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JUDY WOODRUFF'S INSIDE POLITICS

Revised Medicare Cost Estimates Dismay Both Parties; Big-City Blues; Interview With Senator Joseph Biden, Senator John Cornyn

Aired February 9, 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: Prescription politics. New numbers raise the bill for the Medicare drug plan. What are the political costs?

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There's no question that there is an unfunded liability inherent in Medicare that Congress and the administration's going to have to deal with over time.

ANNOUNCER: You may not have heard of him, but comments like these...

MAYOR MARTIN O'MALLEY (D), BALTIMORE: Back on September 11 terrorists attacked our metropolitan cores. Years later, we are given a budget proposal by our commander in chief, the president of the United States, and with a budget ax he is attacking America's cities.

ANNOUNCER: ... and these...

O'MALLEY: These are despicable lies. These are falsehoods. I have always been faithful to my wife.

ANNOUNCER: ... are putting Baltimore Mayor Martin O'Malley in our spotlight.

(END VIDEOTAPE)

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

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

The budget and proposed Social Security reforms have dominated discussion in the early days of the second Bush administration. But those debates now have some company on the Washington agenda. New estimates predict a big jump in the cost of the new Medicare prescription drug benefit. And today the president responded to critics who say Medicare costs are spiraling out of control.

Our senior White House correspondent John King standing by with more.

Hi, John.

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

And all of this coming -- as you noted, there's already a big debate, a lot of tension and nervousness in the Republican ranks about the president's budget, the president's proposal to change Social Security in a dramatic way. And now a hangover, a flashback, if you will, to one of the debates of last year when the president pushed through that new Medicare prescription drug benefit through the Congress.

Many conservatives grumbled at the time. Some didn't want to create the program at all. They said it was a new government entitlement. Others suggested the administration was hiding the true costs of that program. First it was $400 billion, then in the end it was up to a little more than $500 billion.

Now new administration projections say more than $700 billion. The administration says that's nothing new. It's simply a 10-year budget projection, $725 billion or so, versus an eight-year budget projection, which was the $518 billion or so.

So the administration says anyone who accepted the eight-year number should know the 10-year number should be higher. But on Capitol Hill today, our Ted Barrett working his sources in the Republican Party. Significant grumbling up there, people saying again that this is going to cost a lot more than the administration had said it would cost.

But Republicans do not want to go back into this debate, Judy. They still have sour feelings about how it went last year.

Here at the White House, you noted the president was asked about this in the Oval Office with the visiting president of Poland. Mr. Bush did not respond directly to the new numbers, but he also indicated that even as people assess these new numbers today, in the president's view, once the Social Security debate is over, once this year's budget is passed, the president says Congress and the administration are going to have to work on reforming Medicare as well.

(BEGIN VIDEO CLIP)

BUSH: Once we modernize and save Social Security for a young generation of Americans, then it will be time to deal with the unfunded liabilities of Medicare. The same issue that deals with -- creates a problem for Social Security creates a problem for Medicare. Baby boomers are retiring with fewer payers going into the system. I look forward to working with it.

(END VIDEO CLIP)

KING: So there was a debate about the cost and whether these new estimates are, in fact, in line with what the administration said just a few months ago. Again, the White House says they are. But on Congress, Judy, it is much more of an issue not even so much of the numbers. Just of the very tough political choices this president is asking fellow Republicans to make for him in the budget debate, in the Social Security debate, if Medicare comes back up again after Social Security.

A lot of conservative Republicans are saying this is supposed to be a conservative president. They view the Medicare program as more big government. They don't think the president's budget cuts the deficit as much as the president says it does. So, Judy, this yet another reminder again of the tough pressure on the Republicans and sometimes the tension between those Republicans and their Republican president -- Judy.

WOODRUFF: So, John, bottom line, the Medicare prescription drug plan is costing more than the White House said it would or not?

KING: Well, it depends who you ask that question to. The White House estimates went out from 2005 through eight years out. The program doesn't even start until 2006.

The new estimates take the 10-year period from when the program is actually started and everyone in Medicare can get those benefits. The administration says of course it's going to cost more if you're looking at the estimates for when the program is in full effect.

Now, some say, well, the administration should have used those numbers last year, not used the short-term numbers. It's very confusing if you try to have a debate about the numbers themselves. But certainly the program is very expensive, and anyone in Congress will tell you, once you start a program like this, it doesn't get cheaper down the road. In their view it gets only more expensive.

WOODRUFF: John King helping to us understand it. We appreciate it. Thank you.

Well, we've got our first open Democratic Senate seat in next year's midterm election. Minnesota's Mark Dayton has decided not to run for reelection in 2006.

Dayton told reporters this afternoon that he cannot be an effective senator while raising the money he needs to pay for another campaign. Dayton used his personal wealth to finance his first Senate race, but he has said he would not do so again. Political analysts have considered Dayton vulnerable, and he was expected to be a key target for Republicans if he ran for a second term.

Being the mayor of a major city can launch a local politician into the national spotlight. And that sometimes leads to bigger things. In the case of one Maryland mayor, Bruce Morton finds that the glare of the spotlight can be harsh.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): It isn't easy being a big-city mayor. Just ask Baltimore's Martin O'Malley. First he got in trouble for comparing President Bush's proposed budget cuts in programs for cities to the terrorist attacks of 9/11.

O'MALLEY: Back on September 11 terrorists attacked our metropolitan cores, two of America's great cities. Years later, we are given a budget proposal by our commander in chief, the president of the United States, and with a budget ax he is attacking America's cities. He is attacking our metropolitan core.

MORTON: Other mayors at the news conference thought that was going too far. O'Malley insisted he wasn't trying to equate these budget cuts to a terrorist attack.

But wasn't he? Kind of? Not his best speech ever, by any means. Then O'Malley, a Democrat who may well run against Maryland's Republican governor, Robert Ehrlich, next year, said Ehrlich's people were spreading rumors that he had an affair and was being unfaithful to his wife of 14 years.

O'MALLEY: These are despicable lies. These are falsehoods. I have always been faithful to my wife from our first date until this date. She is the greatest thing that has ever happened to me.

MORTON: Governor Ehrlich did not apologize but did fire an aide who told "The Washington Post" he had spread the rumor on a conservative Web site and in e-mails.

KATIE O'MALLEY, MAYOR'S WIFE: I have to tell you from the bottom of my heart this has been one of the most difficult things I've had to endure.

MORTON: Then there's the city. O'Malley, reelected to a second term as Baltimore's mayor last fall, campaigned as a crime fighter. But murders in Baltimore went up last year for the second straight year. More murders per capita than Chicago or New York.

Unwise comparisons, ugly personal rumors, crime. Maybe being mayor isn't such a swell job after all.

Bruce Morton, CNN, reporting.

(END VIDEOTAPE)

WOODRUFF: Thank you, Bruce.

And now we go back it our own top story. President Bush's budget plans for the next fiscal year offering plenty of fodder for the president's critics. One of the Democratic leaders in Congress, Senator Joe Biden, is with me now to talk more about the Bush budget and some other international matters.

Senator, first of all, is -- you know, just on the budget itself overall, the president is trying to hold the line on spending. But everybody seems to be, at least a lot of Democrats, jumping on what he's chosen.

Isn't it going to be a matter of, you know, what's easier to cut, what's harder to cut? You know, hasn't the president at least tried to make, you know, a stab at this?

SEN. JOSEPH BIDEN (D), DELAWARE: Well, Judy, maybe he has, but his own budget director can't name the 150 programs he said he'd cut. I can't find the 150 programs he said he'd cut. And some of the programs that he'd cut are probably one of the reasons why the mayors are in trouble in terms of crime.

He's eliminated the cops program. He's eliminated the Burn (ph) grants. He's eliminated what used to be a $2.6 billion from the federal government going to the cities and the communities to fight crime.

He's eliminated Amtrak at a time when we're talking about energy independence. And just in my little state, to be parochial, 750,000 tickets a year are bought to get on Amtrak. Imagine what the Northeast Corridor will look like.

And so, I mean, the things he's chose that are the most obvious I think are ill suited. And then he hasn't been straightforward with us.

He told us the Medicare bill was going to be about $500 billion. It's going to be $1.2 trillion. An he doesn't even include in the budget, Judy, any money for the war in Iraq or in Afghanistan. And this is just absolutely ridiculous.

WOODRUFF: Well, Senator, give us a couple of examples of what you think should be cut. Clearly you disagree with the president's tax cuts and think they should be...

BIDEN: Yes.

WOODRUFF: But beyond that, what programs deserve -- deserve trimming, deserve cutting out?

BIDEN: Well, I think one of the things we should be going back and look at -- and the president is right, but I haven't seen what he has done -- is the tax structure and all the loopholes that still exist in the tax structure. He's talking about cleaning up the tax structure.

There are programs that range from energy programs we have, that are very little return on any investment, and there are a whole range of programs I'm confident that exist in the social sector that warrant being cut, eliminated. And so we should be constantly reevaluating them.

But the bottom line, Judy, is look at the numbers. If you cut all of the social programs, all of the non-mandated programs, anything but defense in the non-mandated programs and go forward with the tax cut, and you don't include the trillion-dollar cost over the next decade to privatize Social Security, there's not enough money if you cut everything. You cut out the Justice Department, you cut out all -- you don't have enough money to get close to balancing the budget.

WOODRUFF: Senator, let me quickly move you to an international topics.

BIDEN: Sure. WOODRUFF: Iran, the new secretary of state, Condoleezza Rice, today said in a speech that Iran must halt its nuclear program or she said next steps are in the offing. Iran came right back and said they have no intention of doing any such thing.

BIDEN: Well, you know, I wish I knew what the administration's plan was. They don't like the European initiative because they're not fully participating in it to try to negotiate a verifiable deal with the Iranians whereby they cease and desist from the missile and the nuclear program. They said even if they're prepared to do that we still aren't ready to make a deal with them.

They say this is unacceptable. They say that military force is not something on the table right now.

So what's the plan? What is the plan? What is their strategy?

And, Judy, I know you're tired of hearing me say this, but I said it the last four times I've been on your -- for years. This is still a divided administration in some senses, and I wish the president would make a decision on what is the strategy with regard to Iran. I don't know what it is.

WOODRUFF: Senator, let me finally ask you about Iraq. You have written in "The Washington Post" and elsewhere that the United States needs to bring in international support for Iraq. And yet we have the secretary of defense, Mr. Rumsfeld, saying today that while more NATO nations have offered help for Iraq's security forces, these pledges have not materialized.

How big a problem?

BIDEN: It is a giant problem, Judy. And look, we have an incredible opportunity with this powerful election that took place. I think we have to set up a contact group. That is, the EU, NATO, the United States, and other major countries, including two Arab countries, and sit down and say, how are we going to help Iraq transition through this next period? That includes training.

I met for a couple hours with my colleagues, a few of my colleagues, with President Chirac not but two weeks ago. He showed us, he talked about a written offered he made to train 1,500 specialized forces in Iraq. Schroeder stands up and says he will do it.

Let's call them on their offers. None of that has been done. And Condi Rice, I think, is getting it right.

She's at Brussels now with NATO. She said all of those nations are prepared to be involved.

They need a seat at the table, Judy. We have to change the way we train these Iraqi forces. It's our exit strategy. And we have to provide for some relief for Iraqis in real distress.

We haven't spent but $2.5 billion of the $18.4 billion emergency money to alter their lives. We've got to change the whole way we do that. We can do it. There's an opportunity.

I see no -- I don't see a plan yet. And that's trouble.

WOODRUFF: Senator Joe Biden calling for much more international involvement in Iraq. Senator, thank you very much.

BIDEN: Thank you.

WOODRUFF: We appreciate it.

An update on how Americans view the war on terror. Just ahead, our new poll gauges how the public grades the Bush administration's ability to prevent a new attack.

Grumbling on the right about the president's new budget. I'll ask Republican Senator John Cornyn if the Bush plan is too big or spends too much.

And later, John Kerry handing out more campaign cash. We'll tell you where he's sending a million dollars when we update our "Political Bytes."

Stay with us.

(COMMERCIAL BREAK)

WOODRUFF: In our CNN "Security Watch," a new look at how Americans feel about the war on terror. In our new CNN-"USA Today"- Gallup poll, 19 percent of the respondents say they are very satisfied with how things are going. Forty-five percent say they are somewhat satisfied. And just over a third say they are not satisfied.

When asked whether they have confidence in the Bush administration's ability to protect American citizens from terrorism, 38 percent say they have a great deal of confidence. Thirty-five percent say moderate amount. Sixteen percent say not much, and 10 percent say they have no confidence at all.

This programming note. Coming up at 6:00 p.m. Eastern on CNN, is enough being done to protect nuclear power plants in the United States? An in-depth look at the issue on "LOU DOBBS TONIGHT."

Stay tuned to CNN day and night for the most reliable news about your security.

Returning now to some of the big issues being debated here in Washington, President Bush's budget plans have sparked some harsh words from Democrats and some concern from members of Mr. Bush's own party. Senator John Cornyn, a member of the Budget Committee, talked to me just a short time ago. And I asked the Texas Republican how he feels about the president's budget plans.

(BEGIN VIDEOTAPE)

SEN. JOHN CORNYN (R), TEXAS: Well, we haven't really gotten into a lot of weeds on the budget. Basically, as you know, Judy, it's a starting point for a process by which, first of all, we set a top line. That is, the maximum amount of spending through the budget resolution, and then that's the basis upon which the appropriations are decided, and within the Appropriations Committee where those hard tradeoffs and choices are going to be made on individual programs. But I do think it's important that we -- we respond in a constructive way to some pretty dire numbers that we've seen with deficits.

Of course our goal is to cut the deficit in half over the next five years. We know we not only have larger defense and homeland spending responsibilities, we've got supplemental war appropriations which are off of the budget, off line.

WOODRUFF: Well, I asked because I'm sure you know some of your Republican colleagues in the Senate, Arlen Specter, Norm Coleman, are saying while they support big junks of this is budget, they don't agree with cuts in things like special education, vocational education, Medicaid, farm programs. Is there widespread agreement with them in the Senate, do you think?

CORNYN: Well, I would -- I would ask my colleagues, those who believe that we should exercise a greater degree of fiscal discipline, where do they think we should cut? The truth is, a lot of these cuts are really nothing more than a reduction in the rate of increase.

Only in Washington have I found that people consider a reduction in the rate of increase in a program a cut in federal funding. And, of course, not all of these are going to be easy questions. That's, frankly, why we get sent here and paid to make the hard decisions.

But we will -- we will balance out the priorities. We've got to determine, first of all, what those are, and then -- and then fund those. And some of the things that we'd like to have that are not possible based on our tight budget, we're going to have to simply forego.

WOODRUFF: Senator, on the other hand, you have the view of someone like Congressman Mike Pence of Indiana, a Republican. He says unlike the Republican majorities in the 1990s, when he said Republicans were committed to limited government, he said President Bush has a different vision that he says has resulted in education and well fare policies, that he says have increased the size and scope of the government.

CORNYN: Well, the two things that have been driving the deficit primarily are going -- have been the attacks on 9/11, which cost our economy almost a trillion dollars, and the fallout of the corporate scandals that we had during the president's first term. Of course we knew we had economic stagnation and needed to stimulate the economy, and that's frankly the main reason why I supported the budget cuts -- excuse me, the tax cuts, which have led to some deficits, but which have also stimulated the growth of 2.5 million jobs over the last year or so.

So these are all complicated, hard choices. And we will be debating those. And I think this budget should ultimately, when it's passed by the Congress, reflect our nation's priorities and values. But frankly, not everybody can have everything they want.

WOODRUFF: Senator, one last question about immigration. As we know, the president proposed a temporary worker plan last year that would confer legal status on illegal immigrants as long as they could prove they have a job. Your fellow Texan, House Majority Leader Tom DeLay, just yesterday is saying that he can go along with that only if these immigrants go home first.

Do you agree with him that that should be a requirement?

CORNYN: Well, I think what we're finding is, as people are focusing more and more on this issue and how border security, homeland security, which we all agree on, really are unattainable unless we actually deal with people who are already here and people who make up about six million in our current work force, we need to figure some practical way. And I'm glad to hear the majority leader showing some flexibility on that.

I don't think we are together on all points of this. But I think it is important, part of a national conversation that ought to proceed here over the next few months and perhaps longer before we try to achieve a true consensus. But I think clearly there's a problem, and I'm glad people acknowledging that and recognizing that we must do something. And doing nothing is not an option.

(END VIDEOTAPE)

WOODRUFF: Republican Senator John Cornyn of Texas. I talked to him just moments ago.

Straight ahead, Massachusetts Governor Mitt Romney considered a potential White House hopeful. But a new poll finds that he might first have some work to do back home.

Also, Senator John Kerry is giving away more of his campaign money just in time for his party's big meeting this weekend.

(COMMERCIAL BREAK)

WOODRUFF: In our midweek check of "Political Bytes," John Kerry handing out more of his leftover campaign cash. Senator Kerry sent an e-mail to supporters this morning announcing a donation of $1 million to the Democratic National Committee. Kerry says the money comes from his campaign fund, and he describes the check as a way to help the incoming DNC chairman, who is all but assured to be Howard Dean, make a strong start.

In Massachusetts, Republican Governor Mitt Romney's often mentioned as a future presidential candidate. But a new poll finds that he might first have his hands full getting reelected.

A University of Massachusetts survey finds Governor Romney trails potential Democratic challenger Tom Reilly, who's the state attorney general, 45 percent to 41 percent. On a positive note, though, the poll gives Romney a 62 percent approval rating. That is up eight points since September. We'll spotlight the 2008 race for the White House. When we return, could a Hillary Clinton-Rudolph Giuliani contest be in the cards? We'll reveal our new poll results and we'll see just how accurate these early surveys tend to be.

Plus, it's a topic that splits Republicans right down the middle. The issue and today's debate over it coming up on INSIDE POLITICS.

(COMMERCIAL BREAK)

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

Hello, Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: Hi, Judy. Thanks.

Let's start with some politic in the business world. The most visible woman in corporate America has stepped down from her post. Carly Fiorina was apparently forced to resign as Hewlett-Packard's chairman and chief executive. That was under pressure from the company's board.

Opponents criticized Fiorina's strategy, blamed her for weak financial results and the company's controversial acquisition of Compaq Computer. That was nearly three years ago.

Now, HP tells CNN that Fiorina will receive a $21 million severance package. HP's chief financial officer will take the role of interim CEO. That's until a new one is named.

Now, taking a look at Hewlett-Packard shares, they jumped on the news. They gained about 7 percent.

And a look at the rest of the market. We're seeing the final trades are still being counted. But there we have the Dow down about 60 points. The Nasdaq nearly 2 percent lower.

Technology shares were hurt by Cisco's quarterly results. And that company's earnings nearly doubled from a year ago. But it's sales were weaker than expected. That's really not a good sign for tech spending.

$2 billion in taxpayer refunds are sitting unclaimed, could soon belong to Uncle Sam. Nearly 2 million people are about to lose their tax refunds from 2001 because they have still not filed their federal income tax return for that year. Many of those people have too much deducted from their paychecks. More than half of those refunds are for nearly $500.

Well, the IRS is giving these procrastinators until April 15 to file their 2001 tax returns and claim the refunds. Otherwise the money goes to the government.

American music, movie and software companies are trying a new strategy to fight back against Chinese rip-offs. 1,500 firms claim 90 percent of their copyrighted product sold in China are bootlegged versions. Now this group is asking the Bush administration to take immediate legal action against China at the World Trade Organization. The three industries claim they lost nearly $2.5 billion last year from pirating in China alone.

Well, coming up on CNN, 6:00 p.m. Eastern on "LOU DOBBS TONIGHT," we continue our special report, "America's Security Risk." And tonight, how safe are the nation's nuclear power plants? Critics say they are not secure enough and claim the Nuclear Regulatory Commission seems unwilling to crackdown on the industry.

(BEGIN VIDEO CLIP)

DANIELLE BRIAN, PROJECT ON GOVT. OVERSIGHT: Really, the problem we have is a government agency that is so close to the industry that they are simply unwilling to say, you know what, I'm sorry that you don't like this. You're going to have to increase security to levels that we decided are appropriate.

(END VIDEO CLIP)

PILGRIM: Also tonight, strong support from the White House for Congressman Jim Sensenbrenner's real I.D. bill. That prohibits illegal aliens from obtaining driver's licenses. This legislation is being debated on the House floor. We'll talk to the Congressman. And Senator Olympia Snowe introduced a new bill today that would allow Americans to import prescription drugs from other countries. She will be our guest tonight.

And a faceoff. The president's budget for 2006. We'll debate the issue with Republican senator Chuck Grassley and Democratic senator Kent Conrad. That and more, tonight 6:00 p.m. Eastern.

But right now back to Judy Woodruff -- Judy.

WOODRUFF: Thanks, Kitty, we'll be watching at 6:00.

INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: It's only 2005, but the 2008 race for the White House is on. Who are the early front runners? Our new poll is fresh off the press.

The permanent campaign is nothing new, but are we now seeing the permanent negative campaign?

UNIDENTIFIED MALE: It's certainly now extending beyond the political cycle and into the day-to-day political dialogue.

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

(END VIDEOTAPE) WOODRUFF: Welcome back. The second Bush term is just getting started, but behind the scenes the would-be candidates for the next White House race are already plotting strategy. The presidential field is considered wide open for 2008, but our new poll finds that two big names have the early lead.

(BEGIN VIDEOTAPE)

WOODRUFF (voice-over): Meet the frontrunners. Two larger-than- life New Yorkers leading the pack for 2008. When we asked Democrats who should top their ticket, they said Hillary over John Kerry or John Edwards. On the GOP side, it's Rudy. Though Republicans hardly gave first runner-up John McCain a Bronx cheer. No such luck for Jeb Bush and Bill Frist, who trail far behind.

OK, we know it's early. We know things change. We know Giuliani and Clinton have both brushed off talk of presidential campaigns, Clinton as recently as this morning.

SEN. HILLARY CLINTON (D), NEW YORK: I'm running for reelection to the Senate. I have more than I can say grace over right now. There's just so much work to be done.

WOODRUFF: But indulge us for a second and let us dream of a Rudy versus Hillary, Round 2.

RUDY GIULIANI, (R), FORMER NEW YORK MAYOR: This is not the right time for me to run for office.

WOODRUFF: Ask any New York reporter worth his salt and he'll tell you he got robbed the day Giuliani dropped out of the 2000 Senate race. The mayor clearly relished that campaign against the First Lady, flying the Arkansas state flag over City Hall, needling Clinton every chance he got.

But now the former foes find themselves in very different places. Clinton, while still a lightning rod, is a senator now and not a particularly outspoken one at that. Giuliani became an icon, more an embodiment of courageous leadership than brash New York chutzpah.

But here's a key difference. For more than a decade, Hillary Clinton has been one of the world's most scrutinized public figures. Americans know a great deal about her. But when it comes to Rudy Giuliani, do people see more than September 11? A presidential campaign would put him under the microscope. He'd have to account for his moderate views on abortion and gay marriage, his complicated personal life.

GIULIANI: For quite sometime, it's probably been apparent that Donna and I lead, in many ways, independent and separate lives.

WOODRUFF: All those colorful news conferences from his City Hall days.

GIULIANI: Oh, get out of here. Get lost. Get lost, that's a sneaky way of trying to invade somebody's personal life. WOODRUFF: Which brings us to something the once and maybe future rivals share. They have felt the heat, but they are still standing.

(END VIDEOTAPE)

WOODRUFF: It's early, but we can dream. Well, early polls are sometimes, but not always, accurate when it comes to predicting presidential nominees. Back in 1993, then-senator Bob Dole was the frontrunner, as Republicans began to look for a challenger to president Clinton. Dole eventually won the nomination. In early 1997, Texas governor then, George W. Bush, was already leading the Republican pack and, of course, he went on to win the nomination and the White House.

In 2001, however, Al Gore was far ahead among potential Democratic hopefuls and the name John Kerry nowhere to be seen in an early poll. A lot can happen in four years.

And this quick reminder, Senator Hillary Clinton will join Wolf Blitzer on today's "WOLF BLITZER REPORTS" at 5:00 p.m. Eastern. And at 7:00 p.m. Eastern on "ANDERSON COOPER 360," a closer look at two of those potential White House contenders. Candy Crowley reports on Hillary Clinton, Kelly Wallace takes a look at Rudy Giuliani.

Running for national office has become a permanent process, keeping incumbents and candidates continuously busy. The often negative tone that accompanies running for office is becoming constant, as well, we're finding. Our Bill Schneider takes a look at that trend we've observed on the campaign trail.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): It's now the permanent negative campaign. Harry Reid gets elected Senate Democratic leader and sets up a war room -- war as in fighting the enemy. Karl Rove is promoted to deputy chief of staff. The Democratic National Committee circulates a brief history of Roveian dirty tricks and skullduggery and asks,"You promoted this man?"

Meanwhile, the Republican National Committee sends out a massively documented 13-page e-mail asking, "Who is Harry Reid?" The Republicans' answer? Chief Democrat obstructionist. Reid returns fire with some pretty harsh charges against President Bush.

SEN. HARRY REID (D), MINORITY LEADER: We know when he came here he said he wanted to be a uniter and a divider. I'm beginning to think that those statements are just absolutely false.

SCHNEIDER: Senate Republican leader Bill Frist says...

SEN. BILL FRIST (R), MAJORITY LEADER: It's politics. And the politics is playing around us all the time.

SCHNEIDER: It is politics and politics today is war. Notice the language. MICHAEL FELDMAN, DEMOCRATIC CONSULTANT: I think there's an arms race. The warriors in the battle for public attention are at work 24 hours a day.

SCHNEIDER: Why is this happening? Consultants blame technology.

DAN SCHNUR, REPUBLICAN CONSULTANT: The advances in technology make the news cycle move that much faster and make the attacks that much harsher.

SCHNEIDER: You have to cut through a lot more clutter to get your point across.

FELDMAN: You have wire services, 24-hour cable news networks, now the Internet and the blogs.

SCHNEIDER: The information environment is faster and louder.

FELDMAN: As one side becomes -- raises the decibel level and becomes harsher in its rhetoric, the other side usually races to meet that level of harshness.

SCHNEIDER: Both parties concentrate on rallying their own true believers.

SCHNUR: That leads to an ideological isolation in both parties, whereas if you only hear one side of the story from your favorite blog or from your favorite talk show host, you're not engaging in a broader discussion about the future of government.

SCHNEIDER: Almost no one is talking to the broader audience. The result...

FELDMAN: If the result is deadlock in an environment of negative political discourse, then I think we all lose.

(END VIDEOTAPE)

SCHNEIDER: Politics is war and in war there is no broader audience. There's only us and them.

FELDMAN: So, Bill, nobody thinks this is going to slow down.

SCHNEIDER: No.

WOODRUFF: It's only going to accelerate in this direction.

SCHNEIDER: No. They argue it's technology-driven, that the environment has become cluttered. You have to talk louder to make your point, to get it across.

WOODRUFF: And what about how much of it is because of the business of politics? You've got more consultants, more people involved in political advertising, for whom this is the way they make a living.

SCHNEIDER: They do and they claim that what they make a living at it is...

WOODRUFF: Not to mention what we do, reporting...

SCHNEIDER: Of course. They claim they make a living getting heard. And they have to talk louder to get heard. And they say the media is partly at fault because we feed off conflict. If there's a fight we put it on the air.

WOODRUFF: And we even do INSIDE POLITICS in off election years.

SCHNEIDER: Yes, we do.

WOODRUFF: OK. Bill Schneider. Thanks very much.

As we have been hearing the cost of Medicare prescription drug benefits stirring a lot of debate on Capitol Hill. We'll hear more about the issue from CNN's Ed Henry when we come back.

Also we'll hear what Jack Valenti and Ed Rollins have to say about the next battle for the White House and a possible face off between Hillary Clinton and Rudi Giuliani.

And a new tribute to Ronald Reagan, the former president who wrote 10,000 letters receives a national honor.

(COMMERCIAL BREAK)

WOODRUFF: As we reported earlier, the revised Medicare cost estimates the president talked about today have sparked both disappointment and dismay among lawmakers in both parties. Our congressional correspondent Ed Henry joins us from Capitol Hill with more. Hi, Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: That's right. With the president already facing an uphill battle on Capitol Hill to sell his Social Security plan, this news that another entitlement, the Medicare prescription drug benefit is going to have some soaring costs comes at a difficult time for the Republican leadership here on the hill. To give you an idea of the nervousness they have over Social Security, at a closed-door meeting of House Republicans this morning the leadership showed a video of President Bush out on the stump promoting his Social Security plan.

The point there was to prove to Republican rank and file that in fact the president is out there using his political capital, trying to give them some cover on this sensitive issue. But here with this news on Medicare, all of a sudden this has given Democrats a new opening. They are now saying that given the fact that the estimates on Medicare were so far off there's no way to trust the administration over their estimates on Social Security. Here's Senator Ron Wyden.

(BEGIN VIDEO CLIP)

SEN. RON WYDEN (D), OREGON: Yesterday the Senate got the eye- popping news that the prescription drug benefit will cost far more than anyone had ever anticipated. In fact, the early appraisal was that it would cost $400 billion. Then it shot up to over $500 billion. Yesterday we learned that it would cost $720 billion over the next decade. And perhaps would even go to a trillion dollars.

(END VIDEO CLIP)

HENRY: Now, one top House Republican leadership source told CNN that these new numbers are a concern to Republicans up here on the Hill. They think that the media is really mixing apples and oranges. That the original $400 billion estimate was over eight years. Now the new estimates are over ten years. That plus inflation they think are accounting for these changes.

I also talked to conservative Congressman Trent Franks of New Jersey. He was one of seven lawmakers who at the last minute broke in favor of this bill after a lot of pressure from the House Republican leadership. He said while he's also disappointed by this news, he would not change his vote even knowing what he knows now. He believes that even though the Republican Medicare bill was not perfect, he thinks the Democratic alternative that could have passed otherwise would have cost even more and in fact Congressman Franks says that there are some market reforms in this Republican law that he thinks will eventually save money down the road -- Judy.

WOODRUFF: Ed, another issue we're keeping an eye on that I know you're watching is immigration. Some developments on that. Tell us about them.

HENRY: That's right. Today the House finally starting to debate on Congressman James Sensenbrenner's immigration reform proposals. You remember these are left over from the negotiations that were left out of the 9/11 intelligence reform bill late last year. The key provision here would ban illegal immigrants from getting driver's licenses. Here is James Sensenbrenner today promoting his legislation.

(BEGIN VIDEO CLIP)

REP. JAMES SENSENBRENNER (R), WISCONSIN: Of the 19 terrorists, 18 of them used driver's licenses because they knew that if they had showed their foreign passport to the security screener at the airport it would have aroused suspicions so they used a legitimately legally issued state driver's license to get on the plane. And this will -- this bill will make sure that somebody who is here on a six-month visa doesn't get a six-year driver's license.

(END VIDEO CLIP)

HENRY: Congressman Sensenbrenner there obviously referring to the hijackers on 9/11. This legislation very likely to clear the House tomorrow but it faces a very uncertain fate in the Senate. Senate Majority Leader Bill Frist says he is not offering a commitment yet even it passes the House to bring it up this year in the Senate. So there's no clear idea whether it will ever get to President Bush's desk in this Congress.

Also, a lot of division within the Republican party overall on the immigration issue. As you mentioned earlier in the show the president in his State of the Union address last week pushing a guest worker program. But House Majority Leader Tom DeLay and other Republicans do not think that that's exactly the right way to go -- Judy.

WOODRUFF: OK. A lot to keep your eye on. Ed Henry, thank you very much.

As we heard earlier, a new poll is already looking ahead to the next battle for the White House. So what about a match-up between Hillary Clinton and Rudy Giuliani? When we return Jack Valenti and Ed Rollins join me with their views on that and some other subjects.

(COMMERCIAL BREAK)

WOODRUFF: The White House is announcing today this news just in to CNN, that the American amount -- the amount of money that the United States will donate in the aftermath of the south Asian tsunami is almost triple what it was originally said to be, some $350 million. Now the White House saying the president will ask Congress for $950 million. The money would go to relief and for rebuilding in the aftermath of the tsunami. The announcement coming out of the White House just moments ago.

Well, joining me now to talk about that possible match-up that we were just discussing in 2008, possibly Hillary Clinton versus Rudy Giuliani some other issues. Jack Valenti, a former aide to president Lyndon Johnson and in New York Republican strategist Ed Rollins. You know, we make so much of these early match-ups, Jack Valenti. But is this one possible, Valenti -- Clinton versus Giuliani? I don't know if you're interested in running or not.

JACK VALENTI, FMR. AIDE TO PRES. JOHNSON: It's plausible but the fact is that politics 24 hours is an eternity. There was no mention in there of people like Evan Bayh, Senator Bayh, Senator Joe Biden, Governor Mark Warner of Virginia and some others, maybe Al Gore himself will jump in. So we're a long way from picking any kind of a nominee.

WOODRUFF: Plausible to you, Ed Rollins?

ED ROLLINS, REPUBLICAN STRATEGIST: Well, it could be very plausible (UNINTELLIGIBLE) to run against each other in the Senate in New York. That's an automatic race that obviously would be a great one for Republicans in New York. What name ID gives you at this point in time is leads in polls. It also helps you raise money but at the end of the day, it really means very little. There's a very long tedious process to get there but certainly these two -- this former first lady and Rudy Giuliani are well thought of and can certainly raise some substantial money which makes them players.

WOODRUFF: Jack Valenti, if they were to run against each other, who would win?

VALENTI: Well, it's interesting they would both run out of New York. Haven't had that in a long time. I don't know who would win. I think Hillary Clinton has made great strides in re-dressing herself and revising her candidacy. And she's very well respected by her peers in the Senate, even those on the Republican side. She does her homework. Rudy Giuliani is an icon, as a result of 9/11, but you know he hit some bumpy roads, too. Once that microscope is on you, and once the full (UNINTELLIGIBLE) light of the press begins to abrasion it, sometimes people sustain it and sometimes they don't. My judgment is that more candidates are going to get in this race. I think it's going to be quite interesting.

WOODRUFF: Ed Rollins, you care to predict who would win if it were the two of those?

ROLLINS: Well, Rudy has a tough road to hoe in the sense that the conservative base would not be happy with a lot of his positions. So if he won the nomination on our part he certainly would be opening new grounds to be a very significant candidate. I think it's way too early to predict anybody being either the nominee or the winner but I certainly think if they want to play, they can.

WOODRUFF: Jack Valenti, this poll also showed, you know, John Kerry down, John Edwards at 17 percent, but you are saying all that it's just way too early.

VALENTI: I do. John Kerry, Senator Kerry, Senator Edwards, Senator Biden, Senator Bayh, Mark Warner, Al Gore, Hillary Clinton, Rudy Giuliani, you are going to have a lot of guys shuffling out of those gates. And it's going to be crowded.

WOODRUFF: Ed Rollins, let me ask you about something else that we're watching. And that is the -- I don't know whether you call it a spat or worse than that between the Republican National Committee and the Democratic leader in the Senate, Harry Reid. The Republicans putting out pretty steady e-mails over the last two days calling Senator Reid an obstructionist, pointing out what he said in the past that they say differs from what he is saying now about Social Security, for example. The Republicans are saying this is perfectly normal, perfectly ordinary. On the other hand, some people saying isn't it awfully early in a nonelection year to be going negative?

ROLLINS: It is early. I think the thing is that Harry Reid is a very good inside player is not very well known nationally. I think they are going to take this opportunity to define him in a little different way than he may want to be defined himself. I think we're into this ongoing negative type of campaigning. I think the partisanship is far more severe than I have ever seen it in my 40 years in the game. I think it's -- the country is divided. Republicans are not going to complain about the fact that Republican committees is jumping on the leader of the Democrats. And equally as important you know no Democrats are going to become Republicans because of it.

WOODRUFF: Jack Valenti, is this unprecedented? Do we just get used to it, or what?

VALENTI: No, it is not unprecedented. However I share Ed's view. I have been in Washington now 40 years in national politics and Hollywood. I have never seen hostility at such an abrasive point as it is now. In the House, in the Senate, in the national committees, in the press. I have never seen anything like it. And I think it is having a (UNINTELLIGIBLE) effect on civility, on dialogue, on compromise. Everything in Congress is done through compromise. That's how the nation moves forward. And when there is rigidity and when there's a kind of a feeling that I'm the sole repository of all truth, then the engine of government begins to stutter and falter. That is not good for the public.

WOODRUFF: Sounds like a warning, if I've ever heard one. We're going to have to leave it there for this week. Jack Valenti, Ed Rollins, very good to see you both. We appreciate it.

He was a man of letters and now Ronald Reagan's image is on a new postage stamp. We'll tell you more about this new tribute to the former president when we return.

(COMMERCIAL BREAK)

WOODRUFF: Eight months after Ronald Reagan's death the nation's 40th president is getting another honor. Reagan's image including his famous smile is on a new postage stamp. A ceremony marking the first day of issue of the stamp was held today at the Reagan Presidential Library in California. During his lifetime Reagan, who was known as the great communicator, wrote and mailed more than 10,000 letters. It's a dying art.

Well, that's it for INSIDE POLITICS this Wednesday. I'm Judy Woodruff. Thanks for joining us. "CROSSFIRE" starts right now.

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


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