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Inside Politics

The Bush Budget; Paul Shanley Convicted of Child Rape

Aired February 07, 2005 - 15:29   ET

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

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


(BEGIN VIDEOTAPE)
ANNOUNCER: The Bush budget on the table.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... is a lean budget.

ANNOUNCER: But will many of the president's proposed cuts be cut out by Congress?

SEN. KENT CONRAD (D-ND), BUDGET COMMITTEE: This is a hide-and- seek budget.

ANNOUNCER: Look who's talking. Do John Kerry's new musings and John Edward's new moves say anything about the race for '08?

The final Watergate mystery. Who was the source Woodward and Bernstein dubbed "Deep Throat?" We could be close to finding out.

(END VIDEOTAPE)

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

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

We begin by crunching some numbers that speak to President Bush's priorities and his popularity at the start of his second term. Our just-released poll shows Mr. Bush's approval rating is at its highest level in over a year, 57 percent. That is up from 51 percent in mid January. Our Bill Schneider will have more on the poll and the president's standing a little later.

Meantime, another set of figures is under intense scrutiny here in Washington, the Bush administration budget plan that was delivered to Congress and to reporters today. The $2.5 trillion proposal would eliminate or greatly reduce 150 programs, including many intended to help the poor. In the process, the Bush administration projects the federal deficit would fall to $390 billion next year.

Let's get more on what is in and what's not in the budget from our White House correspondent Dana Bash.

Hi, Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Hi, Judy. Well, you talk about cutting the federal deficit. That was a campaign promise, to cut it in half, and it certainly was the driving force behind this budget. At least this is just one of four books that went up to Capitol Hill today.

Now, the president came into office four years ago, his first term, with a record surplus. But he's starting now his second term with a record deficit. And today the White House insisted that if they follow along the lines of what they proposed they will, in fact, fulfill Mr. Bush's promise to cut the deficit over the next five years.

But there are some campaign promises that Mr. Bush is trying to keep that does produce some increase in spending. Let's take a look at some of those.

First of all, homeland security and defense. There will be about a 5 percent increase overall there. Some say that's not enough.

Also, there will be an increase for community health centers and Pell Grants. That being the loan program for college students.

But that, of course, would be the easy part. The hard part is going to be the 150 programs the president wants to eliminate or at least trim, including some reductions in subsidies for farmers, about $587 million there, reduction for food stamps for the poor, about $1 billion there, reducing some prescription drug benefits for veterans, some wealthy veterans who were not in combat, and eliminating some literacy and anti-drug programs altogether.

Now, perhaps that would fall into the category, Judy, of programs the president said he understands will be hard to cut. But he said today that he understands that Congress must look at this and say that this is an issue of priorities.

(BEGIN VIDEO CLIP)

BUSH: The important question that needs to be asked for all constituencies is whether or not the programs achieve a certain result. Have we set goals? And are those goals being met?

And the poor and disadvantaged absolutely ought to be asking that question too. In other words, what is the goal of a particular program? And if that goal isn't being met, the question ought to be asked why isn't the goal being met. And that's the questions we've been asking.

(END VIDEO CLIP)

BASH: But the White House is well aware of how hard that is going to be. Every program that Mr. Bush is considering cutting or at least eliminating will have a constituency to fight for it, either a member of Congress or a special interest group. And just to put this into context, last year the White House wanted to cut or at least reduce about 120 programs, and only a handful made it through Congress because of the fights there for those programs. Later this afternoon, to underscore perhaps the political importance and the political sensitivity here, the OMB director, Josh Bolten, said they understand how hard this is going to be. Especially, for example, the farm subsidies for perhaps members of Congress who are going to be wanting to go to some politically important states when it comes to farming.

(BEGIN VIDEO CLIP)

JOSH BOLTEN, WHITE HOUSE BUDGET DIRECTOR: I'm expecting enthusiasm from members of Congress for -- for cuts in farm programs. Probably not from members who are in or will be visiting farm states.

(END VIDEO CLIP)

BASH: And even for those perhaps who are not going to be aspiring for higher office in Congress. Some Democrats today, Judy, are saying that they think that this budget is, in their words, are a hoax, because they say not included in this budget are some very important and big-ticket items from this White House, things like funding the war in Iraq and Afghanistan. They will ask for about $80 billion in that. Things like Social Security and the personal retirement accounts Mr. Bush wants to get through, that is about $754 billion.

The White House, though, insists they will be able to cut the deficit, but today they did admit that there is a wildcard, and that is the Iraq war. And they're just going to see how that goes to see whether or not they can actually meet that goal.

WOODRUFF: So a lot in this budget proposal, but some things not in it.

BASH: Right.

WOODRUFF: OK. Thank you very much, Dana.

BASH: Thank you.

WOODRUFF: Well, the president may be upbeat about his chances for getting his budget passed, largely intact, but some members of Congress have other ideas.

Here's our congressional correspondent, Ed Henry.

Hi, Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Good afternoon, Judy.

It's often been said in these corridors that the president proposes and Congress disposes. And a lot of this budget will be disposed, will be thrown out.

If you listen to top lawmakers in both parties, no surprise here that Democrats are pouncing on the details that Dana Bash laid out. Democrats like Senator Kent Conrad, top Democrat on the Budget Committee, today held an event reeling about the cuts to health, to education, to Amtrak, to environmental and veterans programs as well.

Also, Senator Conrad using a little bit of theatrics, holding up a series of charts, pulling back some velcro and saying there are hidden parts to this budget. Here he is.

(BEGIN VIDEO CLIP)

CONRAD: This is a hide-and-seek budget because you've got to look very carefully to find out what's going on. And if you pull back the curtain you find something quite different than what the president wants you to see.

This is all the president wants you to see with respect to his tax cuts. He just wants you to look at the first five years. He doesn't want you to look beyond that.

(END VIDEO CLIP)

HENRY: Now, Senate Budget chairman Judd Gregg also had an event of his own. He acknowledged that some Republicans are not going to be excited abated these 150 federal programs that are being targeted by the administration either to be cut or to be shut down altogether. Senator Gregg, in fact, said that some of the programs he favors and would like to keep alive. But Senator Gregg said that it's a time of sacrifice right now and the government needs to tighten its belt.

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG (R-NH), BUDGET COMMITTEE CHAIRMAN: Yes, there is a clear shift in this -- on priorities. But it was put upon us as a nation. We are at war. When you are at war, you've got to make some difficult decisions. The first decision you have to make, which isn't very difficult, is you support the people in the field, you make sure they have what they need, you make sure we have as a nation and we are doing what is necessary to protect ourselves.

It's going to cost a lot of money. And when you make that decision that does reprioritize other spending. Now, this is not a time when we can have guns and butter in excess.

(END VIDEO CLIP)

HENRY: The big political question now, of course, will be whether or not the president can get the ultimate stick of butter, which is his Social Security reform plan. Democrats today screaming about the fact with all this talk about budget cuts and budget deficits, they do not believe the money will be there for these estimates of anywhere from $2 trillion to $4.5 trillion for the transition costs for Social Security reform, transitioning to private accounts. So obviously this is just an open shot of a long budget war here on Capitol Hill -- Judy.

WOODRUFF: Opening shot. That's a very good way to put it. Thanks very much, Ed Henry.

Well, more questions about the Bush budget ahead when I talk with deputy White House budget director Joel Kaplan and the ranking Democrat on the Senate Budget Committee, you just heard from him, Kent Conrad.

We lead off the Monday "Political Bytes" with a look ahead at the 2008 race for the White House. Up first, Democrat John Edwards, who spent Saturday night in New Hampshire.

As we told you on Friday, Edwards was the featured speaker at a gathering of party activists. His focused his remarks on familiar themes such as fighting poverty. But he also criticized the Bush administration and urged Democrats to remain true to their beliefs.

Massachusetts residents, meantime, appear cool to the idea of another White House run by Senator John Kerry. A Bay State poll found 60 percent of state residents don't want Kerry to run for president again. Forty-three percent, however, predicted that he would make another run. When asked about his future plans, Kerry told the "Boston Globe" over the weekend, "God will figure it out."

In the Midwest, Iowa Governor Tom Vilsack is also getting some negative reviews about a potential White House race. In a survey taken for the "Des Moines Register" newspaper, 55 percent of Iowans was said it would be a bad idea for Vilsack to run for president, 29 percent called it a good idea.

And the sitting vice president, Dick Cheney, is in a strong position to run for the top job. But he says don't hold your breath.

Cheney again ruled out a White House run yesterday on a Sunday talk show. He noted there are a lot of rivers he would like to fish, and he said he also wanted to spend more time with his grandchildren.

President Bush calls his new budget plan a common sense approach. Some Democrats call it a hoax. Up next, we'll go deeper into the Bush budget with a White House insider and a Democratic critic.

Also ahead, in the race for Democratic Party chair, only Howard Dean is left standing. We'll consider the secret to his success and the hurdles ahead.

Plus, is Hillary Clinton holding her own against two other big- name politicians in New York?

(COMMERCIAL BREAK)

WOODRUFF: George W. Bush has unveiled the tightest budget blueprint of his presidency. Let's talk more about who would lose and who would gain under the $2.5 trillion spending plan. We're joined first by Deputy White House Budget Director Joel Kaplan.

Mr. Kaplan, good to see you. Thanks very much for joining us.

It may be the tightest budget, but already Democrats are saying it's not a true picture because it doesn't count the wars in Afghanistan and Iraq. And it doesn't include those upfront expensive costs restructuring Social Security. JOEL KAPLAN, DEPUTY WHITE HOUSE BUDGET DIRECTOR: Well, Judy, a couple things. First of all, the budget the president released today builds on the progress we've made over the last four years by continuing pro-growth economic policies and exercising even greater restraint. And if do that we'll remain on track to cut the deficit in half.

Director Bolten clearly explained today how the transition financing of the personal accounts proposal that President Bush discussed in the State of the Union, he explained exactly how that fits into our deficit path over the next few years. And as for the costs of the war, Director Bolten also explained that the $80 billion roughly supplemental that we intend to submit shortly will be reflected -- or is reflected -- excuse me -- is reflected in the deficit impacts that he discussed today.

Now, beyond 2005, we don't know what the costs of the war will be in Iraq and Afghanistan. The president has a strategy of training Iraqi and Afghanistan security forces to take on greater responsibility.

WOODRUFF: Right.

KAPLAN: So hopefully those costs will diminish over time. But the $81 billion roughly is in there.

WOODRUFF: You look overall at this budget, and what you see is defense spending rising by 4.8 percent, while non-security discretionary spending falls by almost 1 percent. Does this reflect the president's priorities?

KAPLAN: Well, certainly at a time of war, Judy, the president's priorities are to win the war on terror, protect Americans at home, and to promote economic growth, to continue the economic prosperity that we've seen over the last year in particular. And so one of the things we need to do to sustain that economic prosperity is to exercise fiscal restraint.

We've got to make choices. The president's budget does just that. It funds his priorities, and it also makes sure, Judy, that we're focusing taxpayer resources on programs that actually work. In a $10.6 trillion budget there are lots of places to find savings if you look and make sure you're funding priorities and you're actually funding programs that deliver the results that they're intended and the taxpayers expect when we spend their money here in Washington.

WOODRUFF: But most of the fiscal restraint is coming in the domestic area, education, agriculture, environmental protection. Is that correct?

KAPLAN: Even within those areas, Judy, there -- you need to fund priorities. Education is a great example.

The No Child Left Behind Act, which has received 46 percent increases during this administration, is on tap to get another 4 percent increase. But elsewhere in the Department of Education, there are a number of programs that haven't been able to demonstrate results for the American people, for parents and for students. And those programs won't continue to get funding.

I think that's what taxpayers expect us to do when they sent their money here to Washington.

WOODRUFF: The Concord Coalition, I know you're familiar with it. Nonpartisan budget -- or rather deficit-cutting group. The head of this group -- referring to the fact that he said tax revenues today as a percentage of the total economy are what they were 50 years ago. He said, "What's unrealistic is that" -- he's talking about the Bush administration view -- "are trying to fund a government with today's demands on a 1950s stream of revenue."

Is he right?

KAPLAN: Well, Judy, there's no question that tax revenues took a hit as a result of the stock market collapse and the recession. But what you'll see is that now we've gotten recovered strong economic growth, our revenues are increasing as well.

Our revenues were up $100 billion in 2004. It will be up something like $170 billion in 2005. And as you get out to the end of the five-year budget window, what you'll see is that even with making the president's tax relief permanent, revenues as a percentage of the economy begin to approach their historical norm of about 18 percent.

So we're not an under-taxed society. And it's -- it's the taxes -- the tax relief that the president and the Congress has enacted that have been so instrumental in getting the economic growth under way. And we think it's critical to keep that economic growth in place.

WOODRUFF: Well, we hear you. Joel Kaplan is the deputy director of the Office of Management and Budget.

It's very good to see you. Thanks. We appreciate it.

KAPLAN: Thanks for having me.

WOODRUFF: And with me now from Capitol Hill to offer a Democrat's perspective on the budget is Senator Kent Conrad of North Dakota. He is the ranking Democrat on the Senate Budget Committee.

Senator, what's your take on this budget proposal?

CONRAD: Well, I think it is a budget that really conceals from the American people the seriousness of our fiscal condition. And I say that because the only way the president gets to cutting the deficit in half is he just leaves out things.

He leaves out any cost of the war past September 30 of this year. He leaves out the cost of his privatization plan for Social Security, which has a 20-year cost of $4.5 trillion. He just leaves it out. He leaves out item after item.

The alternative minimum tax, which is quickly turning into a middle class tax trap, costs $700 billion to fix. He has none of it in his budget. So this is a budget that really hides from the American people the seriousness of our fiscal condition.

WOODRUFF: At the same time, Senator, you just heard -- or I think you just heard Joel Kaplan, who's the deputy budget director, saying this is a budget proposal that reflects the president's priorities. And right now the focus has to be fighting the war on terror.

CONRAD: It doesn't reflect the president's priorities, because the president says top on his agenda is changing the Social Security system. But he completely leaves out the costs associated with this plan.

Again, over 20 years, that's $4.5 trillion. He just leaves it out.

He leaves out any cost of war past September 30 of this year. Now, the president says he's got no timetable for withdraw, but his budget sets a timetable that there's no cost past September 30 of this year.

That's not real. That isn't leveling with the American people. That's not telling them our true financial condition. The truth is, if you put it all together, the things he's left out, then this deficit -- this budget is headed for deeper and deeper deficit, and our country is headed for deeper and deeper debt just at the worst time, right before the baby boomers retire.

WOODRUFF: Well, let's talk about what's in this budget proposal. Among other things, we know Democrats keep urging the administration to get the deficit down. The president does make some proposed cuts in here, and you -- and Mr. Kaplan, the president are saying these cuts are necessary because these programs aren't working.

CONRAD: Yes, there are programs that aren't working that should be cut. The president's right about that. But, you know, this budget is not about cuts. This budget increases federal spending 8 percent.

So what the president is saying is we've got record deficits now. He says let's increase the spending, and then he says make the tax cuts permanent.

By the way, that cost explodes right after the five-year budget window. So that's hidden from the view of the American people just so much like the rest of his budget. This budget will take us deeper and deep into debt and at the worst possible time.

WOODRUFF: But they point out, and again they're saying it today, we just Mr. Kaplan say it just now, they're saying revenues were up this past year $100 billion, they're going to be up this year $175 billion. He talked about revenues approaching 18 percent of gross domestic product. I mean, you're looking at a -- at a proposed -- at an administration proposal that they say makes good sense in current economic conditions.

CONRAD: You know, unfortunately, if you look at the numbers, what you'll find is, with all of that happy talk, the deficit is going up. Revenue is going up, but the deficit is going up. And this is -- this is the good times.

This is when the trust funds of Social Security and Medicare are throwing off hundreds of billions of dollars of additional revenue. When that worm turns, this country is going to be in very, very serious trouble with the president's fiscal plan. Because the bottom line is they want to talk about the cuts. Yes, there are cuts and there are going to have to be more cuts, but the overall budget is not a cut.

The overall budget goes up 8 percent. And the revenue, the president is proposing cutting the revenue dramatically when we already are spending much more than we're taking in. That doesn't add up, at least in the math I was taught in Bismarck, North Dakota.

WOODRUFF: All right. It's day one. I know we're going to be hearing a lot more about this budget.

Senator Kent Conrad, we appreciate it. Thank you so much for joining us.

CONRAD: You bet.

WOODRUFF: New polls about upcoming races in New York and New Jersey. Straight ahead, we'll tell you how Senator Hillary Clinton fares against her potential challengers, including Rudy Giuliani.

(COMMERCIAL BREAK)

WOODRUFF: Several new polls to tell you about and some state races we're watching in the Northeast. In the 2006 New York Governor's race, a hypothetical match-up shows incumbent Republican George Pataki losing to Democrat Eliot Spitzer by 16 points.

But the Sienna College poll finds former New York Mayor Rudy Giuliani would defeat Spitzer by nine points. Giuliani does not fare so well in a head-to-head race against incumbent Senator Hillary Clinton. The poll gives Clinton a nine-point edge. When Pataki is matched up against Clinton he loses by 26 points.

Democratic Senator Jon Corzyn appears to have the upper hand in this year's race for New Jersey governor. Corzyn comes out on top in head-to-head match-ups against two leading Republicans. Against former GOP gubernatorial candidate Brett Schundler, Corzyn leads by more than 20 points. The senator holds an equally large lead when he's matched against former Senate candidate Doug Forrester.

Selling Social Security no easy task, but does President Bush need a plan B to make his case to Congress? Ron Brownstein joins us in a few minutes with his take.

And later, he was the whistleblower who helped bring down President Nixon. Now, more than three decades later, will we finally learn who Deep Throat is? Our Bruce Morton has the story.

(COMMERCIAL BREAK)

WOODRUFF: It's 4:00 on the East Coast. And as the markets get set to close on Wall Street I'm joined by Kitty Pilgrim in New York with "The Dobbs Report."

Hi, Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: Hi, Judy. Thanks. Well, stocks on Wall Street slightly lower for the session but that's after two weeks of solid gains so as the final trades are being counted the Dow Industrial as you can see is very very close to break even and has been there for a bit. The Nasdaq slightly lower.

The big story in the markets today the dollar hitting a three- month high against the euro earlier today and that follows comments from Federal Reserve chairman Alan Greenspan. He says he sees improvement ahead for the U.S. economy.

The other big story very interesting this time of year, crude oil. It's selling more than a dollar today just above $45 a barrel. That's near its lowest level in three weeks but oil's recent run-up is translating into higher prices at the gas pump. The Lundberg Survey says gas prices rose more than $0.06 a gallon over the past two weeks and the average nationwide is now $1.91 a gallon.

The airline industry is objecting to one proposal in President Bush's budget. The president is asking the airlines to raise security fees from $5 to $11 on each round trip ticket. Well, the Air Transportation Association warns the industry's tax burden high enough already could be laying on more taxes and jeopardizing jobs and that could slow the airlines' recovery. Travelers would also likely see an increase in ticket prices.

Well, as we've reported, there is a suspected link between pain- killing drugs and heart attacks or strokes. And now the Food and Drug Administration plans to investigate that link further. A new panel meets next week to review the entire class of drugs known as Cox 2 inhibitors. Now their findings could put restrictions on some of the most widely used pain-killers and they are Celebrex, Bextra and Aleve.

Coming up on CNN 6:00 p.m. Eastern tonight on "LOU DOBBS", we begin our special report on America's security risks. Taking a look at our nations infrastructure. And tonight, a look at dams around the country, many of which are in dangerous disrepair with little money to fix them.

(BEGIN VIDEO CLIP)

MEG GALLOWAY, STATE DAM SAFETY OFFICIALS: Dams that were once in unpopulated areas now have development around them. So at the time they were built, they may have been constructed to lower design standards, and now because there is population at risk downstream the dams should be upgraded.

(END VIDEO CLIP) WOODRUFF: Also tonight, President Bush has sent his $2.5 trillion budget proposal to Congress. And Republican Senator Thad Cochran, chairman of the Senate appropriations committee joins us.

And also broken borders. The president's proposed budget does not include nearly enough funding for homeland security. (UNINTELLIGIBLE) nation's borders at risk? We'll have a special report.

And one L.A. County official wants to keep fake identification cards out of the hands of terrorists by pushing the county to stop accepting the popular type of IDs, it's easy to counterfeit. We'll have that story and more tonight 6:00 p.m. Eastern. But for now back to Judy Woodruff -- Judy.

WOODRUFF: Thanks, Kitty, very much. We'll be watching at 6:00. INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

BUSH: I'm very optimistic...

ANNOUNCER: And why not? The president's poll numbers are on the rise, but what's behind the jump?

HOWARD DEAN, DNC CHAIR CANDIDATE: You have the power to take our country back.

ANNOUNCER: Call him the last man standing. Howard Dean is the only candidate left in the race to run the Democratic party. But is there friction between Dean and top Democrats in Congress?

A very violent weekend in Iraq as euphoria over the national elections wane. We'll talk with a senator just back from Baghdad on what's next for U.S. troops in Iraq.

(END VIDEOTAPE)

WOODRUFF: Welcome back. As President Bush begins another week at the White House, it may be hard to top the last one. With all the to do over his State of the Union address and the elections in Iraq. But there is something new for the White House to savor. A spurt in Mr. Bush's approval rating has a good deal to do with what happened last week. Here now our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): President Bush's job approval is up, 57 percent, higher than the 51 percent who voted to reelect him three months ago. Well, sure, you say, he just delivered his State of the Union. But the main topic of that speech was Social Security. And the president's approval rating on Social Security did not change much. What did change? Iraq. Up eight points. What happened? The January 30 election.

DONALD RUMSFELD, DEFENSE SECRETARY: The people who put their names on the ballots showed a great deal of courage and that has to be inspirational for the people of Iraq, to see that movement forward politically.

SCHNEIDER: It was also encouraging for Americans who didn't expect too much from the Iraqi election.

SEN. JOHN KERRY (D), MASSACHUSETTS: The early indications are pretty much what I think we expected.

SCHNEIDER: Actually, more than 60 percent of Americans say the Iraqi election went better than they expected. And there's been a turn around in opinion over whether the war in Iraq was a mistake. Last month, most Americans said it was a mistake to send U.S. troops to Iraq. Now most say Iraq was not a mistake. The public is not so sure about the president's Social Security plan. They disapprove of it by 50 percent to 44 percent. In his State of the Union speech President Bush aimed his pitch at younger workers.

BUSH: Your money will grow over time at a greater rate than anything the current system can deliver.

SCHNEIDER: But Americans under 55 are not showing much enthusiasm for the president's proposal. They're divided. 45 percent like it. 48 percent don't. President Bush reassured older workers that for them Social Security would not change in any way. Didn't matter. Older Americans are solidly opposed to the president's plan.

(END VIDEOTAPE)

(on camera): The domestic issues the president stressed in his State of the Union, Social Security, tax reform, legal reform and same-sex marriages are not the public's top priorities. Those are terrorism and Iraq.

So what's giving the president a boost isn't the news from Washington. It's the news from Baghdad -- Judy.

WOODRUFF: I'm beginning to think the Social Security reaction, dividing along age lines.

SCHNEIDER: Exactly at age 55, where the president drew the line.

WOODRUFF: OK. Bill Schneider, thank you very much.

Now we turn to the race for Democratic party chairman which isn't really a race any more. Howard Dean's final rival for the job dropped out today. Another bout of what appears to be the inevitable. The failed presidential candidate's election as DNC chair on Saturday.

(BEGIN VIDEOTAPE)

DEAN: You have the power to take back the Democratic party.

WOODRUFF (voice-over): He broke through as an anti-establishment rebel, an us versus them candidate. And by them Dean wasn't just talking about Republicans. DEAN: There's a big difference between what goes on in Washington and what goes on in the rest of the country.

WOODRUFF: Dean's ambitions have evolved and so has his tone. But even now, he still uses Washington like a four-letter word. Like when he's talking about...

DEAN: Washington gossip.

WOODRUFF: Or...

DEAN: Washington rumor.

WOODRUFF: All red flags no doubt to Washington's top two Democrats: Senator Minority Leader Harry Reid and House Minority Leader Nancy Pelosi. Both struggled to mount a Stop Dean movement in the DNC horse race. Their candidate former Indiana congressman and 9/11 commissioner Tim Roemer enjoyed a mini boomlet.

REP. NANCY PELOSI (D), MINORITY LEADER: His message of the Midwest and as a moderate Democrat was one I thought would be useful.

WOODRUFF: But Roemer's candidacy never really got off the ground and today he pulled out. When Dean's victory began to seem inevitable Pelosi and Reid put him on notice. He may have won over the members of the DNC, but they still set the party's agenda. Said, Reid, "the Democratic chairman as a constituency of 447 people. Our constituency is much larger than that." A sentiment Pelosi echoes.

PELOSI: The policy is made by the members of the Senate, the House the governors, mayors, all elected officials throughout our country. And that isn't the role of the party.

WOODRUFF: Still, Dean has bucked the establishment again, zeroing in on his party's grassroots and not the elites. Now with victory in the bag, he's starting to court the party leaders. We're seeing overtures to those Washington downs. A phone call with Reid last week. This from a man who knows the value of political relationships.

(END VIDEOTAPE)

(on camera): And by the way, our new poll drives home some of the challenges ahead for Howard Dean and the Democrats. American say they are divided in their opinion of Dean with slightly more having an unfavorable view of him. And the public has a more favorable view of the Republican party than of the Democratic party by ten percentage points.

The partisan wrangling continues over Iraq even after last week's landmark vote. Up next, has new violence put a damper on the post- election excitement? I'll talk with Senator Johnson who just returned from Iraq.

Also, ahead, what's missing from President Bush's plan to reform Social Security? Analyst Ron Brownstein shares his thoughts. And later, the unanswered question from the Nixon era, who was Deep Throat?

(COMMERCIAL BREAK)

WOODRUFF: We have this news just into CNN. We are just about 10 minutes away from a verdict in the trial of Roman Catholic priest Paul Shanley on trial in Massachusetts for sexual abuse. And we will bring you live coverage of that verdict just as soon as it gets under way.

Meantime, a series of deadly attacks today in Iraq today killed more than two dozen people. Fifteen people died in the city of Baqubah in a suicide car bomb explosion near a crowd of people who were waiting to apply for jobs. Twelve more were killed in Mosul when a suicide bomber attacked a crowd of security personnel outside a temporary police station.

With me now to talk more about the situation in Iraq, Republican Senator John Thune of South Dakota, he's a member the Armed Services Committee and he just returned from a trip to Iraq.

Senator, you were just back last night. How long were you actually in Iraq?

SEN. JOHN THUNE (R-SD), ARMED SERVICES CMTE.: We were 13 hours on the ground in Baghdad, Judy, split about evenly between Camp Victory at the headquarters there and about half of it in the Green Zone.

WOODRUFF: What is your sense of Iraq post-election? There seemed to be almost euphoria last week, Senator, and now we keep hearing daily suicide attacks. How did you read it?

THUNE: Well, I think the terrorists are trying to get the momentum back. But clearly after last Sunday's elections -- or the elections a week ago Sunday, there's a lot of momentum. The exuberance among the Iraqi people was incredible to watch.

We were -- had an opportunity to visit with a number of Iraqi voters. They were still sporting their ink-stained finger that they used on the ballot at the week-ago election. It was really something to observe. And all of the commanders in the region, the troops, everybody who had an opportunity to witness that said it was really historic, really remarkable. And they think it will be significant in helping us turn the corner toward getting this thing resolved.

WOODRUFF: So just the act of the election in and of itself, you're saying, is turning the tide?

THUNE: Well, I think the election was really sort of a watershed event. And it's not just that. It's also what's happening with respect to getting the Iraqi army trained. We visited with General Petraeus, who is in charge of that over there.

And they're really making progress in terms of getting the Iraqi security forces, whether that's the army or the national guard, the police force there, in a position to defend the Iraqi people. The real challenge now is to get a command structure put in place. But if we can get a democracy stood up there, and this government is, in fact, inclusive and reaches out to some of the minority parties, I think that we are -- we've made a lot progress. That doesn't mean that there isn't some heavy lifting ahead and that these terrorists are going to go away.

But I think there were -- everybody was very hopeful and very optimistic when we were there.

WOODRUFF: Well, what about reaching out to these minority parties. There is serious concern that the Sunnis are not going to be represented in appropriate numbers in the government. How did you read that?

THUNE: We visited with a leading member of the Shia alliance ticket and also the deputy prime minister there, Salih, who is a Kurd, and talked about the importance of having an inclusive government that does include the minority parties when it comes to forming a cabinet, when it comes to drafting and ratifying a constitution.

There seems to be an acknowledgement, a recognition there that in order for this democracy to be successful that it has to provide representation for some of those minority interests. So I felt very good based on the conversations that we had, that those efforts are going to be made. But I think it's something that we're going to have to monitor closely as this moves forward.

WOODRUFF: I ask, because the U.S. can't force that, can it?

THUNE: We can't force it. And we frankly shouldn't force it. But I think there is a -- I think the people who are in charge there right now understand that this is something that in order for this to work, it has to take place. And there are efforts being made to reach out to the Sunni minority.

The Kurds are going to be, I think, in the second place on the ballot when this is all counted. But there are going to be some -- there's already some negotiating and brokering going on, positioning for power and building coalitions in the new government. But it's important that that take place.

WOODRUFF: And on that other point you raised, Senator, about getting the Iraqis themselves to take over their own -- their country's security themselves, even Secretary Rumsfeld who talks about 135,000 Iraqi security, says that includes a number who, in his words, are "green as grass." How long is the wait, do you think, for Iraqis to be able to handle that?

THUNE: I think a real key event was the election, because the Iraqi security forces had primary responsibility for protecting and defending all the polling places, the over 5,000 polling places in the election. And there were some heroic acts by some of the Iraqi security forces in protecting people who wanted to vote.

But it is getting a command structure. It's getting people who are willing to assume leadership with those "green as grass" people. There are followers there. And the intensity has picked up in terms of people who are signing up to serve in the Iraqi security forces, but it's going to mean developing a leadership capacity to have someone in place to lead those troops.

WOODRUFF: Senator John Thune, just back last night from a very quick trip to the Middle East and to Iraq. Senator, we appreciate you joining us.

THUNE: Thanks, Judy.

WOODRUFF: Thank you very much.

And we want to tell our viewers, again, word coming down from Cambridge, Massachusetts, the jury has reached a verdict in the trial of Roman Catholic priest Paul Shanley. That verdict coming down in just a matter of minutes. We'll be carrying it live. We'll be right back.

(COMMERCIAL BREAK)

WOODRUFF: Any moment now, we are expecting a verdict in the trial of Roman Catholic priest Paul Shanley. You're was watching him in a courtroom in Cambridge, Massachusetts. As soon as that verdict is announced, it is being read, CNN will take you to the courtroom live.

In the meantime, more now on the day's big development on Capitol Hill. President Bush submitted a proposed $2.5 trillion budget to Congress. The measure eliminates or reduces 150 government programs and it projects an estimated $390 billion deficit. Political analyst Ron Brownstein from The Los Angeles Times joins me to talk about the Bush White House proposals for the budget, as well as Social Security.

Ron, when you put the budget and all that it faces on top of the Social Security proposal the president has laid out there, just how tough is the job he has in front of him?

RON BROWNSTEIN, CNN POLITICAL ANALYST: Well, the intersection, really, Judy, is the impact and the deficit and the debt on the Social Security debate. If you remember back in 2000, President Bush implied, although never directly stating, that he would split the anticipated federal surplus between his tax cut and use some of it for the cost of transition to a partially privatized Social Security system.

The problem he's got now is that because the budget is back in deficit, because the national debt is rising, it's projected to hit $6 trillion by 2009, according to the documents released today. That makes it much tougher to do Social Security. There is not money in the federal budget to fund the individual accounts -- the diversion of money into the individual accounts. As a result you have to borrow.

WOODRUFF: Ron, I'm going to have to interrupt you. My apologies, Judge Stephen Neel in the courtroom in Cambridge, Massachusetts, beginning to deal with the announcement of a verdict in the Paul Shanley trial. We're listening in.

UNIDENTIFIED MALE: ... Paul Shanley with indecent assault and battery on a child under 14. What say you, Mr. Foreman, is the defendant guilty or not guilty?

UNIDENTIFIED MALE: Guilty.

UNIDENTIFIED MALE: So say Mr. Foreman.

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: So say all members of this panel.

JURY: Yes.

UNIDENTIFIED MALE: As for (UNINTELLIGIBLE) 14 of 2002 894 (ph) charged defendant Paul Shanley with indecent assault and battery on a child under 14. What say you, Mr. Foreman, is the defendant guilty or not guilty?

UNIDENTIFIED MALE: Guilty.

UNIDENTIFIED MALE: So say Mr. Foreman.

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: So say all members of this panel.

JURY: Yes.

UNIDENTIFIED MALE: Ladies and gentlemen, you may be seated.

UNIDENTIFIED MALE: (UNINTELLIGIBLE) counsels, would you like to look at the verdict slips?

UNIDENTIFIED MALE: The verdicts may be recorded.

UNIDENTIFIED MALE: (UNINTELLIGIBLE) the verdicts as recorded by the court. You may be seated.

UNIDENTIFIED MALE: Ladies and gentlemen and alternates, your service as jurors and as alternates in this case is now complete. And for that service, the court and the commonwealth and the attorneys thank you. I would ask at this time that you go back to the jury room for one last time where I will come back and speak to you briefly.

WOODRUFF: All right. We are looking at live pictures in a courtroom in Cambridge, Massachusetts, where a defrocked Catholic priest Paul Shanley has just been pronounced -- the charges against him, he has been pronounced guilty on several counts. CNN's Dan Lothian has been covering the trial. He's with us now on the telephone.

Dan, guilty on all counts?

DAN LOTHIAN, CNN CORRESPONDENT: That is correct. First of all, he was charged with two counts of rape of a child. The jury found him guilty on both of those counts. And then on two counts of indecent assault, he's been found guilty on both of those as well. He could face up to life in prison.

This is a case, defrocked priest Paul Shanley was sort of the -- one of the sort of glaring cases in the sexual abuse scandal in the Boston archdiocese. This case dating back to '80s when he was working in a church in the Newton area which is west of Boston.

The victim claimed that rape happened when he was 6 years old. It happened inside of the church. And yet, and he had what seems to be an important issue in this case, repressed memories. Only a few years ago he started talking about what he said happened to him. And that was really at the center of this trial.

Could you believe that these repressed memories were true or were they false? The defense casting doubt on these repressed memories. And amazingly, this two-week trial only presenting one witness who is a U.C. psychologist who questioned the validity of repressed memories.

So once again, the defrocked priest, Paul Shanley, 74 years old, found guilty on two counts of rape of a child, and guilty on both of the counts of indecent assault.

WOODRUFF: All right, CNN's Dan Lothian who has been covering this trial, also with us on the telephone -- or rather, I guess in New York, CNN's legal analyst Jeff Toobin.

Jeff, what happened to the argument by the defense that these memories were just fabricated because they came out so late?

JEFFREY TOOBIN, CNN LEGAL ANALYST: Well, that was an argument forcefully made and apparently quickly rejected by this jury. This was a peculiar case, though, Judy, because Shanley is so much a symbol of the priest abuse scandal.

But yet this only related to one child. And it was a somewhat shaky case because it was so old, you know, almost 20 years old. And there was this issue of recovered or repressed memory which a lot of experts have trouble with. So even though Shanley is a symbol of so much that went wrong in the Catholic Church and he has now been convicted, this particular case was not all that strong against him.

WOODRUFF: Does this close a chapter of some sort, Jeff, or is this just one more part of a long-running story here?

TOOBIN: Well, I think the answer probably is a little of both. Certainly, it closes the chapter on Shanley himself. He's 74 years old. He faces up to a life sentence. So we can safely assume he will die in prison. But both the civil and criminal aspects of this story continue to reverberate, not in as high-profile a way as it was a couple of years ago, but this is very much a story that's not over.

WOODRUFF: Jeff Toobin, CNN legal analyst, commenting on the verdict. Paul Shanley guilty on all counts in a case involving child abuse that occurred many years ago. Now, again, our apologies to Ron Brownstein, our political analyst with The Los Angeles Times. Ron, just to reconstruct what you and I were talking about, the White House today coming out with proposed budget cuts. You've got the deficit, you've got a huge budget proposal, and at the same time, you've got this big Social Security proposal. Where does that leave the White House right now?

BROWNSTEIN: Well, I think right now, the big problem for Social Security is the intersection between the deficit -- one of the big problems for Social Security is the intersections between the deficit and the president's plan because of the way Social Security is now financed, to create the individual accounts the president wants, you'd have to borrow a large amount of money to cover the benefits that are due the people who are retired today. As much as $4.5 trillion would have to be borrowed in the next 20 years.

That's obviously harder to sell politically, Judy, at a time when the budget is already in deficit. Many of the deficit hawks are sort of gagging on the thought of borrowing that much more money. And that's one more of the obstacles the president faces as he tries to push forward the Social Security plan.

WOODRUFF: So what is the president going to have to do. You write today, Ron, about there's at least one alternative out there for him to begin to think about. What are his options?

BROWNSTEIN: Well, the problem he has got on Social Security right now is that usually the way the president has gotten things done is by getting the House Republicans to go along with his ideas, push it through the house, put pressure on the Senate to follow suit.

Right now, the House Republicans are basically saying they don't want go on record voting for a controversial Social Security package unless they're confident they can also pass the Senate, and with 43 Senate Democrats signing a letter last week saying they will not support any plan that increases the deficit, obviously that's enough votes to filibuster if they're willing to do it. So the whole thing is gridlocked.

Some of the people on the Hill, even some House Republicans are suggesting that maybe the answer is to move away from this idea of carving out the account from the payroll tax, which the bright red line for Democrats, and finding a way to create an investment account that would be an add-on in addition to Social Security.

The downside to that, Judy, you'd have to raise a new source of revenue to pay for it and that might alienate -- that probably would alienate many of the conservatives.

WOODRUFF: Well, there's a whole lot for us to talk about. Ron Brownstein joining us today to look at Social Security and how much of a bigger challenge it is now that we see the deficit numbers in black and white, or I should say, in red, black and white.

OK, Ron, thanks very much.

BROWNSTEIN: Thank you.

WOODRUFF: One of America's biggest political mysteries may be closer to being revealed. A source known only as Deep Throat provided information that helped to bring down the Nixon White House. Now a former Nixon aide says that Deep Throat is ill.

Our Bruce Morton looks at what this could mean for this long-held secret.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP FROM "ALL THE PRESIDENT'S MEN")

HAL HOLBROOK, ACTOR: Just follow the money.

BRUCE MORTON, CNN CORRESPONDENT: That advice more than 30 years ago led Washington Post reporters Bob Woodward and Carl Bernstein to trace money one of the Watergate burglars had back to President Richard Nixon's re-election campaign. In the movie "All the President's Men," Deep Throat was Hal Holbrook. But his real identity in this city where everything leaks, have remained a secret.

Now, John Dean, he was Nixon's White House counsel and the author of one of the Senate Watergate Committee hearings most memorable lines.

JOHN DEAN, NIXON WHITE HOUSE COUNSEL: I began telling the president that there was a cancer growing on the presidency.

MORTON: John Dean, who went to prison over Watergate, now writes in The Los Angeles Times that a source tells him that Deep Throat is ill, and that Woodward has told the executive editor of The Post about the illness.

Ben Bradlee, who edited The Post back then, knows who Deep Throat is and has written an obituary on him. Bradlee has said that publicly. Woodward had no comment about any alleged illness. And Leonard Downie, the current executive editor of The Post, says Woodward has not told him Deep Throat is ill.

Deep Throat helped bring down a president. Though Dean says Throat gave out some bad information, too, charging that Senator Howard Baker, a member of the Senate Watergate Committee, was reporting back to the White House.

Baker in fact was a tough investigator asking the key question.

SEN. HOWARD BAKER (R), TENNESSEE: What did the president know and when did he know it?

MORTON (on camera): Whistleblowers sometimes act in the public interest, a Pentagon work, say, tipping a reporter about an expensive new weapon that isn't working the way it's supposed to. Sometimes they act out of pure political spite.

Reporters who promise confidentiality are supposed to keep those promises, even if a judge threatens him with jail for contempt of court. Still, 30-plus years in Washington? Amazing.

(BEGIN VIDEO CLIP FROM "ALL THE PRESIDENT'S MEN")

HOLBROOK: No, I have to do this my way.

(END VIDEO CLIP)

MORTON: Whatever, it's worked.

Bruce Morton, CNN.

(END VIDEOTAPE)

WOODRUFF: Bruce, what are you doing in that garage, could it be you? All right. That's it for INSIDE POLITICS. I'm Judy Woodruff. Thanks for joining us. "CROSSFIRE" starts right now.

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


Aired February 7, 2005 - 15:29   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
ANNOUNCER: The Bush budget on the table.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... is a lean budget.

ANNOUNCER: But will many of the president's proposed cuts be cut out by Congress?

SEN. KENT CONRAD (D-ND), BUDGET COMMITTEE: This is a hide-and- seek budget.

ANNOUNCER: Look who's talking. Do John Kerry's new musings and John Edward's new moves say anything about the race for '08?

The final Watergate mystery. Who was the source Woodward and Bernstein dubbed "Deep Throat?" We could be close to finding out.

(END VIDEOTAPE)

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

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

We begin by crunching some numbers that speak to President Bush's priorities and his popularity at the start of his second term. Our just-released poll shows Mr. Bush's approval rating is at its highest level in over a year, 57 percent. That is up from 51 percent in mid January. Our Bill Schneider will have more on the poll and the president's standing a little later.

Meantime, another set of figures is under intense scrutiny here in Washington, the Bush administration budget plan that was delivered to Congress and to reporters today. The $2.5 trillion proposal would eliminate or greatly reduce 150 programs, including many intended to help the poor. In the process, the Bush administration projects the federal deficit would fall to $390 billion next year.

Let's get more on what is in and what's not in the budget from our White House correspondent Dana Bash.

Hi, Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Hi, Judy. Well, you talk about cutting the federal deficit. That was a campaign promise, to cut it in half, and it certainly was the driving force behind this budget. At least this is just one of four books that went up to Capitol Hill today.

Now, the president came into office four years ago, his first term, with a record surplus. But he's starting now his second term with a record deficit. And today the White House insisted that if they follow along the lines of what they proposed they will, in fact, fulfill Mr. Bush's promise to cut the deficit over the next five years.

But there are some campaign promises that Mr. Bush is trying to keep that does produce some increase in spending. Let's take a look at some of those.

First of all, homeland security and defense. There will be about a 5 percent increase overall there. Some say that's not enough.

Also, there will be an increase for community health centers and Pell Grants. That being the loan program for college students.

But that, of course, would be the easy part. The hard part is going to be the 150 programs the president wants to eliminate or at least trim, including some reductions in subsidies for farmers, about $587 million there, reduction for food stamps for the poor, about $1 billion there, reducing some prescription drug benefits for veterans, some wealthy veterans who were not in combat, and eliminating some literacy and anti-drug programs altogether.

Now, perhaps that would fall into the category, Judy, of programs the president said he understands will be hard to cut. But he said today that he understands that Congress must look at this and say that this is an issue of priorities.

(BEGIN VIDEO CLIP)

BUSH: The important question that needs to be asked for all constituencies is whether or not the programs achieve a certain result. Have we set goals? And are those goals being met?

And the poor and disadvantaged absolutely ought to be asking that question too. In other words, what is the goal of a particular program? And if that goal isn't being met, the question ought to be asked why isn't the goal being met. And that's the questions we've been asking.

(END VIDEO CLIP)

BASH: But the White House is well aware of how hard that is going to be. Every program that Mr. Bush is considering cutting or at least eliminating will have a constituency to fight for it, either a member of Congress or a special interest group. And just to put this into context, last year the White House wanted to cut or at least reduce about 120 programs, and only a handful made it through Congress because of the fights there for those programs. Later this afternoon, to underscore perhaps the political importance and the political sensitivity here, the OMB director, Josh Bolten, said they understand how hard this is going to be. Especially, for example, the farm subsidies for perhaps members of Congress who are going to be wanting to go to some politically important states when it comes to farming.

(BEGIN VIDEO CLIP)

JOSH BOLTEN, WHITE HOUSE BUDGET DIRECTOR: I'm expecting enthusiasm from members of Congress for -- for cuts in farm programs. Probably not from members who are in or will be visiting farm states.

(END VIDEO CLIP)

BASH: And even for those perhaps who are not going to be aspiring for higher office in Congress. Some Democrats today, Judy, are saying that they think that this budget is, in their words, are a hoax, because they say not included in this budget are some very important and big-ticket items from this White House, things like funding the war in Iraq and Afghanistan. They will ask for about $80 billion in that. Things like Social Security and the personal retirement accounts Mr. Bush wants to get through, that is about $754 billion.

The White House, though, insists they will be able to cut the deficit, but today they did admit that there is a wildcard, and that is the Iraq war. And they're just going to see how that goes to see whether or not they can actually meet that goal.

WOODRUFF: So a lot in this budget proposal, but some things not in it.

BASH: Right.

WOODRUFF: OK. Thank you very much, Dana.

BASH: Thank you.

WOODRUFF: Well, the president may be upbeat about his chances for getting his budget passed, largely intact, but some members of Congress have other ideas.

Here's our congressional correspondent, Ed Henry.

Hi, Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Good afternoon, Judy.

It's often been said in these corridors that the president proposes and Congress disposes. And a lot of this budget will be disposed, will be thrown out.

If you listen to top lawmakers in both parties, no surprise here that Democrats are pouncing on the details that Dana Bash laid out. Democrats like Senator Kent Conrad, top Democrat on the Budget Committee, today held an event reeling about the cuts to health, to education, to Amtrak, to environmental and veterans programs as well.

Also, Senator Conrad using a little bit of theatrics, holding up a series of charts, pulling back some velcro and saying there are hidden parts to this budget. Here he is.

(BEGIN VIDEO CLIP)

CONRAD: This is a hide-and-seek budget because you've got to look very carefully to find out what's going on. And if you pull back the curtain you find something quite different than what the president wants you to see.

This is all the president wants you to see with respect to his tax cuts. He just wants you to look at the first five years. He doesn't want you to look beyond that.

(END VIDEO CLIP)

HENRY: Now, Senate Budget chairman Judd Gregg also had an event of his own. He acknowledged that some Republicans are not going to be excited abated these 150 federal programs that are being targeted by the administration either to be cut or to be shut down altogether. Senator Gregg, in fact, said that some of the programs he favors and would like to keep alive. But Senator Gregg said that it's a time of sacrifice right now and the government needs to tighten its belt.

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG (R-NH), BUDGET COMMITTEE CHAIRMAN: Yes, there is a clear shift in this -- on priorities. But it was put upon us as a nation. We are at war. When you are at war, you've got to make some difficult decisions. The first decision you have to make, which isn't very difficult, is you support the people in the field, you make sure they have what they need, you make sure we have as a nation and we are doing what is necessary to protect ourselves.

It's going to cost a lot of money. And when you make that decision that does reprioritize other spending. Now, this is not a time when we can have guns and butter in excess.

(END VIDEO CLIP)

HENRY: The big political question now, of course, will be whether or not the president can get the ultimate stick of butter, which is his Social Security reform plan. Democrats today screaming about the fact with all this talk about budget cuts and budget deficits, they do not believe the money will be there for these estimates of anywhere from $2 trillion to $4.5 trillion for the transition costs for Social Security reform, transitioning to private accounts. So obviously this is just an open shot of a long budget war here on Capitol Hill -- Judy.

WOODRUFF: Opening shot. That's a very good way to put it. Thanks very much, Ed Henry.

Well, more questions about the Bush budget ahead when I talk with deputy White House budget director Joel Kaplan and the ranking Democrat on the Senate Budget Committee, you just heard from him, Kent Conrad.

We lead off the Monday "Political Bytes" with a look ahead at the 2008 race for the White House. Up first, Democrat John Edwards, who spent Saturday night in New Hampshire.

As we told you on Friday, Edwards was the featured speaker at a gathering of party activists. His focused his remarks on familiar themes such as fighting poverty. But he also criticized the Bush administration and urged Democrats to remain true to their beliefs.

Massachusetts residents, meantime, appear cool to the idea of another White House run by Senator John Kerry. A Bay State poll found 60 percent of state residents don't want Kerry to run for president again. Forty-three percent, however, predicted that he would make another run. When asked about his future plans, Kerry told the "Boston Globe" over the weekend, "God will figure it out."

In the Midwest, Iowa Governor Tom Vilsack is also getting some negative reviews about a potential White House race. In a survey taken for the "Des Moines Register" newspaper, 55 percent of Iowans was said it would be a bad idea for Vilsack to run for president, 29 percent called it a good idea.

And the sitting vice president, Dick Cheney, is in a strong position to run for the top job. But he says don't hold your breath.

Cheney again ruled out a White House run yesterday on a Sunday talk show. He noted there are a lot of rivers he would like to fish, and he said he also wanted to spend more time with his grandchildren.

President Bush calls his new budget plan a common sense approach. Some Democrats call it a hoax. Up next, we'll go deeper into the Bush budget with a White House insider and a Democratic critic.

Also ahead, in the race for Democratic Party chair, only Howard Dean is left standing. We'll consider the secret to his success and the hurdles ahead.

Plus, is Hillary Clinton holding her own against two other big- name politicians in New York?

(COMMERCIAL BREAK)

WOODRUFF: George W. Bush has unveiled the tightest budget blueprint of his presidency. Let's talk more about who would lose and who would gain under the $2.5 trillion spending plan. We're joined first by Deputy White House Budget Director Joel Kaplan.

Mr. Kaplan, good to see you. Thanks very much for joining us.

It may be the tightest budget, but already Democrats are saying it's not a true picture because it doesn't count the wars in Afghanistan and Iraq. And it doesn't include those upfront expensive costs restructuring Social Security. JOEL KAPLAN, DEPUTY WHITE HOUSE BUDGET DIRECTOR: Well, Judy, a couple things. First of all, the budget the president released today builds on the progress we've made over the last four years by continuing pro-growth economic policies and exercising even greater restraint. And if do that we'll remain on track to cut the deficit in half.

Director Bolten clearly explained today how the transition financing of the personal accounts proposal that President Bush discussed in the State of the Union, he explained exactly how that fits into our deficit path over the next few years. And as for the costs of the war, Director Bolten also explained that the $80 billion roughly supplemental that we intend to submit shortly will be reflected -- or is reflected -- excuse me -- is reflected in the deficit impacts that he discussed today.

Now, beyond 2005, we don't know what the costs of the war will be in Iraq and Afghanistan. The president has a strategy of training Iraqi and Afghanistan security forces to take on greater responsibility.

WOODRUFF: Right.

KAPLAN: So hopefully those costs will diminish over time. But the $81 billion roughly is in there.

WOODRUFF: You look overall at this budget, and what you see is defense spending rising by 4.8 percent, while non-security discretionary spending falls by almost 1 percent. Does this reflect the president's priorities?

KAPLAN: Well, certainly at a time of war, Judy, the president's priorities are to win the war on terror, protect Americans at home, and to promote economic growth, to continue the economic prosperity that we've seen over the last year in particular. And so one of the things we need to do to sustain that economic prosperity is to exercise fiscal restraint.

We've got to make choices. The president's budget does just that. It funds his priorities, and it also makes sure, Judy, that we're focusing taxpayer resources on programs that actually work. In a $10.6 trillion budget there are lots of places to find savings if you look and make sure you're funding priorities and you're actually funding programs that deliver the results that they're intended and the taxpayers expect when we spend their money here in Washington.

WOODRUFF: But most of the fiscal restraint is coming in the domestic area, education, agriculture, environmental protection. Is that correct?

KAPLAN: Even within those areas, Judy, there -- you need to fund priorities. Education is a great example.

The No Child Left Behind Act, which has received 46 percent increases during this administration, is on tap to get another 4 percent increase. But elsewhere in the Department of Education, there are a number of programs that haven't been able to demonstrate results for the American people, for parents and for students. And those programs won't continue to get funding.

I think that's what taxpayers expect us to do when they sent their money here to Washington.

WOODRUFF: The Concord Coalition, I know you're familiar with it. Nonpartisan budget -- or rather deficit-cutting group. The head of this group -- referring to the fact that he said tax revenues today as a percentage of the total economy are what they were 50 years ago. He said, "What's unrealistic is that" -- he's talking about the Bush administration view -- "are trying to fund a government with today's demands on a 1950s stream of revenue."

Is he right?

KAPLAN: Well, Judy, there's no question that tax revenues took a hit as a result of the stock market collapse and the recession. But what you'll see is that now we've gotten recovered strong economic growth, our revenues are increasing as well.

Our revenues were up $100 billion in 2004. It will be up something like $170 billion in 2005. And as you get out to the end of the five-year budget window, what you'll see is that even with making the president's tax relief permanent, revenues as a percentage of the economy begin to approach their historical norm of about 18 percent.

So we're not an under-taxed society. And it's -- it's the taxes -- the tax relief that the president and the Congress has enacted that have been so instrumental in getting the economic growth under way. And we think it's critical to keep that economic growth in place.

WOODRUFF: Well, we hear you. Joel Kaplan is the deputy director of the Office of Management and Budget.

It's very good to see you. Thanks. We appreciate it.

KAPLAN: Thanks for having me.

WOODRUFF: And with me now from Capitol Hill to offer a Democrat's perspective on the budget is Senator Kent Conrad of North Dakota. He is the ranking Democrat on the Senate Budget Committee.

Senator, what's your take on this budget proposal?

CONRAD: Well, I think it is a budget that really conceals from the American people the seriousness of our fiscal condition. And I say that because the only way the president gets to cutting the deficit in half is he just leaves out things.

He leaves out any cost of the war past September 30 of this year. He leaves out the cost of his privatization plan for Social Security, which has a 20-year cost of $4.5 trillion. He just leaves it out. He leaves out item after item.

The alternative minimum tax, which is quickly turning into a middle class tax trap, costs $700 billion to fix. He has none of it in his budget. So this is a budget that really hides from the American people the seriousness of our fiscal condition.

WOODRUFF: At the same time, Senator, you just heard -- or I think you just heard Joel Kaplan, who's the deputy budget director, saying this is a budget proposal that reflects the president's priorities. And right now the focus has to be fighting the war on terror.

CONRAD: It doesn't reflect the president's priorities, because the president says top on his agenda is changing the Social Security system. But he completely leaves out the costs associated with this plan.

Again, over 20 years, that's $4.5 trillion. He just leaves it out.

He leaves out any cost of war past September 30 of this year. Now, the president says he's got no timetable for withdraw, but his budget sets a timetable that there's no cost past September 30 of this year.

That's not real. That isn't leveling with the American people. That's not telling them our true financial condition. The truth is, if you put it all together, the things he's left out, then this deficit -- this budget is headed for deeper and deeper deficit, and our country is headed for deeper and deeper debt just at the worst time, right before the baby boomers retire.

WOODRUFF: Well, let's talk about what's in this budget proposal. Among other things, we know Democrats keep urging the administration to get the deficit down. The president does make some proposed cuts in here, and you -- and Mr. Kaplan, the president are saying these cuts are necessary because these programs aren't working.

CONRAD: Yes, there are programs that aren't working that should be cut. The president's right about that. But, you know, this budget is not about cuts. This budget increases federal spending 8 percent.

So what the president is saying is we've got record deficits now. He says let's increase the spending, and then he says make the tax cuts permanent.

By the way, that cost explodes right after the five-year budget window. So that's hidden from the view of the American people just so much like the rest of his budget. This budget will take us deeper and deep into debt and at the worst possible time.

WOODRUFF: But they point out, and again they're saying it today, we just Mr. Kaplan say it just now, they're saying revenues were up this past year $100 billion, they're going to be up this year $175 billion. He talked about revenues approaching 18 percent of gross domestic product. I mean, you're looking at a -- at a proposed -- at an administration proposal that they say makes good sense in current economic conditions.

CONRAD: You know, unfortunately, if you look at the numbers, what you'll find is, with all of that happy talk, the deficit is going up. Revenue is going up, but the deficit is going up. And this is -- this is the good times.

This is when the trust funds of Social Security and Medicare are throwing off hundreds of billions of dollars of additional revenue. When that worm turns, this country is going to be in very, very serious trouble with the president's fiscal plan. Because the bottom line is they want to talk about the cuts. Yes, there are cuts and there are going to have to be more cuts, but the overall budget is not a cut.

The overall budget goes up 8 percent. And the revenue, the president is proposing cutting the revenue dramatically when we already are spending much more than we're taking in. That doesn't add up, at least in the math I was taught in Bismarck, North Dakota.

WOODRUFF: All right. It's day one. I know we're going to be hearing a lot more about this budget.

Senator Kent Conrad, we appreciate it. Thank you so much for joining us.

CONRAD: You bet.

WOODRUFF: New polls about upcoming races in New York and New Jersey. Straight ahead, we'll tell you how Senator Hillary Clinton fares against her potential challengers, including Rudy Giuliani.

(COMMERCIAL BREAK)

WOODRUFF: Several new polls to tell you about and some state races we're watching in the Northeast. In the 2006 New York Governor's race, a hypothetical match-up shows incumbent Republican George Pataki losing to Democrat Eliot Spitzer by 16 points.

But the Sienna College poll finds former New York Mayor Rudy Giuliani would defeat Spitzer by nine points. Giuliani does not fare so well in a head-to-head race against incumbent Senator Hillary Clinton. The poll gives Clinton a nine-point edge. When Pataki is matched up against Clinton he loses by 26 points.

Democratic Senator Jon Corzyn appears to have the upper hand in this year's race for New Jersey governor. Corzyn comes out on top in head-to-head match-ups against two leading Republicans. Against former GOP gubernatorial candidate Brett Schundler, Corzyn leads by more than 20 points. The senator holds an equally large lead when he's matched against former Senate candidate Doug Forrester.

Selling Social Security no easy task, but does President Bush need a plan B to make his case to Congress? Ron Brownstein joins us in a few minutes with his take.

And later, he was the whistleblower who helped bring down President Nixon. Now, more than three decades later, will we finally learn who Deep Throat is? Our Bruce Morton has the story.

(COMMERCIAL BREAK)

WOODRUFF: It's 4:00 on the East Coast. And as the markets get set to close on Wall Street I'm joined by Kitty Pilgrim in New York with "The Dobbs Report."

Hi, Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: Hi, Judy. Thanks. Well, stocks on Wall Street slightly lower for the session but that's after two weeks of solid gains so as the final trades are being counted the Dow Industrial as you can see is very very close to break even and has been there for a bit. The Nasdaq slightly lower.

The big story in the markets today the dollar hitting a three- month high against the euro earlier today and that follows comments from Federal Reserve chairman Alan Greenspan. He says he sees improvement ahead for the U.S. economy.

The other big story very interesting this time of year, crude oil. It's selling more than a dollar today just above $45 a barrel. That's near its lowest level in three weeks but oil's recent run-up is translating into higher prices at the gas pump. The Lundberg Survey says gas prices rose more than $0.06 a gallon over the past two weeks and the average nationwide is now $1.91 a gallon.

The airline industry is objecting to one proposal in President Bush's budget. The president is asking the airlines to raise security fees from $5 to $11 on each round trip ticket. Well, the Air Transportation Association warns the industry's tax burden high enough already could be laying on more taxes and jeopardizing jobs and that could slow the airlines' recovery. Travelers would also likely see an increase in ticket prices.

Well, as we've reported, there is a suspected link between pain- killing drugs and heart attacks or strokes. And now the Food and Drug Administration plans to investigate that link further. A new panel meets next week to review the entire class of drugs known as Cox 2 inhibitors. Now their findings could put restrictions on some of the most widely used pain-killers and they are Celebrex, Bextra and Aleve.

Coming up on CNN 6:00 p.m. Eastern tonight on "LOU DOBBS", we begin our special report on America's security risks. Taking a look at our nations infrastructure. And tonight, a look at dams around the country, many of which are in dangerous disrepair with little money to fix them.

(BEGIN VIDEO CLIP)

MEG GALLOWAY, STATE DAM SAFETY OFFICIALS: Dams that were once in unpopulated areas now have development around them. So at the time they were built, they may have been constructed to lower design standards, and now because there is population at risk downstream the dams should be upgraded.

(END VIDEO CLIP) WOODRUFF: Also tonight, President Bush has sent his $2.5 trillion budget proposal to Congress. And Republican Senator Thad Cochran, chairman of the Senate appropriations committee joins us.

And also broken borders. The president's proposed budget does not include nearly enough funding for homeland security. (UNINTELLIGIBLE) nation's borders at risk? We'll have a special report.

And one L.A. County official wants to keep fake identification cards out of the hands of terrorists by pushing the county to stop accepting the popular type of IDs, it's easy to counterfeit. We'll have that story and more tonight 6:00 p.m. Eastern. But for now back to Judy Woodruff -- Judy.

WOODRUFF: Thanks, Kitty, very much. We'll be watching at 6:00. INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

BUSH: I'm very optimistic...

ANNOUNCER: And why not? The president's poll numbers are on the rise, but what's behind the jump?

HOWARD DEAN, DNC CHAIR CANDIDATE: You have the power to take our country back.

ANNOUNCER: Call him the last man standing. Howard Dean is the only candidate left in the race to run the Democratic party. But is there friction between Dean and top Democrats in Congress?

A very violent weekend in Iraq as euphoria over the national elections wane. We'll talk with a senator just back from Baghdad on what's next for U.S. troops in Iraq.

(END VIDEOTAPE)

WOODRUFF: Welcome back. As President Bush begins another week at the White House, it may be hard to top the last one. With all the to do over his State of the Union address and the elections in Iraq. But there is something new for the White House to savor. A spurt in Mr. Bush's approval rating has a good deal to do with what happened last week. Here now our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): President Bush's job approval is up, 57 percent, higher than the 51 percent who voted to reelect him three months ago. Well, sure, you say, he just delivered his State of the Union. But the main topic of that speech was Social Security. And the president's approval rating on Social Security did not change much. What did change? Iraq. Up eight points. What happened? The January 30 election.

DONALD RUMSFELD, DEFENSE SECRETARY: The people who put their names on the ballots showed a great deal of courage and that has to be inspirational for the people of Iraq, to see that movement forward politically.

SCHNEIDER: It was also encouraging for Americans who didn't expect too much from the Iraqi election.

SEN. JOHN KERRY (D), MASSACHUSETTS: The early indications are pretty much what I think we expected.

SCHNEIDER: Actually, more than 60 percent of Americans say the Iraqi election went better than they expected. And there's been a turn around in opinion over whether the war in Iraq was a mistake. Last month, most Americans said it was a mistake to send U.S. troops to Iraq. Now most say Iraq was not a mistake. The public is not so sure about the president's Social Security plan. They disapprove of it by 50 percent to 44 percent. In his State of the Union speech President Bush aimed his pitch at younger workers.

BUSH: Your money will grow over time at a greater rate than anything the current system can deliver.

SCHNEIDER: But Americans under 55 are not showing much enthusiasm for the president's proposal. They're divided. 45 percent like it. 48 percent don't. President Bush reassured older workers that for them Social Security would not change in any way. Didn't matter. Older Americans are solidly opposed to the president's plan.

(END VIDEOTAPE)

(on camera): The domestic issues the president stressed in his State of the Union, Social Security, tax reform, legal reform and same-sex marriages are not the public's top priorities. Those are terrorism and Iraq.

So what's giving the president a boost isn't the news from Washington. It's the news from Baghdad -- Judy.

WOODRUFF: I'm beginning to think the Social Security reaction, dividing along age lines.

SCHNEIDER: Exactly at age 55, where the president drew the line.

WOODRUFF: OK. Bill Schneider, thank you very much.

Now we turn to the race for Democratic party chairman which isn't really a race any more. Howard Dean's final rival for the job dropped out today. Another bout of what appears to be the inevitable. The failed presidential candidate's election as DNC chair on Saturday.

(BEGIN VIDEOTAPE)

DEAN: You have the power to take back the Democratic party.

WOODRUFF (voice-over): He broke through as an anti-establishment rebel, an us versus them candidate. And by them Dean wasn't just talking about Republicans. DEAN: There's a big difference between what goes on in Washington and what goes on in the rest of the country.

WOODRUFF: Dean's ambitions have evolved and so has his tone. But even now, he still uses Washington like a four-letter word. Like when he's talking about...

DEAN: Washington gossip.

WOODRUFF: Or...

DEAN: Washington rumor.

WOODRUFF: All red flags no doubt to Washington's top two Democrats: Senator Minority Leader Harry Reid and House Minority Leader Nancy Pelosi. Both struggled to mount a Stop Dean movement in the DNC horse race. Their candidate former Indiana congressman and 9/11 commissioner Tim Roemer enjoyed a mini boomlet.

REP. NANCY PELOSI (D), MINORITY LEADER: His message of the Midwest and as a moderate Democrat was one I thought would be useful.

WOODRUFF: But Roemer's candidacy never really got off the ground and today he pulled out. When Dean's victory began to seem inevitable Pelosi and Reid put him on notice. He may have won over the members of the DNC, but they still set the party's agenda. Said, Reid, "the Democratic chairman as a constituency of 447 people. Our constituency is much larger than that." A sentiment Pelosi echoes.

PELOSI: The policy is made by the members of the Senate, the House the governors, mayors, all elected officials throughout our country. And that isn't the role of the party.

WOODRUFF: Still, Dean has bucked the establishment again, zeroing in on his party's grassroots and not the elites. Now with victory in the bag, he's starting to court the party leaders. We're seeing overtures to those Washington downs. A phone call with Reid last week. This from a man who knows the value of political relationships.

(END VIDEOTAPE)

(on camera): And by the way, our new poll drives home some of the challenges ahead for Howard Dean and the Democrats. American say they are divided in their opinion of Dean with slightly more having an unfavorable view of him. And the public has a more favorable view of the Republican party than of the Democratic party by ten percentage points.

The partisan wrangling continues over Iraq even after last week's landmark vote. Up next, has new violence put a damper on the post- election excitement? I'll talk with Senator Johnson who just returned from Iraq.

Also, ahead, what's missing from President Bush's plan to reform Social Security? Analyst Ron Brownstein shares his thoughts. And later, the unanswered question from the Nixon era, who was Deep Throat?

(COMMERCIAL BREAK)

WOODRUFF: We have this news just into CNN. We are just about 10 minutes away from a verdict in the trial of Roman Catholic priest Paul Shanley on trial in Massachusetts for sexual abuse. And we will bring you live coverage of that verdict just as soon as it gets under way.

Meantime, a series of deadly attacks today in Iraq today killed more than two dozen people. Fifteen people died in the city of Baqubah in a suicide car bomb explosion near a crowd of people who were waiting to apply for jobs. Twelve more were killed in Mosul when a suicide bomber attacked a crowd of security personnel outside a temporary police station.

With me now to talk more about the situation in Iraq, Republican Senator John Thune of South Dakota, he's a member the Armed Services Committee and he just returned from a trip to Iraq.

Senator, you were just back last night. How long were you actually in Iraq?

SEN. JOHN THUNE (R-SD), ARMED SERVICES CMTE.: We were 13 hours on the ground in Baghdad, Judy, split about evenly between Camp Victory at the headquarters there and about half of it in the Green Zone.

WOODRUFF: What is your sense of Iraq post-election? There seemed to be almost euphoria last week, Senator, and now we keep hearing daily suicide attacks. How did you read it?

THUNE: Well, I think the terrorists are trying to get the momentum back. But clearly after last Sunday's elections -- or the elections a week ago Sunday, there's a lot of momentum. The exuberance among the Iraqi people was incredible to watch.

We were -- had an opportunity to visit with a number of Iraqi voters. They were still sporting their ink-stained finger that they used on the ballot at the week-ago election. It was really something to observe. And all of the commanders in the region, the troops, everybody who had an opportunity to witness that said it was really historic, really remarkable. And they think it will be significant in helping us turn the corner toward getting this thing resolved.

WOODRUFF: So just the act of the election in and of itself, you're saying, is turning the tide?

THUNE: Well, I think the election was really sort of a watershed event. And it's not just that. It's also what's happening with respect to getting the Iraqi army trained. We visited with General Petraeus, who is in charge of that over there.

And they're really making progress in terms of getting the Iraqi security forces, whether that's the army or the national guard, the police force there, in a position to defend the Iraqi people. The real challenge now is to get a command structure put in place. But if we can get a democracy stood up there, and this government is, in fact, inclusive and reaches out to some of the minority parties, I think that we are -- we've made a lot progress. That doesn't mean that there isn't some heavy lifting ahead and that these terrorists are going to go away.

But I think there were -- everybody was very hopeful and very optimistic when we were there.

WOODRUFF: Well, what about reaching out to these minority parties. There is serious concern that the Sunnis are not going to be represented in appropriate numbers in the government. How did you read that?

THUNE: We visited with a leading member of the Shia alliance ticket and also the deputy prime minister there, Salih, who is a Kurd, and talked about the importance of having an inclusive government that does include the minority parties when it comes to forming a cabinet, when it comes to drafting and ratifying a constitution.

There seems to be an acknowledgement, a recognition there that in order for this democracy to be successful that it has to provide representation for some of those minority interests. So I felt very good based on the conversations that we had, that those efforts are going to be made. But I think it's something that we're going to have to monitor closely as this moves forward.

WOODRUFF: I ask, because the U.S. can't force that, can it?

THUNE: We can't force it. And we frankly shouldn't force it. But I think there is a -- I think the people who are in charge there right now understand that this is something that in order for this to work, it has to take place. And there are efforts being made to reach out to the Sunni minority.

The Kurds are going to be, I think, in the second place on the ballot when this is all counted. But there are going to be some -- there's already some negotiating and brokering going on, positioning for power and building coalitions in the new government. But it's important that that take place.

WOODRUFF: And on that other point you raised, Senator, about getting the Iraqis themselves to take over their own -- their country's security themselves, even Secretary Rumsfeld who talks about 135,000 Iraqi security, says that includes a number who, in his words, are "green as grass." How long is the wait, do you think, for Iraqis to be able to handle that?

THUNE: I think a real key event was the election, because the Iraqi security forces had primary responsibility for protecting and defending all the polling places, the over 5,000 polling places in the election. And there were some heroic acts by some of the Iraqi security forces in protecting people who wanted to vote.

But it is getting a command structure. It's getting people who are willing to assume leadership with those "green as grass" people. There are followers there. And the intensity has picked up in terms of people who are signing up to serve in the Iraqi security forces, but it's going to mean developing a leadership capacity to have someone in place to lead those troops.

WOODRUFF: Senator John Thune, just back last night from a very quick trip to the Middle East and to Iraq. Senator, we appreciate you joining us.

THUNE: Thanks, Judy.

WOODRUFF: Thank you very much.

And we want to tell our viewers, again, word coming down from Cambridge, Massachusetts, the jury has reached a verdict in the trial of Roman Catholic priest Paul Shanley. That verdict coming down in just a matter of minutes. We'll be carrying it live. We'll be right back.

(COMMERCIAL BREAK)

WOODRUFF: Any moment now, we are expecting a verdict in the trial of Roman Catholic priest Paul Shanley. You're was watching him in a courtroom in Cambridge, Massachusetts. As soon as that verdict is announced, it is being read, CNN will take you to the courtroom live.

In the meantime, more now on the day's big development on Capitol Hill. President Bush submitted a proposed $2.5 trillion budget to Congress. The measure eliminates or reduces 150 government programs and it projects an estimated $390 billion deficit. Political analyst Ron Brownstein from The Los Angeles Times joins me to talk about the Bush White House proposals for the budget, as well as Social Security.

Ron, when you put the budget and all that it faces on top of the Social Security proposal the president has laid out there, just how tough is the job he has in front of him?

RON BROWNSTEIN, CNN POLITICAL ANALYST: Well, the intersection, really, Judy, is the impact and the deficit and the debt on the Social Security debate. If you remember back in 2000, President Bush implied, although never directly stating, that he would split the anticipated federal surplus between his tax cut and use some of it for the cost of transition to a partially privatized Social Security system.

The problem he's got now is that because the budget is back in deficit, because the national debt is rising, it's projected to hit $6 trillion by 2009, according to the documents released today. That makes it much tougher to do Social Security. There is not money in the federal budget to fund the individual accounts -- the diversion of money into the individual accounts. As a result you have to borrow.

WOODRUFF: Ron, I'm going to have to interrupt you. My apologies, Judge Stephen Neel in the courtroom in Cambridge, Massachusetts, beginning to deal with the announcement of a verdict in the Paul Shanley trial. We're listening in.

UNIDENTIFIED MALE: ... Paul Shanley with indecent assault and battery on a child under 14. What say you, Mr. Foreman, is the defendant guilty or not guilty?

UNIDENTIFIED MALE: Guilty.

UNIDENTIFIED MALE: So say Mr. Foreman.

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: So say all members of this panel.

JURY: Yes.

UNIDENTIFIED MALE: As for (UNINTELLIGIBLE) 14 of 2002 894 (ph) charged defendant Paul Shanley with indecent assault and battery on a child under 14. What say you, Mr. Foreman, is the defendant guilty or not guilty?

UNIDENTIFIED MALE: Guilty.

UNIDENTIFIED MALE: So say Mr. Foreman.

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: So say all members of this panel.

JURY: Yes.

UNIDENTIFIED MALE: Ladies and gentlemen, you may be seated.

UNIDENTIFIED MALE: (UNINTELLIGIBLE) counsels, would you like to look at the verdict slips?

UNIDENTIFIED MALE: The verdicts may be recorded.

UNIDENTIFIED MALE: (UNINTELLIGIBLE) the verdicts as recorded by the court. You may be seated.

UNIDENTIFIED MALE: Ladies and gentlemen and alternates, your service as jurors and as alternates in this case is now complete. And for that service, the court and the commonwealth and the attorneys thank you. I would ask at this time that you go back to the jury room for one last time where I will come back and speak to you briefly.

WOODRUFF: All right. We are looking at live pictures in a courtroom in Cambridge, Massachusetts, where a defrocked Catholic priest Paul Shanley has just been pronounced -- the charges against him, he has been pronounced guilty on several counts. CNN's Dan Lothian has been covering the trial. He's with us now on the telephone.

Dan, guilty on all counts?

DAN LOTHIAN, CNN CORRESPONDENT: That is correct. First of all, he was charged with two counts of rape of a child. The jury found him guilty on both of those counts. And then on two counts of indecent assault, he's been found guilty on both of those as well. He could face up to life in prison.

This is a case, defrocked priest Paul Shanley was sort of the -- one of the sort of glaring cases in the sexual abuse scandal in the Boston archdiocese. This case dating back to '80s when he was working in a church in the Newton area which is west of Boston.

The victim claimed that rape happened when he was 6 years old. It happened inside of the church. And yet, and he had what seems to be an important issue in this case, repressed memories. Only a few years ago he started talking about what he said happened to him. And that was really at the center of this trial.

Could you believe that these repressed memories were true or were they false? The defense casting doubt on these repressed memories. And amazingly, this two-week trial only presenting one witness who is a U.C. psychologist who questioned the validity of repressed memories.

So once again, the defrocked priest, Paul Shanley, 74 years old, found guilty on two counts of rape of a child, and guilty on both of the counts of indecent assault.

WOODRUFF: All right, CNN's Dan Lothian who has been covering this trial, also with us on the telephone -- or rather, I guess in New York, CNN's legal analyst Jeff Toobin.

Jeff, what happened to the argument by the defense that these memories were just fabricated because they came out so late?

JEFFREY TOOBIN, CNN LEGAL ANALYST: Well, that was an argument forcefully made and apparently quickly rejected by this jury. This was a peculiar case, though, Judy, because Shanley is so much a symbol of the priest abuse scandal.

But yet this only related to one child. And it was a somewhat shaky case because it was so old, you know, almost 20 years old. And there was this issue of recovered or repressed memory which a lot of experts have trouble with. So even though Shanley is a symbol of so much that went wrong in the Catholic Church and he has now been convicted, this particular case was not all that strong against him.

WOODRUFF: Does this close a chapter of some sort, Jeff, or is this just one more part of a long-running story here?

TOOBIN: Well, I think the answer probably is a little of both. Certainly, it closes the chapter on Shanley himself. He's 74 years old. He faces up to a life sentence. So we can safely assume he will die in prison. But both the civil and criminal aspects of this story continue to reverberate, not in as high-profile a way as it was a couple of years ago, but this is very much a story that's not over.

WOODRUFF: Jeff Toobin, CNN legal analyst, commenting on the verdict. Paul Shanley guilty on all counts in a case involving child abuse that occurred many years ago. Now, again, our apologies to Ron Brownstein, our political analyst with The Los Angeles Times. Ron, just to reconstruct what you and I were talking about, the White House today coming out with proposed budget cuts. You've got the deficit, you've got a huge budget proposal, and at the same time, you've got this big Social Security proposal. Where does that leave the White House right now?

BROWNSTEIN: Well, I think right now, the big problem for Social Security is the intersection between the deficit -- one of the big problems for Social Security is the intersections between the deficit and the president's plan because of the way Social Security is now financed, to create the individual accounts the president wants, you'd have to borrow a large amount of money to cover the benefits that are due the people who are retired today. As much as $4.5 trillion would have to be borrowed in the next 20 years.

That's obviously harder to sell politically, Judy, at a time when the budget is already in deficit. Many of the deficit hawks are sort of gagging on the thought of borrowing that much more money. And that's one more of the obstacles the president faces as he tries to push forward the Social Security plan.

WOODRUFF: So what is the president going to have to do. You write today, Ron, about there's at least one alternative out there for him to begin to think about. What are his options?

BROWNSTEIN: Well, the problem he has got on Social Security right now is that usually the way the president has gotten things done is by getting the House Republicans to go along with his ideas, push it through the house, put pressure on the Senate to follow suit.

Right now, the House Republicans are basically saying they don't want go on record voting for a controversial Social Security package unless they're confident they can also pass the Senate, and with 43 Senate Democrats signing a letter last week saying they will not support any plan that increases the deficit, obviously that's enough votes to filibuster if they're willing to do it. So the whole thing is gridlocked.

Some of the people on the Hill, even some House Republicans are suggesting that maybe the answer is to move away from this idea of carving out the account from the payroll tax, which the bright red line for Democrats, and finding a way to create an investment account that would be an add-on in addition to Social Security.

The downside to that, Judy, you'd have to raise a new source of revenue to pay for it and that might alienate -- that probably would alienate many of the conservatives.

WOODRUFF: Well, there's a whole lot for us to talk about. Ron Brownstein joining us today to look at Social Security and how much of a bigger challenge it is now that we see the deficit numbers in black and white, or I should say, in red, black and white.

OK, Ron, thanks very much.

BROWNSTEIN: Thank you.

WOODRUFF: One of America's biggest political mysteries may be closer to being revealed. A source known only as Deep Throat provided information that helped to bring down the Nixon White House. Now a former Nixon aide says that Deep Throat is ill.

Our Bruce Morton looks at what this could mean for this long-held secret.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP FROM "ALL THE PRESIDENT'S MEN")

HAL HOLBROOK, ACTOR: Just follow the money.

BRUCE MORTON, CNN CORRESPONDENT: That advice more than 30 years ago led Washington Post reporters Bob Woodward and Carl Bernstein to trace money one of the Watergate burglars had back to President Richard Nixon's re-election campaign. In the movie "All the President's Men," Deep Throat was Hal Holbrook. But his real identity in this city where everything leaks, have remained a secret.

Now, John Dean, he was Nixon's White House counsel and the author of one of the Senate Watergate Committee hearings most memorable lines.

JOHN DEAN, NIXON WHITE HOUSE COUNSEL: I began telling the president that there was a cancer growing on the presidency.

MORTON: John Dean, who went to prison over Watergate, now writes in The Los Angeles Times that a source tells him that Deep Throat is ill, and that Woodward has told the executive editor of The Post about the illness.

Ben Bradlee, who edited The Post back then, knows who Deep Throat is and has written an obituary on him. Bradlee has said that publicly. Woodward had no comment about any alleged illness. And Leonard Downie, the current executive editor of The Post, says Woodward has not told him Deep Throat is ill.

Deep Throat helped bring down a president. Though Dean says Throat gave out some bad information, too, charging that Senator Howard Baker, a member of the Senate Watergate Committee, was reporting back to the White House.

Baker in fact was a tough investigator asking the key question.

SEN. HOWARD BAKER (R), TENNESSEE: What did the president know and when did he know it?

MORTON (on camera): Whistleblowers sometimes act in the public interest, a Pentagon work, say, tipping a reporter about an expensive new weapon that isn't working the way it's supposed to. Sometimes they act out of pure political spite.

Reporters who promise confidentiality are supposed to keep those promises, even if a judge threatens him with jail for contempt of court. Still, 30-plus years in Washington? Amazing.

(BEGIN VIDEO CLIP FROM "ALL THE PRESIDENT'S MEN")

HOLBROOK: No, I have to do this my way.

(END VIDEO CLIP)

MORTON: Whatever, it's worked.

Bruce Morton, CNN.

(END VIDEOTAPE)

WOODRUFF: Bruce, what are you doing in that garage, could it be you? All right. That's it for INSIDE POLITICS. I'm Judy Woodruff. Thanks for joining us. "CROSSFIRE" starts right now.

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