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CNN CAPITAL GANG

President Bush presented his 2006 budget to Congress. Condoleezza Rice makes her first trip abroad as secretary of state, and North Korea withdraws from talks and announces it already possesses nuclear weapons. Democrats object to Republican attacks on Senate majority leader Harry Reid.

Aired February 12, 2005 - 19:00   ET

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


ANNOUNCER: From Washington, THE CAPITAL GANG.
AL HUNT, GUEST HOST: Welcome to THE CAPITAL GANG. I'm Al Hunt, with Mark Shields, Robert Novak and Kate O'Beirne. Our guest is the ranking Democrat on the Senate Budget Committee, Kent Conrad of North Dakota.

Kent, it's great to have you back on the show.

SEN. KENT CONRAD (D-ND), BUDGET COMMITTEE: It's good to be back.

HUNT: Thank you for being here.

President Bush presented his 2006 budget to Congress.

(BEGIN VIDEO CLIP)

GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: My budget reduces spending -- reduces spending -- on non-security discretionary programs by 1 percent, the most disciplined proposal since Ronald Reagan was in office.

(END VIDEO CLIP)

HUNT: He received sharply different reactions from the Budget Committee's top Republican and top Democrat.

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG (R-NH), BUDGET COMMITTEE CHAIRMAN: This budget does not allow government to grow faster than the rate of growth of the economy or faster than the productivity rate of the economy, and that's how you control government and make it responsible.

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.

(END VIDEO CLIP)

HUNT: Kate, do you like this budget any better than Kent Conrad? KATE O'BEIRNE, CAPITAL GANG: Where I part ways with both Republicans and Democrats on Capitol Hill is that I don't have to posture every time a president sends his budget up. And there's a lot of posturing going on. I also, to a degree, about this budget disagree with some conservative critics. Spending has been going up far too rapidly the last few years.

This is the most restrained budget this president has submitted. He's marked 150 programs for elimination. Will they be eliminated? No. Because neither Republicans or Democrats on Capitol Hill want to see them eliminated. That's the political reality. Democrats, of course, want to raise taxes to pay for more spending. The Republicans just want more spending. So it's hard to criticize him for not having submitted a budget that even has less of a chance of passing. And to the extent Congress is responsible for talking fiscal responsibility but not being willing to do anything about it, ultimately, it's the voters who send these members.

As a conservative, I don't like recognizing, but I think I have to, there's not a big constituency for smaller government here in Washington.

HUNT: Kent, bipartisan blame, not a constituency, really, to do anything other than wring your hands about the budget deficit on both sides of the aisle?

CONRAD: You know, that may be a place where Kate and I might agree. The big problem with this budget is the only way it's disciplined is he just leaves out things we all know are going to cost money. He doesn't have any money for the war costs past September 30. You know, they say it's hard to estimate. The one thing we know for sure, the right answer is not zero. He leaves out the cost of his Social Security privatization plan. He leaves out any money for fixing the alternative minimum tax, which is becoming a middle class tax trap, costs $700 billion to fix. There's not a dollar in this budget for it. He hides the full effect of his tax cuts because he just provides the first five years. The cost explodes in the second five years.

You add it all up and the deficit is getting deeper and deeper at the worst possible time, right before the Baby Boomers retire.

HUNT: Now, Bob, you don't worship at the altar of a balanced budget. I know that. So you shouldn't, I assume, be that bothered by this budget.

BOB NOVAK, CAPITAL GANG: No, I'm not. But I tell you what I do. I do enjoy listening to Kent Conrad because I -- I watch him on C-Span on the Senate floor, and he is -- he is so astute and clever, but what he talks about has nothing to do with...

O'BEIRNE: You knew a "but" was coming, didn't you, Kent?

(LAUGHTER)

NOVAK: ... has nothing to do with reality. What the reality is, is taxes. That's what this whole issue is about. Are you going to have a highly-graduated Karl Marx-type tax system...

(LAUGHTER)

NOVAK: ... or are you going to have a Ronald Reagan-Jack Kemp- type tax system? And George W. Bush has opted for the latter. Now, all -- all he is doing, he's putting in a little 1 percent decrease in government spending, not -- not the kind of cuts in the government that I would make, certainly, but a little cut. And all these people are wringing their hands! I listen to Republican senators saying, Oh, my goodness! There's things that are being cut in my budget! But you can't do anything with the Congress on that. You just got to make sure they don't increase taxes.

HUNT: Well, Mark, some liberals will claim that what he's really doing, he is making some cuts for poor people and children in order to fund tax cuts for millionaires. Is that just demagoguery, or does that have some validity?

MARK SHIELDS, CAPITAL GANG: I think you've used the word, Al, and I...

NOVAK: Demagoguery?

SHIELDS: I think demagoguery is good. I've always admired your old thesaurus.

(LAUGHTER)

SHIELDS: We've got -- we've got two things here, Bob. We've -- really, we've got the tax-and-spend Democrats, as they were branded by conservative over the generations. We've got the tax-cut-and-spend -- tax-and-spend liberals, the tax-cut-and-spend conservatives. I mean, these people -- and Novak's put his finger -- Mr. Novak has put his finger right on it. I mean...

NOVAK: You don't have to call me Mr.

SHIELDS: I only call you Mr. Novak because you are so wrong once again. And I have to say, Al, we can talk all we want about cutting out these little programs and the 1 percent and all this and baloney. All he doesn't want us to look at -- George Bush doesn't want anybody to look at the revenue side because the revenue side -- he passed those tax cuts when we had surpluses as far as the eye could see, Al. We had a -- we had cascading revenues because of the high-tech boom. We didn't have 9/11. We didn't have a Medicare prescription drug plan that has gone from $400 billion to $720 billion and hasn't -- and hasn't even come into being yet. Doesn't come into being for another year. So I mean, this thing is just totally -- and he wants to make these tax cuts permanent. It is an outrage! It's indefensible! And that's where the debate ought to be.

(CROSSTALK)

O'BEIRNE: Revenues are actually up!

HUNT: Kent, let me ask this. Look... O'BEIRNE: Revenues are up!

HUNT: Some of the spending proposals are really going to be small-bore stuff. And whether they're good or whether they're bad -- there's a proposal that we wrote about, for instance, at Bloomberg this week about -- to cut $50 million for rural airport subsidies. My guess is you're going to have problems with that proposal. But that's just the little stuff. The big stuff is entitlements and taxes because as Willie Sutton said about, Why I rob banks, that's where the money is. And there's no indication that Congress is going to tackle either one of those, is there?

CONRAD: You know, probably not. And the thing that's the tragedy, you know -- and I know Bob doesn't worry about this, but the fact is, as a country, we're living beyond our means. That's the hard reality. We're spending money we don't have, and that means we've got to borrow it. So what difference does it make? Well, where are we borrowing the money? We now just don't borrow from ourselves, we've now gone with a tin cup all around the rest of the world. We've borrowed now over $700 billion from Japan, nearly $200 billion from China. We've even borrowed over $65 billion from South Korea. Now, at some point, these people who are our creditors are going to say, Hey, we'll expect you to pay the bills.

NOVAK: The interesting thing -- Mark really did come to the real issue, which is taxes. It isn't who we borrow from.

O'BEIRNE: No, they want to raise taxes!

NOVAK: They want to raise taxes. They want to graduate taxes. And I tell you something, my friend...

CONRAD: Yes?

NOVAK: ... that if they hadn't had these tax cuts, we would have been in such a recession, with such deep deficit spending that you'd really have a crisis in America, and we'd have...

HUNT: You know, it's sort of like...

NOVAK: ... soup lines in America!

HUNT: ... the Clinton tax increases in '93. Boy, they really killed the economy, didn't they. Kate, quick.

O'BEIRNE: The size of the deficit doesn't matter. Size of government matters. And its reach and expense keeps getting bigger and bigger.

HUNT: OK. On that, you will you have the last word because THE GANG will be back with the new secretary of state's first trip abroad.

(COMMERCIAL BREAK)

HUNT: Welcome back. Secretary of State Condoleezza Rice made her debut overseas and hailed the revival of the peace process with Israeli and Palestinian leaders.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: This is the most promising moment for progress between Palestinians and Israeli in recent years. The United States is determined to do all that we can to take advantage of this moment of opportunity in the weeks and months ahead.

(END VIDEO CLIP)

HUNT: The secretary of state met with European leaders.

(BEGIN VIDEO CLIP)

RICE: It is the best discussion of Iraq that we have had as an alliance since the Saddam Hussein regime fell, and in fact, well before that, because it was clearly a unified alliance.

The good news is that while France and the United States have disagreed from time to time and everybody has paid attention to that, the United States and France have continued to cooperate on a wide, wide range of efforts.

(END VIDEO CLIP)

HUNT: As she left Europe, North Korea announced it has produced nuclear weapons and suspended participation in arms talks.

(BEGIN VIDEO CLIP)

RICE: This is an unfortunate move, most especially, probably, for the people of North Korea because it only deepens the North Korean isolation from the rest of the international community.

(END VIDEO CLIP)

HUNT: Mark, was this a successful first mission for the secretary of state?

SHIELDS: Yes, it was, Al. And I think it's fair to say that stylistically, substantively, she handled herself well. Leaders on both sides obviously want to get along. They know that they're wed for another four years, and the United States, while it could do Iraq -- was convinced it could do Iraq by itself, knows that to do Iran, they need Europe and need it very much.

I'd just add to that we're in an interesting position. Iraq did not have -- insisted they did not have nukes, did not have chemical or biological weapons, so we invaded them, toppled their government and occupied them. North Korea boasts that they have nuclear weapons, and so we say, China, will you talk to them? And Iran says, Hey, we're on the nuclear -- we're in the nuclear business. I mean, what the hell's going on? They say, Well, maybe the Europeans will talk to them. We don't have a military option left.

HUNT: Bob, I thought the Rice trip was very successful, but North Korea rained on her victory lap, didn't it?

NOVAK: Yes, it did. And the whole problem is, you can't do business with those people. And the...

HUNT: "Those people" being the North Koreans?

NOVAK: The North Koreans. And the -- you know, there's this -- this big abstruse debate whether you have one-on-one talks or six-time talks. That's not what really the issue is. There are very (ph) few people in the administration (UNINTELLIGIBLE) there's no point in negotiating with them anyway because they're going to do what they're going to do.

And I think the only thing you can do with North Korea is not negotiate but ignore them. We're certainly not going to go to war with them and have destruction of Seoul and another Korean war. We're not going to do that. But the idea that they're going to take their nuclear weapon and send it over to Hawaii, in which case, they will become burnt ashes on the retaliation, is not going to happen.

HUNT: Kate, how do you ignore then when they've been exporters of terrorism, more than Iraq, and they -- and they'll be -- and they will have the threat of a nuclear weapon in one of the most important areas, if not the most important area in the world? How do you ignore North Korea?

O'BEIRNE: Al, I'm going to ignore that question.

(LAUGHTER)

O'BEIRNE: Another time...

HUNT: All right.

O'BEIRNE: ... I'll set Mark right no North Korea. I don't think -- I want to make a more general point and not -- not gloss over Condoleezza Rice's maiden voyage. Given that she's been a public person all these years, I was surprised that I was as moved as I was seeing her in the position of secretary of state, representing America at that level. I found it -- I was deeply proud to see this black woman in that role. And I think we're going to see a real contrast with the past four years. There's always been this contradiction...

HUNT: Contrast with Colin Powell.

O'BEIRNE: Yes. The president's critics have this contradiction -- praising the heck out of Colin Powell and always trashing the American -- the administration's foreign policy, foreign diplomacy. Well, that's a contradiction. I think Condoleezza Rice is going to be more effective at public diplomacy because she is 100 percent on board this administration's foreign policy. I think she's going to travel more because she doesn't have to stay home and engage in intramural fights. And given the parameters of what we have to work with with some of our allies, I think she's going to be extremely effective, moreso than her predecessor. HUNT: Kent, at the risk of having two people ignore my questions, let me just have pick up on what Kate said about Rice, but also your take on the North Korean...

CONRAD: It can't be ignored. Look, you can't ignore it because this is another nuclear power and one that has shown a willingness to proliferate. That is, to sell what they have. And that's the great concern. One of the things we got to make sure is we interdict any movement off the Korean coast to others because that would be a very serious matter. And we've got to be concerned about the movement of technology. You know, for the life of me, I don't understand why the administration's so rigid on the question of not talking to them directly. We're going to talk in a room with six people, why we can't talk in a room with two kind of eludes me. But look...

O'BEIRNE: Because we need -- because Japan and China and South Korea are part of the solution here! What do we -- we're not going to do what the Clinton...

CONRAD: Yes, but -- wait, wait.

O'BEIRNE: ... administration did, bribe them! And then, of course, they broke all those promises!

CONRAD: The problem isn't any of those countries, the problem is North Korea. North Korea's saying they're not going to participate in those talks. So the question is, are you going to talk to them or not? And I think it's always better to talk.

HUNT: They also -- this administration has been in office now for four years. It's pretty hard to argue that that North Korean policy has worked, Mark.

SHIELDS: It's on their watch right now. And let's be very frank about it. North Korea was announcing yesterday, We're open for business. That's where we are. I mean, these are the people that sold ballistic technology to Libya as recently as 2001. They're a basket case economically. Where are they going to get money?

(CROSSTALK)

CONRAD: You can't ignore that.

SHIELDS: Do I think they'll sell? Sure, I think they'll sell.

NOVAK: Do you really think, based on the...

O'BEIRNE: They can be trusted, is what you're saying! You're saying they can be trusted.

NOVAK: Do you really think...

SHIELDS: To sell.

NOVAK: Can I say something?

HUNT: You may.

NOVAK: Do you think, really, based on the experience of President Clinton and the first four years of President Bush that there's any future in negotiating with these people? Do you think they will stick to agreements? Do you think they care about agreements?

SHIELDS: I think, Bob -- I think it's absolutely folly to pretend that they don't matter and to ignore them.

(CROSSTALK)

SHIELDS: No, seriously. No, I think -- I think you've got to engage them. I really do. And I think -- we're asking China to do this. As Kent pointed out earlier, our demands on China become increasingly less -- have less traction the more money we owe them. We can't go in and tell them what to do. And China is worried about the destabilization of North Korea and that government coming down, the refugees streaming into -- into China.

HUNT: Kent, the one thing we can't -- we can't send forces over there, can we?

CONRAD: You know, I don't think anybody wants to ever say the military option is off the table. That's not a wise thing to do. But look...

O'BEIRNE: It's not a good (UNINTELLIGIBLE)

CONRAD: ... to say -- to say...

CONRAD: As a matter of fact, there may not be a good one, but...

(CROSSTALK)

CONRAD: The thing that I think is the overwhelming concern is that these folks have a record of selling these technologies, and that's a danger to all the world.

HUNT: The last word goes to the gentleman from North Dakota.

SHIELDS: And a good one is was!

HUNT: Next on THE CAPITAL GANG, the RNC and Harry Reid trade punches.

(COMMERCIAL BREAK)

HUNT: Welcome back. The Republican National Committee issued a 13-page mailing criticizing the Senate Democratic leader. Quote, "While President Bush and Republicans in Congress are working to win the war on terror, preserve Social Security and lower health care costs, Harry Reid and his taxpayer-funded war room are focused on obstruction," end quote.

(BEGIN VIDEO CLIP) SEN. HARRY REID (D-NV), MINORITY LEADER: I don't think the president of the United States can say one thing and then do something else and get away with it. Is this how he wants to be a uniter and divider? Mr. President, I call upon you to repudiate this document, to tell the Republican National Committee, Don't mail it.

(END VIDEO CLIP)

HUNT: Senator Reid had dinner at the White House, but afterwards said he was unsatisfied with the president's response.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R-TN), MAJORITY LEADER: I would discourage both Democrats and Republicans to single out a particular mailing and not single out the comments by the Democratic chairman from the State of the Union, who basically said that the president purposely misled the American people in the State of the Union message.

(END VIDEO CLIP)

HUNT: Bob, is the attack on Reid just normal politics, or does it go over the line?

NOVAK: It's strictly normal politics. Harry Reid, who I like -- he's been a guest in that seat many times -- take a deep breath! He's gotten a little puffed up by being Democratic leader. I've gone over this whole -- this whole thing. There's nothing in there that's -- that is libelous or slanderous. They say how his votes were.

Now, I have found something -- that Democrats, particularly from red states, don't like to have their votes analyzed! That's -- that goes way back to the early '80s, when NCPAC (ph) took these -- these voters who pose as moderates and they're really liberals. And Harry doesn't like his votes analyzed!

But the idea that this is beyond the pale -- I think that Senator Reid ought to look at his own speeches that he has made over the last couple of years and say if they are not exactly -- perfectly OK with me -- they're exactly in the same character as the RNC mailing.

HUNT: Mark Shields, I thought Harry Reid would have been better served if he'd used a little humor himself to deflect that, rather than treating it as this...

SHIELDS: I thought there was, at a point in that delivery by Senator Reid, a certain whiny quality, which I don't think served him well. But I think there's a couple of points here. Brother Novak is so wrong politically. Red state -- George Bush carried Nevada by 2 points. Harry Reid carried Nevada by 26 percentage points. This isn't Tom Daschle in South Dakota, where he's losing by 21 points -- and 2 points -- Harry Reid's going to be there -- he was reelected last November. He's going to be there after George Bush and Dick Cheney are long gone out of this town.

Now, one thing about the president's response is -- the president didn't like it, thought it was a bad thing. He went on record saying that. But he wouldn't stop it. Did it remind you of the Swift Boats at all, Al? That just the Swift Boat -- terrible -- I'm not going to condemn it. I'm not going to condemn it, but it's bad and I wouldn't have done it. And boy, I would -- I don't know what's going on over at the RNC. My campaign manager's running the place. Come on!

HUNT: Kent, was there real anger among Senate Democrats, or is this just part of the game?

CONRAD: No, there's real anger. And the real anger is they saw this being done to Tom Daschle, the destruction of Tom Daschle. You know, it was -- it was just a constant campaign to tear him down. And now they've come after Harry Reid, the same strategy, the same plan of destruction. And you know, if the president wants to be a uniter not a divider, this isn't the way to begin. If he wants to have a climate where we can work on the real serious challenges facing the country -- and goodness knows, this is a challenging time -- this isn't the right way to start.

HUNT: Kate, wouldn't you love to have been at that dinner at the White House the other night?

O'BEIRNE: Kent, Harry Reid should take advice from a previous Harry. If you can't stand the heat, Senator Reid! I guess the rules now on the part of the Senate Democrats is, We have a right to obstruct everything. Senator Reid announced the president's plans for this year are dead on arrival, even before the State of the Union, will not permit the Senate to fulfill its advise and consent role by actually voting on judges. They have a right to do all of that, but Republicans can't draw attention to the fact that they're obstructing everything?

And this is perfectly legitimate. It is pages of Senator Reid's votes and quotes. That's all it is. Yet it's impolite to be held accountable for the way he voted and the things he said?

NOVAK: See, I don't find any adjectives.

O'BEIRNE: Right!

NOVAK: I don't find that he's accused of moral turpitude...

O'BEIRNE: Right.

NOVAK: ... or some kind of sexual misbehavior.

O'BEIRNE: Right.

NOVAK: It says Reid voted against expanding child tax credit at least 17 times! He did!

O'BEIRNE: Right. And the whining...

NOVAK: Reid voted at least 12 times against relief...

(CROSSTALK) O'BEIRNE: Mark, you are so right. The whining is so unattractive!

(CROSSTALK)

HUNT: ... give Kent Conrad a chance to respond.

CONRAD: Listen to what we're talking about...

HUNT: They're saying it just -- they're just talking about his record.

O'BEIRNE: Right!

CONRAD: Listen to what we're talking about, you know? Instead of us being talking about the serious challenges facing the country, we're talking about this document put out by the RNC...

O'BEIRNE: This obstruction...

CONRAD: ... to trash...

O'BEIRNE: This obstruction...

CONRAD: ... to trash Harry Reid, the Democratic leader...

O'BEIRNE: This obstruction...

(CROSSTALK)

CONRAD: ... after this is exactly what they did to Tom Daschle. Wait a minute. If this is politics, I'll just say -- I'll look into the camera and say to my friends on the Republican side. If the Democrats decide to go down this road...

NOVAK: They're going down the road!

CONRAD: ... we are -- no, no, no.

(CROSSTALK)

CONRAD: No, if they start going down this road, this is going to get uglier and uglier...

O'BEIRNE: They are well down this road!

(CROSSTALK)

CONRAD: This is not campaign time...

O'BEIRNE: Ask Senator Kennedy!

CONRAD: This is not campaign time.

O'BEIRNE: Tell Senator Kennedy!

CONRAD: This is the time we ought to be dealing with the serious challenges facing the country.

HUNT: A quick final word, Mark.

SHIELDS: Al, I'll just put it this bluntly to Ken Mehlman and to George Bush, to Karl Rove. And that is, if you're going to pass Social Security in the Senate, you're going to have to have 70 votes. And that's the only...

(CROSSTALK)

SHIELDS: Bill Thomas put it -- they ought to listen to Bill Thomas. They ought to listen to him. He makes more sense than anybody...

HUNT: That is the final word.

SHIELDS: ... in the Senate.

HUNT: We're out of here.

SHIELDS: And you don't -- this is not how you get them.

HUNT: Kent Conrad, thank you for joining us.

Coming up next in the second half of CAPITAL GANG, our "Sidebar" story of the week is Karl Rove's promotion. We'll go "Beyond the Beltway" to find out if New York will get gay marriages. And our "Outrages of the Week" all after the break.

(COMMERCIAL BREAK)

(COMMERCIAL BREAK)

(NEWSBREAK)

HUNT: Welcome back to the second half of CAPITAL GANG.

President Bush promoted his top adviser Karl Rove to the role of deputy chief of staff. The president's official White House announcement said "Karl Rove is a longtime adviser and trusted member of my team. His hard work and dedicated have been invaluable. I appreciate Karl's willingness to continue to serve my administration in his new position."

Mark, does Karl Rove's new role enhance his already considerable power?

SHIELDS: How can you enhance the infinite power that Karl Rove already has obviously in this administration, Al, and the Republican Party but it just continues to amaze me in this town when somebody is good at politics and really good and Karl Rove I think people (UNINTELLIGIBLE) have to get into policy.

When someone masters policy they want to play politics. It's the plaintiff cry of a beautiful blonde, "Love me for my mind as well as my body. I want to be taken seriously."

HUNT: Do we want to take Karl Rove seriously for his mind and his body?

O'BEIRNE: Clearly, clearly Mark recognizes I want to be taken seriously. I get it, Mark.

SHIELDS: Got it all Kate.

O'BEIRNE: Karl Rove -- Karl Rove -- I understand Mark's point and I have witnessed it obviously over the years too. Karl Rove is that rare individual though. He is extremely talented on both fronts, both politics and policy. He loses most people, even experienced Capitol Hill types.

HUNT: Do you think this is a real promotion as opposed to just a recognition of what his power was?

O'BEIRNE: No, you know what I think it is, he has always played, because he's very strong on policy, a very influential role on policy formulation and I think what this does is recognize now that what preoccupied so much of his time is over, the reelection of George Bush. I think it signals that the campaign now is a policy campaign and they're going to use Karl Rove's skills on the policy front in a way to make the possibility of passing those reforms (UNINTELLIGIBLE).

HUNT: Didn't we know that before this announcement this week though?

NOVAK: This announcement makes no change whatever, just gives him a new title. He's always been into policy. He's not even been into policy, he's been into micromanaging, like deciding who gets awards and who gets little medals for things.

SHIELDS: And I think we disparaged Jimmy Carter for doing that.

NOVAK: Yes, but I don't think Karl is president. I think he is a staffer.

O'BEIRNE: (UNINTELLIGIBLE).

NOVAK: It is a staffer's role. Now, why did they do it? Well, I have heard this theory put out and I believe that Karl has heard it put out and I don't think he disagrees with it that a lot of his colleagues have been promoted, Condi Rice from the staff promoted to Secretary of State, Gonzales appointed to Attorney General, Spellings appointed to Secretary of Education. Is he going to be left out without any kind of little promotion? And I understand he feels he deserves a little promotion and that's what this was.

SHIELDS: Did he get a better parking space out of this Bob?

NOVAK: This is a pat on the back. Did you ever get a pat on the back in your life?

SHIELDS: Only from you Bob. HUNT: How about the NSC, will the NSC have any objections to this would you think?

SHIELDS: I don't think the -- I don't think anybody is going to object to Karl Rove in this White House.

HUNT: Kate.

O'BEIRNE: No, and I think -- I think Bob's wrong. I think it actually does make a difference when people responsible for policy are reporting directly to you and he's a very organized guy who follows up and I think that's going to be reflected in this switch.

HUNT: All right. The critical question now, Bob, does this new job make it more likely or less likely that Karl Rove will return your phone calls?

NOVAK: Well we won't -- we don't talk about that kind of thing whether somebody returns the calls but I would -- I would say he is the most -- one of the most powerful single White House staffers that I have seen in a long time in Washington. He is in the caliber of Sherman Adams.

HUNT: And Jim Baker.

NOVAK: And Jim Baker and I don't think this little change in title has anything to do with it.

HUNT: No, I think certainly in my time the only White House staffer with as much power as Jim Baker. I don't think there's any question of that.

Coming up the CAPITAL GANG Classic, a Bush budget from the past.

(BEGIN VIDEO CLIP)

ANNOUNCER: Here's your CAPITAL GANG trivia question of the week. While in high school Karl Rove served as youth coordinator for which United States Senator: A) Wallace Bennett; B) Robert Kennedy; or, C) John Tower. We'll have the answer right after the break.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER: Before the break we asked "While in high school, Karl Rove served as youth coordinator for which United States Senator"? The answer is A, Wallace Bennett.

(END VIDEO CLIP)

HUNT: Welcome back.

Fifteen years ago the first President Bush also introduced a budget with a large projected deficit. THE CAPITAL GANG discussed it on February 3, 1990 with the president's budget director Richard Darman.

(BEGIN VIDEOTAPE)

SHIELDS: George Bush revealed himself to be a liberal Republican, I mean Headstart, great society program, going to plant a billion trees, childcare, no mention of Ronald Reagan, no mention of abortion, no mention of pornography, no mention of school prayer.

NOVAK: There is no vision there because he did sound not like a liberal Republican. He sounded like a Democrat with a Republican budget. No new taxes is a pretty tough budget and it's got all the soft rhetoric and that is trouble.

UNIDENTIFIED MALE: I think it' a good budget and I don't mind a little bit of the rhetoric and a little bit here for Headstart. That's what you expect from George Bush.

RICHARD DARMAN, FMR. BUDGET DIRECTOR: Everybody would like to cut taxes even more. Even we would like to do so but it's not possible right at the moment. Maybe it will be possible in the future.

HUNT: I'm going to give Bush credit for the troop cut. I think the troop cut was a good idea. The Warsaw Pact is dead and I think the cut to 225 is fine.

(END VIDEOTAPE)

HUNT: Bob, was that budget as bad as you thought it was back then?

NOVAK: It was worse because I thought at least that it was a no new taxes budget, even though they had all these liberal programs and, of course, Darman was saying we wish we could cut taxes. He was the architect of the tax increase. So, it was really a much worse budget and I thought that you were very interesting and you thought we could do with the troop cut. Maybe we would have been better off if we had.

HUNT: The Warsaw Pact was dead though.

O'BEIRNE: One could -- although Saddam Hussein was invading Kuwait within months, which it just goes to show none of us obviously can predict, one good thing that came out of that budget was the revenue increases later in the year and they voted for the tax increase despite the no taxes pledge. The one good thing is in 15 years Republicans have not supported a broad-based tax increase since.

HUNT: Mark.

SHIELDS: Al, I point out that the U.S. military was twice as big then as it is now. I mean so we're not talking about depleting the American services. You were right, Al, the Warsaw Pact was dead and I think I may have overreacted. I don't know what I had, maybe caffeine that night, but I thought I overreacted and I'd like to apologize to Dick Darman 15 years later.

NOVAK: How did you overreact?

SHIELDS: I just thought I did the syllabus of errors like I was tacking him up on the door and, you know, I just thought it was a little overdone.

HUNT: I want to tell Bob Novak I miss Dick Darman.

Next on CAPITAL GANG we'll go "Beyond the Beltway" with gay marriages and politics in New York. "Newsday" reporter Glenn Thrush joins us.

(COMMERCIAL BREAK)

HUNT: Welcome back.

In New York City, State Supreme Court Justice Doris Ling-Cohan ruled that the ban on same-sex marriages was unconstitutional saying "Under both federal and New York State constitutions, it is beyond question that the right to liberty and the concomitant right to privacy, extend to protect marriage."

Republican Mayor Michael Bloomberg of New York City personally supports gay marriage.

(BEGIN VIDEO CLIP)

MAYOR MICHAEL BLOOMBERG (R), NEW YORK: I think anybody should be allowed to marry anybody. I don't happen to think that we should put restrictions on who you can marry.

(END VIDEO CLIP)

HUNT: However, the mayor joined the state's Attorney General Eliot Spitzer in appealing the judge's order in order to get a definitive ruling from the New York Court of Appeals.

(BEGIN VIDEO CLIP)

BLOOMBERG: The public deserves the finality of the court ruling and I think people that want to marry people of the same sex deserve the right to have the courts issue a ruling, a declarative, definitive final ruling one way or another and that's what I'm going to try to do very much.

(END VIDEO CLIP)

HUNT: Joining us now is Glenn Thrust, City Hall reporter for "Newsday." Thanks for being with us, Glen.

GLENN THRUSH, "NEWSDAY": Thanks.

HUNT: Glen what is the political fallout?

THRUSH: Well, I think Bloomberg is going to take some hits from the right in particular. I don't think the stuff he's going to take from the left is going to be that significant but I think the larger damages that he comes off looking foolish, this is his version of "I smoked marijuana but I didn't inhale." It doesn't seem like a very clear position that he's staked out.

HUNT: Bob.

NOVAK: You say he won't get any hits from the left on this appeal. Do they understand that this is to prevent the disappointments they had in San Francisco when the marriages were ruled invalid? Do you think -- do you believe the gay community will accept that and be reasonable about it?

THRUSH: Well, I think the dynamic in New York is a little different than in some places. In 1998, Rudy Giuliani, who I'm sure you guys are familiar with, pushed through a domestic partnership law that granted a pretty wide array of benefits for gay and lesbian couples in New York.

So, the issue isn't vital in terms of people getting access to benefits. It's much more symbolic and I think a lot of the people who are coming out bashing him are already backing some of his opponents already.

HUNT: Kate.

O'BEIRNE: Glenn, in a parallel with California, this is New York City, of course, not the whole state. California voted by referendum rejecting same-sex marriage, even in liberal California. San Francisco was out of step with them. Is this likely to impact statewide races next year for either Senator of governor?

THRUSH: Well, I think the Spitzer -- Bloomberg over the weekend, after he had twisted in the wind for about 24 hours, figured out that it might be a good strategy to use Eliot Spitzer as his human shield on the issue and he's sort of discovered that he and Spitzer were fighting side-by-side a little bit late in the game.

I think this is going to play an enormous role in state politics insofar as Spitzer seems to be drifting to the right so as not to alienate Long Island or upstate voters who may not share New York City opinions.

HUNT: Mark Shields.

SHIELDS: Glenn, we certainly saw in the past presidential election the Massachusetts Supreme Court decision was of very little help to a Massachusetts Democratic Senator running for president and I just wonder if after San Francisco and the fact that three state judges have already in New York said that it was unconstitutional, that gay marriage was, I mean wasn't it a prudent move on the mayor's part to simply say let's get a definitive, declarative decision on this?

THRUSH: Well, it was a prudent political move in the short term but remember Bloomberg was elected on two things. First of all, he's got more money than a lot of countries. The second is he has credibility with voters when he says "I'm not a politician and I make decisions based on merit."

This was not, if you've parsed out the statements from Friday, this did not sound a lot like Martin Luther King's "I have a dream" speech. This was a much more calculated political move and he's got to convince a lot of New Yorkers, who aren't necessarily sold by him after three years, that he's the real deal and I'm not sure that this does that.

HUNT: Glenn, let me ask of you how are his Democratic rivals handling this in the mayor's race?

THRUSH: They're piling on.

HUNT: They're what, I'm sorry?

THRUSH: They're piling on. This is, you know, the gay and lesbian constituency in New York City, particularly in Manhattan politics, is a really galvanized constituency. They're the ones who man the phone banks.

They're disproportionately represented among the political consultant class, so I think they've seized upon this in the short term in a big issue. I think it remains to be seen how it's going to play out in the larger mayoral race when you involve all five boroughs, however.

HUNT: Bob.

NOVAK: Glenn, the second step of this little two-step is that if the court then -- if the Court of Appeals reverses the lower court and they go to the legislature and try to -- and I guess the mayor and maybe the attorney general would advocate some kind of a constitutional change, a statutory change -- not a constitutional change, a statutory change on the gay marriage ban, what is the speculation there? Is there a majority in the New York legislature for supporting gay marriage?

THRUSH: There's a majority. The New York State legislature is split. The Democrats control the Assembly. The Republicans control the Upper House and State Senator Majority Leader Bruno in New York, who is a conservative Republican on social issues and a religious Catholic, has said over his dead body essentially on this issue.

However, there has been some grumblings about ousting him over the last couple of years. There have been a number of mini scandals, so it's not certain how long he'll hold on. But for the foreseeable future, the Republicans have a strong enough majority I think that any real chance of that changing is remote.

HUNT: Kate.

O'BEIRNE: Glenn, I'm trying to figure out exactly what Mayor Bloomberg's political philosophy is here. I guess he's saying...

THRUSH: Join the club.

O'BEIRNE: I guess he's saying that it doesn't -- it's fine with him if men and women marry each other, men and men, brides and brides, but they can't smoke at the reception, is that what he's taking to the voters next year?

THRUSH: He's also apparently taking a stance against heterosexual marriage, so you shouldn't hold that against him. I mean the question you ask is the seminal question of Mike Bloomberg's career. A lot of people have spent a lot of time and a lot of money trying to figure out what it is that he's doing.

But he's in a tough position. He's a centrist. He's trying to reconcile a complicated political dynamic. As you know, the Republicans in New York City, the real Republicans, who are now revolting against him in a couple of counties, are as conservative as conservatives in the rest of the country so he's got a real tightrope to walk.

HUNT: OK. Glenn thanks for joining us.

THE GANG will be back with our "Outrages of the Week."

THE CAPITAL GANG FACT: Of the seven members of the New York Court of Appeals, three were nominated by Democratic Governor Mario Cuomo. Four justices were nominated by Republican Governor George Pataki.

(COMMERCIAL BREAK)

HUNT: And now for the "Outrages of the Week."

A few months ago, some House Republicans tried to protect Majority Leader Tom DeLay by revoking a rule forcing him to step down if indicted. Following public outrage, this was abandoned.

Now, DeLay allies in the Texas Legislature are trying another run which incredibly would let politicians veto the prosecution of a politician. Not so coincidentally, Mr. DeLay is under investigation for fundraising scams. He should face the same bar of justice, no higher but no lower as any other citizen.

SHIELDS: Amen.

NOVAK: This week Baltimore Mayor Martin O'Malley, considered a rising star in the Democratic Party, compared the 9/11 terrorist attack on America's metropolitan core to President Bush's budget.

(BEGIN VIDEO CLIP)

MAYOR MARTIN O'MALLEY, BALTIMORE: Years later we are given a budget proposal by our commander-in-chief, the president of the United States and with a budget axe he is attacking America's cities.

(END VIDEO CLIP) NOVAK: Now the mayor claims he did not mean to compare the president with terrorist murderers but you could have fooled me, shame on you, Mr. Mayor, for unacceptable partisanship.

HUNT: Kate.

O'BEIRNE: Boxers or briefs, Virginia lawmakers disagree about that preference but agree they don't want to see either poking above low slung pants. A Democrat proposed a $50 fine if offensive underwear is visible and the ban was approved by the Republican House of Delegates.

It was a bipartisan butting in to turn law enforcement officers into fashion police. So much for limited government, what's next no white shoes after Labor Day? After brief attention the delegates became the butt of plenty of jokes and the Senate killed the whole bad idea.

HUNT: You changed your sartorial splendor (UNINTELLIGIBLE).

SHIELDS: Hey, good for you Kate.

And did anybody even notice Brother Novak it's only Democrats who are partisans? But that's another matter.

President Bush is campaigning hard to convince Americans that Social Security confronts a real crisis and that the solution lies in his private accounts, the ones the president advocates.

You can call this leadership but what you cannot call it is to call these pre-selected invitation only pep rallies town meetings. They are not town meetings. Town meetings are where all opinions are welcome because they recruit the already committed and exclude the honestly skeptical as the Bush folks do.

They are bogus, synthetic and staged just like the press conferences of George Bush when they call upon right-wing hit men (UNINTELLIGIBLE) to ask questions posing as journalists and a responsible press corps would call them exactly that.

HUNT: Boy from underwear to Social Security we have a range on this show.

This is Al Hunt saying goodnight for THE CAPITAL GANG.

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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