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CNN CAPITAL GANG

Suicide Bomber Blows Up U.S. Military Mess Tent in Mosul; Bush Presents Outlines of Second-Term Domestic Agenda

Aired December 25, 2004 - 19:00   ET

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


ANNOUNCER: From Washington, THE CAPITAL GANG.
MARK SHIELDS, HOST: Welcome to THE CAPITAL GANG, and Merry Christmas. I'm Mark Shields, with the full GANG: Al Hunt, Robert Novak, Kate O'Beirne and Margaret Carlson.

The explosion in a mess tent in the northern Iraq city of Mosul killed 18 Americans in the deadliest attack of the war.

(BEGIN VIDEO CLIP)

BRIG. GEN. CARTER HAM, COMMANDER, TASK FORCE OLYMPIA: It's a sad day in Mosul, but as they always do, soldiers will come back from that, and they will do what they can do best to honor those who are fallen today.

(END VIDEO CLIP)

SHIELDS: Later, the chairman of the Joint Chiefs said this was a suicide bombing.

(BEGIN VIDEO CLIP)

GEN. RICHARD MYERS, JOINT CHIEFS CHAIRMAN: At this point, it looks like it was an improvised explosive device worn by an attacker.

(END VIDEO CLIP)

SHIELDS: Before the attack, President Bush expressed optimism about Iraq.

(BEGIN VIDEO CLIP)

GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: I'm confident the terrorists will fail, the elections will go forward and Iraq will be a democracy that reflects the values and traditions of its people.

(END VIDEO CLIP)

SHIELDS: The president also defended his secretary of defense.

(BEGIN VIDEO CLIP)

BUSH: I know Secretary Rumsfeld's heart. I know how much he cares for the troops.

DONALD RUMSFELD, DEFENSE SECRETARY: I am truly saddened by the thought that anyone could have the impression that I or others here are doing anything other than working urgently to see that the lives of the fighting men and women are protected and are cared for in every way humanly possible.

(END VIDEO CLIP)

SHIELDS: Bob Novak, will the Mosul disaster erode popular American support for the war in Iraq?

BOB NOVAK, CAPITAL GANG: Yes, it will, because the terrorists, the insurgents, they know what they're doing. They know the history of how we were run out of Beirut, how we were run out of Somalia before that, or Vietnam, and now you have the addition of the cable saturation, the Internet. So if they can just keep -- keep this pressure up, they think that there'll be so much unpopularity that the president will get out prematurely. That is the strategy, and it -- regrettably, it tends to work because -- I think of World War II, Mark, and -- when the Marines were killed by thousands in the Pacific, and it was a -- it was a blip on the front page. And now we have, sad as it is, 18 Americans died, and it's -- it is a national tragedy.

SHIELDS: Kate O'Beirne, do you think it will erode popular support for the war? Polls seem to suggest that popular support is on the wane.

KATE O'BEIRNE, CAPITAL GANG: Yes, we see polls now showing the public questioning, Was it worth it? I think it's a perfectly natural response when you see the kind of -- the kind of carnage we saw in a mess tent this week. On the other hand, a clear majority, despite the serious misgivings, understands and says that we have to see it through. A plurality sees some progress. This week, I think the president prepared people, the American people, which he has to do more of, for the proposition that things are not going to get dramatically better after the elections in January. It's an important first step, but it's only a first step.

SHIELDS: Margaret Carlson, Chuck Hagel, a Republican and combat veteran himself, says we're in worse trouble there now than ever before -- 1,300 Americans dead and billions spent. He says, you know, that -- Now you tell me whether we're winning or we're losing.

MARGARET CARLSON, CAPITAL GANG: Yes. I wish these Republicans who are speaking out now would have spoken out during the election. Even the president, during the debates, claimed that the Iraqi security forces were going to mean that the troops could come home sooner, they'll be taking over the security of the Iraqi people, we'll hold these elections. This week, he admitted that there's no viable Iraqi security force in Iraq.

So you know, we move on from there. We'll get the -- not the democracy we want but the democracy we have after these elections because there's no saying that these elections are going to be held with Sunni participation. And by the way, these bases, these forward bases are not protected. They're not hardened. The soldiers call them "Mortaritaville (ph)" because of the danger that they feel all the time. Only Baghdad and the Green Zone are truly hardened.

SHIELDS: Al Hunt?

AL HUNT, CAPITAL GANG: Well, I think the conundrum that flows from this terrible tragedy really has less to do with short-term popular support (UNINTELLIGIBLE) support for the war back here than the fact that American hopes and policies, such as it is, in Iraq really depend on the Iraqis increasingly taking over the security of that country. To do that requires more intensive involvement and collaboration with the Americans. This is going to impede that because if you're American forces over there, you're saying, All right, who among them may be an infiltrator? This (UNINTELLIGIBLE) you're going to hear (UNINTELLIGIBLE) the terrible football (ph) problems, you're going to hear footsteps.

And I think the tragedy is that there may only be a relative handful of, really, these criminal insurgents over there, but they are being protected or covered up by millions of Iraqis who clearly hated Saddam Hussein but also hate the American occupation. After January 30, with a government that's probably going to be much less friendly to the U.S., we face another huge dilemma as to where we then proceed.

O'BEIRNE: Look, the same week, 60 Iraqis were killed, innocent Iraqis were killed by car bombs, including election workers. Iraqis who are working for a future, democratic future in Iraq, are also targeted. I don't think there's any evidence that millions of Iraqis support these -- these terrorists. And the point should be made...

HUNT: No, no, no, no.

O'BEIRNE: ... they're not just...

HUNT: No, no, no. Kate, wait a second. I did not say support (UNINTELLIGIBLE) I said they are either -- they are not turning them in or they're covering them up, or else we'd be getting them.

(CROSSTALK)

O'BEIRNE: We don't know that millions are aware of exactly who they are and where they are because they're not just, by any means, Ba'athists. Syria and Iran are providing intelligence...

NOVAK: Kate...

O'BEIRNE: ... and support for them...

NOVAK: Look, the problem...

O'BEIRNE: ... and a lot of them are foreigners, as is their leader, Zarqawi himself!

NOVAK: The problem is -- and I hear this from a lot of people, from Republicans, I hear it from people inside the administration, I heard it before the election from people inside the administration, and I said it. They feel there has to be a time when we get out of this and leave it up to the Iraqis. And it is...

O'BEIRNE: Right!

NOVAK: It is their country. And if they cannot cope with the insurgents, it's going to make it look bad, the fact that we got in there in the first place, but that is the way life is going to be. But there is no -- there is no rationality and no public support for an indefinite occupation of Iraq. It's an entirely different concept than the strategic placement of troops in Korea or Western Europe.

SHIELDS: Bob Novak, in the privacy of your own soul -- you've been a strong supporter of this -- U.S. troops once we're there. Was it a mistake to go in?

NOVAK: I was -- I said it was a mistake in the first place to go in. I've always said -- I've never said it wasn't a mistake. I've only said that once you go in, I don't think you can -- you can pound on them. That's a -- that's another issue we're not debating today. I've always -- I've always thought it was a mistake to go in because I am -- I am not a Woodrow Wilson interventionist. I don't believe we can control the world.

CARLSON: You know, the...

SHIELDS: Final word, Margaret.

CARLSON: The administration seems always to be surprised by the fact that there are all these insurgents and that Iraq is not secure, when it's the administration's failure to listen to the State Department and go with the Pentagon that meant we didn't have enough soldiers to immediately secure it. So these ordinary Iraqis, Kate, they're not sympathetic to the insurgents, necessarily, but they're too scared...

NOVAK: More soldiers...

CARLSON: They're too scared...

NOVAK: More soldiers...

CARLSON: ... to turn them in.

NOVAK: ... would not help. Come on! That's ridiculous.

SHIELDS: I -- well, I disagree with that. I don't think there's any question that more soldiers would have helped, especially in that...

CARLSON: At the beginning.

SHIELDS: ... to stop the looting immediately afterwards. But THE GANG of five will be back with the president's priorities.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. In his last news conference of the year, President Bush called for less government spending and for tort reform.

(BEGIN VIDEO CLIP)

BUSH: My budget will maintain strict discipline in the spending of tax dollars and keep our commitment to cutting the deficit in half over five years.

I expect the Congress to bring forth meaningful tort reform.

(END VIDEO CLIP)

SHIELDS: He again pushed for personal accounts and a revised Social Security system.

(BEGIN VIDEO CLIP)

BUSH: It is judgment essential to make the system viable in the out years, to allow younger workers to earn an interest rate more significant than that which is being earned with their own money.

(END VIDEO CLIP)

SHIELDS: The president then turned to the immigration issue.

(BEGIN VIDEO CLIP)

BUSH: We want our border patrol agents chasing, you know, crooks and thieves and drug runners and terrorists, not good-hearted people who are coming here to work. And therefore, it makes sense to allow the good-hearted people who are coming here to do jobs that American won't do a legal way to do so.

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, is President Bush convincing America on his agenda?

CARLSON: I will note that George Bush called Donald Rumsfeld and people trying to come to this country to work -- both are good-hearted people. He loves that word.

Listen, he talked about his agenda, but he puts out these goals and describes the problems but never says how he's going to get there. And there's a bait-and-switch aspect to this. When somebody said, What -- when a reporter asked, What are the tough measures that you're going to need to bring about Social Security -- this transition to private accounts, he said, Don't waste your time asking me that. Ask the Congress. You know?

When he was asked about troops in Iraq, he was -- he said, Go ask the generals. Don't ask me. And on taxes, he wants to simplify taxes. Well, who wouldn't? But as far as how he's going to get through anything on taxes, he never explains. And the switch part comes when what he really wants to do is reward Wall Street and give them a windfall on these private accounts. And on taxes, he wants to keep taxing wages and not tax capital.

SHIELDS: Bob Novak, I assume you disagree, but I also want you to address the immigration thing. I -- did the president make it clear -- he's got problems with his own party on immigration.

NOVAK: He's got problems with both parties. That's an issue -- one of the few issues that really cuts across party lines. And I think he made a very convincing case. He convinced me. I think it -- I think these people who come across the border, not agents (ph), and to be guest workers, I think they shouldn't be treated -- hunted down by the immigration service.

You know, taxing capital is something that Karl Marx liked and Margaret Carlson likes, but something I don't like much and most Americans don't like it much. And I thought that was a very good press conference. I think the president does have a coherent domestic agenda. I think he's going to get much of it. He was very successful on his domestic agenda, what there was, already in the first term.

The only thing that I'm really skeptical about is how tough he's going to be on cutting spending. And he says he is, and he's asked for smaller budgets from the individual departments, but whether he's going to really crack down on Congress, I don't know.

SHIELDS: Al Hunt, some people call it the difference between earned income and unearned income, people who work every day for wages with their hands, their heart, their heads, as opposed to those who just clip coupons, should be taxed at a lower rate, according to the Bush doctrine, is that right?

NOVAK: Or not taxed at all.

SHIELDS: Or not taxed at all. I mean, that's...

CARLSON: Yes. Right.

HUNT: You know, that's -- that's Bob Novak's view. I don't think that's the view of most -- most Americans. I think the president, however, has a lot more convincing to do. He may have convinced Bob, which, in all due respect, I don't think was the hardest sell in the world, Robert. But he's got to convince a lot more Democrats on Social Security. He cannot enact Social Security reform with just -- with just Republicans. And he's got to convince a lot more Republicans on immigration.

Robert, you are right on spending. Unless he vetoes -- this is a president who's not vetoed a single bill. Unless he wields that veto pen, there's not going to be any kind of fiscal discipline. And on Social Security, I hate to tell you, you're going to have to choose probably between real Social Security reform and tax cuts, Bob. Be a tough choice for you.

SHIELDS: You know, Kate, I just have a question for you, and that is, what about the good-hearted people in Ireland, in Italy and all over the globe who want to come here and work? I mean, should people who come...

O'BEIRNE: They're welcome to come. They're welcome to come...

SHIELDS: Legally?

O'BEIRNE: ... legally.

SHIELDS: What about people just streaming across...

O'BEIRNE: Both parties...

SHIELDS: ... the border?

O'BEIRNE: Both parties -- have more than Republicans to convince here. The issue of immigration is an issue that has party leadership in both parties and elite opinion totally out of step with the opinion of the majority of Americans, who think we should control our borders and not reward law-breaking, which these good-hearted people have done, by giving them some kind of amnesty, which is what the president's plan would be.

NOVAK: With -- with -- with all due respect, with the exception of Al, how many of our ancestors were invited to come to this country?

(LAUGHTER)

O'BEIRNE: They came legally!

CARLSON: Yes.

NOVAK: Oh, mine didn't come legally!

SHIELDS: Yes, they came legally because they wanted -- quite frankly, in our case, because they wanted cheap labor here. Let's be very frank about it.

O'BEIRNE: What did I tell you? Elite opinion is not interested in controlling the borders!

SHIELDS: Kate -- Kate is...

O'BEIRNE: Witness this!

SHIELDS: Yes. Kate is absolutely right on this issue between elite and popular opinion. No doubt about it.

Next on THE CAPITAL GANG: Who was the Loser of the Year? Our awards for 2004 coming right up.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. And now THE CAPITAL GANG announces its highly coveted and widely publicized awards for the past year. First, the Most Valuable Performer of 2004. Bob Novak? NOVAK: Mark, it's George W. Bush. He -- everybody was citing all the statistics and the trends and all the numbers to show that he couldn't win. He ran a very good campaign, was elected -- very valuable to the Republican Party.

SHIELDS: Margaret Carlson?

CARLSON: My Most Valuable Performer is Eliot Spitzer, who's about to run for governor. But in the...

SHIELDS: Attorney general of New York.

CARLSON: In the absence of anyone else in government going after these "masters of the universe" who cheat, you know, ordinary folks, Eliot Spitzer has done it time and again -- Jack Grubman, Sandy Weil, the insurance industry. And now he's going to go after securities arbitrators who always, always rule in favor of, guess what, the stock broker.

NOVAK: You talking about arbitrage (UNINTELLIGIBLE)

CARLSON: No, I did not.

NOVAK: Arbitrators?

(CROSSTALK)

SHIELDS: Kate? Kate O'Beirne.

O'BEIRNE: My MVPs are the soldiers, airmen and Marines who performed so magnificently this year. And their families that produced them and support them deserve enormous credit.

SHIELDS: Al Hunt?

HUNT: Mark, Bob's right about Bush. But I give mine to Ken Mehlman. If Karl Rove was the architect of that impressive reelection campaign, then Ken Mehlman was the general contractor. He really put together a new, different and more sophisticated kind of campaign.

SHIELDS: Well, the Most Valuable Performer, in my judgment, this year was John McCain, and I say that because it's a good bet that just with a wink and a nod, he possibly could have been vice presidential running mate on either ticket, if he had so indicated. And his support of George W. Bush was a real blow to John Kerry.

Margaret Carlson, I want you to name the Rookie of the Year.

CARLSON: The Rookie of the Year? The bloggers, who really managed to make a difference this time around on the reporting, including on the documents that "60 Minutes" used in its report on Bush's National Guard service. My favorite is Kausfiles, by the way.

SHIELDS: OK. Kate O'Beirne?

O'BEIRNE: My favorite's The Corner at "National Review." My Rookies of the Year are voters in Afghanistan. In the face of threats, there was a huge turn-out, 10 million registered, 40 percent women, and they produced the first democratically elected government in their history, and they deserve enormous credit.

SHIELDS: Rookie, Al?

HUNT: Barack Obama. If we had mentioned that name a year ago, people would have thought it was a new Parker Brothers game. Now he's the hottest item in the Democratic Party.

SHIELDS: My Rookie of the Year is a novice politician, a one- term U.S. senator, John Edwards of North Carolina, who really emerged from nowhere to challenge seriously for the Democratic nomination in 2004 and will be a major factor in the future.

Robert Novak?

NOVAK: A new congressman just elected in the last election from Louisiana, Bobby Jindal, not only tough for a Republican to get elected in Louisiana, but very tough for somebody who is of Indian -- East Indian origin. He knows Washington. He was a staffer here. He's going to be a player from the beginning. And he is the Rookie of the Year.

SHIELDS: Kate O'Beirne, the Biggest Surprise of 2004?

O'BEIRNE: Mark, I think the high Republican turnout in November was a big surprise. Conventional wisdom had it that a big turnout helps Democrats. Not so. The Republican Party successfully delivered millions of new Republican voters and had parity for the first time in memory with the Democrats.

HUNT: Mine is a variation of Kate's. I was in Ohio a week before the election and was convinced that if John Kerry could get between 2.6 and 2.7 million votes, 500,000 more than Gore got four years earlier, he was a cinch to win the Buckeye State...

SHIELDS: And he did.

HUNT: ... and he got over 2.7 million. And the problem was, George Bush got almost 2.9 million. That turnout really, really stunned me.

SHIELDS: My biggest surprise of the year is 35 years after winning a Pulitzer Prize for the My Lai massacre story, Seymour Hersh, "The New Yorker" magazine, broke the Abu Ghraib case and has held this administration and this country accountable in a way that, you know, is, I think, a beacon for all in journalism.

Bob Novak?

NOVAK: My surprise is John Kerry winning the Democratic presidential nomination (UNINTELLIGIBLE) that wasn't a surprise (UNINTELLIGIBLE) you can show me anybody -- anybody here or anybody around the country -- who a year ago was saying John Kerry was going to be the nominee, I'll be surprised because he was an upset winner and unexpected.

SHIELDS: Margaret Carlson?

CARLSON: My biggest surprise was the kiss between John -- and the hug between John McCain and George Bush on the campaign trail, which I think did...

NOVAK: They actually kissed?

CARLSON: ... an awful -- yes, just a peck, Bob, there on the cheek.

O'BEIRNE: Not a Tipper Gore-Al Gore...

(CROSSTALK)

NOVAK: Oh, OK.

CARLSON: There was a lot of kissing...

SHIELDS: Not a Gavin Newsom sort of...

CARLSON: No! No. But there was an awful lot of kissing and hugging during this campaign by men. But I was surprised because, first of all, Bush had -- you know, was his sworn enemy after the South Carolina primary and what he did to John McCain, and I didn't think that John McCain wanted to be a regular politician getting back in the good graces of the Republican Party.

SHIELDS: Finally, the Worst Performance of the Year. Al Hunt?

HUNT: Mark, has to be the secretary of defense -- Abu Ghraib, the ill-advised flip comment to the troops in Kuwait, the auto-pen, and most of all, the continuing lack of preparation for the post- Saddam Iraq.

SHIELDS: Although you wouldn't know it if you only watch Fox News, the worst performance of the year was Bill O'Reilly. Bill O'Reilly who wrote a book for teen -- pre-teen advice -- Guys, if you exploit a girl, it will come back to you, and that's called karma, to haunt you -- yes, well, Bill O'Reilly, it turns out, was making a lot of phone calls, according to a lawsuit filed by his producer, and unwelcome phone calls on all matters topical to vibrators and such, which he denied, but settled out of court...

CARLSON: Mark, it's a family show! It's Christmas!

SHIELDS: It's a family show, and I thought Bill O'Reilly was a family guy until this year -- the Worst Performance of the Year. Sorry, Bill.

Robert Novak?

NOVAK: The Democratic national chairman, Terry McAuliffe. In his four years, he did raise a lot of money, but you have to have accountability. They lost the Senate in the '02 election, continue to lose Congress, lost the presidency by 3.5 million votes. The party's continuing to go down hill. So I thought it was bad performance by Mr. McAuliffe.

SHIELDS: Margaret?

CARLSON: Mine is literal -- Janet Jackson and her "wardrobe malfunction" and Whoopi Goldberg being crude and vulgar at a Democratic fund-raiser, which set off Democrats not having good moral values in matters -- matters cultural, despite the fact that the red states watch "Desperate Housewives" in far higher numbers than Democrats.

O'BEIRNE: The worst performance was Dan Rather and CBS, who had a much bigger malfunction than did Janet Jackson. Even when their own experts disagreed, they were so desperate to use those forged documents to nail George Bush, when questions were raised, he attacked the critics.

SHIELDS: The only thing I can say is that Rather was not Tivo'd as much as Janet Jackson was.

Coming up next, in the second half of THE CAPITAL GANG, our "Newsmaker of the Week" is the political satirist Mark Russell with his own unique rendition of the political year that was. Then we'll go "Beyond the Beltway" to Jerusalem for a look at the mood in the Holy Land on this Christmas day. And our "Outrages of the Week." That's all after the latest messages and a check of the hour's top stories.

(COMMERCIAL BREAK)

(NEWSBREAK)

HUNT: Welcome to the second half of CAPITAL GANG and welcome to a power Christmas.

Here we are at the Oval Room Restaurant, a stone's throw from the White House with the chief executive of American political humor Mark Russell doing his rendition of the election year.

MARK RUSSELL, POLITICAL SATIRIST: Well, you know, a year ago at this time the frontrunner was Howard Dean. Howard Dean is now on the short list to be chairman of the Democratic National Committee.

HUNT: You were a (UNINTELLIGIBLE) man but it was a primaries.

RUSSELL: Yes, so the reason they want Howard Dean is because Kucinich turned it down. But, anyway, taking you back one year ago the scream speech when Howard Dean parted with his marbles on live television.

Did you see him in the crowd? He was shouting out loud like a blow-up from inside. I couldn't tell if the doctor was Dr. Jekyll or if he was Mr. Hyde. With his eyes bugging out what was that all about with smoke coming out of his ears. The man wouldn't stop. He was over the top and the sum of all of our fears. Were the Democrats planning to elect a loose cannon with senses in need of aligning, a cross between Hannibal Lecter and Jack Nicholson in "The Shining." With his airy harangue he was bearing his fangs shouting out the name of the states. The man is unsound. Throw him down to the ground and get a stun gun before it's too late.

Well, that was the end of Howard Dean and John Kerry went on to win all of the other primaries. Proud Kerry came to the Senate with a chest full of medals for all to adore vowing that he'd never vote for a war but vows were meant to be broken. Proud Kerry was misspoken though he's rolling, rolling to the nomination, rolling, rolling, but no inauguration.

HUNT: He got the nomination.

RUSSELL: Got it.

HUNT: In the spirit of diversity we had conventions on the East Coast, Boston and New York and a debate between two skull and bones guys.

RUSSELL: Al, what if a year ago somebody had told you that one of the principal speakers at the Democratic Convention would be Ron Reagan but there he was as President Reagan once said to his son, "Ron, you will be a Democrat over my dead body."

Moving over to the Republican Convention, Arnold Schwarzenegger, the great speech, remember the "We don't want no economic girly men." Was that Jeffersonian or what?

And then there was that other speech by Zell Miller that mean, vitriolic, acid, caustic speech. The delegates loved it. I thought it worked better in the original German myself.

And then you remember that night Zell Miller challenged Chris Matthews to a duel. The betting in Vegas was even but the duel never took place. We had to settle for a duel between Jon Stewart and Tucker Carlson.

Then they went on to the debates. Now the debates, that first debate, Kerry experimented with something for the first time in his life, a thing called clarity. George W. Bush showing off a little bit kept dropping names of world leaders just to show us he knew who they were.

Remember, Vladimir and I are tight. That's President Putin to you. I spoke with the Prime Minister of Japan, Mr. Kamikaze.

My favorite debate was the one between the vice presidential candidates. There was Cheney and Edwards. Now, you remember Edwards was not John Kerry's original choice of running mate, you remember?

Kerry went to John McCain. McCain turned him down. Edwards never forgot that. That haunted him. All through the campaign whenever Edwards and Kerry were alone, Edwards would turn to Kerry and say "You're thinking about him, aren't you?" Now, you remember that night, Al, Cheney said he was meeting Edwards for the first time but then it had turned out they had met other times before but Cheney didn't remember it. His mind was a blank, which is a pretty good argument for stem cell research, wouldn't you say?

HUNT: Bush wins. There's no hanging chads. There's no Justice Scalia deciding the outcome, your take?

RUSSELL: Well, let me tell you this. We're divided. We're a divided country and people in the blue states who say that George W. Bush is stupid, they make a big mistake. People in the red states who say that he's brilliant, they make a bigger mistake. And so for those pessimists among us who say that the glass is half empty, I say no, no. Get a smaller glass. It will be full.

HUNT: George Bush, four years, good or bad for the country but more importantly good or bad for Mark Russell?

RUSSELL: I'm glad he won. I'm glad he won because if Kerry had won, the thorn would still be in the paw of the right wing lion and he would be meaner than ever, so he's pacified now.

HUNT: Hey, thank you Mark Russell for joining us.

RUSSELL: Thank you, Al.

HUNT: You can see more of Mark Russell at Fords Theater from January 18th to January 23rd in Washington and we'd like to thank the Oval Room Restaurant for hosting us.

And coming up next on THE CAPITAL GANG classic, our predictions a year ago.

(BEGIN VIDEO CLIP)

ANNOUNCER: Here is your CAPITAL GANG trivia question of the week. How many consumers started their holiday shopping during the last week before Christmas? Is it, a) six million; b) nine million; or, c) 12 million? We'll have the answer right after the break.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER: Before the break we asked: How many consumers started their holiday shopping during the last week before Christmas? The answer is C, 12 million.

(END VIDEO CLIP)

SHIELDS: Welcome back.

One year ago, your CAPITAL GANG predicted the outcome of the presidential election eleven months then in the future. We made our guesses on December 27, 2003. Our guest was political satirist Mark Russell.

(BEGIN VIDEOTAPE)

RUSSELL: Saddam Hussein came out of his hole and saw his shadow, which means we'll have four more years of Bush. Now, Bush will win by two and a half pregnant chads.

CARLSON: We will be out of Iraq one way or another. Our presence will be diminished. They will have turned it over to the Iraqis. The economy will not produce jobs but people in charge will feel buoyant because the market will be up. So, I say Bush by three.

O'BEIRNE: I predict George Bush by at least five points. I think the public credits him with the resolve and strength necessary given the war on terror we face.

SHIELDS: There will be an upset and we'll have the second Bush one-term president by four percent.

NOVAK: I think Allawi is going to get the situation under control in Iraq but there's a lot of people who hate Bush, someone at this table, and he'll only win by three points.

(END VIDEOTAPE)

SHIELDS: Al Hunt, you were wise enough, shrewd enough not to be here last year. What do those predictions say about the prophetic talents of your colleagues?

HUNT: Well, Mark, if I had been here I would have predicted Bush would have won by 2.87 percent which of course is exactly what he won by. Actually, I think you all can feel pretty good. The average was about two and a half percent. He won by a little over two and a half percent, so I think you all ought to be very, very proud of yourselves.

SHIELDS: Kate.

O'BEIRNE: With the exception of anybody in particular, Al, who didn't even have Bush winning?

HUNT: No. It's Christmas, Kate.

O'BEIRNE: Look, jobs were created. We weren't out of Iraq but I think because of the confidence the public had in the war on terror George Bush won.

SHIELDS: Margaret Carlson.

CARLSON: He did it without getting out of Iraq but ever optimistic I thought we would be and I thought that he'd be rewarded for getting us out of Iraq not more deeply mired in it.

SHIELDS: Bob Novak. NOVAK: As usual, Margaret and I were in lock step. We each predicted three percent and said we'd be out of Iraq. I really thought they would be out by now. You did too.

CARLSON: Yes.

SHIELDS: Well, you admitted you were wrong.

HUNT: I was wrong.

SHIELDS: Nice of Kate to point it out but that's Christmas, you know, this is THE CAPITAL GANG.

We go "Beyond the Beltway" to the holy land talking there to CNN Correspondent Guy Raz in Jerusalem.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Reports from the holy land indicate there was little Christmas cheer with tourists staying away. The mayor of Bethlehem Hanna Nasser said:

"Each year I try not to be gloomy in my Christmas message but the harsh facts on the ground and the clouds of instability and suffering that continue to overshadow Bethlehem strongly push me to this direction. Living under occupation is certainly the most painful experience man can face and the biggest offense to human rights and dignity."

In contrast, British Prime Minister Tony Blair and Israeli Prime Minister Ariel Sharon were upbeat as they met in Jerusalem.

(BEGIN VIDEO CLIP)

TONY BLAIR, BRITISH PRIME MINISTER: What I hope today is that the Palestinian side can see that we stand ready to help to make sure that the measures that are necessary in order to give peace a chance actually take place.

ARIEL SHARON, ISRAELI PRIME MINISTER (through translator): Today, we are facing a unique opportunity. Who knows when we will be able to return to such a situation in the future? We must not miss the opportunity of achieving a settlement.

(END VIDEO CLIP)

SHIELDS: Joining us from Jerusalem is CNN Correspondent Guy Raz. Thank you for coming in Guy. Guy, less than five years ago the stone square outside the Church of the Nativity in Bethlehem was brimming with tourists. Pope John Paul II visited there. Now Bethlehem is bleak, occupied and deserted. What has gone wrong?

GUY RAZ, CNN CORRESPONDENT: Well, I'm not really sure if it's a matter of what's gone wrong. I mean the comparison between five years ago, of course, was that it was before the Palestinian uprising or intifada against the Israeli occupation began but I wouldn't say it's entire gloom or doom.

It's probably somewhere in between gloom and hope. On the one hand, as you mentioned, the town of Bethlehem is under occupation. The economy there is in tatters and essentially the people who live in Bethlehem and in other Palestinian towns have experienced this kind of situation for the past four years.

But, if you look at recent polls conducted among Palestinians, you find that there is considerable optimism for the first time really in four years. Many Palestinians putting their hopes in the future President Mahmoud Abbas, a man who's expected to be elected in January.

Now, on the Israeli side, I would say it's a question of pragmatism not so much optimism. Most Israelis support the Prime Minister Ariel Sharon's plan to withdraw from Gaza and they believe that 2005 could bring about this window of opportunity.

The statement we hear so much it's almost become cliche but really if you talk to Israelis, if you talk to Palestinians you find that many of them are describing next year as window of opportunity indeed.

SHIELDS: Bob Novak.

NOVAK: What makes these Palestinians think that Prime Minister Sharon is going to be in any way more conciliatory or more agreeable than he's been through his long career?

RAZ: Well, certainly there's no great trust among Palestinians for Ariel Sharon. He has long been vilified not only by Palestinians but in the Arab world, seen as somebody who launched a very devastating war in Lebanon in 1982.

But, if you look at his recent statements and many Palestinians have been looking at his recent statements, they in a sense have no choice but to hope that Mr. Sharon does carry out his plan to withdraw all of the Jewish settlements from the occupied Gaza Strip and, of course, the Israeli soldiers there effectively ending that occupation.

Ariel Sharon wants to consolidate his legacy. He wants to solidify it. He doesn't want to be remembered as the bulldozer or as a man responsible arguably for the deaths of thousands of Palestinians. So, really he's also pushing this idea that the next year, 2005, is a year for historic change.

SHIELDS: Margaret Carlson.

CARLSON: Guy, the leader of Hamas has said -- has asked members of Hamas to boycott the Palestinian election. Is that going to have an effect and what is it like to campaign for office in Palestine?

RAZ: Well, you know, the issue with Hamas is really a matter of political posturing in some ways because essentially Hamas is already turning into a kind of a political party.

Palestinians have held municipal elections this week and Hamas took part. It's the first time that Hamas has taken part in an official Palestinian election and, while they publicly might say they'll be boycotting the presidential race, certainly something like 80, 85 percent of Palestinians have already said in recent polls that they intend to take part.

Official campaigning begins on the 26th of December and, of course, it's very difficult for Palestinian presidential candidates to campaign, you know, among roadblocks and under occupation but the Israeli government has essentially said they will be easing conditions to allow this campaign process to go forward with as much ease as possible.

Now, of course, it remains to be seen whether these candidates will be able to move freely but so far it appears as if there will be some ability to move around from town to town and village to village without too many complications.

SHIELDS: We're down to 90 seconds, Guy. We have two people to question first Kate.

O'BEIRNE: Guy, following the death of Arafat there's an opportunity clean up the Palestinian Authority to end the widespread corruption. It's a top priority for Tony Blair at his conference. George Bush thinks it has to happen before there can be Palestinian statehood. What are the prospects?

RAZ: Well, the prospects are really mixed. Of course, Tony Blair came here this week and if his trip really proved anything it was the extent to which the British influence in the region is quite low.

I mean Tony Blair's intention, his heart might be in the right place but ultimately he knows that when it comes to affecting change in this region the power is in Washington and Tony Blair knows he's going to have to take a back seat to President Bush.

President Bush is really pushing Palestinian internal reforms. He's not so -- he's not pushing the notion of the Israeli occupation -- ending the Israeli occupation as much as the prime minister is but ultimately Mr. Blair knows that the road map for peace sponsored by the White House is going to be the ultimate path to negotiated settlement.

SHIELDS: Al Hunt.

HUNT: Guy, there are reports that Bethlehem, which used to be 90 percent Christian that the city that was the birthplace of Christ is now down to a third and thousands of Christians are leaving every year. Is this inexorable? Are we going to have a constant reduction of Christians in Bethlehem?

RAZ: Well, we've seen a trend of Christians leaving Bethlehem in the past four years. This is really unprecedented, an unprecedented exodus compared to the past decades and it has a lot to do with the uprising over the past four years.

Of course, Bethlehem was a city under siege some two years ago. Now, Israeli soldiers have essentially withdrawn but, of course, Christians have been leaving the West Bank and other Palestinian areas for some time now and Bethlehem is really just another example of this trend over the past four years.

SHIELDS: Guy Raz thank you very, very much for joining us and for your insights.

The gang will be back with our choices of either Scrooge of the year or Christmas cheer of the year.

(COMMERCIAL BREAK)

SHIELDS: And now for the Scrooge or the good cheer of the year.

Good cheer next year Major League Baseball returns to Washington, D.C. for the first time in 33 years. This is good news for the city but it's also good news for the nation. Why? Because the capital city needs baseball's straightforward language, hits, runs, errors, no interim reports or task forces on overlap.

Baseball is an art form almost free of violence and, more important, the D.C. influence does not matter in baseball. The best connected lobbyist, even a six-figure soft money contribution are no help if you can't hit the curve ball. Baseball in Washington will mean a better America -- Bob Novak.

NOVAK: There are many Scrooges out there in Denver and Mayor John Hickenlooper announced that saying "Merry Christmas" would be banned in the City-County Building.

The Macy's chain ordered its department stores to replace "Merry Christmas" with "Happy Holidays" and "Seasons Greetings."

In Seattle, public library administrators tried to ban Christmas trees.

In New Jersey, the South Orange-Maplewood School District banned Christmas songs but here is Christmas cheer from Maplewood. A hundred singers showed up in front of a high school to sing Christmas carols and Hanukkah songs. That's fighting back against political correctness.

SHIELDS: Margaret Carlson.

CARLSON: Mark, who's more of a Scrooge than Sergeant Lynndie England with her snarling dog or the soldiers who forced Iraqis into a naked human pyramid? A new Army report says such abuse was far more routine than previously admitted.

Iraqis, many rounded up without cause, were shocked with electric guns, shackled naked without food or water, urinated on and sexually humiliated. One was murdered in his cell because he wouldn't shut up. Remember who opened the door to this because the Geneva Conventions were "quaint," Alberto Gonzales, Bush's choice to head the Justice Department.

SHIELDS: Kate O'Beirne.

O'BEIRNE: The Swift Boat Veterans for Truth provided long overdue good cheer to their fellow Vietnam Veterans when they resolved to hold John Kerry responsible for his slander of them in 1971. They are justifiably proud of their sacrifice and service. They are all fathers, husbands and brothers, not the "monsters" of Kerry's Senate testimony.

The Swift Boat vets stood up to withering attacks, after all, they've taken incoming fire before, because they had one more important mission, mission accomplished.

SHIELDS: Al Hunt.

HUNT: Mark, you've got the Christmas cheer. You're dead on.

The Scrooge, however, of this Christmas, a guy who looks more like Santa Claus, is our friend Mississippi Governor Haley Barber. He plans to throw 50,000 seniors and people with disabilities off the Medicaid health coverage rolls because of the state's budget crisis.

The fiscal situation in Mississippi requires action but the governor refuses to get that revenue from Mississippians who can most afford it or by simply increasing the tax on cigarettes. Instead, he's picking on the poorest and the most helpless. That's not only reminiscent of Scrooge but also of the old Mississippi.

SHIELDS: This is Mark Shields saying good night for THE CAPITAL GANG.

Coming up next "CNN PRESENTS: THE MYSTERY OF JESUS."

At 9:00 p.m. on "LARRY KING LIVE" Kyle Maynard.

And be sure to tune in next week when our New Year's guest will be political humorist P.J. O'Rourke.

Thank you for joining us and have a very Merry Christmas.

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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