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JUDY WOODRUFF'S INSIDE POLITICS

Anticipation Building for State of the Union Address; Iowa Diner Dishes Politics

Aired February 2, 2005 - 15:30   ET

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


(BEGIN VIDEOTAPE)
ANNOUNCER: The state of the speech. President Bush prepares to address Congress, the nation and the challenges ahead at home and in Iraq.

DAN BARTLETT, WHITE HOUSE COUNSEL: I think what they'll hear from President Bush is a strategy for success.

ANNOUNCER: The Democrats respond early and often, hoping to get the minority's message out to the American people.

UNIDENTIFIED MALE: I would like to see the State of the Union focus on real problem of this country, not the manufactured crisis.

ANNOUNCER: It's Groundhog Day. Does that foreshadow a warm or chilly reception for the president's state of the union speech?

(END VIDEOTAPE)

ANNOUNCER: Now, live from Washington, JUDY WOODRUFF'S INSIDE POLITICS.

JUDY WOODRUFF, CNN ANCHOR: Thank you for joining us.

We are on Capitol Hill today, where anticipation is building for President Bush's State of the Union Address to Congress and to the nation tonight. Both Republicans and Democrats going to great lengths to share their takes on the speech, even before Mr. Bush gives it.

I was part of a group of television network news anchors invited to have lunch with the president at the White House today. We found him invigorated and looking forward to an active second term. Now, much of what he said we have to keep off the record until he says it, but we were told to look for the speech to be divided into thirds, one part Iraq, one part on values, one part on extending prosperity, as they put it.

For much more on what to expect tonight, let's go to our senior White House correspondent John King.

Hi, John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Hello to you, Judy.

The president is going to need to be invigorated as he tries through this speech to begin selling his ambitious second-term domestic agenda. As we have been reporting for days, the signature issue when it comes to domestic issues will be the president's call for Congress to revamp Social Security and to do it this year.

Now, we are told the president will offer far more details than he has been willing to in the past on just how he want this done, especially on the issues of personal retirement accounts, diverting a small percentage of Social Security payroll taxes into private investment accounts if younger Americans decide that is what they want to do. We're told, for example, the president will draw the line at age 55, saying those 55 or above would not have their benefits changed at all, but those below that age group would have the option of investing their money, again, if he gets his way, in private accounts, some of their money in private accounts.

The president will make the case that these accounts can be save, not risky, like many Democrats say, and offer some detail on how he envisions such a system taking place. He also will make clear that other changes must be made as well to put Social Security on a long- term better financial footing.

We are told to not look for any of the details of what the president would like to see in the end tonight, but that Mr. Bush will make clear that the Congress and the administration will need to talk about things liking changing the way annual costs of living increases are made in the Social Security program, perhaps considering raising the retirement age as well.

I spoke about this a short time ago with the White House counselor, Dan Bartlett, and he says the president will make clear to the American people tonight that he understands the risks. He also wants to make clear to the Congress that he's prepared to take the heat.

(BEGIN VIDEO CLIP)

BARTLETT: President Bush will clearly state that he's willing to have a very candid conversation with the American people and with members of Congress about those type of issues that help bring you to permanently fixing the problem. So what you'll see is leadership tonight on these issues.

He'll be very straightforward, very candid, and reaching out to both parties. Because this will take a bipartisan effort. There's been a lot of political rhetoric, as there typically is when you take on a big issue, but he will demonstrate why they have a responsibility above and beyond partisanship to take this issue on.

KING: And you mention political rhetoric. The leader of the Democrat in the Senate said he doesn't know that there's any Democratic votes for this issue, the personal accounts issue that the president wants. The president will travel to five states after this speech that, lo and behold, have Democratic senators. Some would say that's hardball right out of the box.

BARTLETT: I don't think so. And I think you ought to judge the president by his comments, what he does and what he says when he goes to those states. And he'll go all over the country.

This is very early in the process. And I imagine if you went back and looked at the file tape of the early days of the debate on tax cuts, you heard very similar language. "Over my dead body will we cut taxes by x amount."

And as the process kind of unfolds and how you give and take and work and negotiate in good faith, you can come -- you can come to some consensus and get a majority of members of Congress to pass something. So he wants as many people at the table as possible.

This is not the time to draw lines in the sand. It's a time to put ideas on the table. And I think those in the other party who decide to defend the status qo, who say, oh, there's not a problem, to try to score short-term political points, I think they're the ones who the American people will face with a lot more skepticism, and maybe even when future elections are down the road.

There's always been the problem, who's going to touch the third rail. I think at end of the day those who touch who don't confront the issue may be putting themselves in more political jeopardy than those who do.

(END VIDEO CLIP)

KAGAN: Now, Social Security the biggest challenge, but hardly the only challenge. The president will urge members of both parties to work with him to impose what he will call fiscal discipline, a very tight budget to come from the president later this week.

The president also will directly challenge Republicans, his own party, to work with him on immigration reforms that include allowing some who came illegally into the United States to enter into a new temporary worker program. Many conservative Republicans vehemently oppose that.

And Judy, one other thing, the president will say the elections this past Sunday in Iraq allow the U.S. mission there to enter into a new phase. But he will reject any calls to set any exit timetable for U.S. troops, saying that setting such a timetable would be irresponsible right now, that Iraq has additional steps to take on the way to democracy and that much more needs to be done to train Iraqi security forces so that they can be ready to take over security of the country. Only then will the president consider bringing the troops home -- Judy.

WOODRUFF: All right. John King giving us a fill on what to expect tonight. John, thanks very much.

Meantime, here on Capitol Hill just a short while ago, Senate Minority Leader Harry Reid and House Minority Leader Nancy Pelosi had their own briefing with television network news angers. They told us their official response to the president's speech tonight will take a tough line against any privatizing of Social Security and for a clear plan for ending the U.S. presence in Iraq.

For more, let's bring in our congressional correspondent, Ed Henry.

You talk to the folks on the Hill all the time. What are they saying?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Well, the bottom line is there's a new political dynamic for President Bush heading into this State of the Union that maybe we haven't seen in the last four years. In the first term the president got just about everything he wanted from this Republican Congress on issues ranging from tax cuts to Medicare reform. But all of a sudden, we're seeing some small cracks in that Republican unity that could exacerbate some of the attacks that are coming in from Democrats.

Congressional Republicans are very nervous that if Social Security is mishandled, that they are the ones who will face the -- face the wrath of voters next year in 2006 at the polls, whereas the president is essentially a lame duck. Democrats are very eager to exploit this divide.

As you mentioned, today Senate Democratic Leader Harry Reid and House Minority Leader Nancy Pelosi went through the preparations for their official response to the State of the Union tonight, and there they also spoke to reporters. They took some more shots at the president on Social Security, saying that in their estimation he has manufactured a crisis, that he's trying to play roulette with Social Security.

And Republicans, though, point out that Democrats are just taking these shots at the president, but not offering an actual Social Security reform plan of their own. Harry Reid answered those critics today.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MINORITY LEADER: We don't have a plan from the president. How can you have a you counter plan to nothing? All we've heard is a lot of talk.

We have said from the very beginning that we're willing to work with the president to take care of the out years. We know that 50 years from now there's going to be a problem with Social Security. Not a big problem, but a problem, and we're willing to take care of that.

(END VIDEO CLIP)

HENRY: Now, Republicans up here admit that they have not exactly gotten off to a strong start on Social Security, but they think tonight the president will finally start fleshing out the details of that plan, as John King mentioned. And Republicans here on the Hill feel that they will start building momentum for reform out of that.

And, in fact, yesterday, House Majority Leader Tom DeLay told me that the president essentially road tested his Social Security portion of his speech at a private retreat with Republican lawmakers last -- last week. We saw some of that publicly. But in the private portion, Tom DeLay said that the president was very strong, saying that he's going to put his money where his mouth is, he's going to fight the Democrats hard on this issue.

And as Tom DeLay pointed out, right away, after the State of the Union, the president is going to several states and start beating the drums for this plan. And Tom DeLay says he feels that once the American people actually hear it, they're going to like this plan and they're going to see moral leadership from the president saying the Democrats don't want reform.

The president is going to take on a tough political issue. And so the Republicans feel right out of the box he's fighting.

WOODRUFF: I hear you saying the Republicans are watching this as every bit as closely as the Democrats for reaction.

HENRY: Oh, absolutely.

WOODRUFF: Ed Henry, thank you very much.

Well, while all this is going on, Democrats are not making things easy for two of President Bush's cabinet nominees today. They asked Homeland Security secretary nominee Michael Chertoff some tough questions during his confirmation hearing.

Judge Chertoff was grilled about his role in formulating the Patriot Act after the 9/11 attacks while serving as a top official at the Justice Department. Chertoff defended the Patriot Act, but noted that he was not involved in decisions about the way specific detainees were held or treated.

Meantime, Senate debate continued today over the president's choice of Alberto Gonzales to be attorney general. Democrats have decided not to filibuster his nomination, but many are expected to vote against Gonzales's confirmation tomorrow.

Well, heading into the president's State of the Union Address, Americans remain divided about the way Mr. Bush is handling his job. A new "Washington Post" poll puts the president's approval rating at 50 percent. He gets a 48 percent approval rating in a new Quinnipiac University poll. Now, we should note that both of these surveys were conducted mostly before Sunday's election in Iraq, which is an event that could influence public opinion.

Joining us now from the White House, Nicolle Devenish, in her first television interview since becoming White House communications director.

Congratulations again...

NICOLLE DEVENISH, WHITE HOUSE COMMUNICATIONS DIRECTOR: Thanks, Judy.

WOODRUFF: ... on the new position. Nicolle Devenish, on these poll numbers with the caveat that this polling was done, much of it, before Sunday's vote in Iraq, still these numbers have President Bush with the lowest approval rating of any second-term president ever, with the exception of Richard Nixon. How much harder does that make his job tonight?

DEVENISH: Well, Judy, I think you know by now that this is not a president who makes decisions or sets an agenda based on polls. This is a president who is guided by deep principles and a deep belief in a commitment to doing the right thing. And I think tonight's State of the Union is the perfect evidence of that.

Tonight, he calls on members of Congress to take a generational approach to tackling some of the big issues facing our country. And certainly his commitment to the spread of freedom and democracy is a -- is a tough undertaking. And certainly taking on Social Security, these are big things, and these are important debates, and they're things that are certainly tougher to accomplish than -- than the small things that get talked about and get batted around here in Washington. But I think you know by now from covering this White House and this president that polls aren't a factor when he sets an agenda.

WOODRUFF: Nicolle Devenish, what about -- we just heard our Ed Henry reporting that there are cracks in Republican unity, really for the first time in a significant way in his presidency. He said that a number of Republicans are worried that if Social Security in any way is mishandled by the president, they're going to face the wrath of voters next year.

Is the president aware of that? And how does he deal with it?

DEVENISH: Well, I think you could call them cracks, or you could call it a debate. And that's what we're having, Judy.

We're having a very important debate about an issue that affects Americans in every community. This is not a debate that should only happen here inside the Beltway. That's why the president is hitting the road after the State of the Union Address. He'll travel to five states and carry his message about the choice we face about Social Security.

Doing nothing is not an acceptable option for this president. So he will certainly lay out more detail. And he has a lot of respect for the members of Congress who are going to have to join him in tackling this tough issue. But I think the third rail -- I know that you talked about the third rail being Social Security -- I think it's becoming doing nothing and the status quo, which is almost a guaranteed cut in benefits.

WOODRUFF: Going to the states of -- they're red states that voted for President Bush, but they also have elected Democratic senators to Congress. So, you know, some people are saying this president is playing hardball already. Isn't he going to need to work with Democrats, though?

DEVENISH: Well, you can call it whatever you want, but the president wouldn't travel to states unless he had every intention of working with those senators. And that we want to pass the reform and work with members is no secret. And that we're hitting the road to campaign for our agenda and work to educate people about the important details -- you know, the president's going to detail tonight exactly how personal accounts would work, and he's going to talk about a personal retirement account that would let people take some of the money that they'd already sent to Washington and the taxes that they've paid and seize a little bit of control over that money.

Now, that's an idea that will have broad popular support. And I think the president's going to give senators and members of Congress an opportunity to be part of that.

WOODRUFF: But the one thing, at least one thing that we know he is not prepared to negotiate on, is the idea of these personal retirement accounts, is that correct?

DEVENISH: Well, the president, as you know, has a deep commitment to creating an ownership society. And again, tonight's speech will talk about reforms that have a generational impact, and that leave our government stronger and better shape than it was in when we came here. So certainly the personal retirement accounts are part of creating that retirement -- that ownership society.

WOODRUFF: Nicolle Devenish, newly selected to be the communications director at the White House. We thank you very much for being with us on INSIDE POLITICS.

DEVENISH: Thanks, Judy.

WOODRUFF: Good to see you. Thank you.

And be sure to stay tuned to CNN in the coming hours for live coverage of the president's State of the Union Address, the Democratic response and in-depth analysis.

Republicans and Democrats will be on their best behavior tonight, but we can expect plenty of head-butting before and after. Coming up, Senators Kay Bailey Hutchison and Dick Durbin square off on some of the issues.

And later, outgoing DNC chairman Terry McAuliffe gets in a parting shot or two, we think, at the president's agenda. And we'll find out if he's worried at all that Howard Dean may soon have his job.

And later, do President Bush and actor Bill Murray have something in common?

(COMMERCIAL BREAK)

WOODRUFF: As we continue our preview of the State of the Union Address from here on Capitol Hill, I am joined by two senators who are members of their respective party leadership teams, Democrat Dick Durbin of Illinois and Republican Kay Bailey Hutchison of Texas.

Senators, thank you very much for joining me.

Senator Hutchison, from the perspective on the Republican side, what do you need -- what do you want the president to get done tonight? SEN. KAY BAILEY HUTCHISON (R), TEXAS: I think he will set out his agenda for the next four years for our country. He will talk about his domestic agenda and, of course, the war on terrorism.

The war on terrorism overrides everything we do. He cares about finishing this, making sure that America and safe and secure, and protecting our troops in the field.

On the domestic side, I think it's clear that Social Security will be a major topic, tax simplification, trying to ease the tax burden on people in our country and spurring the economy in the process. So -- and I think he will also talk about efficiency in government. I think he he's going to say it's time for us to start working on the deficit reduction.

So I think it will be clear agenda, and we will know what he wants from Congress. And hopefully we'll roll up our sleeves and start working with him.

WOODRUFF: Senator Durbin, if that's what the president does tonight, does that go a long way toward creating an atmosphere that you, the Democrats can work with the president in?

SEN. RICHARD DURBIN (D), ILLINOIS: I think it can happen. And I think many of us on the Democratic side want to see it happen.

Of course, the first, as Senator Hutchison said, the first item on the agenda is the security of America. We want to know that the bravery shown by the Iraqi people on Sunday will not only lead to self-governance, but self-defense, so that they will prepare an army and a police force so American soldiers can come home as quickly as possible.

And secondly, we need some straight talk from the president on Social Security. There's been a lot of pre-game hype, to put an analogy to the Super Bowl here. The president receives a kickoff tonight, and he has to move the ball down the field.

Let's hear exactly how he's going to privatize Social Security without weakening Social Security. What he's going to do about the cuts in retiree benefits that are part of privatization, and how he'll handle a $2 trillion to $5 trillion addition to America's national debt. Those are hard questions the president has to address.

WOODRUFF: And will the president address those questions, Senator Hutchison, particularly in a climate when you have got the Democratic leader in the Senate, Senator Durbin's colleague, Harry Reid, saying privatization isn't going to happen? He said yesterday, "The sooner the president realizes that, the better off we are."

HUTCHISON: Well, I do think that it is important that all of us come together. The personal accounts that Senator Durbin is referring to are something that even Senator Moynihan thought were a good -- was a good idea, that you would give people something that they can see grow, that will help take the burden off the government. I think the president will say tonight that this will not affect anyone 55 and older, but what it will do is try to create some opportunities for younger people who don't think Social Security is going to be there for them. And we want it to be there for them, and the president thinks the time to start planning is now.

WOODRUFF: And again, Senator Durbin, if that's what the president says, does that address some of your concerns and the concerns of your fellow Democrats?

DURBIN: No, it does not, because honestly we have to get down to details. If we're going to take money out of the Social Security trust fund to privatize it and create these private accounts, how will we make up the difference, the shortfall? That's going to weaken Social Security, not strengthen it.

It's going to force us to cut benefits. And, in addition, it's going to add to the debt of this country, a debt that we have to rely on foreign governments like China and Japan to take care of. That doesn't give younger people in America a brighter future.

WOODRUFF: Senator Hutchison, isn't that going to be a problem, what Senator Durbin is outlining, not just for Democrats but also for Republicans?

HUTCHISON: Well, the question is, when does it start getting weak? We can't wait for 20 years when the payments start outweighing what the revenue stream is. We can't wait to fix it then. So we're going to see a weakened Social Security system if we do nothing.

What we're trying do is strengthen it by having the ability for someone to take some part of their account on a voluntary basis, maybe 2 percent, maybe 3 percent, and take that money and put it into a -- basically a 401(k) like we have in the federal government, like corporate employees have, to give them an opportunity to get more from Social Security to own it and pass it to their heirs when they die. That's something that will stabilize our country economically and give more people a chance to start creating stability.

WOODRUFF: Very quickly, Senator Durbin, on Iraq, because the elections in Iraq went as they did on Sunday, is the president in stronger shape now in leading U.S. policy in that country?

DURBIN: I think the president can point with pride and our soldiers can point with pride to what happened last Sunday. But we also want to understand when this is coming to an end.

There's no end in sight. The president has asked for $80 billion more. We know that American soldiers have dying virtually every day.

We have to have a timetable now, even if it's a private and quiet agreement between the Iraqis and the United States, where the American troops start coming home. I think that we don't want the long-term commitment of American forces in the field running the risks and dangers that they do every day in Iraq.

WOODRUFF: Senator Durbin, Senator Hutchison, we thank you both. We appreciate you joining us today. Thank you.

DURBIN: Thank you.

WOODRUFF: And we continue our special preview coverage of the president's speech. Just ahead, our Bill Schneider finds it appropriate that the State of the Union takes place on Groundhog Day. He'll join us to explain the connection just minutes from now.

(COMMERCIAL BREAK)

WOODRUFF: Presidents promise a lot if their State of the Union Addresses, but do they deliver? Our scorecard when we return.

Plus, it is the place where average Joes come to talk politics. We'll pay a visit to an Iowa eatery, gauge the pulse of the people on the state of the union.

And it looks like Howard Dean will be the next leader of the Democratic Party. We'll ask the current boss if he has any tips for his probable successor.

(COMMERCIAL BREAK)

WOODRUFF: It's just about 4:00 on the East Coast and as the markets close on Wall Street, I'm joined by Lou Dobbs in New York with "The Dobbs Report." Hi, Lou.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Hi, Judy. The big news this afternoon, the Federal Reserve has raised interest rates again. The Fed raised its key interest rate by another quarter point to 2.5 percent. This, the sixth straight increase in interest rates since June. The Fed's statement virtually identical to the last, saying it will continue raising rates at a measured pace. Despite the string of rate hikes, mortgage interest rates are actually lower now when they were in June when this string of rate hikes began.

Investors gave little reaction to the Fed move today. Stocks ending the day slightly higher, as the final trades are being counted. The Dow Jones industrials up over 44 points, almost 45 points, higher. The Nasdaq slightly higher on the day.

Google a big winner, soaring $20 a share, up 10% on the day. The Internet search engine's quarterly profits up nearly eight-fold. The stock has risen 145 percent since it's initial public offering back in August.

A new study finds the government needs to fill nearly 40,000 security and law enforcement jobs over the next two years. Positions available include police officers, prison guards and airport screeners. That report also says the government will need to hire thousands of healthcare workers and scientists. A separate survey shows the slowdown in the number of layoffs this month. Challenger Grady Christmas (ph) says employers laid off less fewer than 100,000 workers for the last time since last summer.

Hundreds of thousands of Americans are finding health insurance is no longer protection against personal bankruptcy. A study out of Harvard finds one out of three people who file for personal bankruptcy were forced to do so because of an illness or injury. And most of those people were working at the time, covered by health insurance.

(BEGIN VIDEO CLIP)

DR. DAVID HIMMELSTEIN, HARVARD MEDICAL SCHOOL: We have a health insurance system that's like an umbrella that melts in the rain. It's great as long as you're healthy, but if you're sick and actually need care, you may find that your insurance doesn't protect you.

(END VIDEO CLIP)

DOBBS: We'll be taking a much closer look into this assault on the middle class at 6:00 Eastern here on CNN on "LOU DOBBS TONIGHT." Also tonight, "Broken Borders." A shocking find on a Colorado state government Web site. A how-to guide for illegal alien on how to find work and avoid deportation. We'll have that special report for you.

And "Exporting America." Tonight we take a look at how President Bush is planning to push so-called free trade agreements through Congress without any debate.

And ahead of the president's State of the Union address, we'll be meeting with several prominent lawmakers, among them Congressman Duncan Hunter, Senator Jay Rockefeller, Senator Arlen Specter, Congressman Christopher Shay. All of that and more coming up tonight here on CNN at 6:00 p.m. Eastern.

Now, back to Judy Woodruff -- Judy.

WOODRUFF: Lou, what about the State of the Union address tonight? What are you expecting? What are you looking for?

DOBBS: Well, we're told to expect, Judy, that the president will focus in on Social Security and move this to the top of the national agenda if the White House is not already been successful in doing so. It is also going to set the stage for whatever is to come within the Republican party itself, that is, either a consolidation of Republicans on this issue or a final breach. It all begins tonight with the president's State of the Union.

WOODRUFF: Well, we'll all be part of it. We will be watching you at 6:00. Thanks very much.

DOBBS: Thanks, Judy.

WOODRUFF: INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: I have the high privilege and the distinct honor of presenting to you the president of the United States.

ANNOUNCER: We are five hours away from the big speech. What do Americans want to hear from the president tonight? UNIDENTIFIED MALE: I think he's done plenty worldwide, you know, I would like him to maybe concentrate more on domestic.

ANNOUNCER: They happen every year, but how did they start?

UNIDENTIFIED MALE: George Washington delivered the first one before a joint session of Congress in New York, January 8, 1790.

ANNOUNCER: Our Bruce Morton on the history of the State of the Union.

He appears to be a shoe-in, but is Howard Dean the right person to run the Democratic party? We'll talk with the man he hopes to succeed.

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

(END VIDEOTAPE)

WOODRUFF: Welcome back to Capitol Hill and our countdown to the president's State of the Union address. Those of us who spent some time with the president today saw firsthand how energetic he is feeling about his second term and he did seem to be in good humor.

As I mentioned earlier, I was one of the network news anchors invited to have lunch with the president. He did seem to be involved in the details of the big policy issues that he'll be addressing tonight, including Social Security.

Our senior political analyst Bill Schneider's been thinking about the potential effect of the president's speech and the date he's delivering it.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): It's State of the Union day and it's also...

UNIDENTIFIED MALES: Groundhog Day!

SCHNEIDER: How appropriate. You remember how in the movie Bill Murray kept reliving the same day over and over?

BILL MURRAY, ACTOR: Well, it's Groundhog Day again.

SCHNEIDER: Well, there's a certain sameness to the State of the Union experience. Presidents announce new initiatives and they promptly fade away. Like in 1994, when president Clinton threatened Congress that if they failed to pass a comprehensive healthcare plan...

BILL CLINTON, FMR. PRESIDENT OF THE UNITED STATES: You will force me to take this pen, veto the legislation...

SCHNEIDER: Within a year, Clinton's healthcare initiative was dead, along with Democratic majorities in the House and Senate. Two years earlier in 1992, the first President Bush addressed the nation at what should have been a moment of triumph. The United States had just won two wars, the Gulf War and the Cold War. Big deal. People were only interested in the economy, stupid. Did the president have a bold new plan to turn things around? Not really.

GEORGE H. BUSH, FMR. PRESIDENT OF THE UNITED STATES: At this hour I cannot take no for an answer. You must cut the capital gains tax.

SCHNEIDER: That got nowhere and neither did President Bush's re- election campaign. In 2002, a few months after the 9/11 attacks, President Bush addressed the nation united by grief and determination. He urged Americans to set aside old cultural divisions.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: For too long our culture has said if it feels good, do it. Now America is embracing a new ethic and a new creed. Lets roll.

SCHNEIDER: Instead the old divisions came roaring back and helped Bush get re-elected. How much political impact does a State of the Union speech really have? We checked every president's job approval rating just before the State of the Union speech for the past six decades. The average, 58 percent. And just after the speech? The average, 58 percent. Nothing changes. It's Groundhog Day.

(END VIDEOTAPE)

SCHNEIDER: Turn on your TV tomorrow night and see if you hear the president's speech all over again. Then you'll know it's Groundhog Day -- Judy.

WOODRUFF: You are watching the calendar, aren't you, Bill Schneider?

SCHNEIDER: Yes, indeed.

WOODRUFF: Thank you very much, Bill. Don't forget, to our viewers CNN is the place to be tonight for live coverage of the president's State of the Union address, the Democratic response and analysis.

Well speaking of the Democrats, it may be DNC chairman Terry McAuliffe's final days of being the party point man against President Bush, because we know Democrats vote for a new chair a week from this Saturday. But we still want to hear what Terry McAuliffe has to say. And he joins me right now at the Capitol. It's good to see you.

TERRY MCAULIFFE, DNC CHAIRMAN: Judy, it's great. Ten days to go.

WOODRUFF: So is it Howard Dean?

MCAULIFFE: Well, he clearly is a frontrunner. Today, he has all of the momentum. We still have about three or four candidates in the race, but you know, Howard Dean right now is pounding up the votes that he needs to be elected a week from Saturday. WOODRUFF: A lot of Democrats clearly worried about Howard Dean. The leadership in the Congress, Nancy Pelosi, Harry Reid, were favoring somebody else in this race. Are Democrats going to be able to deal with this if he's chosen?

MCAULIFFE: Yes, they better. And because, there are some important issues that are being debated here in Washington and all across the country. We need to be united as a party. I think what we saw in the last election, John Kerry got 59 million votes for president.

We had a huge, massive, turn-out on a grassroots across the county. We have to build upon that and we can only do it being unified. So once this election's over in a week, we all need to come together as Democrats on real issues. Millions of Americans are counting on the Democrats and we need to do it with one solid, unified voice.

WOODRUFF: But the Democratic party is on the verge of choosing as its leader somebody who is clearly a lightning rod, somebody we are told the Republicans have stored up reams of what they call opposition research on. Are Democrats prepared for that?

MCAULIFFE: We're prepared for anything. Listen, let's see if Howard Dean wins the election. But when he comes into the office, he's coming into a party, as you know, I've already projected, we're going to have $100 million this year. We're in the best shape, financially, technologically, in our party's history. We're in a place we've never been. So the new chair will come into a party with tens of millions of dollars to be able to spend.

If it is Howard, he clearly has proven how he can mobilize the grassroots. It's an exciting time for our party. We all need to come together. Republicans are going to throw a lot of stuff. That's OK. We can deal with that. We're fighting for real Americans out there.

WOODRUFF: You're not worried that he's too liberal, his image is too liberal, to lead the party at a time when you are looking to expand the base?

MCAULIFFE: We clearly need to build upon our base. We need to expand our base. But it is not the Democratic National Committee chairman that sets policy. I've never voted on Iraq or tax policy. It is your job as chairman of the party is to raise money, to mobilize, to build the infrastructure. And if it's Howard, that's what he will do. We'll leave it to the governors across the country, to the members of the House and the Senate, who actually have to vote on these issues.

You have to remember when you're chairman of the DNC you represent Democratic senators who are in red states, liberal senators, House members. You represent everybody. Your job is to get the mechanics going. And if it's Howard, he'll do a magnificent job.

WOODRUFF: So are you saying he's going to have to button his lip? MCAULIFFE: He knows what he has to do. He has to continue to build his party. I've told Howard, I've told the other candidates, two big challenges we face, we have got to continue to build our state parties. We need to do for the state parties what we did for the national party. We outraised the RNC last time -- last year for the first time in the history of our country.

We have got to build the state parties. We have got to do a better job in our micro-messaging, testing. We are already doing that in the governor's races this year. Build upon the grass roots. Build that up with a clear message what we stand for. And it doesn't matter who the chair of the party is.

WOODRUFF: Two friends of the Democratic Party, good friends of yours, Stan Greenberg and James Carville, their research firm have come out with a report. I just saw it for the first time last night. But their report, their research says as voters compare the parties, they see a Democratic Party without purpose, without defining ideas, a party that is weak politically without strong leaders and direction, not the go-to party on protecting the country, ambivalent on basic values. This is a very damning report. Is that the Democratic Party you know? These guys like the party and that's what they are saying.

MCAULIFFE: Sure, yes. This is a party that got 59 million votes for its nominee on November 2nd of 2004. We had the biggest vote turn-out we have ever had. Judy, we ran against an incumbent president while at war. And we have never beaten an incumbent president while at war. And John Kerry got closer than anyone ever has, 59 million Americans came out and voted for John Kerry, unfortunately, 62 million came out and voted for George Bush.

That is something we need to build upon. There is no question that we need to be forcefully out there with what this party stands for, the values that we stand for. And I've got to tell you, George Bush talking about taking benefits away from our senior citizens on Social Security, going to foreign nations to borrow $2 trillion so that we can transfer Social Security to some Wall Street brokers. That's not right.

WOODRUFF: Well, he would say that's not what he's doing. I mean, the report we are hearing is that 55 and over are exempt from any of these changes. Are Democrats going to reach out to the president after tonight's State of the Union?

MCAULIFFE: We will always reach out and work with the president when he's willing to reach out and work with us. But Judy, as it relates to Social Security, he declared the war on terror the last couple years, he declared war on Social Security. This is a core principle of the Democratic Party. We will never let George Bush cut benefits to seniors. And I don't like the idea of us borrowing $2 trillion more from foreign nations who are going to take over our debt so that we can help Wall Street make more money all at the disadvantage of the seniors in this country. It's not right. We'll fight him on those issues.

WOODRUFF: Well, they are not here to debate it. Of course, they say that it is less than that. But Terry McAuliffe...

MCAULIFFE: Great to be with you, Judy. It has been a great four years.

WOODRUFF: Not quiet, right down to the wire. And not a bit quiet. Thank you very much.

MCAULIFFE: You bet. Thank you.

WOODRUFF: We'll be talking to you in the days and weeks to come.

Well, if you are looking for a political sounding board in the heartland, there's no place like Iowa. Our John King went back there recently for a lunch-time chat with the locals about the State of the Union.

Also ahead, State of the Union history, do you know which president never delivered that big speech? Our Bruce Morton has the answer.

Plus is Senator John McCain trying to cut in on President Bush's airtime today?

(COMMERCIAL BREAK)

WOODRUFF: We're at the Capitol on the State of the Union day. And among those keeping watch over events here in Washington are the customers at a venerable Iowa restaurant where politics and political debates are always on the menu.

Our John King introduces us to the colorful and opinionated group of diners in Bettendorf, Iowa.

(BEGIN VIDEOTAPE)

KING (voice-over): Working a crossword puzzle is part of Jim Gall's lunchtime routine, not to mention jousting with the Republicans across the counter.

JIM GALL, ROSS' CUSTOMER: The Iraqis had nothing to do with 9/11. And Bush planned on going into Iraq long before 9/11.

KING: Bill Harvey begs to differ and is never shy about interrupting lunch to launch at the liberals.

BILL HARVEY, ROSS' CUSTOMER: They don't like the war. They don't like the economy. They didn't like anything.

KING: Welcome to Ross's, a Bettendorf landmark for 66 years now. Order the Magic Mountain if you brought a hearty appetite. Come at lunchtime if you want a daily debate over the state of the Union, whether or not the president is delivering a big speech.

Harlan Sundholm has been a Ross' regular for 42 years and is upbeat about one state of the Union test for any president.

HARLAN SUNDHOLM, ROSS' CUSTOMER: The economy, fantastic. Couldn't ask for anything better.

KING: The debate here doesn't always track the issues dominating politics back in Washington. But the Iraq war is as much a staple as the bottomless coffee. Glenn Boyles opposed the war but says Congress should give the president another $80 billion in military spending.

GLENN BOYLES, ROSS' CUSTOMER: I wish we weren't there. Now that we are, if the money is necessary, what can you say?

KING: Fred Stanton worries all the president's talk of freedom means there will be another war to pay for. And that's not his only worry.

FRED STANTON, ROSS' CUSTOMER: Why should he impose his moral values on everyone? I mean, it's the Moral Majority is what they are pushing.

KING: Craig Higknight speaks for the Republican side on that one. For 28 years now he has been coming to Ross', the president talking of God and morals are overdue in his view.

CRAIG HIGNIGHT, ROSS' CUSTOMER: He's just pointing out what the moral values of the country have been and what they should be. You know, the country will just literally go to pot if there is not some basic moral construction or basis.

KING: Susan Esser sits in when she thinks the men need a fresh perspective or when the Democrats need some spice. She get a little stirred up when Bill Harvey calls her a communist, still mad at herself, too, for not working harder in last year's campaign.

SUSAN ESSER, ROSS' CUSTOMER: Two times I was laying in bed drinking coffee and watching "The View." I should have been out knocking on doors.

KING: The Republicans are fiercely loyal to the president yet at the same time want some second-term shifts.

HARVEY: I'm concerned they are spending too much money and advancing big government too much.

KING: Carl Christian chose the clam chowder and hopes Mr. Bush chooses to focus more on pocketbook issues.

CARL CHRISTIAN, ROSS' CUSTOMER: I think he has done plenty worldwide. I would like him to maybe concentrate more on domestic.

KING: It is perhaps fitting that Carl is out of place. A Republican in enemy territory because the Democrats are slightly outnumbered this day. Just how the vote went in Iowa two months ago. But here the disagreements are pointed without getting overly personal.

CHRISTIAN: We're enemies in ideals but friends all the way.

(LAUGHTER) UNIDENTIFIED MALE: I was reaching for that knife in my back.

KING: Fierce but friendly partisanship always on the menu at Ross'. Perhaps a State of the Union lesson for Washington.

John King, CNN, Bettendorf, Iowa.

(END VIDEOTAPE)

WOODRUFF: Thanks, John. You can't go to Iowa without getting strong opinions.

Well, supporters of campaign finance reform have a new target in their sights. Up next, Senators McCain and Feingold turn their attention to the big spending 527 groups. Their plan and their new allies when we return.

(COMMERCIAL BREAK)

WOODRUFF: Back here at the Capitol as the president prepares to offer his assessment of the State of the Union, we want to lead off our "Political Bytes" with unfinished business with the 2004 campaign.

Senators John McCain and Russ Feingold today picked up new support in their effort to rein in so-called 527 groups. Republican Trent Lott and Democrat Charles Schumer are backing a proposal to bring 527s under federal campaign finance laws. 527 groups, of course, poured tens of millions of unregulated dollars into last year's presidential race.

In Florida, state election officials say that while voters there cast over a million and a half more ballots in November than they did back in 2000, the number of ballots ruled invalid fell by 83 percent. State leaders say that this report proves that Florida's election reform since 2000 have led to dramatic improvements in state voting procedures.

And looking ahead perhaps to the next presidential campaign, trips to New Hampshire have a way of attracting attention. And this time it is Colorado Republican Congressman Tom Tancredo who is heading to the Granite State. Tancredo will swing through New Hampshire tomorrow and Friday talking about his signature issue, immigration reform.

A history lesson coming up, the State of the Union is one of the few times a head of the executive branch speaks directly to the entire legislative branch. When INSIDE POLITICS returns, Bruce Morton explains how the president's address has changed over time.

(COMMERCIAL BREAK)

WOODRUFF: The tradition of a presidential message to Congress is as old as the nation itself. How and when that message is delivered has gone through some changes as our Bruce Morton explains.

(BEGIN VIDEOTAPE) UNIDENTIFIED MALE: Mr. Speaker, the president of the United States.

BRUCE MORTON, CNN CORRESPONDENT (voice-over): It's the only speech where you get one standing ovation when you enter the room.

REP. DENNIS HASTERT (R-IL), SPEAKER: I have the high privilege and the distinct honor of presenting to you the president of the United States.

MORTON: And a second one when you are formally introduced. Two standing O's before you've opened your mouth, not bad. It started in the Constitution, Article II, Section III: "The president shall from time to time give to Congress information on the state of the Union."

That's turned out to mean every year. George Washington delivered the first one before a joint session of Congress in New York, January 8, 1790. It may have been the shortest ever, 833 words which experts say would be a speech between four and seven minutes. Mr. Bush is expected to take about an hour.

Washington and John Adams delivered theirs in person. Thomas Jefferson thought it was an aristocratic imitation of the British monarch's speech from the throne, unsuitable in a republic. So he sent a written message and they stayed written until Woodrow Wilson delivered one in person 1913.

They've been mostly in person ever since, though Harry Truman and Dwight Eisenhower both sent their last ones in printed form, figuring, let the new the president speak.

And some presidents don't give an official State of the Union speech in their first year, since they've just outlined their program in an inaugural address. Bill Clinton and this president did that.

Now a trivia question while you're waiting for the speech to start. Which two presidents never gave the State of the Union speech? William Henry Harrison died just 32 days after he was inaugurated, and James Garfield was assassinates after 199 days in office without either one giving a State of the Union speech.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: And we appreciate the history lesson as always. Thank you, Bruce. Well, that's it for INSIDE POLITICS on this Wednesday. I'm Judy Woodruff. "CROSSFIRE" starts right now.

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