Dow while it's at it. As the final trades are now being counted shortly after 4:00 p.m. Eastern, the Dow Jones industrials up almost 14 points. The Nasdaq composite, however, down nearly 1 percent on the day.

On the economy, another sign of improvement in employment. Initial claims for unemployment benefits declined last week to the lowest level in five months. But there are new signs the strong housing market may be encountering some resistance. The number of new homes under construction fell thirteen percent in November. That's the biggest monthly decline in nearly 11 years. And the third quarter current account deficit widened slightly to almost $165 billion, an all-time high.

Good news at Apple Computer. Apple's hot selling i-Pod is certainly one of the most attractive gifts of the season. In fact, the digital music player is all but sold out at many major retailers both online and in stores. The i-Pod accounts for just about a quarter of Apple's overall sales and the company could sell four million of them this holiday season alone.

Coming up here on CNN at 6:00 p.m. Eastern, on "LOU DOBBS TONIGHT," our special report on broken borders. Millions of Mexican illegal aliens live in this country. They're desperate to escape poverty in their own country. But Mexico is actually home to nearly a dozen billionaires, 85,000 millionaires, amongst the richest population in all of Central and South America. Tonight we take a look at why Mexico is so anxious to export their poor to this country.

(BEGIN VIDEO CLIP)

GEORGE W. GRAYSON, COLLEGE OF WILLIAM & MARY: Our border provides an escape valve which really lets the Mexican political and economic elite off the hook in terms of providing opportunities for their own people.

(END VIDEO CLIP)

DOBBS: Also tonight, our special report, Red Star rising. China's emergence as a global superpower, economically, politically and militarily. We take a look tonight at what's behind the close relationship now forming between China and France.

And the National Guard, supposed to be our first line of defense here in the United States. But nearly half of all guardsmen and women are now fighting in Iraq. The former co-chair of the Commission on National Security, Gary Hart, is my guest tonight. He says we are simply not prepared to handle another terrorist attack.

Also, former Labor Secretary Robert Reich joins me. We'll be talking about his new book, "Reason: Why Liberals Will Win the Battle for America." All of that and more at 6:00 p.m. Eastern here on CNN. Please join us.

Now back to Judy Woodruff in Washington -- Judy.

WOODRUFF: Lou, the economy, the economic conference now going on here in Washington, sponsored by the Bush White House. What's your sense of what is going to come out of this?

DOBBS: I suspect that if it is like previous economic conferences, Judy -- you've covered and reported on a few of them over the years, the fact is that this is an opportunity for the White House to lay out, amongst a very friendly audience, its agenda. Social Security, tax code reform.

But in truth, this White House is encountering considerable resistance from an unexpected quarter. And that is conservatives within the Republican party, as well as Democrats who've established their bona fides for prudent fiscal management under the Clinton administration. So the White House is hitting some significant political headwinds in what should be a highly successful but staged event like an economic conference. WOODRUFF: Well, we're watching it. We're going to be watching you at 6:00. Thanks, Lou.

DOBBS: Thank you, Judy.

WOODRUFF: INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Together for the first time since the election. Bush and Kerry campaign managers Ken Mehlman and Mary Beth Cahill discuss high points, low points and how the other guy did.

MARY BETH CAHILL, KERRY'S CAMPAIGN MANAGER: They had four years to look at this, they looked at everything very closely. And they were very data-driven.

KEN MEHLMAN: Having the later convention was an advantage. At the time their convention ended, it didn't feel like one.

ANNOUNCER: The revolving door from Congress to K Street. How lawmakers-turned-lobbyists are cashing in.

A strike-out in Washington? Politics threatens baseball's capital comeback.

UNIDENTIFIED MALE: As I think we are in great, great jeopardy.

ANNOUNCER: Now, live from Washington, Judy Woodruff's INSIDE POLITICS.

(END VIDEOTAPE)

WOODRUFF: Welcome back. As the president wrapped up his two-day economic conference today, there was a report that top Republicans recently approached Fed Reserve Chairman Alan Greenspan about joining the White House team as treasury secretary. "The Financial Times" reports that senior party members lobbied the White House and Greenspan in hopes of replacing current treasury secretary John Snow. Greenspan reportedly turned down the idea. A White House spokesman refused comment. Last week the White House announced that Snow would remain as treasury secretary. These reports come as the president made the case today for dramatic changes in the Social Security program.

White House Budget Director Josh Bolten was among the panelists and he joins me from the White House. Josh Bolten, thanks very much for talking with me. This report in "The Financial Times" about Chairman Greenspan, was this done with the knowledge of the White House?

JOSH BOLTEN, WHITE HOUSE BUDGET DIRECTOR: Oh, I don't think so. We're all big admirers of Chairman Greenspan here. We're also big fans of Secretary Snow, we're glad he's staying in place. I certainly am. He's been great partner and I think he'll continue to be an excellent secretary of the treasury. WOODRUFF: And by the way, your name was one of those names being mentioned as a possible successor to John Snow. Were you approached by anyone about the job?

BOLTEN: No. And I'm very happy to be remaining in a very tough job right now, which is looking over the federal budget.

WOODRUFF: Well, and before we get onto the conference, Josh Bolton, which I do want to ask you about, a number of people are saying the way the John Snow announcement was handled, the fact that he was left sort of out there for several days with anonymous White House officials saying he might not be around for very long, in effect undermine him, weakened him as he goes forward?

BOLTEN: Well, I hope not. And usually when you have these anonymous sources, they're people who don't know what they're talking about. In this case, they didn't. All of us are very happy that Secretary Snow is staying on and we're looking forward to working with him on the president's agenda in the months ahead.

WOODRUFF: So you think he'll be around for the entire second term?

BOLTEN: Oh, I can't speak for anybody for the entire second term, but I am looking forward to working with him on the president's priorities that are coming up early in the next session, which include Social Security and tax reform.

WOODRUFF: Well speaking of that, Josh Bolton, so much of the focus of this conference the White House has hosted today and yesterday has been on reforming Social Security, has been on getting rid of these so-called frivolous lawsuits, as the president describes them. Some are asking, though, why aren't we hearing more at this point about what the administration is going to do about the record budget deficit? Something which clearly has an effect on the economy.

BOLTEN: Well, it does have an affect on the economy. And we spent a fair amount of the panel that I participated in this morning with the president talking about the federal deficit. Our situation right now is actually looking pretty good in the short run. With the disciplines we put in place, with the economic growth we've had, we think we're well ahead of pace right now to meet the president's goal of cutting the deficit in half over the next five years.

The big challenge, though, comes in the long run, where the unfunded liabilities in our entitlement programs really put us in a difficult budget box. And that's why when we have a budget conversation, it shifts pretty quickly to talking about the entitlement. Social Security is the one that's up on the agenda.

WOODRUFF: Well, we know the president has ruled out raising any payroll taxes for Social Security. What I'm looking at today is the head of the Nonpartisan Congressional Budget Office saying the only way to put Social Security, though, on a sound footing is either to increase taxes or to cut benefits. BOLTEN: Well, a comprehensive plan we think is going to have to involve the creation of personal accounts. That means that people get to keep some of their own money, invest it, get a much better return on that money than they would in the regular Social Security system, and come out better in the end. Right now we have a serious problem in the Social Security system. The system is unfunded to the tune of probably over $10 trillion and we need to reform that system and a key part of that reform is, in fact, to give people personal accounts that will let them keep some of their own money, invest it and pass that benefit on to their heirs.

WOODRUFF: And today, a "Wall Street Journal"/NBC poll showing half of the American people think that it's a bad idea to let workers invest that Social Security money in the markets.

BOLTEN: Well, I think if you actually look down in the questions find, you find that -- and I think in the same poll they said if you had extra money, would you invest it in the market, eighty percent said yes. That's one of the reasons why the president wanted to have this conference at this time, and that is to begin the public debate. Because I think when you inform people about what personal accounts actually mean to them, especially the younger people to whom this is relevant, you get an enormously positive response.

I should emphasize, Judy, as you know that this debate is not about what's happening to today's seniors or the people who will be retired shortly. Their benefits are going to stay as they are in the Social Security system as we know it. It is the people coming into the workforce today for whom we need to change the system otherwise the system won't be there to pay their benefits. That's the focus of the debate. It was good to see so many young people participating in the discussions at the conference today.

WOODRUFF: White House budget director Josh Bolten. We look forward to hearing more details about all of that coming out, we assume, in the weeks to come. Thank you very much. Good to see you. We appreciate it.

While the Bush White House does move forward with second-term planning, both Republican and Democratic campaign honchos still are piecing together where they went right this election year and where they went wrong. Bush campaign manager Ken Mehlman and Kerry campaign manager Mary Beth Cahill are taking part in an election post-mortem, you might call it, at Harvard University. I caught up with them in Boston for their first joint interview since November 2.

(BEGIN VIDEOTAPE)

WOODRUFF: So before we start this interview, anything you want to say to each other here?

MARY BETH CAHILL, KERRY CAMPAIGN MANAGER: Congratulations.

KEN MEHLMAN, BUSH CAMPAIGN MANAGER: Thank you very much. It is very kind of you.

WOODRUFF: Anything you want to get off your chest?

MEHLMAN: We enjoyed -- we had a regular hotline between us and communicated on a number of occasions and were briefed on some things together so I enjoyed getting to know Mary Beth and appreciate your kind words.

WOODRUFF: I want to turn the tables a little bit and ask each one of you what you thought the other one -- the other campaign did well. Mary Beth, I'm going to start with you. What do you give them credit for in this campaign?

CAHILL: I give them credit for the fact that they understood really early on that this election really was about 9/11 and about the nation's security. And even when they got hit very hard after the first ads they did, steady leadership in tough times, showing the iconography of 9/11, they got hit very hard in the press and they kept at it because they understood that that was how they were going to win the election. And that fortitude carried them, I think, throughout the year.

MEHLMAN: I think in a lot of ways the Kerry campaign ran an excellent campaign. As a lot of people have pointed out John Kerry got the second most number of votes of anyone running for president in the history of elections. They ran a great turnout operation and turned out votes in huge numbers, registered millions of people all around the country. They ran a very aggressive campaign. I thought their advertising was good on behalf of Senator Kerry. I thought they were very formidable opponents and I thought that the convention was a good convention. So I thought from a number of perspectives the Kerry campaign did a good job.

WOODRUFF: Is there -- if you had had the cards they had been dealt, is there anything you know today that looking back you would have done differently or at the time you thought would have done differently?

CAHILL: I think that the Bush campaign really researched everything. They had four years to look at this. They looked at everything very closely. They were very data driven. And it really worked for them. I think that the one thing that I would change if given the possibility is I think the way the scheduling, the fact that our convention was five weeks ahead of theirs was really an almost impossible hill to climb as I look back and as I know more about how this actually went. I think the scheduling was very smart on their part.

WOODRUFF: Do you agree that was an important thing?

MEHLMAN: No question that was an advantage having the later convention. It was an advantage. At the time their convention ended it didn't feel like one. A lot of folks were out there worrying that we don't have your convention, you've got several weeks. What are you going to do with that month? But I think we were benefited by having the later convention and I think our convention was good one. We made a very conscious decision to use the convention to roll out our agenda for the next four years so that we felt like that was important given the timing.

WOODRUFF: If you have been given their hand, what would you have done differently?

MEHLMAN: It is always hard to -- one of the things I think that we did at our convention -- as I said I thought they had a very good convention, it was very unified, and it was a strong convention. I think that a lot of times it is very important in politics to make sure you're talking about something new to get coverage that you want, to make sure you're driving coverage. One of the things we did by talking in our convention about our second-term agenda was discuss what we wanted to do in the future and I think that looking back on it I probably would have used the convention, their convention as an opportunity to lay out in specific terms, in more detail the agenda you have going forward so it would be something different than they had been discussing for a while.

WOODRUFF: What do you think about that?

CAHILL: I think that John Kerry talked about his plans for the economy, for health care throughout the entire year. President Bush relatively rarely spoke about what he wanted to do in the future. The convention for me was notable because it was so negative about John Kerry. That was the very real difference, I think, between the two conventions.

MEHLMAN: I would respectfully disagree with that. I think that as evidenced by the polling changes that occurred, a lack of balance in their convention and the big bounce in our convention, I think our convention was specific and was filled with policy, detail of what we would like to do and the various surrogates that spoke at the convention whether it was Senator McCain or Governor Schwarzenegger pointed that out. And so I thought our convention went very well.

(END VIDEOTAPE)

WOODRUFF: And we'll have more of my interview with Mehlman and Cahill tomorrow on INSIDE POLITICS when they talk about their toughest moments in the campaign.

When politicians lose elections or get the boot from the administration, they often go on to greener pastures as in the color of money. Up next, we'll look at the latest comings and goings from the halls of power to higher paying jobs.

And later why many baseball fans in this capital city are crying, say it ain't so.

(COMMERCIAL BREAK)

WOODRUFF: This week's announcement that retiring Republican Congressman Bill Tauzin will be the top lobbyist for the pharmaceutical industry has renewed debate over government officials becoming lobbyists. For more on this I'm joined by CNN political analyst Ron Brownstein of the "Los Angeles Times." Ron, there's already comment coming out from those groups that watch government saying that this is really setting another bad precedent.

RON BROWNSTEIN, "LOS ANGELES TIMES": Well, to say it is a precedent would basically -- 100 hundred years of Washington history. There's a long tradition of people who come to Washington to do good and stay to do well. So much that it's a cliche already. But this is a dramatic example where you have a congressman from the committee that more than anyone else oversees the pharmaceutical industry and was instrumental in writing the Medicare bill that has enormous impact on the future of the pharmaceutical industry moving to become the chief lobbyist of that industry. We'd like to say it's some dramatic new development. In fact it's been going on here for a very long time.

WOODRUFF: Is it a direct conflict of interest thought? The "New York Times" reporting that Bush signed the Medicare bill, what was it, December 8, 2003. It was after that that Tauzin's lawyers started these conversations with the pharmaceutical...

BROWNSTEIN: And what they are saying is that he kept it completely -- that he kept a distance. The issue will be for those outside Washington who believe that the system is too incestuous, too much of a closed club. They will look at this kind of example of the revolving door, someone going from Congress to the industry that they regulated. We see that in the executive branch as well. People going into the industries they regulate, sometimes going into government, sometimes going back to those industries. They will see it as a sign that the system is closed off against average Americans.

There's another development here that's important. There has been a longstanding goal of the Republican congressional majority since they took power in '95 and certainly reinforced since President Bush took office in 2000 to have more Republicans running these trade associations and being hired as lobbyists. That's important because they have access directing campaign funds. Now Pharma with the pharmaceutical issue with Billy Tauzin is going is already very Republican leaning and gave about two-thirds of its money in the last election cycle to Republicans. But there's a longstanding goal that further entrench the majority here by what they call the K Street Project, having more Republicans become lobbyists which would then direct more of that campaign money to the majority.

WOODRUFF: Is there something overtly wrong with that?

BROWNSTEIN: It is the way politics is now being played. The battlefield I think -- we talked about this in other context -- is widening. Virtually every front on which the fight for political advantage can be fought is now being utilized from pressuring trade associations to hire more Republicans on the theory that that will lead to more campaign contributions to lobbying news organizations. Essentially we are in the era, what was called 20 years ago, the permanent campaign has been moved, I think, into hyper-drive because it has been widened so much so that anything that intersects with the battle for political power is now fully part of the battlefield. WOODRUFF: Which raises all sorts of questions about how healthy this is in the long run. The fact is that that's the way it is.

BROWNSTEIN: And look, Democrats maintain their congressional majority in part in the late 80s and 90s by convincing businesses that didn't agree with them ideologically they had to deal with them pragmatically because they had power. Now Republicans really have both. They have the power and a pragmatic argument. They also have a closer ideological affinity to many businesses who want less regulation like Pharma.

WOODRUFF: Ron Browstein, "Los Angeles Times." Thank you very much, Ron. We appreciate it.

And this just in from Ohio. The state supreme court's chief justice has thrown out a challenge to the Ohio presidential election results on a technicality. Chief Justice Thomas Moyer ruled the request improperly challenged two separate elections, the presidential vote and Moyer's own race against a municipal judge. The challenge is likely to be refiled. it accused the Bush campaign of, quote, "high tech vote stealing."

Major League Baseball officials have put their plans for the nation's capital on hold. Up next, D.C.'s city council throws a curveball. The city's hopes of scoring a franchise may be fading.

(COMMERCIAL BREAK)

WOODRUFF: Here in Washington city officials have until the end of the month to salvage a deal to become home to a Major League baseball team. As Bruce Morton reports the latest efforts to bring the nation's pastime back to the nation's capital weren't supposed to end this way.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): Baseball back in Washington? Don't hold your breath.

MAYOR ANTHONY WILLIAMS (D), DISTRICT OF COLUMBIA: I think we're in great, great jeopardy. I do not underestimate the difficulty of what we have to accomplish.

MORTON: The old Washington senators left 33 years ago. Washington fans said first in war, first in peace and last in the American League. But didn't the mayor make a deal the city would build a stadium at its expense? The Montreal Expos would come to D.C. as the Nationals? Yes, but the city council had to approve and it voted Tuesday night to require that half of the money from the stadium come from private sources not city bonds. Major League Baseball said in a statement, the legislation was inconsistent with the deal they made and, quote, "wholly unacceptable to Major League Baseball." Council chair Linda Cropp who sponsored the change...

LINDA CROPP (D), D.C. COUNCIL CHAIRMAN: I don't believe that this is a deal breaker. I don't think this is something that would move Major League Baseball from the District of Columbia.

MORTON: Jack Evans, a pro baseball council member.

JACK EVANS (D), D.C. COUNCIL MEMBER: I think what we have to do is sit down with the chairman this week and see if there's any give, anything that we can do to allay the concerns that baseball has about not getting the stadium built.

MORTON: Residents are split. Some think it is too expensive, some want a team.

UNIDENTIFIED MALE: That wouldn't be fair to the citizens of Washington, D.C. to have to pay for the entire stadium.

UNIDENTIFIED FEMALE: The Red Sox won the World Series. I think anything can happen.

MORTON: Baseball has stopped selling Washington Nationals gear and is offering refunds on tickets. The city has until December 31 to come up with a deal baseball would accept. Then presumably the Major League will look elsewhere. Cropp wants baseball to extend that deadline and the mayor is shopping for private money. Stay tuned. Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: You can imagine there are strong feelings on both sides. INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: That's all the time we have for INSIDE POLITICS this Thursday. I'm Judy Woodruff. Thanks for joining us. "CROSSFIRE" starts right now.

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


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