CNN.com - Transcripts

Transcript Providers

Return to Transcripts main page

The Lead with Jake Tapper

Bush Attends Peace Summit in Jordan; Democrats Take Aim at Bush's Tax Cut; What Will Political Fallout Be From Hillary Clinton's Book?

Aired June 07, 2003 - 19:00 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.

ANNOUNCER: Live from Washington, THE CAPITAL GANG.
MARK SHIELDS, HOST: Welcome to CAPITAL GANG.

I'm Mark Shields, with Al Hunt, Robert Novak, and Margaret Carlson.

Our guest is Republican Congressman David Dreier of California, the powerful chairman of the powerful House Rules Committee.

Great to see you again, David.

REP. DAVID DREIER (R-CA), CHAIRMAN, RULES COMMITTEE: You know, it's always great to be with Margaret and your Triple Crown winner, Bob Novak.

SHIELDS: Oh, boy. Thank you. Boy, a giant sucking sound from southern California.

President Bush completed a seven-day foreign trip with a peace summit in Jordan, attended by the prime ministers of Israel and Palestine.

(BEGIN VIDEO CLIPS)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Israel must deal with the settlements. Israel must make sure there's a continuous territory that the Palestinians can call home.

MAHMOUD ABBAS, PALESTINIAN PRIME MINISTER (through translator): Armed intifada must end, and we must use and resort to peaceful means in our quest to end the occupation and the suffering of Palestinians and Israelis and to establish the Palestinian state...

RAANAN GISSIN, SENIOR SHARON ADVISER: If the cease-fire is the first step on the road to really dismantling the terrorist organization, this army that's collecting the illegal weapons -- Of course, Israel will reciprocate...

(END VIDEO CLIPS)

SHIELDS: But the Palestinian Hamas organization did not echo those sentiments.

(BEGIN VIDEO CLIP)

ABDEL AZIZ RANTISI, HAMAS LEADER: I believe that Abu Mazen himself, the close -- have closed the door in front of Hamas because he committed himself in front of Bush and Sharon by what Palestinians refuse.

(END VIDEO CLIP)

SHIELDS: Al Hunt, did the peace summit make President bush's trip a success?

AL HUNT, CAPITAL GANG: Mark, I think it might have gone the other way. I thought the trip was going very well for the president. But I think at the end, they may have overplayed the hand. I think they did a disservice to Mahmoud Abbas, the Palestinian prime minister. The U.S. wrote part of his script at the end. And I think what it did is, it gave Hamas and Arafat, who want to sabotage any road to peace, it gave them, it gave them an opportunity to do just that.

It's not the substance of what he said, but it's -- but to the extent the Palestinian prime minister is perceived as being in the back pocket of the Americans or even the Israelis, I think that's worrisome, and I think we overplayed our hand a bit.

SHIELDS: Bob Novak?

ROBERT NOVAK, CAPITAL GANG: Well, I -- Al is usually very good on the Middle East, and you were very bad that time, because I thought it Washington a perfect trip by the president. I thought he did very well, and I thought he did -- act like e really stunned the world at the Jordan summit. People thought he wasn't serious about this. He is serious, including some of the friends of Prime Minister Sharon in the United States, who don't want an agreement.

Granted that Abbas has a very tough time. He's got Arafat sniping at him, and he's got the Hamas with terrorists, and, of course, you've got Sharon, who wants to take the first excuse to say, Ah, he can't control the terrorists.

But I thought it was a terrific start by the president, and it gives some hope, which we didn't have much before.

SHIELDS: Do we have, Margaret Carlson, beyond hope, though, Bob Novak just almost described the stacked deck, I mean, that all these people who really aren't -- are unwilling participants, whether it's Arafat or Sharon?

MARGARET CARLSON, CAPITAL GANG: Right. Al put -- makes a good point, which is that delicate dance of the parties here may have some -- the parties may have stumbled because Bush looked a little too much on the side of Abbas.

And then he can't deal with Arafat and Hamas if he seems to be in the pocket of the United States. But that being said, it -- the president's involvement after two years of disengagement is a good thing, because it raises the level of the talks on the road map. And it does give Mahmoud Abbas status within the international community to be recognized by Bush.

It's just that it can't be too close, because the minute it does, it sends Arafat and Hamas out of the peace talks.

SHIELDS: David Dreier, want to get your take on it, but I also want you to ask -- answer one question, that is, going in a political year, reelection year, with the Republican nominee has probably as good a shot at picking up Jewish votes as any Republican nominee in recent American history, isn't there a certain political downside here?

DREIER: This is a bold and courageous step that the president took, Mark. I remember several years ago sitting on the South Lawn of the White House when President Clinton brought together for that very famous handshake Yitzhak Rabin and Yasser Arafat. And now to see President Bush on the tarmac, basically, with King Abdullah of Jordan saying, There had been up to this point a loss of hope, did in fact provide, I believe, a great deal of encouragement.

Clearly, dealing with Hamas, Hezbollah, and the Islamic Jihad has not been easy. But -- and there will be, as the White House said, bumps in the road as we head down this path. But I think the president was courageous and bold in trying to deal with this tough challenge.

SHIELDS: And while acknowledging, I think, the president did elevate hope, and I give him credit for that and for putting some political capital, willing to spend some political capital here, it bothered me that when he left in charge Condi Rice, rather than a Jim Baker, rather than a George Mitchell, I mean, (UNINTELLIGIBLE) somebody of high stature who said this is their one and only job, Condi Rice has an awful lot on her...

DREIER: (UNINTELLIGIBLE) and Colin Powell, too.

SHIELDS: But, I mean -- but they have an awful lot on their plate beyond this. In other words, when this has worked in the past, this was one person of high stature has had full responsibility.

NOVAK: You know, Mark, I tell you something, I been hearing at this table for two years, he doesn't do anything in the Middle East, he is -- and I have even made that criticism of him. And here he is, I don't think he could have done this except for this war in Iraq. I don't think it would have happened. And I was against the war, but I don't think it could have happened.

But I think, really, to nitpick who he left in charge and whether he was too much for Abbas, I think this is trivial. You got the president of the United States putting all his, putting all his chips on the table on this. That's what the story is.

CARLSON: (UNINTELLIGIBLE)... HUNT: Well, Bob, I agree with you. It was a very bold start. But we don't know if there's going to be the follow-through. If there is a follow-through, then it will be bold and courageous. If there's not...

DREIER: (UNINTELLIGIBLE) there is now hope.

HUNT: Well, but, but, but wait, wait. There will be hope if he's there when it gets tough three or four or five months now, when it will get tough. And I think Mark's point is a relevant one, Bob, because I do think you either -- if the president wants to invest a lot of his time and a lot of his capital, it'll be better, but if he's not going to, he's got to have someone who's going to invest virtually all their time (UNINTELLIGIBLE)...

DREIER: He's already done that. He's already invested time and effort in putting this together. It didn't just happen overnight.

I mean, remember, he's responsible for the fact that Yasser Arafat is not in church. He called for the existence of a Palestinian state and for a new prime minister.

HUNT: Mark...

CARLSON: But for the moment, Condi Rice, who has great stature within the administration, is fine. But you're right, Mark, he needs to find a Middle East envoy, somebody that Bush reveres, like James Baker, and send him there...

HUNT: (UNINTELLIGIBLE).

CARLSON: ... and keep him there. Well, he doesn't revere him...

NOVAK: (UNINTELLIGIBLE)...

CARLSON: ... but his dad does, and people...

(CROSSTALK)

CARLSON: Yes.

NOVAK: You know, I just...

SHIELDS: (UNINTELLIGIBLE)...

NOVAK: ... I -- it just, it just -- you know, it just -- there's such a big issue going, and (UNINTELLIGIBLE) you want to put this guy there or that guy...

CARLSON: Well, you need a...

NOVAK: ... (UNINTELLIGIBLE).

HUNT: (UNINTELLIGIBLE)...

SHIELDS: Bob, I don't... CARLSON: ... you need continuity.

(CROSSTALK)

DREIER: ... a few days, (UNINTELLIGIBLE)...

SHIELDS: I know how nitpicking Bob (UNINTELLIGIBLE).

David Dreier and THE GANG will be back with a congressional win for the Democrats. And later, Hillary Clinton's blockbuster.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

The newly passed tax cut came under Democratic fire for excluding lower-income Americans.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: This administration is waging war on poor children. They are steadily and surely trying to turn the clock back on all of the programs and support that working families and their children need.

(END VIDEO CLIP)

SHIELDS: The Senate, with only two opposing votes, extended the children's tax credit. But House Majority Leader Tom DeLay objected. Quote, "It's a little difficult to give tax relief to people who don't pay taxes. It's a spending program," end quote.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: It would be a real shame for these 8 million families, about a million military kids in addition to firefighters and policemen and teachers and everybody else, left out because the House refused to act.

(END VIDEO CLIP)

SHIELDS: As the week ended, Congressman DeLay softened his tone.

(BEGIN VIDEO CLIP)

REP. TOM DELAY (R), MAJORITY LEADER: Whatever the Senate does, certainly we will take it under consideration...

(END VIDEO CLIP)

SHIELDS: Bob Novak, are the Republicans now in full retreat on this thorny issue?

NOVAK: As fast as they can run. This is like the retreat from Caparetto. Do you remember that one?

(CROSSTALK)

NOVAK: And in fact, the House would have passed this billion that the Senate passed except for one thing, they had a higher priority. They don't like to work on Fridays. And so they had a -- put it over until Tuesday, when they'll pass it...

DREIER: Well, we (UNINTELLIGIBLE) press this morning.

NOVAK: ... they will have a -- they were panicked by a "New York Times" article. You know, "The Times" still has some clout, despite their troubles, which panicked them. The Democrats were too stupid to do it themselves. They had to wait for "The New York Times" to have a demagoguery of saying the people who don't pay taxes should have a tax cut.

And in fact, what this is, is a welfare handout. Now, why the Republicans were so terrified is that Mark led the way last week when he played the card of the military, the poor military aren't getting the proper tax cut.

This is a disgraceful performance by the political establishment. And both sides have to share the responsibility.

SHIELDS: David Dreier, Republicans are not in full retreat on this issue.

DREIER: No, we're not in full retreat. I will tell you, when the Senate votes with only two dissenting votes on this, it's a challenge. You know, this bill was described, it was the Jobs and Growth Act. And clearly, the virulent opponents to this measure, Mark, ended up being who now want more in tax cuts, which is kind of an interesting commentary on what it is that the Democrats are trying to do on this.

I will tell you that I personally -- we, we -- I've been proud that we've been able to move a number of people off the tax rolls. There are now 40 million Americans who pay no federal income tax. And I will tell you that I'm troubled about our continuing down the road towards doing that, but at the end of the day, we have faced reality, and so we will be...

NOVAK: (UNINTELLIGIBLE) you're not in retreat, yes or no?

DREIER: No, we're, we're not...

NOVAK: Not in retreat?

DREIER: -- we're not, we're, we're not, we are not as a party in retreat.

NOVAK: (UNINTELLIGIBLE)

DREIER: We've got a great president. We've put -- we -- listen, we cut the capital gains tax, Bob, that's not in retreat.

SHIELDS: But will the House, will the House pass this? NOVAK: Of course it will.

DREIER: Oh, yes, the House will pass this.

SHIELDS: Margaret.

CARLSON: David, you should be proud to be in retreat on this, because when you put a face on the people who were losing out in this tax bill, which is the military...

DREIER: We're not in retreat, we're moving forward.

CARLSON: ... fight fires, and the people who clean my office, who work as hard as I do, why shouldn't they get a piece of this...

NOVAK: Why should they (UNINTELLIGIBLE)...

CARLSON: ... talk about re, re, redistribution...

DREIER: The Jobs and Growth Act? The Jobs and Growth Act?

(CROSSTALK)

CARLSON: ... of income. You know, they should make a lot more than they do, because they work just as hard. And they care just as much about their children. And if it's a stimulus bill, if it's a growth bill, person who cleans my office is going to spend the money. Not...

DREIER: This has already been a consumer-driven...

CARLSON: ... what, what, what Bob Novak is going to do is go and buy a new municipal bond with his money.

DREIER: Yes, and that'll create some jobs.

(CROSSTALK)

SHIELDS: Al Hunt, Al Hunt.

HUNT: (UNINTELLIGIBLE).

SHIELDS: Al Hunt, these people do spend...

DREIER: (UNINTELLIGIBLE).

SHIELDS: ... these people do pay taxes.

HUNT: Of course they do, of course they do, Mark. Look, this entire bill was a dishonest bill. It was labeled, it was (UNINTELLIGIBLE) it was dishonest the way it was labeled, it was dishonest the way it was costed out, and it was dishonest in leading these people on.

I don't want a bigger tax cut. I want a more effective and a fairer tax cut. And these people do, they pay 15 -- over 15 percent of their paltry income goes to payroll taxes. Now, I'll tell you this, if we increased payroll taxes, suddenly Brother Novak would find this a tax. I don't think he would no longer say (UNINTELLIGIBLE)...

NOVAK: (UNINTELLIGIBLE)...

HUNT: ... just try doing that and see...

(CROSSTALK)

HUNT: ... and they pay it, and you know what they are? They're not welfare people, they are working poor. They are working people, Mark.

NOVAK: The payroll tax is compensated for by the investment, by the tax credit that they get. That takes care of the payroll tax. Now you want to give them a double benefit.

But let me try to explain something to you.

HUNT: (UNINTELLIGIBLE) like we do on dividends (UNINTELLIGIBLE).

NOVAK: Let me try to explain something to you, Al. The -- this provision was not contained in the original bill, was not contained in the Democratic version, was not contained in -- (UNINTELLIGIBLE) to aid the poor was not in contained in the House bill or the Senate bill. It was put in at the last minute to get (UNINTELLIGIBLE) Blanche Lincoln's vote, Senator Blanche Lincoln of Arkansas, to get her vote.

When she didn't vote for it, for the bill, they took it out. That's the way politics works.

HUNT: Surreptitiously in the dead of night...

(CROSSTALK)

NOVAK: Oh, come on!

(CROSSTALK)

HUNT: ... they snuck it out, and they kept in every provision for every wealthy campaign contributor there was. And not only that, Mark...

DREIER: Oh, come on...

HUNT: ... there are another 8 million Americans who pay income taxes, who pay income taxes...

DREIER: Al, this is (UNINTELLIGIBLE)...

HUNT: ... who don't get a tax cut...

(CROSSTALK)

SHIELDS: David, David, the moderator just wants to say something, OK? The moderator has done some reporting. And the reporting tells him this, that the Republicans in the House this week, led by the majority leader, would like to sabotage this by killing it with kindness, by making it permanent, making it permanent, therefore putting a price tag on it of somewhere between $80 and $100 billion, thus guaranteeing, when it goes back to the Senate, it will be killed because it exceeds the 350.

DREIER: Mark...

SHIELDS: Is that part of the strategy?

DREIER: ... Mark...

(CROSSTALK)

DREIER: ... this is the Jobs and Growth Act, and what we need to do is, we need to focus on jobs and growth...

(CROSSTALK)

DREIER: ... and we, we've seen a benefit already created from the package that's gone in, with the market moving, we're seeing improvements in the economy already...

(CROSSTALK)

DREIER: ... that's going to (UNINTELLIGIBLE)...

CARLSON: But to sunset, everything (UNINTELLIGIBLE)...

HUNT: The old trickle-down jobs and growth package.

CARLSON: Right, but to sunset everything else and not that, so that fails? That is...

NOVAK: It wasn't in the original bill.

DREIER: That wasn't part of it. It wasn't part of it.

SHIELDS: Dave...

HUNT: Dead of the night, they took it out.

CARLSON: Please. Yes.

SHIELDS: That's right, dead of night.

Next on CAPITAL GANG, what will the political fallout be from Hillary Clinton's book?

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

The Associated Press quoted from Senator Hillary Rodham Clinton's memoir, "Living History," including her reaction when Bill Clinton confessed to his relationship with Monica Lewinsky. Quote, "I could hardly breathe. Gulping for air, I started crying and yelling at him, 'What do you mean? What are you saying? Why did you lie to me?' I was dumbfounded, heartbroken, and outraged that I'd believe him at all. As a wife, I wanted to wring Bill's neck."

(BEGIN VIDEO CLIP)

CLINTON: I hope when people read the whole book, that they will see that many of the policies that my husband's administration pursued were good for our country, and in just two and a half years, we've gone in the wrong direction on so many fronts.

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, our own Washington best-selling author, what is the political fallout of this, this book?

CARLSON: Yesterday she was in Boston, and there was a rope line, and people were held back. And so we can say that for the next period of time, none of the nine Democratic candidates will get much air time.

She did two things in this book, which I think are important to her to get done for her own political career. One is, we've always known she was smart. She made herself look human with the admission that, hey, she cried. And with the "I want to wring Bill's neck," you know, she identifies with all the women in the world that have said exactly the same thing about their own husbands, although not for the same reason.

And the other thing she did was to set the record straight. The legal gladiator came forth in the one part in which she sets the record straight that she was not Bill's accomplice, that in fact she did not know until the moment when he had to admit to the rest of us. I think that was very important for her to do.

Whether or not that timeline is precisely right, because there's some others who differ with it, nonetheless, she put it down and the lawyer has it. What did she know and when did she know it? Nothing.

SHIELDS: David Dreier.

DREIER: I don't care what she knew and when she knew it. I mean, I frankly -- we all lived through this. I did as a member of the first branch of government. And I'm sick and tired of it. And I assume she's telling the truth. I know a lot of people have said she lied, you know, they say the wife is the last to know. She'd obviously heard all kinds of rumors. And so I'm going to take her at that.

But since you brought it up, Mark, I guess I feel obligated to mention that this is, based on everything I've heard, a much better book than the one that's going to be...

SHIELDS: By Margaret Carlson.

DREIER: ... unveiled by Margaret Carlson.

CARLSON: Unfortunately, it doesn't have as much sex in it.

SHIELDS: That's right.

DREIER: Yes, thanks for giving this to me, Margaret.

(CROSSTALK)

SHIELDS: OK, Bob Novak.

NOVAK: Senator Clinton had been doing very well in the Senate, getting a lot of high marks from Republicans as well as Democrats. And I think she really blew it with this book. To say that she didn't know, she's either a fool or, as most people believe, David, she's a liar. And this, this, this steamy prose sounds like it's out of a romance novel.

CARLSON: Have you read any?

NOVAK: Oh, every night. And...

DREIER: Six hundred pages.

NOVAK: ... it is a -- you know, it is just that she's demeaning herself. She's got her $8 million. They're never going to make it back. Why she's hawking this book, I don't know. But (UNINTELLIGIBLE) for example, Wednesday night in Virginia, she's going to be at Wal-Mart, Wal-Mart...

HUNT: That's great.

CARLSON: Even I haven't gone to Wal-Mart.

(CROSSTALK)

HUNT: That's wonderful.

(CROSSTALK)

HUNT: ... wonderful.

SHIELDS: If she were at some tony...

HUNT: That's great.

SHIELDS: ... upscale...

NOVAK: You bet it.

SHIELDS: ... Georgetown bookstore, Novak would say it, There she is, out there with the chichi Georgetown set. Instead, she's out with real people, Bob.

DREIER: She's just observing both. HUNT: Mark, this is almost as good as tax cuts. We really ought to have a Hillary section every week. Because, Bob, you know what Bob does, he flutters first, and then he fulminates, and then he flagellates, and I love to watch him do it.

(CROSSTALK)

HUNT: It's just fun.

If Mrs. Clinton had asked my advice, which she never has, I would have said, Don't write the book now. You know, it's ill advised. I have not read it. I believe she's telling the truth, and I think Margaret's probably right, she's gotten it out in that sense, it served some purpose. It doesn't help any other Democrats, though.

NOVAK: It is -- it's...

SHIELDS: Guys...

NOVAK: ... you'd believe anything she says, don't you?

HUNT: No, I don't.

NOVAK: Anything. You believe she said...

HUNT: No, but I love to watch you...

NOVAK: ... she said, this guy has been cheating with her, on her all these years, and she says, What a shock!

(CROSSTALK)

HUNT: ... I love to watch you talking about her.

(CROSSTALK)

SHIELDS: I tell you what I think, I think, I mean, she's surprised that this is a guy who'd been not faithful to their marital promises. But the point is, she knew what an ambitious guy he was. And the word was down when he came to the White House that any screwing around from that point was going to be a political disaster. And, I mean, I think she -- out -- beyond being outraged, it was stupid.

So I think she's done two things...

DREIER: (UNINTELLIGIBLE) surprised that he went as far as he did.

SHIELDS: I think, I think she's, I think she's done two things...

(CROSSTALK)

SHIELDS: ... she's (UNINTELLIGIBLE) -- she's put that whole period behind her. When she gets to questions, if she does go for national office at any point, say, It's in the book, read the book.

DREIER: Weren't we all surprised that she went -- that he went as far as he did?

SHIELDS: Well, I mean, I think...

DREIER: Back then?

SHIELDS: ... yes, no, but I think that's...

HUNT: No, no, I wasn't.

(CROSSTALK)

HUNT: No, I think habit's hard to break. But, you know, I also think...

DREIER: That's...

HUNT: ... one of the great, one of the great, you know, really, indictments of Bill Clinton's performance there was the fact that the one person he leveled with was Dick Morris...

SHIELDS: Yes.

HUNT: ... I mean, it's incredible, you don't tell your wife, (UNINTELLIGIBLE) you tell Dick Morris.

SHIELDS: And it just shows what great judgment he had of people.

(CROSSTALK)

NOVAK: Yes, but I, I love, I love, I love, I love the sound bite we just showed too, when she says, you know...

SHIELDS: I read it, actually.

NOVAK: ... Don't, don't, don't, don't worry about the -- about -- no, not, not, not (UNINTELLIGIBLE)...

(CROSSTALK)

NOVAK: ... the sound bite, the sound -- no, you read that, your dramatic reading was terrific.

SHIELDS: Thank you.

NOVAK: But, but the, the sound, the sound...

(CROSSTALK)

NOVAK: ... bite, when she says, you know, If you really read the book, it's not just about Monica, it's about what a terrific administration we had compared to this terrible Bush administration...

DREIER: Oh, my God. NOVAK: ... you know people are going to read the book for one thing, and that's titillation.

(CROSSTALK)

CARLSON: And they already, they've already been titillated.

DREIER: I'm not going to buy it.

HUNT: ... I just want to pick up on what David Dreier said. Margaret Carlson's book is about more than sex, it really is.

SHIELDS: How many jobs were created in the Clinton years?

HUNT: Oh, I think it's about 24 million, wasn't it?

(CROSSTALK)

DREIER: ... the Republican Congress (UNINTELLIGIBLE)?

HUNT: Twenty, 24 million, I think 26 million...

(CROSSTALK)

NOVAK: Thanks to the Republican...

(CROSSTALK)

SHIELDS: ... there's still a Republican Congress...

(CROSSTALK)

NOVAK: And the Reagan tax cuts.

SHIELDS: Still a Republican Congress...

(CROSSTALK)

HUNT: ... and Alan Greenspan...

DREIER: Let's go there.

(CROSSTALK)

SHIELDS: OK, that's it...

CARLSON: (UNINTELLIGIBLE) unemployment in nine years.

SHIELDS: David Dreier, thank you very much.

DREIER: Always great to be...

(CROSSTALK)

DREIER: ... with all of you...

SHIELDS: ... plugging Margaret's book...

DREIER: Thanks.

SHIELDS: ... you're forgiven just about anything else (UNINTELLIGIBLE).

Coming up in the second half of CAPITAL GANG, our "Newsmaker of the Week" is former assistant secretary of state Bernard Aronson, talking about Latin American policy. "Beyond the Beltway" looks at the effort to recall California Governor Gray Davis with "Los Angeles Times" reporter Michael Finnegan. And our "Outrages of the Week." That's all after the latest news headlines.

(COMMERCIAL BREAK)

(NEWSBREAK)

ANNOUNCER: Live from Washington, THE CAPITAL GANG.

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

I'm Mark Shields, with Al Hunt, Robert Novak, and Margaret Carlson.

Our "Newsmaker of the Week" is Latin American affairs expert Bernard Aronson, currently a senior fellow in foreign policy at the Brookings Institution.

Bernard Aronson, age 57, residence Tacoma Park, Maryland, religion Jewish. University of Chicago graduate 1967.

Assistant to the president of the United Mine Workers Union, 1972 to 1976. Deputy assistant and executive speechwriter to President Jimmy Carter, 1977 to 1981. Assistant secretary of state for Latin American affairs in the first Bush administration, 1989 to 1993.

Al Hunt sat down with Bernie Aronson earlier this week, prior to the annual meeting of the Organization of American States.

(BEGIN VIDEOTAPE)

HUNT: Bernie, five or 10 years ago, there was great hope that democracy and free markets would produce a vibrant Latin America. Why has that not materialized?

BERNARD ARONSON, THE BROOKINGS INSTITUTION: The region has lost momentum and lost direction, and I think there's been a failure of political leadership in Latin America and also in the United States. These reforms are difficult, so a lot of countries cut the baby in half. They carried out the initial wave of reforms, but the tougher reforms, like pension reforms and labor standards and laws, they've docked, and creating independent and clean judiciaries.

And the United States kind of got out of the game as well. We didn't move forward extending the North American Free Trade Agreement. We didn't keep engaging with the region in a strong way, and so... HUNT: What is the Bush administration policy for Latin America?

ARONSON: You know, the Bush administration policy toward Latin America started out with a lot of high hopes and a commitment to engage. Today it's really driven by trade. I give them high marks on that. They've revived the trade agenda, they're moving forward with Chile, Central America, Free Trade Area of the Americas, very aggressively.

But beyond trade, there's not really been any broad vision for the region. And the region feels it and is disappointed.

HUNT: Is corruption a growing problem?

ARONSON: It's a huge problem in almost every country. And it's a problem that's taking a long time to deal with. And there's a lot of disillusionment with government per se.

And another huge problem, which isn't talked about as much, is just ordinary crime in the streets. Latin America is like New York City used to be 15 years ago, governments can't protect their people. And the number one problem, if people talk about it, is that they don't feel safe in their own homes and in their neighborhoods.

HUNT: You're talking about human rights abuses.

ARONSON: It is nowhere near as bad as it was in the bad old days when they had dirty wars and guerrilla wars. But there are some countries where it's still a problem.

HUNT: Guatemala?

ARONSON: Guatemala in particular. And journalists in particular are a target, in places like Colombia, journalists are killed on a regular basis with impunity.

HUNT: In Latin America, the economic engine, or the big enchilada of economic growth is Brazil. How's Brazil doing?

ARONSON: Brazil is actually doing pretty well. They just went through an election, and the person who won is a fellow with a fourth grade education who was a metal worker, came out of the trade union movement, came from a fairly militant left political party. But he's governing very responsibly. He's built a kind of broad coalition, and he's doing the right thing economically.

And Brazil's democratic institutions are very strong, and there's a lot of capital flowing into the country.

HUNT: Is the drug war being lost in Colombia and even spreading to Peru and Venezuela?

ARONSON: The latest statistics in Colombia on production are better than they were previously. They're reducing production. At the end of the day, the war on drugs in Latin America is a war against corruption and crime, but it's not going to be won unless we and other Western nations reduce demand.

HUNT: You mentioned Venezuela. In the short term, at least, is it just hopeless under Chavez?

ARONSON: You know, the opposition and the government reached an agreement to hold a referendum on Chavez's rule sometime after August. That was brokered by the OAS. I'm not sure the agreement will hold. If it does, that could be a resolution. But it's a very polarized society. You've had dozens of people killed, the economy's in a state of free fall.

And it's in crisis.

HUNT: What one or two things would you like the United States to do now, Bernie, in order to effectuate a better Latin American policy?

ARONSON: You know, first of all is to follow Willie Loman's advice, "Attention should be paid." This cannot be managed by mid- level people at State, Treasury, NSC. It needs the sustained attention of the president, secretary of state, the secretary of the Treasury, the attorney general, the higher-ups to deal with the region.

And to engage with the region in a sustained and serious way, we have to offer some kind of a positive vision and incentives for these political leaders to take tough steps on economic reform.

And if we're not in the game, it just makes it harder for them to do what they have to do. And we're not very much in the game today.

(END VIDEOTAPE)

SHIELDS: Al Hunt, when the top level of the Bush administration is preoccupied by terrorism, the occupation of Iraq, and the North Korean threat, is Bernie Aronson's recommendation as far as Latin America really practical?

HUNT: Mark, those other items clearly have to be the highest priority, there's no question of that. But you can't ignore your back yard. And it is true, as Bernie said, four or five years ago, there was such great hope.

SHIELDS: Now that you've (UNINTELLIGIBLE)...

HUNT: And some of it really is diminishing. And I think, I think, really, it would be better to have at least a little bit more of an American involvement, economically and politically.

NOVAK: You know, as I sit at this table, I'm always amazed how wonderful everything was four or five years ago when Bill Clinton was being president, how everything has just gone to hell all over the place.

What baloney! But the matter of fact, I was here in 1961, when the Alliance for Progress was started by President Kennedy, they were going to reform Latin America. Latin America isn't going to be reformed, it's going to be corrupt, there's going to be a lot of problems. And I think it's Yankee arrogance to think that somebody sitting in Washington is going to do it.

CARLSON: Five hundred thirty-five members of Congress were invited to the Hemispheric Conference in Brazil May 23 to 26. Seven accepted. One went. That's how much interest there is in Latin America at the moment.

SHIELDS: Margaret Carlson, last word.

Coming up, the CAPITAL GANG Classic, looking at the 1996 Mideast peace summit.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Over seven years ago, in the wake of terrorist bombings in Israel, President Bill Clinton agreed to attend a world summit in Egypt that included Palestinian leader Yasser Arafat. CAPITAL GANG discussed this development on March 9, 1996. Our guest was Rudy Giuliani, then mayor of New York.

(BEGIN VIDEO CLIP, March 9, 1996)

KATE O'BEIRNE, CAPITAL GANG: These latest attacks that have killed over 50 people in nine days have been in the face of Israel making enormous concessions that have largely benefited the Palestinians. It's up to them. They've got to start policing their side.

MAYOR RUDY GIULIANI (R), NEW YORK: The first thing you have to do is restore security in Israel. And I think when it resumes, negotiate with Arafat, but don't trust him, and don't elevate him, and don't romanticize him.

NOVAK: I don't think it's up to the Palestinians mainly, I think it's up to the Israelis. This is a plan, this violence, this murder, to get the Israelis to turn out the Peres government, to bring back the Likuds, to end the peace process, to stop the negotiation...

HUNT: There is a mutuality of interest between Hamas and the Israeli Likud Party. I mean, they despise each other, but there really is a mutuality of interest. And it scares me, because I think their mutual interest is both want to destroy the peace process.

SHIELDS: Everything that Hamas does strengthens the position and the political popularity of Likud, who have been the hard-liners in Israel.

(END VIDEOTAPE)

SHIELDS: Bob Novak, what has changed in the Middle East equation in the last seven years?

NOVAK: Well, the relationship between Likud and Hamas, as both of you mentioned, is exactly right. Difference is that now the Likud is in power, and before they weren't, so it makes it more difficult. Not much has changed.

SHIELDS: Margaret?

CARLSON: Arafat is not at the table. That's the best news in these years. And so there is, as David Dreier said, hope.

SHIELDS: Al Hunt.

HUNT: There still is a mutuality of interest between Hamas and elements of Likud, to destroy a peace process. But I'll give what Bob Novak's said earlier, I give Bob some credit. I think that George Bush has brought some hope to this process. I'm still skeptical whether he's going to follow through, but he's brought some hope, no question.

SHIELDS: Well, Bob will be busy picking nits the rest of the evening.

Next on CAPITAL GANG, "Beyond the Beltway" looks at the effort to recall California Governor Gray Davis. "Los Angeles Times" reporter Michael Finnegan joins us.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Republican Congressman Darrell Issa, who seeks to replace Democrat Gray Davis as governor of California with Darrell Issa, ran a full-page ad in "The Sacramento Bee" calling for Governor Davis's removal in a recall election.

He concluded with this slogan, quote, "Because it's time to clean up the Gray Davis mess," end quote.

Democratic Senator Dianne Feinstein, herself a possible replacement, in an editorial written for California newspapers, said, quote, "I don't believe it is right to overturn the results of an election simply because of political differences," end quote.

If nearly 900,000 valid signatures are collected by July 9, Californians will vote this fall whether to remove Governor Davis and select his replacement.

Joining us now from Los Angeles is reporter Michael Finnegan of "The Los Angeles Times."

Thanks for coming in, Michael.

MICHAEL FINNEGAN, REPORTER, "THE LOS ANGELES TIMES": Thank you.

SHIELDS: Michael, will there be a vote to recall Governor Gray Davis this year?

FINNEGAN: That's a possibility. There -- that seemed pretty remote as a possibility a long time ago, earlier this year, but at this point, given Congressman Issa's financial support for the petition effort to get a recall election before voters, that's now a real possibility.

SHIELDS: And is, there a switch in the attitudes of voters? I mean, the -- Gray Davis seems to be less popular today than he was three months ago.

FINNEGAN: He is. The fiscal crisis in California is quite severe, and voters, polls have shown, blame Gray Davis for that.

SHIELDS: OK. Bob Novak.

NOVAK: Michael, I just got back from Los Angeles, and the two things that struck me was, I thought that the establishment politicians in both parties were in denial on this thing, Oh, it can't happen, when the petition circulators claim they've got 520,000 signatures already, and they've got till July 19 to get it on the ballot in the fall.

And secondly, I smell some of that same thing with Proposition 13 years ago, the -- when the establishment said, You can't -- they're not going to cut the property tax, and the voters did it. Do you think there's any merit to those conclusions?

FINNEGAN: Well it's -- you know, in California, it's very hard to get something on the ballot. In this case, it takes about 900,000 signatures of registered voters. And to actually get that many, you need a lot more than that. So it's very, very difficult to get it on the ballot. And as a result, you have to spend a lot of money, $2, $3 million, to pay people to go out to shopping malls and supermarkets and gather signatures on your petition to get something on the ballot.

And Darrell Issa's money is making it possible that that will actually happen. You know, how voters would vote once it is on the ballot, if it gets on the ballot, that's another question.

SHIELDS: Margaret Carlson.

CARLSON: Michael, is it -- Arnold Schwarzenegger was making a lot of appearances this weekend. He confirmed that he's been talking to political insiders in California about running for governor, with the proviso that he's not going to make up his mind until his new release, "Terminator 3," probably the only politician who will ever say such a thing.

But after "Terminator 3" is out on July 2, he's going to make his decision. Now, could Darrell Issa spend all this money only to elect Arnold Schwarzenegger?

FINNEGAN: Anything is possible in this thing. It's never been done before. It's been possible since 1911 to recall a governor of California, but it's never gotten on a ballot before. And so right now, Arnold Schwarzenegger and Darrell Issa are just two of many people who are looking at the possibility of being on this ballot.

So, yes, it's possible that the two of them will be running against each other, and it's possible it'll be a very crowded race.

SHIELDS: Al Hunt.

HUNT: Michael, there were reports this week that the White House is discouraging people from getting behind this recall drive, that they got the National Rifle Association to pull back on plans to give money. What is the downside for Republicans here? Is there one?

FINNEGAN: Well, it's a distraction from the two main goals of the Republican Party in California right now. One of them is the president's reelection campaign in 2004, and the other one is the effort to unseat Senator Barbara Boxer, who is up for reelection next year.

So this throws in all kinds of uncertainties to that picture, and also complicates the effort to raise money for both of those things.

SHIELDS: Michael, one of the wild cards i this whole equation is Senator Feinstein, who, of course, lost a gubernatorial race to Pete Wilson before coming to the Senate. Now, A, do you think she would run, if the recall is there? And what do the others do, I mean, the people like Phil Angelides, he's the state treasurer, Bill Lockee, the attorney general, were already planning to run in 2006. Cruz Bustamante, the lieutenant governor.

FINNEGAN: It's impossible to say. Nobody really knows. If this gets on the ballot, there are going to be all kinds of calculations that need to be made by candidates who had been planning to run for governor in 2006, like the lieutenant governor and the state treasurer and the state attorney general and Arnold Schwarzenegger. And Dianne Feinstein, for the moment, has discouraged talk of her getting on the ballot to do this.

But she's run for governor before, and it's possible that she will wind up deciding otherwise. But at the moment, everybody is just keeping their options open and waiting to see what it's going to look like a few months down the road. The actual deadline to get in the petition is September 2, and then there's some more time to count the signatures. And this whole thing could tied up in litigation.

So it's -- nobody really knows.

SHIELDS: OK.

NOVAK: You know, I heard some Republicans, apparently White House is much afraid of Senator Feinstein. I don't think she would get in unless the field was cleared for her.

But what I hear, Michael, is that there's just an army of Democrats who are interested. I hear senate, state senate president John Burton, one of his friends told me that he may get in, and Willy Brown, the mayor of San Francisco, who was term-limited out, may run. Do you think -- this is really something that's impossible to call, isn't it?

FINNEGAN: That's exactly right. And there are a lot of ambitious politicians in California. And some may see this as their opportunity to get in there. The lieutenant governor, for example, has much less money than the other two statewide office holders who are preparing to run for governor in 2006. And so he may very well see this as his chance to just go in there and roll the dice and see if he can get -- he can, he can win.

The crazy thing about the way this election would work is that the -- it's a two-part ballot. First is just an up-or-down question on the governor, Should Davis be recalled. But the second part is just a list of candidates to replace the governor. And that could be a very long list. And it's the person who gets the most votes would win.

And so potentially, somebody with 8, 10, 12 percent of the vote could wind up being the next governor of California. So those are the -- that's the kind of thing that will be part of the calculation when people decide whether or not they want to run...

SHIELDS: OK.

HUNT: ... in this particular circumstance.

SHIELDS: Only in California.

Thank you very much for being with us, Michael Finnegan.

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

(COMMERCIAL BREAK)

SHIELDS: Now for the Outrage of the Week.

Since George W. Bush took office on January 20, 2001, the number of private sector jobs in the United States has plummeted by 3.1 million. Today the United States unemployment rate of 6.1 percent is the highest in nine years. As South Carolina Congressman John Spratt puts it, "After three large tax cuts in two years," end quote, there today more than 9 million Americans out of a job.

The Bush administration's record is the worst in the last 55 years.

Robert Novak.

NOVAK: And that's the last we'll hear of that.

The House voted two to one this week to outlaw partial birth abortion, which soon will be signed into law. But look at some Democrats voting no. Minority leader Nancy Pelosi, a Roman Catholic, minority whip Stenny Hoyer, who once sponsored a bill to abolish partial birth abortion, Democratic caucus chairman Robert Menendez, also Roman Catholic, Martin Frost, supposedly a moderate leader.

The only House Democrat running for president, Richard Gephardt, says he still opposes partial birth abortion, but he didn't show up to vote, didn't risk enraging the pro-abortion lobby. SHIELDS: Margaret Carlson.

CARLSON: Mark, energy company Westar paid $56,000 to Republicans Tom DeLay, Joe Barton, and Richard Shelby for, quote, "a seat at the table," unquote. Quite a bargain. Corporation executives David Wittig and Douglas Lake stood to get $27 million back for their $56,000.

Representatives held fast when Democrat Ed Markey tried to block their move. E-mails catch the executives red-handed in a quid pro quo, if not bribery.

When the Justice Department gets done with Martha Stewart, maybe they could go after this multimillion-dollar heist of the American people.

SHIELDS: Al Hunt.

HUNT: Mark, John Ashcroft, the most insensitive attorney general on civil liberties since Mitch Palmer and the Red Scares more than 80 years ago, wants even more power under the misnamed PATRIOT Act. This follows a report from Justice's own inspector general that hundreds of immigrants rounded up in the terrorist sweep have been physically and verbally abused and denied basic rights.

The greatest concern about General Ashcroft is not whether he will protect us from terrorists, but whether we will be protected from him.

SHIELDS: This is Mark Shields saying goodbye for THE CAPITAL GANG.

Coming up next, "CNN PRESENTS: Inside the War Room." At 9:00 p.m., "LARRY KING WEEKEND," Martha Stewart before the indictment. And at 10:00, the latest news on CNN.

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

Bush's Tax Cut; What Will Political Fallout Be From Hillary Clinton's Book?>

Aired June 7, 2003 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Live from Washington, THE CAPITAL GANG.
MARK SHIELDS, HOST: Welcome to CAPITAL GANG.

I'm Mark Shields, with Al Hunt, Robert Novak, and Margaret Carlson.

Our guest is Republican Congressman David Dreier of California, the powerful chairman of the powerful House Rules Committee.

Great to see you again, David.

REP. DAVID DREIER (R-CA), CHAIRMAN, RULES COMMITTEE: You know, it's always great to be with Margaret and your Triple Crown winner, Bob Novak.

SHIELDS: Oh, boy. Thank you. Boy, a giant sucking sound from southern California.

President Bush completed a seven-day foreign trip with a peace summit in Jordan, attended by the prime ministers of Israel and Palestine.

(BEGIN VIDEO CLIPS)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Israel must deal with the settlements. Israel must make sure there's a continuous territory that the Palestinians can call home.

MAHMOUD ABBAS, PALESTINIAN PRIME MINISTER (through translator): Armed intifada must end, and we must use and resort to peaceful means in our quest to end the occupation and the suffering of Palestinians and Israelis and to establish the Palestinian state...

RAANAN GISSIN, SENIOR SHARON ADVISER: If the cease-fire is the first step on the road to really dismantling the terrorist organization, this army that's collecting the illegal weapons -- Of course, Israel will reciprocate...

(END VIDEO CLIPS)

SHIELDS: But the Palestinian Hamas organization did not echo those sentiments.

(BEGIN VIDEO CLIP)

ABDEL AZIZ RANTISI, HAMAS LEADER: I believe that Abu Mazen himself, the close -- have closed the door in front of Hamas because he committed himself in front of Bush and Sharon by what Palestinians refuse.

(END VIDEO CLIP)

SHIELDS: Al Hunt, did the peace summit make President bush's trip a success?

AL HUNT, CAPITAL GANG: Mark, I think it might have gone the other way. I thought the trip was going very well for the president. But I think at the end, they may have overplayed the hand. I think they did a disservice to Mahmoud Abbas, the Palestinian prime minister. The U.S. wrote part of his script at the end. And I think what it did is, it gave Hamas and Arafat, who want to sabotage any road to peace, it gave them, it gave them an opportunity to do just that.

It's not the substance of what he said, but it's -- but to the extent the Palestinian prime minister is perceived as being in the back pocket of the Americans or even the Israelis, I think that's worrisome, and I think we overplayed our hand a bit.

SHIELDS: Bob Novak?

ROBERT NOVAK, CAPITAL GANG: Well, I -- Al is usually very good on the Middle East, and you were very bad that time, because I thought it Washington a perfect trip by the president. I thought he did very well, and I thought he did -- act like e really stunned the world at the Jordan summit. People thought he wasn't serious about this. He is serious, including some of the friends of Prime Minister Sharon in the United States, who don't want an agreement.

Granted that Abbas has a very tough time. He's got Arafat sniping at him, and he's got the Hamas with terrorists, and, of course, you've got Sharon, who wants to take the first excuse to say, Ah, he can't control the terrorists.

But I thought it was a terrific start by the president, and it gives some hope, which we didn't have much before.

SHIELDS: Do we have, Margaret Carlson, beyond hope, though, Bob Novak just almost described the stacked deck, I mean, that all these people who really aren't -- are unwilling participants, whether it's Arafat or Sharon?

MARGARET CARLSON, CAPITAL GANG: Right. Al put -- makes a good point, which is that delicate dance of the parties here may have some -- the parties may have stumbled because Bush looked a little too much on the side of Abbas.

And then he can't deal with Arafat and Hamas if he seems to be in the pocket of the United States. But that being said, it -- the president's involvement after two years of disengagement is a good thing, because it raises the level of the talks on the road map. And it does give Mahmoud Abbas status within the international community to be recognized by Bush.

It's just that it can't be too close, because the minute it does, it sends Arafat and Hamas out of the peace talks.

SHIELDS: David Dreier, want to get your take on it, but I also want you to ask -- answer one question, that is, going in a political year, reelection year, with the Republican nominee has probably as good a shot at picking up Jewish votes as any Republican nominee in recent American history, isn't there a certain political downside here?

DREIER: This is a bold and courageous step that the president took, Mark. I remember several years ago sitting on the South Lawn of the White House when President Clinton brought together for that very famous handshake Yitzhak Rabin and Yasser Arafat. And now to see President Bush on the tarmac, basically, with King Abdullah of Jordan saying, There had been up to this point a loss of hope, did in fact provide, I believe, a great deal of encouragement.

Clearly, dealing with Hamas, Hezbollah, and the Islamic Jihad has not been easy. But -- and there will be, as the White House said, bumps in the road as we head down this path. But I think the president was courageous and bold in trying to deal with this tough challenge.

SHIELDS: And while acknowledging, I think, the president did elevate hope, and I give him credit for that and for putting some political capital, willing to spend some political capital here, it bothered me that when he left in charge Condi Rice, rather than a Jim Baker, rather than a George Mitchell, I mean, (UNINTELLIGIBLE) somebody of high stature who said this is their one and only job, Condi Rice has an awful lot on her...

DREIER: (UNINTELLIGIBLE) and Colin Powell, too.

SHIELDS: But, I mean -- but they have an awful lot on their plate beyond this. In other words, when this has worked in the past, this was one person of high stature has had full responsibility.

NOVAK: You know, Mark, I tell you something, I been hearing at this table for two years, he doesn't do anything in the Middle East, he is -- and I have even made that criticism of him. And here he is, I don't think he could have done this except for this war in Iraq. I don't think it would have happened. And I was against the war, but I don't think it could have happened.

But I think, really, to nitpick who he left in charge and whether he was too much for Abbas, I think this is trivial. You got the president of the United States putting all his, putting all his chips on the table on this. That's what the story is.

CARLSON: (UNINTELLIGIBLE)... HUNT: Well, Bob, I agree with you. It was a very bold start. But we don't know if there's going to be the follow-through. If there is a follow-through, then it will be bold and courageous. If there's not...

DREIER: (UNINTELLIGIBLE) there is now hope.

HUNT: Well, but, but, but wait, wait. There will be hope if he's there when it gets tough three or four or five months now, when it will get tough. And I think Mark's point is a relevant one, Bob, because I do think you either -- if the president wants to invest a lot of his time and a lot of his capital, it'll be better, but if he's not going to, he's got to have someone who's going to invest virtually all their time (UNINTELLIGIBLE)...

DREIER: He's already done that. He's already invested time and effort in putting this together. It didn't just happen overnight.

I mean, remember, he's responsible for the fact that Yasser Arafat is not in church. He called for the existence of a Palestinian state and for a new prime minister.

HUNT: Mark...

CARLSON: But for the moment, Condi Rice, who has great stature within the administration, is fine. But you're right, Mark, he needs to find a Middle East envoy, somebody that Bush reveres, like James Baker, and send him there...

HUNT: (UNINTELLIGIBLE).

CARLSON: ... and keep him there. Well, he doesn't revere him...

NOVAK: (UNINTELLIGIBLE)...

CARLSON: ... but his dad does, and people...

(CROSSTALK)

CARLSON: Yes.

NOVAK: You know, I just...

SHIELDS: (UNINTELLIGIBLE)...

NOVAK: ... I -- it just, it just -- you know, it just -- there's such a big issue going, and (UNINTELLIGIBLE) you want to put this guy there or that guy...

CARLSON: Well, you need a...

NOVAK: ... (UNINTELLIGIBLE).

HUNT: (UNINTELLIGIBLE)...

SHIELDS: Bob, I don't... CARLSON: ... you need continuity.

(CROSSTALK)

DREIER: ... a few days, (UNINTELLIGIBLE)...

SHIELDS: I know how nitpicking Bob (UNINTELLIGIBLE).

David Dreier and THE GANG will be back with a congressional win for the Democrats. And later, Hillary Clinton's blockbuster.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

The newly passed tax cut came under Democratic fire for excluding lower-income Americans.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: This administration is waging war on poor children. They are steadily and surely trying to turn the clock back on all of the programs and support that working families and their children need.

(END VIDEO CLIP)

SHIELDS: The Senate, with only two opposing votes, extended the children's tax credit. But House Majority Leader Tom DeLay objected. Quote, "It's a little difficult to give tax relief to people who don't pay taxes. It's a spending program," end quote.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: It would be a real shame for these 8 million families, about a million military kids in addition to firefighters and policemen and teachers and everybody else, left out because the House refused to act.

(END VIDEO CLIP)

SHIELDS: As the week ended, Congressman DeLay softened his tone.

(BEGIN VIDEO CLIP)

REP. TOM DELAY (R), MAJORITY LEADER: Whatever the Senate does, certainly we will take it under consideration...

(END VIDEO CLIP)

SHIELDS: Bob Novak, are the Republicans now in full retreat on this thorny issue?

NOVAK: As fast as they can run. This is like the retreat from Caparetto. Do you remember that one?

(CROSSTALK)

NOVAK: And in fact, the House would have passed this billion that the Senate passed except for one thing, they had a higher priority. They don't like to work on Fridays. And so they had a -- put it over until Tuesday, when they'll pass it...

DREIER: Well, we (UNINTELLIGIBLE) press this morning.

NOVAK: ... they will have a -- they were panicked by a "New York Times" article. You know, "The Times" still has some clout, despite their troubles, which panicked them. The Democrats were too stupid to do it themselves. They had to wait for "The New York Times" to have a demagoguery of saying the people who don't pay taxes should have a tax cut.

And in fact, what this is, is a welfare handout. Now, why the Republicans were so terrified is that Mark led the way last week when he played the card of the military, the poor military aren't getting the proper tax cut.

This is a disgraceful performance by the political establishment. And both sides have to share the responsibility.

SHIELDS: David Dreier, Republicans are not in full retreat on this issue.

DREIER: No, we're not in full retreat. I will tell you, when the Senate votes with only two dissenting votes on this, it's a challenge. You know, this bill was described, it was the Jobs and Growth Act. And clearly, the virulent opponents to this measure, Mark, ended up being who now want more in tax cuts, which is kind of an interesting commentary on what it is that the Democrats are trying to do on this.

I will tell you that I personally -- we, we -- I've been proud that we've been able to move a number of people off the tax rolls. There are now 40 million Americans who pay no federal income tax. And I will tell you that I'm troubled about our continuing down the road towards doing that, but at the end of the day, we have faced reality, and so we will be...

NOVAK: (UNINTELLIGIBLE) you're not in retreat, yes or no?

DREIER: No, we're, we're not...

NOVAK: Not in retreat?

DREIER: -- we're not, we're, we're not, we are not as a party in retreat.

NOVAK: (UNINTELLIGIBLE)

DREIER: We've got a great president. We've put -- we -- listen, we cut the capital gains tax, Bob, that's not in retreat.

SHIELDS: But will the House, will the House pass this? NOVAK: Of course it will.

DREIER: Oh, yes, the House will pass this.

SHIELDS: Margaret.

CARLSON: David, you should be proud to be in retreat on this, because when you put a face on the people who were losing out in this tax bill, which is the military...

DREIER: We're not in retreat, we're moving forward.

CARLSON: ... fight fires, and the people who clean my office, who work as hard as I do, why shouldn't they get a piece of this...

NOVAK: Why should they (UNINTELLIGIBLE)...

CARLSON: ... talk about re, re, redistribution...

DREIER: The Jobs and Growth Act? The Jobs and Growth Act?

(CROSSTALK)

CARLSON: ... of income. You know, they should make a lot more than they do, because they work just as hard. And they care just as much about their children. And if it's a stimulus bill, if it's a growth bill, person who cleans my office is going to spend the money. Not...

DREIER: This has already been a consumer-driven...

CARLSON: ... what, what, what Bob Novak is going to do is go and buy a new municipal bond with his money.

DREIER: Yes, and that'll create some jobs.

(CROSSTALK)

SHIELDS: Al Hunt, Al Hunt.

HUNT: (UNINTELLIGIBLE).

SHIELDS: Al Hunt, these people do spend...

DREIER: (UNINTELLIGIBLE).

SHIELDS: ... these people do pay taxes.

HUNT: Of course they do, of course they do, Mark. Look, this entire bill was a dishonest bill. It was labeled, it was (UNINTELLIGIBLE) it was dishonest the way it was labeled, it was dishonest the way it was costed out, and it was dishonest in leading these people on.

I don't want a bigger tax cut. I want a more effective and a fairer tax cut. And these people do, they pay 15 -- over 15 percent of their paltry income goes to payroll taxes. Now, I'll tell you this, if we increased payroll taxes, suddenly Brother Novak would find this a tax. I don't think he would no longer say (UNINTELLIGIBLE)...

NOVAK: (UNINTELLIGIBLE)...

HUNT: ... just try doing that and see...

(CROSSTALK)

HUNT: ... and they pay it, and you know what they are? They're not welfare people, they are working poor. They are working people, Mark.

NOVAK: The payroll tax is compensated for by the investment, by the tax credit that they get. That takes care of the payroll tax. Now you want to give them a double benefit.

But let me try to explain something to you.

HUNT: (UNINTELLIGIBLE) like we do on dividends (UNINTELLIGIBLE).

NOVAK: Let me try to explain something to you, Al. The -- this provision was not contained in the original bill, was not contained in the Democratic version, was not contained in -- (UNINTELLIGIBLE) to aid the poor was not in contained in the House bill or the Senate bill. It was put in at the last minute to get (UNINTELLIGIBLE) Blanche Lincoln's vote, Senator Blanche Lincoln of Arkansas, to get her vote.

When she didn't vote for it, for the bill, they took it out. That's the way politics works.

HUNT: Surreptitiously in the dead of night...

(CROSSTALK)

NOVAK: Oh, come on!

(CROSSTALK)

HUNT: ... they snuck it out, and they kept in every provision for every wealthy campaign contributor there was. And not only that, Mark...

DREIER: Oh, come on...

HUNT: ... there are another 8 million Americans who pay income taxes, who pay income taxes...

DREIER: Al, this is (UNINTELLIGIBLE)...

HUNT: ... who don't get a tax cut...

(CROSSTALK)

SHIELDS: David, David, the moderator just wants to say something, OK? The moderator has done some reporting. And the reporting tells him this, that the Republicans in the House this week, led by the majority leader, would like to sabotage this by killing it with kindness, by making it permanent, making it permanent, therefore putting a price tag on it of somewhere between $80 and $100 billion, thus guaranteeing, when it goes back to the Senate, it will be killed because it exceeds the 350.

DREIER: Mark...

SHIELDS: Is that part of the strategy?

DREIER: ... Mark...

(CROSSTALK)

DREIER: ... this is the Jobs and Growth Act, and what we need to do is, we need to focus on jobs and growth...

(CROSSTALK)

DREIER: ... and we, we've seen a benefit already created from the package that's gone in, with the market moving, we're seeing improvements in the economy already...

(CROSSTALK)

DREIER: ... that's going to (UNINTELLIGIBLE)...

CARLSON: But to sunset, everything (UNINTELLIGIBLE)...

HUNT: The old trickle-down jobs and growth package.

CARLSON: Right, but to sunset everything else and not that, so that fails? That is...

NOVAK: It wasn't in the original bill.

DREIER: That wasn't part of it. It wasn't part of it.

SHIELDS: Dave...

HUNT: Dead of the night, they took it out.

CARLSON: Please. Yes.

SHIELDS: That's right, dead of night.

Next on CAPITAL GANG, what will the political fallout be from Hillary Clinton's book?

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

The Associated Press quoted from Senator Hillary Rodham Clinton's memoir, "Living History," including her reaction when Bill Clinton confessed to his relationship with Monica Lewinsky. Quote, "I could hardly breathe. Gulping for air, I started crying and yelling at him, 'What do you mean? What are you saying? Why did you lie to me?' I was dumbfounded, heartbroken, and outraged that I'd believe him at all. As a wife, I wanted to wring Bill's neck."

(BEGIN VIDEO CLIP)

CLINTON: I hope when people read the whole book, that they will see that many of the policies that my husband's administration pursued were good for our country, and in just two and a half years, we've gone in the wrong direction on so many fronts.

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, our own Washington best-selling author, what is the political fallout of this, this book?

CARLSON: Yesterday she was in Boston, and there was a rope line, and people were held back. And so we can say that for the next period of time, none of the nine Democratic candidates will get much air time.

She did two things in this book, which I think are important to her to get done for her own political career. One is, we've always known she was smart. She made herself look human with the admission that, hey, she cried. And with the "I want to wring Bill's neck," you know, she identifies with all the women in the world that have said exactly the same thing about their own husbands, although not for the same reason.

And the other thing she did was to set the record straight. The legal gladiator came forth in the one part in which she sets the record straight that she was not Bill's accomplice, that in fact she did not know until the moment when he had to admit to the rest of us. I think that was very important for her to do.

Whether or not that timeline is precisely right, because there's some others who differ with it, nonetheless, she put it down and the lawyer has it. What did she know and when did she know it? Nothing.

SHIELDS: David Dreier.

DREIER: I don't care what she knew and when she knew it. I mean, I frankly -- we all lived through this. I did as a member of the first branch of government. And I'm sick and tired of it. And I assume she's telling the truth. I know a lot of people have said she lied, you know, they say the wife is the last to know. She'd obviously heard all kinds of rumors. And so I'm going to take her at that.

But since you brought it up, Mark, I guess I feel obligated to mention that this is, based on everything I've heard, a much better book than the one that's going to be...

SHIELDS: By Margaret Carlson.

DREIER: ... unveiled by Margaret Carlson.

CARLSON: Unfortunately, it doesn't have as much sex in it.

SHIELDS: That's right.

DREIER: Yes, thanks for giving this to me, Margaret.

(CROSSTALK)

SHIELDS: OK, Bob Novak.

NOVAK: Senator Clinton had been doing very well in the Senate, getting a lot of high marks from Republicans as well as Democrats. And I think she really blew it with this book. To say that she didn't know, she's either a fool or, as most people believe, David, she's a liar. And this, this, this steamy prose sounds like it's out of a romance novel.

CARLSON: Have you read any?

NOVAK: Oh, every night. And...

DREIER: Six hundred pages.

NOVAK: ... it is a -- you know, it is just that she's demeaning herself. She's got her $8 million. They're never going to make it back. Why she's hawking this book, I don't know. But (UNINTELLIGIBLE) for example, Wednesday night in Virginia, she's going to be at Wal-Mart, Wal-Mart...

HUNT: That's great.

CARLSON: Even I haven't gone to Wal-Mart.

(CROSSTALK)

HUNT: That's wonderful.

(CROSSTALK)

HUNT: ... wonderful.

SHIELDS: If she were at some tony...

HUNT: That's great.

SHIELDS: ... upscale...

NOVAK: You bet it.

SHIELDS: ... Georgetown bookstore, Novak would say it, There she is, out there with the chichi Georgetown set. Instead, she's out with real people, Bob.

DREIER: She's just observing both. HUNT: Mark, this is almost as good as tax cuts. We really ought to have a Hillary section every week. Because, Bob, you know what Bob does, he flutters first, and then he fulminates, and then he flagellates, and I love to watch him do it.

(CROSSTALK)

HUNT: It's just fun.

If Mrs. Clinton had asked my advice, which she never has, I would have said, Don't write the book now. You know, it's ill advised. I have not read it. I believe she's telling the truth, and I think Margaret's probably right, she's gotten it out in that sense, it served some purpose. It doesn't help any other Democrats, though.

NOVAK: It is -- it's...

SHIELDS: Guys...

NOVAK: ... you'd believe anything she says, don't you?

HUNT: No, I don't.

NOVAK: Anything. You believe she said...

HUNT: No, but I love to watch you...

NOVAK: ... she said, this guy has been cheating with her, on her all these years, and she says, What a shock!

(CROSSTALK)

HUNT: ... I love to watch you talking about her.

(CROSSTALK)

SHIELDS: I tell you what I think, I think, I mean, she's surprised that this is a guy who'd been not faithful to their marital promises. But the point is, she knew what an ambitious guy he was. And the word was down when he came to the White House that any screwing around from that point was going to be a political disaster. And, I mean, I think she -- out -- beyond being outraged, it was stupid.

So I think she's done two things...

DREIER: (UNINTELLIGIBLE) surprised that he went as far as he did.

SHIELDS: I think, I think she's, I think she's done two things...

(CROSSTALK)

SHIELDS: ... she's (UNINTELLIGIBLE) -- she's put that whole period behind her. When she gets to questions, if she does go for national office at any point, say, It's in the book, read the book.

DREIER: Weren't we all surprised that she went -- that he went as far as he did?

SHIELDS: Well, I mean, I think...

DREIER: Back then?

SHIELDS: ... yes, no, but I think that's...

HUNT: No, no, I wasn't.

(CROSSTALK)

HUNT: No, I think habit's hard to break. But, you know, I also think...

DREIER: That's...

HUNT: ... one of the great, one of the great, you know, really, indictments of Bill Clinton's performance there was the fact that the one person he leveled with was Dick Morris...

SHIELDS: Yes.

HUNT: ... I mean, it's incredible, you don't tell your wife, (UNINTELLIGIBLE) you tell Dick Morris.

SHIELDS: And it just shows what great judgment he had of people.

(CROSSTALK)

NOVAK: Yes, but I, I love, I love, I love, I love the sound bite we just showed too, when she says, you know...

SHIELDS: I read it, actually.

NOVAK: ... Don't, don't, don't, don't worry about the -- about -- no, not, not, not (UNINTELLIGIBLE)...

(CROSSTALK)

NOVAK: ... the sound bite, the sound -- no, you read that, your dramatic reading was terrific.

SHIELDS: Thank you.

NOVAK: But, but the, the sound, the sound...

(CROSSTALK)

NOVAK: ... bite, when she says, you know, If you really read the book, it's not just about Monica, it's about what a terrific administration we had compared to this terrible Bush administration...

DREIER: Oh, my God. NOVAK: ... you know people are going to read the book for one thing, and that's titillation.

(CROSSTALK)

CARLSON: And they already, they've already been titillated.

DREIER: I'm not going to buy it.

HUNT: ... I just want to pick up on what David Dreier said. Margaret Carlson's book is about more than sex, it really is.

SHIELDS: How many jobs were created in the Clinton years?

HUNT: Oh, I think it's about 24 million, wasn't it?

(CROSSTALK)

DREIER: ... the Republican Congress (UNINTELLIGIBLE)?

HUNT: Twenty, 24 million, I think 26 million...

(CROSSTALK)

NOVAK: Thanks to the Republican...

(CROSSTALK)

SHIELDS: ... there's still a Republican Congress...

(CROSSTALK)

NOVAK: And the Reagan tax cuts.

SHIELDS: Still a Republican Congress...

(CROSSTALK)

HUNT: ... and Alan Greenspan...

DREIER: Let's go there.

(CROSSTALK)

SHIELDS: OK, that's it...

CARLSON: (UNINTELLIGIBLE) unemployment in nine years.

SHIELDS: David Dreier, thank you very much.

DREIER: Always great to be...

(CROSSTALK)

DREIER: ... with all of you...

SHIELDS: ... plugging Margaret's book...

DREIER: Thanks.

SHIELDS: ... you're forgiven just about anything else (UNINTELLIGIBLE).

Coming up in the second half of CAPITAL GANG, our "Newsmaker of the Week" is former assistant secretary of state Bernard Aronson, talking about Latin American policy. "Beyond the Beltway" looks at the effort to recall California Governor Gray Davis with "Los Angeles Times" reporter Michael Finnegan. And our "Outrages of the Week." That's all after the latest news headlines.

(COMMERCIAL BREAK)

(NEWSBREAK)

ANNOUNCER: Live from Washington, THE CAPITAL GANG.

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

I'm Mark Shields, with Al Hunt, Robert Novak, and Margaret Carlson.

Our "Newsmaker of the Week" is Latin American affairs expert Bernard Aronson, currently a senior fellow in foreign policy at the Brookings Institution.

Bernard Aronson, age 57, residence Tacoma Park, Maryland, religion Jewish. University of Chicago graduate 1967.

Assistant to the president of the United Mine Workers Union, 1972 to 1976. Deputy assistant and executive speechwriter to President Jimmy Carter, 1977 to 1981. Assistant secretary of state for Latin American affairs in the first Bush administration, 1989 to 1993.

Al Hunt sat down with Bernie Aronson earlier this week, prior to the annual meeting of the Organization of American States.

(BEGIN VIDEOTAPE)

HUNT: Bernie, five or 10 years ago, there was great hope that democracy and free markets would produce a vibrant Latin America. Why has that not materialized?

BERNARD ARONSON, THE BROOKINGS INSTITUTION: The region has lost momentum and lost direction, and I think there's been a failure of political leadership in Latin America and also in the United States. These reforms are difficult, so a lot of countries cut the baby in half. They carried out the initial wave of reforms, but the tougher reforms, like pension reforms and labor standards and laws, they've docked, and creating independent and clean judiciaries.

And the United States kind of got out of the game as well. We didn't move forward extending the North American Free Trade Agreement. We didn't keep engaging with the region in a strong way, and so... HUNT: What is the Bush administration policy for Latin America?

ARONSON: You know, the Bush administration policy toward Latin America started out with a lot of high hopes and a commitment to engage. Today it's really driven by trade. I give them high marks on that. They've revived the trade agenda, they're moving forward with Chile, Central America, Free Trade Area of the Americas, very aggressively.

But beyond trade, there's not really been any broad vision for the region. And the region feels it and is disappointed.

HUNT: Is corruption a growing problem?

ARONSON: It's a huge problem in almost every country. And it's a problem that's taking a long time to deal with. And there's a lot of disillusionment with government per se.

And another huge problem, which isn't talked about as much, is just ordinary crime in the streets. Latin America is like New York City used to be 15 years ago, governments can't protect their people. And the number one problem, if people talk about it, is that they don't feel safe in their own homes and in their neighborhoods.

HUNT: You're talking about human rights abuses.

ARONSON: It is nowhere near as bad as it was in the bad old days when they had dirty wars and guerrilla wars. But there are some countries where it's still a problem.

HUNT: Guatemala?

ARONSON: Guatemala in particular. And journalists in particular are a target, in places like Colombia, journalists are killed on a regular basis with impunity.

HUNT: In Latin America, the economic engine, or the big enchilada of economic growth is Brazil. How's Brazil doing?

ARONSON: Brazil is actually doing pretty well. They just went through an election, and the person who won is a fellow with a fourth grade education who was a metal worker, came out of the trade union movement, came from a fairly militant left political party. But he's governing very responsibly. He's built a kind of broad coalition, and he's doing the right thing economically.

And Brazil's democratic institutions are very strong, and there's a lot of capital flowing into the country.

HUNT: Is the drug war being lost in Colombia and even spreading to Peru and Venezuela?

ARONSON: The latest statistics in Colombia on production are better than they were previously. They're reducing production. At the end of the day, the war on drugs in Latin America is a war against corruption and crime, but it's not going to be won unless we and other Western nations reduce demand.

HUNT: You mentioned Venezuela. In the short term, at least, is it just hopeless under Chavez?

ARONSON: You know, the opposition and the government reached an agreement to hold a referendum on Chavez's rule sometime after August. That was brokered by the OAS. I'm not sure the agreement will hold. If it does, that could be a resolution. But it's a very polarized society. You've had dozens of people killed, the economy's in a state of free fall.

And it's in crisis.

HUNT: What one or two things would you like the United States to do now, Bernie, in order to effectuate a better Latin American policy?

ARONSON: You know, first of all is to follow Willie Loman's advice, "Attention should be paid." This cannot be managed by mid- level people at State, Treasury, NSC. It needs the sustained attention of the president, secretary of state, the secretary of the Treasury, the attorney general, the higher-ups to deal with the region.

And to engage with the region in a sustained and serious way, we have to offer some kind of a positive vision and incentives for these political leaders to take tough steps on economic reform.

And if we're not in the game, it just makes it harder for them to do what they have to do. And we're not very much in the game today.

(END VIDEOTAPE)

SHIELDS: Al Hunt, when the top level of the Bush administration is preoccupied by terrorism, the occupation of Iraq, and the North Korean threat, is Bernie Aronson's recommendation as far as Latin America really practical?

HUNT: Mark, those other items clearly have to be the highest priority, there's no question of that. But you can't ignore your back yard. And it is true, as Bernie said, four or five years ago, there was such great hope.

SHIELDS: Now that you've (UNINTELLIGIBLE)...

HUNT: And some of it really is diminishing. And I think, I think, really, it would be better to have at least a little bit more of an American involvement, economically and politically.

NOVAK: You know, as I sit at this table, I'm always amazed how wonderful everything was four or five years ago when Bill Clinton was being president, how everything has just gone to hell all over the place.

What baloney! But the matter of fact, I was here in 1961, when the Alliance for Progress was started by President Kennedy, they were going to reform Latin America. Latin America isn't going to be reformed, it's going to be corrupt, there's going to be a lot of problems. And I think it's Yankee arrogance to think that somebody sitting in Washington is going to do it.

CARLSON: Five hundred thirty-five members of Congress were invited to the Hemispheric Conference in Brazil May 23 to 26. Seven accepted. One went. That's how much interest there is in Latin America at the moment.

SHIELDS: Margaret Carlson, last word.

Coming up, the CAPITAL GANG Classic, looking at the 1996 Mideast peace summit.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Over seven years ago, in the wake of terrorist bombings in Israel, President Bill Clinton agreed to attend a world summit in Egypt that included Palestinian leader Yasser Arafat. CAPITAL GANG discussed this development on March 9, 1996. Our guest was Rudy Giuliani, then mayor of New York.

(BEGIN VIDEO CLIP, March 9, 1996)

KATE O'BEIRNE, CAPITAL GANG: These latest attacks that have killed over 50 people in nine days have been in the face of Israel making enormous concessions that have largely benefited the Palestinians. It's up to them. They've got to start policing their side.

MAYOR RUDY GIULIANI (R), NEW YORK: The first thing you have to do is restore security in Israel. And I think when it resumes, negotiate with Arafat, but don't trust him, and don't elevate him, and don't romanticize him.

NOVAK: I don't think it's up to the Palestinians mainly, I think it's up to the Israelis. This is a plan, this violence, this murder, to get the Israelis to turn out the Peres government, to bring back the Likuds, to end the peace process, to stop the negotiation...

HUNT: There is a mutuality of interest between Hamas and the Israeli Likud Party. I mean, they despise each other, but there really is a mutuality of interest. And it scares me, because I think their mutual interest is both want to destroy the peace process.

SHIELDS: Everything that Hamas does strengthens the position and the political popularity of Likud, who have been the hard-liners in Israel.

(END VIDEOTAPE)

SHIELDS: Bob Novak, what has changed in the Middle East equation in the last seven years?

NOVAK: Well, the relationship between Likud and Hamas, as both of you mentioned, is exactly right. Difference is that now the Likud is in power, and before they weren't, so it makes it more difficult. Not much has changed.

SHIELDS: Margaret?

CARLSON: Arafat is not at the table. That's the best news in these years. And so there is, as David Dreier said, hope.

SHIELDS: Al Hunt.

HUNT: There still is a mutuality of interest between Hamas and elements of Likud, to destroy a peace process. But I'll give what Bob Novak's said earlier, I give Bob some credit. I think that George Bush has brought some hope to this process. I'm still skeptical whether he's going to follow through, but he's brought some hope, no question.

SHIELDS: Well, Bob will be busy picking nits the rest of the evening.

Next on CAPITAL GANG, "Beyond the Beltway" looks at the effort to recall California Governor Gray Davis. "Los Angeles Times" reporter Michael Finnegan joins us.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Republican Congressman Darrell Issa, who seeks to replace Democrat Gray Davis as governor of California with Darrell Issa, ran a full-page ad in "The Sacramento Bee" calling for Governor Davis's removal in a recall election.

He concluded with this slogan, quote, "Because it's time to clean up the Gray Davis mess," end quote.

Democratic Senator Dianne Feinstein, herself a possible replacement, in an editorial written for California newspapers, said, quote, "I don't believe it is right to overturn the results of an election simply because of political differences," end quote.

If nearly 900,000 valid signatures are collected by July 9, Californians will vote this fall whether to remove Governor Davis and select his replacement.

Joining us now from Los Angeles is reporter Michael Finnegan of "The Los Angeles Times."

Thanks for coming in, Michael.

MICHAEL FINNEGAN, REPORTER, "THE LOS ANGELES TIMES": Thank you.

SHIELDS: Michael, will there be a vote to recall Governor Gray Davis this year?

FINNEGAN: That's a possibility. There -- that seemed pretty remote as a possibility a long time ago, earlier this year, but at this point, given Congressman Issa's financial support for the petition effort to get a recall election before voters, that's now a real possibility.

SHIELDS: And is, there a switch in the attitudes of voters? I mean, the -- Gray Davis seems to be less popular today than he was three months ago.

FINNEGAN: He is. The fiscal crisis in California is quite severe, and voters, polls have shown, blame Gray Davis for that.

SHIELDS: OK. Bob Novak.

NOVAK: Michael, I just got back from Los Angeles, and the two things that struck me was, I thought that the establishment politicians in both parties were in denial on this thing, Oh, it can't happen, when the petition circulators claim they've got 520,000 signatures already, and they've got till July 19 to get it on the ballot in the fall.

And secondly, I smell some of that same thing with Proposition 13 years ago, the -- when the establishment said, You can't -- they're not going to cut the property tax, and the voters did it. Do you think there's any merit to those conclusions?

FINNEGAN: Well it's -- you know, in California, it's very hard to get something on the ballot. In this case, it takes about 900,000 signatures of registered voters. And to actually get that many, you need a lot more than that. So it's very, very difficult to get it on the ballot. And as a result, you have to spend a lot of money, $2, $3 million, to pay people to go out to shopping malls and supermarkets and gather signatures on your petition to get something on the ballot.

And Darrell Issa's money is making it possible that that will actually happen. You know, how voters would vote once it is on the ballot, if it gets on the ballot, that's another question.

SHIELDS: Margaret Carlson.

CARLSON: Michael, is it -- Arnold Schwarzenegger was making a lot of appearances this weekend. He confirmed that he's been talking to political insiders in California about running for governor, with the proviso that he's not going to make up his mind until his new release, "Terminator 3," probably the only politician who will ever say such a thing.

But after "Terminator 3" is out on July 2, he's going to make his decision. Now, could Darrell Issa spend all this money only to elect Arnold Schwarzenegger?

FINNEGAN: Anything is possible in this thing. It's never been done before. It's been possible since 1911 to recall a governor of California, but it's never gotten on a ballot before. And so right now, Arnold Schwarzenegger and Darrell Issa are just two of many people who are looking at the possibility of being on this ballot.

So, yes, it's possible that the two of them will be running against each other, and it's possible it'll be a very crowded race.

SHIELDS: Al Hunt.

HUNT: Michael, there were reports this week that the White House is discouraging people from getting behind this recall drive, that they got the National Rifle Association to pull back on plans to give money. What is the downside for Republicans here? Is there one?

FINNEGAN: Well, it's a distraction from the two main goals of the Republican Party in California right now. One of them is the president's reelection campaign in 2004, and the other one is the effort to unseat Senator Barbara Boxer, who is up for reelection next year.

So this throws in all kinds of uncertainties to that picture, and also complicates the effort to raise money for both of those things.

SHIELDS: Michael, one of the wild cards i this whole equation is Senator Feinstein, who, of course, lost a gubernatorial race to Pete Wilson before coming to the Senate. Now, A, do you think she would run, if the recall is there? And what do the others do, I mean, the people like Phil Angelides, he's the state treasurer, Bill Lockee, the attorney general, were already planning to run in 2006. Cruz Bustamante, the lieutenant governor.

FINNEGAN: It's impossible to say. Nobody really knows. If this gets on the ballot, there are going to be all kinds of calculations that need to be made by candidates who had been planning to run for governor in 2006, like the lieutenant governor and the state treasurer and the state attorney general and Arnold Schwarzenegger. And Dianne Feinstein, for the moment, has discouraged talk of her getting on the ballot to do this.

But she's run for governor before, and it's possible that she will wind up deciding otherwise. But at the moment, everybody is just keeping their options open and waiting to see what it's going to look like a few months down the road. The actual deadline to get in the petition is September 2, and then there's some more time to count the signatures. And this whole thing could tied up in litigation.

So it's -- nobody really knows.

SHIELDS: OK.

NOVAK: You know, I heard some Republicans, apparently White House is much afraid of Senator Feinstein. I don't think she would get in unless the field was cleared for her.

But what I hear, Michael, is that there's just an army of Democrats who are interested. I hear senate, state senate president John Burton, one of his friends told me that he may get in, and Willy Brown, the mayor of San Francisco, who was term-limited out, may run. Do you think -- this is really something that's impossible to call, isn't it?

FINNEGAN: That's exactly right. And there are a lot of ambitious politicians in California. And some may see this as their opportunity to get in there. The lieutenant governor, for example, has much less money than the other two statewide office holders who are preparing to run for governor in 2006. And so he may very well see this as his chance to just go in there and roll the dice and see if he can get -- he can, he can win.

The crazy thing about the way this election would work is that the -- it's a two-part ballot. First is just an up-or-down question on the governor, Should Davis be recalled. But the second part is just a list of candidates to replace the governor. And that could be a very long list. And it's the person who gets the most votes would win.

And so potentially, somebody with 8, 10, 12 percent of the vote could wind up being the next governor of California. So those are the -- that's the kind of thing that will be part of the calculation when people decide whether or not they want to run...

SHIELDS: OK.

HUNT: ... in this particular circumstance.

SHIELDS: Only in California.

Thank you very much for being with us, Michael Finnegan.

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

(COMMERCIAL BREAK)

SHIELDS: Now for the Outrage of the Week.

Since George W. Bush took office on January 20, 2001, the number of private sector jobs in the United States has plummeted by 3.1 million. Today the United States unemployment rate of 6.1 percent is the highest in nine years. As South Carolina Congressman John Spratt puts it, "After three large tax cuts in two years," end quote, there today more than 9 million Americans out of a job.

The Bush administration's record is the worst in the last 55 years.

Robert Novak.

NOVAK: And that's the last we'll hear of that.

The House voted two to one this week to outlaw partial birth abortion, which soon will be signed into law. But look at some Democrats voting no. Minority leader Nancy Pelosi, a Roman Catholic, minority whip Stenny Hoyer, who once sponsored a bill to abolish partial birth abortion, Democratic caucus chairman Robert Menendez, also Roman Catholic, Martin Frost, supposedly a moderate leader.

The only House Democrat running for president, Richard Gephardt, says he still opposes partial birth abortion, but he didn't show up to vote, didn't risk enraging the pro-abortion lobby. SHIELDS: Margaret Carlson.

CARLSON: Mark, energy company Westar paid $56,000 to Republicans Tom DeLay, Joe Barton, and Richard Shelby for, quote, "a seat at the table," unquote. Quite a bargain. Corporation executives David Wittig and Douglas Lake stood to get $27 million back for their $56,000.

Representatives held fast when Democrat Ed Markey tried to block their move. E-mails catch the executives red-handed in a quid pro quo, if not bribery.

When the Justice Department gets done with Martha Stewart, maybe they could go after this multimillion-dollar heist of the American people.

SHIELDS: Al Hunt.

HUNT: Mark, John Ashcroft, the most insensitive attorney general on civil liberties since Mitch Palmer and the Red Scares more than 80 years ago, wants even more power under the misnamed PATRIOT Act. This follows a report from Justice's own inspector general that hundreds of immigrants rounded up in the terrorist sweep have been physically and verbally abused and denied basic rights.

The greatest concern about General Ashcroft is not whether he will protect us from terrorists, but whether we will be protected from him.

SHIELDS: This is Mark Shields saying goodbye for THE CAPITAL GANG.

Coming up next, "CNN PRESENTS: Inside the War Room." At 9:00 p.m., "LARRY KING WEEKEND," Martha Stewart before the indictment. And at 10:00, the latest news on CNN.

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

Bush's Tax Cut; What Will Political Fallout Be From Hillary Clinton's Book?>