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INSIDE POLITICS SUNDAY

2005 Political Agenda; Winners, Losers of 2004

Aired December 26, 2004 - 10:00   ET

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


ED HENRY, CNN ANCHOR: INSIDE POLITICS. Today, new year's resolutions from the White House to Capitol Hill. We'll get a sneak peak at the 2005 political agenda from two powerful senators, Democrat Harry Reid and Republican Mitch McConnell.
Holiday returns are a Christmas tradition and we have some political exchanges we'd like to make. You won't want to miss this.

And the political winners and losers of 2004. Who's on top and who's not? That's all straight ahead.

ANNOUNCER: Live from Washington, this is INSIDE POLITICS SUNDAY.

HENRY: It's the day after Christmas and only 25 days until the presidential inauguration. Good Sunday morning to you. I'm Ed Henry in Washington. Politics doesn't take weekends or holidays off and neither do we.

In this hour we'll take a look back at a remarkable year in American politics. And we'll have exclusive interviews with two top senators who will help us forecast the year ahead.

First though we turn to the problems a lot of people are having getting through the last part of this year. Tens of thousands of holiday travelers aren't going anywhere stopped cold after an airline cancels all of its weekend flights.

Another carrier got thousands of people to their destinations just without their luggage. Gary Nuremberg is at Reagan National Airport with the latest on the holiday holdups. Good morning, Gary.

GARY NUREMBERG, CNN CORRESPONDENT: Good morning, Ed. Over the river and through the woods tot he airport we go where we spend the night not being able to make it to where we wanted to go for Christmas. That's the story for tens of thousands of travelers. Many of them who were booked on Comair flights throughout the country.

Comair is a Delta subsidiary that canceled 1160 flights yesterday stranding 30,000 passengers, whom they tried to get to their destinations by putting on Delta flights or on buses. But many simply spent the night at the airport with no way to get to where they wanted to be.

Comair also announced it was canceling its 1160 flights system wide today. But the Associated Press reports that Comair hopes to return to a limited schedule sometime earlier today, a story we're watching develop.

Comair is not the only airline with problems. U.S. Airways ended up with 10,000 pieces of luggage in Philadelphia separated from their owners. The results, U.S. Airways says, of sick calls by hundreds of flight attendants and baggage handlers. That 10000 number of luggage separated from owners has now been reduced by two thirds according to a vice president for U.S. Airways Chris Chiames.

(BEGIN VIDEO CLIP)

CHRIS CHIAMES, U.S. AIRWAYS SPOKESMAN: We've had managers from around the system flying into Philadelphia today and yesterday to help load bags. We've hired vendors to help us sort bags. We've flown special sections of cargo only aircraft or baggage only aircraft from Philadelphia to Charlotte where we have another hub and appropriate staffing sot hat we can sort the bags and sort them.

So our employers have stepped up...

(END VIDEO CLIP)

NUREMBERG: Chimes hopes to have that lost luggage returned by the end of the day. The big story of the day, Ed, is what Comair will do. We'll be watching Comair and if it does return to a limited schedule we'll let you know right away.

HENRY: Thank you Gary, and happy holidays.

It has been a grueling political year. You might recall there was a brief burst of bipartisan right after the election. But now both parties are breaking along partisan lines again as they brace for ethical showdowns over issues like Social Security and tax reform. And some Republicans are nervous President Bush's biggest problems could come from fellow conservatives on Capitol Hill.

In a few moments we'll get some insight in our exclusive interviews with two top Senate leaders. As for President Bush, he left Camp David this morning for his Texas ranch where he will stay until after the new year. With reelection behind him and his second term agenda ahead of him, Dana Bash explains where the president is focusing his attention.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CORRESPONDENT (voice-over): At times the president talks like he'll start a second term with a clean slate vowing to do his part for bipartisanship.

GEORGE W. BUSH, PRESIDENT UNITED STATES: I will work hard as the president to get rid of zero some politics in Washington. That says, you know, old George does fine if this passes and my party doesn't. We've got to get rid of that.

BASH: Democrats say the first Bush term leaves them skeptical.

SEN. JON CORZINE, (D) NEW JERSEY: Basically said my way or the highway, but let's try to have a few of you come along.

BASH: Bush aides know deep partisan lines don't just disappear after election day. It's why the president is speaking out early and often in search of momentum for major goals like reforming Social Security.

BUSH: Your constituents may not be overwhelming you with letters demanding a fix now, but the crisis is now.

BASH: It's vintage George W. Bush.

DAN BARTLETT, W.H. COMMUNICATIONS DIRECTOR: It's something that he's learned as somebody who has been a governor and president that you can't store political capital. It expires. And I think he feels like he was elected not to sit back and hope for things to turn out the best.

BASH: Bush critics say hoping for he best without a viable plan is exactly what has happened in Iraq. The American death toll is climbing, public support now sinking. As much as this war president wants to put a premium on domestic issues during term two uncertainty and unrest in Iraq many believe will dominate.

DAVID GERGEN, FMR. WHITE HOUSE ADVISER: This president is the most audacious we've had since Lyndon Johnson. But like LBJ he's beginning to worry that time and events could turn swiftly against him as he heads into a second term.

BASH: Bush veterans say experience will help, but that experience also tells them to expect surprises.

BARTLETT: Just like we all talked about during the campaign that often times this campaign was formulated by events outside the control of the two candidates, we still live in that environment.

BASH: Mr. Bush promises he'll make good on campaign pledges to curb lawsuits and simplify the tax code. But GOP divisions over intelligence reform may be a reminder a bigger majority does not mean a rubber stamp.

GERGEN: I think it's going to surprise how quickly the rebellions have broken out in the ranks and it suggest he's going to be under a lot of cross pressures within his own party.

BASH (on camera): Intra party skirmishes an ill-fated cabinet nomination and GOP criticism of his Defense secretary have all cut the president's post election honeymoon short. But even Bush critics say the inauguration and all that comes with it should help give him a fresh start.

Dana Bash, CNN the White House.

(END VIDEOTAPE)

HENRY: Senate Democrats begin the new year with a new year, who did not come straight out of central casting.. Harry Reid hails from the red state of Nevada and opposes abortion rights. A Mormon, who is partial to cardigans sweaters, he has been compared to Mr. Rogers and has said he'd rather dance than fight with President Bush.

But Reid can be tough. After all he's a former boxer and when I interviewed Senator Reid this week I started by asking what he and the president can get done and the senator made clear he's not going to be rolled.

SEN. HARRY REID (D-NV), MINORITY LEADER: Well, I think it's up to the president. We have a Republican House, Republican Senate and of course the White House and for things to be accomplished and if things are accomplished there's a lot of credit to go around to everybody. If things aren't accomplished and there's a lot of blame to go around then that's rightly so.

So we're there. I've extended by arms of fellowship to the president, said we're willing to work with you and we are. But we'll have to see what he wants accomplish before we're able to...

HENRY: Now on an issue like Social Security though is that one issue that you think you can dance with him and get something done in 2005?

REID; Well first of all we have to understand, the viewers have to understand this is a crisis that doesn't exist. Social Security is in good shape. One hundred percent of benefits will be paid out until the year 2055. And if we do nothing after that people will still draw 80 percent of their benefits.

I want and we as Democrats want the recipients after the year 2055 to draw 100 percent of the benefits and we're willing to sit down and talk to the president how that can be accomplished. But we are not, we are not going to let the president ruin Social Security.

There are Republicans who say this is Democratic program let's have the Republican program to replace it and that's a privatization program. We will not allow that to happen. We will not let this administration destroy the most successful social program in the history of the world, Social Security. We will not let that happen.

HENRY: But senator, what is the Democratic plan to reform Social Security? You say it will not go broke for another 50 years, but clearly changes need to be made.

REID: This is a crisis that the president has perpetuated and you've bought into it, the journalistic world. There is not a crisis. We can do some things. We're happy to sit down and talk to him about some minor changes that can be made.

But for heavens sake to talk about changing a program like they did in Great Britain in the years of Margaret Thatcher and they ruined the retirement program in Great Britain. In Chile they used to use that as a model. They don't any more because their program is going broke.

So if he wants to sit down and talk about some of the things that can be made to have some relatively minor changes in Social Security we're happy to do that.

HENRY: Let's talk about another big issue in 2005, Supreme Court nominations, the possibility of those. Now you've kicked up a little bit of controversy when you suggested you might, and I say might be able to support Justice Scalia to be elevated to chief justice.

Some liberals were outraged by that. Can you clarify where you stand on Justice Scalia and whether he should be elevated?

REID: Well, fist of all, we're doing a lot of hypothetical stuff here that's unnecessary. What I said is that Scalia was approved overwhelmingly by the Senate some time ago. He has a record. That record will have to be reviewed by the Judiciary committee. That is the Republicans and Democrats on the Judiciary committee.

Not only do we have his opinions to look at but we also have his ethical problems that have come into fore. And I think that that's something we have to take a look at.

HENRY: So could you support him to be chief justice?

REID: I don't know. Let's see what happens. What I said is I compared him to Thomas and between him and Thomas there isn't much comparison. He's a much better justice than Thomas. Now is that good enough to be elevated to the Supreme - to be chief justice? We'll have to take a look at that.

HENRY: Let's take a look at what you said. When you were asked on NBC's "Meet the Press" whether or not you could support Justice Thomas to be chief justice you said quote, "I think that he has been an embarrassment to the Supreme Court. I think that his opinions are poorly written."

Could you name one of those opinions that you think is poorly written?

REID: Oh sure, that's easy to do. You take the Hillside Diary case. In that case you had a descent written by Scalia and a descent written by Thomas. There -- it's like looking at an 8th grade dissertation compared to somebody who just graduated from Harvard.

Scalia's is well reasoned. He doesn't want to turn stari decisive precedent on its head. That's what Thomas wants to do. So yes, I think he has written a very poor opinion there and he's written other opinions that are not very good.

HENRY: Now one of the top issues as well in 2005 of course will be Iraq. And the president said just this week that life is better now than it was under Saddam Hussein in the year since Saddam was captured. Do you agree with that statement?

REID: Well I think the president is looking at it through a different pair of glasses than I am. Maybe the future holds out something better, but right now the past year has been a tragedy. It has been a tragedy for 1300 American families who have lost loved ones there. We have about 11,000 who have been wounded, some of which very grievously.

I went to -- last Thanksgiving I went and visited some of these injured Marines at Bethesda. It was a very, very rough day for me on Thanksgiving.

We have s situation where we have about 100,000 Iraqis who have been killed, civilians. Not counting those military Iraqis who have been killed. So I don't -- it doesn't sound like it's much better to me now than it was a year ago.

HENRY: It sounds like it might be more likely you're going to fight with the president than dance perhaps on Social Security, Iraq and some of these other issues

REID: As I say, that's up to the president. It's up to the president. We're willing to sit down and talk to him about Iraq, social Security, anything he wants to talk about. But it has to be something that's reasonable and not be an inopportune time to do bad things to the American people.

HENRY: Ahead later this hour the Republican perspective. We'll speak with Kentucky Senator Mitch McConnell about whipping the president's agenda through the 109th Congress. Plus it's December 26. Time to head back to the mall to make your holiday gift exchanges. Our Bill Schneider has some returns of his own coming up in his Story Behind the Story.

And out with the old, end with 2008. The Democratic and Republican hopefuls are already lining up for the next race for the White House. We'll take you through the possible contenders. This is INSIDE POLITICS SUNDAY.

(COMMERCIAL BREAK)

HENRY: It's the day after Christmas and we hope you had a very happy holiday. Now that it's over it's time to write your thank you cards and exchange gifts you didn't really want. Our Bill Schneider has some political returns he would like to make in his Story Behind the Story.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, SR. POLITICAL ANALYST (voice-over): It's the day after Christmas and you know what that means, returns. A gift that seems like a brilliant idea ends up looking like a really bad choice. Back it goes along with he inevitable question, what were they thinking?

We ask that question a lot in politics too. Like would President Bush's nomination of Bernard Kerik to be his Homeland Security secretary.

GEORGE W. BUSH, PRESIDENT UNITED STATES: He knows something about security. He has lived security all his life.

SCHNEIDER: Kerik's conflicts of interest and his record of irresponsible behavior quickly came out plus, a nanny problem. What was Bush thinking? John Kerry's explanation for voting against funds for the troops in Iraq was gift wrapped for his opponent.

SEN. JOHN KERRY (D-MA), FMR. PRESIDENTIAL CANDIDATE: I actually did vote for the $87 billion before I voted against it.

SCHNEIDER: Who said thank you very much.

BUSH: And then he entered the flip flop hall of fame.

SCHNEIDER: What could Kerry have been thinking? And when a soldier asked Donald Rumsfeld for some Christmas cheer in the shape of better armor for Iraq the Defense secretary sounded like Ebenezer.

DONALD RUMSFELD, DEFENSE SECRETARY: You go to war with the Army you have.

SCHNEIDER: Bad answer. Rumsfeld went back to Iraq to try to calm the waters.

RUMSFELD: The reason I'm here is to have a chance to look you in the eye. I hope have a chance to shake your hands and tell you how much I appreciate what you do for us.

SCHNEIDER: That's a long way to go for Christmas cheer. President Bush is proud of his gift to seniors, a brand new prescription drug program.

BUSH: Seniors will start seeing help quickly.

SCHNEIDER: But the recipients have not shown much gratitude. Only about 5.8 million seniors have signed up out of some 40 million eligible. Many wondered why didn't Bush give us what we really wanted, the right to import cheaper drugs from other countries.

Last year Howard Dean had all the Christmas gifts he needed, more money than any other Democrat and a place at the top of the polls and then he had an unseasonal message for the voters of Iowa.

HOWARD DEAN, FORMER PRESIDENTIAL CANDIDATE: If you look at the caucuses systems they are dominated by the special interest on both sides and both parties.

SCHNEIDER: Iowans marked Dean return to sender. His reaction confirmed their judgment.

DEAN: (UNINTELLIGIBLE).

(END VIDEOTAPE)

SCHNEIDER: What was he thinking? Well, here's what we're thinking. Happy day after Christmas and many happy returns -- Ed.

HENRY: Bill what about those exit polls? Should they be returned to sender? SCHNEIDER: Well, they've already gone back to the shop. But what's not clear is whether they were broken or whether they got abused, you know, like children do with a toy the day after Christmas. The early exit polls, which should never be trusted because they're always just a piece of the poll, they got out over the Internet and people over reacted to them. So I think the most important thing is to figure out that kind of abuse in the future.

HENRY: That's right, Bill. I know all about those toys and we thank you for coming in. Happy holidays to you.

SCHNEIDER: Sure.

HENRY: A very strong earthquake and deadly earthquake and deadly Tsunamis devastate parts of southeast Asia. An update on this developing story is next.

Plus what is Senator Mitch McConnell's new year's resolution. Stay tuned to INSIDE POLITICS SUNDAY for the answer.

(COMMERCIAL BREAK)

HENRY: In the immediate after glow of the election it appeared President Bush's second term agenda might be a slam dunk thanks to increased Republican majorities in the House and Senate. But Republican infighting over the intelligence reform bill has led some to wonder whether being a lame duck might complicate the president's agenda. That agenda will be in the hands of Republican leaders like Senate Majority Whip Mitch McConnell, who I interviewed this week.

I started by asking whether passing the president's agenda might be harder then expected.

SEN. MITCH MCCONNELL (R-KY): Well, first of all, I don't know anybody who thought it would be a slam dunk after the election. Certainly 55 Republican senators is better than 51 but it's not 60. And as you know, Ed, it takes 60 to do most things in the Senate. So we're not suffering from hubris here. We know that to advance the president's agenda in the second term we're going to need a substantial number of Democrats to help.

And I think based on the conversations that I've had since the election with a number of red state Democrats and some other Democrats, I think they're going to be open minds there and we may have a chance of advancing the president's agenda on a bipartisan basis much more so than we were able to in the election year last year.

HENRY: Now it's an ambitious agenda, Social Security reform, tax reform, lawsuit reform as well. What would you say is the top priority out of all of those issues that you think you've got to get done in 2005?

MCCONNELL: Well, as you know, President Bush is a big issue president. I don't think you'll see him having any press conferences about school uniforms. He wants us to tackle Social Security. One of the most important issues if not the most important issue of our time on the domestic side and I'm confidant that we will.

I mean some people say well, let's keep kicking the can down the road, there's not a crisis tomorrow. But why do that? Why not go on and do something important for our grandchildren.

HENRY: Now if you do make this transition people are saying that the transition will cost -- there will be a shortfall of about $2 trillion. How are you going to make up for that, you're going to have benefit cuts, you're going to have tax increases? Obviously as you said, there are no easy choices.

MCCONNELL: Well, we have an enormous shortfall anyway. I mean it's a huge unfunded liability down the road. We could of course wait for another decade or so to tackle this or we could go on and try to do something truly innovative and one of the things the president would like to see as part of the overall comprehensive fix is to provide personal retirement accounts for younger workers.

As you can imagine, or maybe you don't know, among workers 55 and under it's wildly popular. And of course it wouldn't apply to anybody receiving Social Security today or anybody about to receive Social Security. So those people could really tune out the debate. It's really about the next generation.

HENRY: We spoke to Senator Harry Reid, as you know the new Democratic leader in the Senate earlier in the program and he said, these private accounts will destroy Social Security. Are you out to dismantle the program?

MCCONNELL: No it won't destroy social Security. I'm not sure that Harry is going to be part of a bipartisan coalition to get there on Social Security. But maybe he will be able to help us on other things. The president is also, as you know, interested in tax reform. He's going to appoint a bipartisan commission soon to come up with some ideas to try to simplify this enormous code.

Right now it takes six billion man hours, that's with a B, six billion man hours every year for American tax payers to grapple with paying their federal income tax. There's got to be a better way than that for people to undergo the unpleasant task of having to pay their taxes.

And of course, legal reform is extremely important too. We have the most litigious society in the world by far. Too many lawsuits, too many frivolous lawsuits. There are a number of things that we can do in that area.. For example, class action reform, which I hope will be early in the Senate -- dealt with early in the Senate next year.

HENRY: What about judicial nominations, another big issue. Senator Majority Leader Bill Frist has suggested he may use the nuclear option, which is to change the Senate rules in order to prevent individual senators from filibustering judicial nominations anymore.

Are you going nuclear next year? MCCONNELL: Well, I'm sorry that we started filibustering judges in the last few years. It had not happened in the previous 200 years history of our country. But look, I think we've got a good chance of getting judges approved.

Most of the district judges were approved. We do have a serious problem with circuit judges. But I'm optimistic that we're going to have a different attitude in the Senate this year about giving the president's circuit court nominees a fair chance.

HENRY: Last question. Obviously Iraq will always be an important issue going into the new year. The president acknowledged this week that the insurgents are causing problems, but he also said there's been progress in the last year.

Harry Reid as the president must be looking at a different situation. With the violence he thinks that the situation is not getting better. What do you say?

MCCONNELL: Well, it depend son where you live in Iraq. In 15 of the 18 provinces in Iraq people are having a pretty normal life. Things are a lot better for them than it was when Saddam Hussein was there murdering 300,000 of his own people.

But there's no question that in the Sunni triangle we have serious security problems. They're trying to disrupt the election. There's no chance the election will not occur on January the 30th and that's just the first election leading to the writing of a constitution and the final election of representatives in the Iraq government.

We're not going to be deterred by these terrorists and insurgents. It is a challenge but nobody ever thought it would be easy to set up a democracy in Iraq.

HENRY: Senator McConnell very quickly. What's your new year's resolution?

MCCONNELL: Well I think probably I'm going to watch a little less football and a little more CNN.

HENRY: OK. Good advice. Let's go to CNN world headquarters in Atlanta where Tony Harris has the latest stories now in the news.

(NEWSBREAK)

HENRY: Coming up next on INSIDE POLITICS SUNDAY, celebrity politics from Whoopi Goldberg to Bruce Springsteen to Ben Affleck, the stars were out in full force this election year. We'll take a look back.

And later, a final farewell.

(BEGIN VIDEO CLIP)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): Most of these men and women lived full lives, found success and maybe happiness.

(END VIDEO CLIP)

HENRY: Bruce Morton takes a look back at those we lost in 2004.

(COMMERCIAL BREAK)

HENRY: It's been a raucous 12 months in the world of politics and, as we approach the new year, CNN Political Editor John Mercurio takes a look back at some of the most memorable moments.

(BEGIN VIDEOTAPE)

JOHN MERCURIO, CNN POLITICAL EDITOR (voice-over): 2004, it was a year of winners...

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm proud to lead such an amazing country and I'm proud to lead it forward.

MERCURIO: And losers.

SEN. JOHN KERRY (D), FORMER PRESIDENTIAL CANDIDATE: Today, I hope that we can begin the healing.

MERCURIO: But those are the easy ones and, of course, behind every winner stands well a lot of other folks who did pretty well too, like this man. He tamed the Democrats in Sacramento.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I called them girly men.

MERCURIO: And gave two memorable performances for President Bush.

John McCain also came out on top. He backed his former rival. He kept the peace among Republicans while he made friends across the aisle and along the way breathed new life into his own presidential ambitions, McCain '08?

SEN. JOHN MCCAIN (R), ARIZONA: I don't think I can help the people of Arizona by planning and plotting to be president of the United States.

MERCURIO: Then there's this boy genius. Karl Rove helped turn a struggling economy and a deadly war into a second term for George W. Bush. Along the way, Rove established himself as a master of American politics and another clear winner. Rove's nemesis, Democratic consultant Bob Shrum lost his eighth straight presidential campaign putting him squarely in the loser column.

Joining Shrum there are these famous faces. They hitched their star to Kerry's wagon and in the end came up short. To be sure, other Democrats end the year on a down slope as well.

Tom Daschle and Dick Gephardt suffered crushing defeats sending them home. SEN. TOM DASCHLE (D), FMR. SEN. MINORITY LEADER: I say farewell.

MERCURIO: Or, at least out of office.

Ted Kennedy came out swinging for his fellow Bostonian but, while the Red Sox ended one hometown curse, the senior Senator from Massachusetts reminded us that another one continues.

Of course not all Republicans had the best of years and not all Democrats saw their fortunes collapse. Get used to these folks. They'll be around for a while, their political fortunes lifted by Kerry's defeat and Democrat search for a new leader.

With Kerry out of the way all four make the short list of '08 wannabees. Barack Obama probably won't run for president in four years but at a time when Democrats are eager for new blood, the Senator-elect is one of their few '04 success stories.

(on camera): But, if you're searching for winners, look mostly to Republicans who head into 2005 with the wind at their back. Then, again, Democrats need to wait only two years for their chance at redemption. Ask any Yankees fan and they'll agree just wait until next season.

John Mercurio, CNN, Washington.

(END VIDEOTAPE)

HENRY: And here with this week's political report our panel of reporters, all of them winners. There's plenty on their plate in the coming year, the presidential agenda, Congress, Iraq and even the 2008 race for the White House. That's right, 2008.

We welcome Julie Davis of the "Baltimore Sun," our Political Analyst Ron Brownstein who is also with the "Los Angeles Times," and Vince Morris of the "New York Times," welcome all and happy holidays.

VINCE MORRIS, "NEW YORK POST": "New York Post," Ed.

HENRY: "New York Post," I'm sorry. I said "New York Times."

MORRIS: It's a little more fun to read.

HENRY: Ron, I want to start with you. I was struck by something that David Gergen said earlier in the program about comparing President Bush to Lyndon Johnson and saying he's just as audacious as LBJ but that events next year, just like LBJ with Vietnam, could overtake this president's agenda. What do you think?

RON BROWNSTEIN, "LOS ANGELES TIMES": It could be an intriguing analogy. I mean obviously President Bush has been defined from the outset of his presidency by having enormous goals.

I mean if you look at the comparison, the contrast between the size of his victory in 2000 and the breadth of his agenda over this last term, there are very few comparable examples in American history. And, I think once again for the next term he's not stinting on ambition at all, Social Security, tax reform, malpractice reform and so forth but he does face the risk of Iraq consuming attention in Congress and especially in the country.

I mean the most tangible effect that it has on him is it diminishes his power to set the agenda for the country and the media and the Congress and it also takes a bite out of his approval rating when it's not going well and that reduces his leverage, especially on Democrats in Congress.

HENRY: Vince.

MORRIS: Yes, I agree absolutely and not only is Iraq overshadowing but his tax cuts, the three tax cuts that he's pushed through has put this country into a huge deficit and that is hampering any attempt to actually fix Social Security or actually engage in any other kind of grand or ambitious domestic program because the country is running a huge deficit and there's no money.

HENRY: Julie, another complication could be conservatives on the Hill who have been relatively quiet in the first term. They were onboard for a lot of the agenda. What do you think about the second term?

JULIE DAVIS, "BALTIMORE SUN": Absolutely the president has said and his administration has said that he feels like he comes into the second term with a mandate but I also think conservatives feel like they have somewhat of a mandate after this election, you know, that we saw a lot of them win their races in the states around the country where there were competitive contests between Republicans and Democrats.

They feel like, OK, we've been the good soldiers. We've helped the president get reelected and get his agenda through in his first four years. Now where's our payback? How can we repay our constituents and the people who really wanted us in office in the first place?

HENRY: And the clock is ticking, Ron. Some people say the president has to move and get this Social Security, tax reform passed in the next two years. Others say he only has a year before lame duck really kicks in.

BROWNSTEIN: Lindsey Graham, who is one of the principal Senate advocates of Social Security reform, as you know, has said really they will know in six months whether or not they have a realistic chance of making this happen.

You know, Vince is right. I mean when people were talking about Social Security reform in the late 1990s and there was a prospect of a $5.6 trillion surplus, it was always going to be tough but that made it a lot easier because that was the way you could theoretically fund the transition cost, the cost of getting from where we are now to a personal account system. Now that you're looking at potentially borrowing $2 trillion in the first decade, $4.5 trillion perhaps in the second decade at a time when we're already running $400 billion a year deficits, the concern is that some fiscal conservatives might join the Democrats who don't like the idea of relying more on the market and it makes it very difficult to see how you get to 60 votes in the Senate in that kind of circumstance.

HENRY: And, Vince, second terms have been very difficult for a lot of presidents.

MORRIS: Yes. I mean everybody is wondering whether there's going to be a scandal, you know, that will mark his second term. I'm not sure. I think President Bush runs a very tight ship and you saw with the way they hand-picked the people who were staying and the people who were going. I don't think that's more of an issue.

I think the question is can he -- will Iraq and will the problems, just the devastation that's going to happen there next month when they try and hold these elections, will that set the tone for a very negative, very cloudy, very pessimistic next few years and will that overshadow what he tries to do here in Washington?

HENRY: Looking ahead, Julie, at those next few years, I know the president has not even been inaugurated yet for a second term but people on both sides of the aisle already looking ahead to 2008. Give us an idea of Senator Kerry, kicking off with him. You covered his campaign quite a bit. What do you think his role will be in 2005 and beyond as Democrats try to pick up the pieces?

DAVIS: Well, Senator Reid said, who you had earlier on your program, that Senator Kerry is no shrinking violet and that's certainly true. In fact, some of his colleagues would say quite the opposite that he seeks out the limelight but I think he's still trying to figure out after his defeat what his role is going to be in the next year or two years.

He definitely is on some committees that are going to deal with some really important issues, obviously the Finance Committee. He'll be dealing with the Social Security issue and he's always been active on military and foreign relations issues.

So, he'll have a platform to have a more prominent role but I don't think that he's really decided yet, nor has his caucus really decided on the Hill what kind of role he's going to cast himself in and I think it will make a difference in terms of how Democrats cast their message in the next two or three years.

BROWNSTEIN: The longer term issue of whether he can run again in 2008, I mean they've floated this and talked a little bit about it and you really wonder. Earlier generations we did see losing candidates come back and run again, Adlai Stevenson, Richard Nixon.

But now the process is so long, so extensive. The media coverage is so intense. You really get to the feeling by the end of the race this candidate has been sort of ground up in the public mind. It's hard to come back.

I think the big question for Kerry in 2008 would obviously be what could he win that he didn't win last time? He did very well at consolidating blue America. He got 56 million votes.

He held almost all the states Gore won but he had almost no reach beyond that as a Massachusetts basically liberal Senator beyond that and it will be very hard for him to answer the question I think for a lot of Democrats where do you go that you haven't gone already when you fell just short?

HENRY: Go ahead.

MORRIS: I was just going to say, moreover, in the same way that a lot of Democrats were angry, actually angry at Al Gore for blowing a chance to beat George Bush, there are some Democrats who are mad at Kerry that he couldn't get it done, given all the baggage that Bush is carrying with this war and some of the other decisions he's made. There are people who are really genuinely upset that Kerry just couldn't get it done and I think that rules out any chance for him to come back in 2008.

HENRY: What about John Edwards? We haven't heard his name pop up yet. Joe Lieberman, we saw him hamstrung a bit in the last campaign waiting for Al Gore to make up his mind but there have been suggestions privately that maybe there's no love lost between John Edwards and John Kerry. Ron, do you think John Edwards is going to sit around waiting for Kerry?

BROWNSTEIN: No. I think Edwards will sort of make his own judgment. Edwards has one big asset and maybe two big problems. The big asset is I think there are going to be a lot of Democrats looking for a candidate from the red states in 2008 because, as I said, Kerry did very well in blue America.

But basically what we saw was a consolidation of Republican control in the red states, not only at the presidential level but in the congressional level as well where they've expanded their majority.

They now hold 44 of the 58 Senate seats in the states that Bush won twice, so there will be a premium on finding somebody who can put a little more of the country in play and, obviously being from North Carolina, John Edwards has that.

The two big problems he has is he won't have a platform. He's out of office. And there have got to be questions after the performance in North Carolina about whether he really can be attractive to the white southern voters that the Democrats lost so badly in this election.

HENRY: Let's talk quickly about the Republicans. We haven't gotten to them, Julie. The bottom line is Defense Secretary Don Rumsfeld has faced a lot of criticism. Interestingly, a lot of it has come from Republicans like Chuck Hagel, John McCain, some of the names you hear popping up in 2008. DAVIS: That's right. We hear a lot of criticism coming from Republicans, both moderates on Bush's left and conservatives on his right about various aspects of his agenda. Right now it's a lot focused on Rumsfeld.

I think it will be, as Ron said, focused on Social Security and how to pay for some of these things that the president wants to do. Also immigration reform, we're going to hear a lot of criticism coming from the Hill and a lot of it from people who may have a political future to worry about of their own in 2008.

And they're not going to wait for the president to set the tone on these things. They're going to want to set their line out there and see if they can get the president to sort of engage.

HENRY: Vince, what about somebody that the Republicans are very interested in, somebody you cover very closely at the "New York Post," Senator Hillary Clinton? What does she need to do over the next year or two to get set up?

MORRIS: The most important thing for her is to win reelection in 2006 by a resounding margin, by a good five to ten-point margin to show that she's reached up into New York, upstate New York, up in Buffalo and some of those areas. It's like a mini red state up there and she needs to win over those voters.

She did in 2000 but there was a certain novelty factor or -- I'm sorry, she did it in 2000 but she has to convince those people to vote for her again and that sometimes can be harder. If she can win reelection and win by a good margin that's going to give her the momentum she needs to put her in a great place for 2008.

HENRY: When we return what's your New Year's resolution? Our panel has some suggestions for a few politicians out there. Stay with us.

(COMMERCIAL BREAK)

HENRY: Welcome back.

We're asking for political predictions and New Year's resolutions. Our reporter panel has joined us to provide some suggestions, Julie Davis, Ron Brownstein and Vince Morris.

Please, Julie, why don't you kick it off with a prediction.

DAVIS: My prediction would be that President Bush is going to have possibly a harder time getting his agenda going and through the Republican ranks of Congress than he will with Democrats.

I think there are a lot of conservatives and moderates who will make his life very difficult and obviously Democrats will be there the vocal opposition but his Republican rank and file will be quite a challenge as well.

HENRY: Ron.

BROWNSTEIN: My prediction is a tough one for the president too. I think Social Security reform will prove a bridge too far and there may be resistance from Republicans, fiscal conservatives uneasy about adding so much debt and Democrats who don't like the idea of relying more on the stock market to fund retirement.

HENRY: Vince, a lot of bad news for the president so far. Can you cheer it up?

MORRIS: Yes, well I'm going to give you two predictions but neither of them have to do with the president.

The first is I think that you're going to see Barack Obama, who we mentioned earlier in that piece, really push to the forefront. I think the Democrats love the idea of making him a leader in their party and even though he's brand new, I think they're going to try and get him in the public as much as possible.

The second prediction, this one's easier, the New England Patriots will win the Super Bowl again next year and that will be the only good news John Kerry gets next year.

BROWNSTEIN: Another word for the president prediction wise...

HENRY: Yes, quickly.

BROWNSTEIN: ...I think it will not be a good strategy to run in 2008 as a critic of the president in the Republican primary, solid 90 percent approval among Republicans doesn't change. It will not be easy to run as someone who has been dissenting from him. In fact, there will be kind of an intra-party test of loyalty in that race.

HENRY: Great. Quickly, New Year's resolutions -- Julie.

DAVIS: Related to the prediction, if I were the president, my New Year's resolution would be to keep very close counsel with the leaders in the House and the Senate on the Republican side and to make sure that what I'm pushing doesn't fall into a gap there between the opposition of the Democrats and the challenge of the Republicans as well.

BROWNSTEIN: My resolution is also for the president and it would be to put as much priority on uniting the country as passing his agenda.

HENRY: Vince.

MORRIS: Same theme. The president should just once admit a single mistake and say "I want to do things a little differently," say he's sorry about something. He'd be a better man for it and I think it would go a long way to working with Congress.

HENRY: I want to point out it's also been a big year for all three of you. Julie Davis, moving at the "Baltimore Sun" from the congressional beat to the White House beat. Ron Brownstein just got engaged to Eileen McMannimon (ph) a CNN producer. Congratulations.

BROWNSTEIN: Thank you.

HENRY: And Vince Morris blessed with the birth of his second daughter this year.

MORRIS: Yes.

HENRY: Congratulations to you as well.

MORRIS: Thanks.

HENRY: We appreciate you coming in today. Thank you.

Coming up next on INSIDE POLITICS SUNDAY, a final farewell to all those we lost this past year. Their memories will live on. Bruce Morton takes a look back.

(COMMERCIAL BREAK)

HENRY: Looking back at the famous people we lost this year, one of our most popular presidents passed away. But the not-so-famous people who left us are also top of mind for CNN's Bruce Morton.

(BEGIN VIDEOTAPE)

MORTON (voice-over): We lost Ronald Reagan, a president who gave us some of his optimism, his faith in America, a staunch anti- communist who nevertheless negotiated with the Soviets and saw the Cold War start to end.

MARLON BRANDO, ACTOR: I don't know nothing. I ain't seen nothing and I'm not saying nothing.

MORTON: We lost Marlon Brando, probably the most influential actor of his generation, vivid in movies from "On the Waterfront" to "The Godfather."

(UNINTELLIGIBLE) Miller who danced in movies like "Kiss Me Kate" and "On the Town" or insuring her legs for $1 million but paying $1 million was worth more then than it is now.

We lost Julia Child who taught generations of Americans how to cook swell tasting food. Stage hands loved to work her show. They got to eat what she cooked.

We lost (UNINTELLIGIBLE) who used a small camera, liked to be unobtrusive while he worked and was probably the greatest photographer in the world.

Alistair Cook died. If you lived here, you knew him as the host of "Masterpiece Theater" but the British remember his weekly radio report "Letter from America." He wrote it for 56 years.

ALISTAIR COOK: So, good night and goodbye. MORTON: We lost Archibald Cox, the prosecutor who demanded Richard Nixon's Watergate tapes, the tapes which eventually forced Nixon to resign the presidency.

We lost Faye Ray who was in more than 70 movies but we remember her on the Empire State Building with King Kong, the ape who loved her.

And Janet Leigh, who also made many movies but is remembered for dying in the shower in Alfred Hitchcock's "Psycho."

Charles Sweeney died. You don't remember him but he flew the plane that dropped the second atom bomb on Nagasaki essentially ending World War II.

Paul (UNINTELLIGIBLE) adviser to eight presidents, architect of the Marshal Plan to rebuild post-war Europe.

So, did Pierre Salinger, John Kennedy's press secretary.

The Middle East lost Yasser Arafat, who led the Palestinians for more than 30 years, a survivor but a leader who could not bring his people peace.

Here at home we lost Christopher Reeve, Superman, then paralyzed in a riding accident, who left behind a foundation seeking the cure for injuries like his.

We lost Johnny Ramon, an influential guitarist who may have founded punk rock.

And Robert Merrill (ph) the Metropolitan Opera's favorite baritone who loved the songs Guiseppe Verdi wrote.

And, Ray Charles, who loved all kinds of music, (UNINTELLIGIBLE), blues, bring it on.

We lost Peter Ustinov, playwright, director, actor, novelist, genius, sure, why not?

Most of these men and women lived full lives, found success and maybe happiness but our saddest losses were mostly young people, more than 800 men and women in the American armed forces who died this past year in Iraq. They won't ever reach their goals or find their dreams. They just went where their country sent them and died.

(END VIDEOTAPE)

HENRY: That moving piece was filed before the bomb attack in Mosul added 18 more Americans to the list of those we lost. Hopefully, their families will find comfort in knowing that after a divisive year in politics America is unified in honoring their sacrifice.

Thanks for joining us on INSIDE POLITICS SUNDAY. Coming up in 30 minutes, "RELIABLE SOURCES" takes a look at a difficult year for the media and why the mainstream press seems to be losing the trust of the American people.

And, at Noon Eastern on "LATE EDITION," the Reverends Jerry Falwell and Jesse Jackson debate moral values and politics.

For now thanks for watching. I'm Ed Henry in Washington. Have a safe and happy New Year.

"CNN LIVE SUNDAY" continues after this short break.

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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