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CNN Novak, Hunt & Shields

John Kerry Discusses Federal Budget Problems

Aired September 08, 2001 - 17:30   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.
ROBERT NOVAK, CO-HOST: I'm Robert Novak. Al Hunt and I will question a leading prospective candidate for the next Democratic presidential nomination.

AL HUNT, CO-HOST: He is Senator John Kerry of Massachusetts.

(BEGIN VIDEOTAPE)

HUNT (voice-over): President Bush and Congress returned to Washington following their August vacations to entertain Mexico's President Vicente Fox in the first formal state visit of the Bush administration.

But behind the diplomatic formalities, the Senate's Democratic leadership was blaming President Bush's policies for the shrinking federal budget surplus and demanding that he submit a new budget.

A prominent freshman Democratic senator sounded that message.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: It is his budget. It is his tax cut. And it is therefore his responsibility as the president to give us a plan as to what we should do now that circumstances have so dramatically changed.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I think it's best for me to start working in a cooperative fashion with the members of Congress. I will start by saying, let's work together to make sure that our budgets don't cause us to dip into Social Security.

HUNT: John Kerry is a decorated Vietnam veteran who turned against the war, ran for Congress in 1972 and lost. Following law school and a stint as a prosecutor in Boston, he sought elective office again in 1982 and was elected lieutenant governor of Massachusetts.

Two years later in 1984 he was elected to the Senate. In 1996, he came from behind to win a third term against Republican Governor William Weld.

Senator Kerry, making early visits to New Hampshire and Iowa, is a leading Democratic prospect for president in 2004.

(END VIDEOTAPE) HUNT: Senator, the Democrats this week have assailed President Bush for the shrinking budget surplus. The unemployment rate soared to a four-year high.

You called for putting everything on the table in an economic summit. Now, economic summits and table settings are nice, but real leadership requires more. What one or two steps would you take to address the short-term economic issue and the longer-term budget issue?

SEN. JOHN KERRY (D), MASSACHUSETTS: Well, Al, I mean, you've got to talk to each other to begin the process. I mean, you may say it's nice, but I don't think it can be dismissed altogether.

There's only a one-vote margin in the Democratic Senate. There is no way that, without the president of the United States offering leadership and acknowledging the difficult situation that we're in, that you can begin to come up with a solution.

This is the president's budget. The president has offered a tax cut that takes 74 percent of the total surplus. And so, when you're suddenly confronted with a situation that you have less revenue than you thought you were going to have, you're suddenly in a downturn in your economy and your numbers are not holding up -- as they are not, according to CBO and everybody's understanding in Washington -- the president of the United States, whose budget it is, whose tax cut it is, has a responsibility to offer something new.

HUNT: Senator Kerry, I don't think anyone would deny that, but you also are a leader in the Democratic Party. The short-term economic issue, there are three possible approaches. Let me ask you if you favor any of these three: A, more spending to stimulate the economy; B, a further tax cut in the short term; or, C, more pressure on the Fed to ease interest rates more?

KERRY: Well, I think it's very clear what I favor because we voted for it early in the spring, which was the Democratic budget alternative that had triggers in it where you didn't wind up spending money you don't have. It had a smaller tax cut but more tax cut for a stimulus, which is what we need.

So you ask me, what do we need now? Yes, we need additional stimulus. We should absolutely not raise taxes. We should not cut spending. What we need to do is drive the economy of this country. The economy is the number one issue. It is the most important thing we should focus on. And we need...

(CROSSTALK)

HUNT: Excuse me, go ahead.

KERRY: No, I was just going to say, we need to take steps, Al, that are going to guarantee that we're growing the economy. And you can't do that in the current construct that the president of the United States has on the table. George Bush has left us with a situation where we don't have those alternatives now. And until the president turns around and says, "We can't operate as we were, we have to adjust and face the new reality," there's nothing that one -- you know, that the Democratic Senate is going to do if he pulls out his veto pen and vetoes it and sends it back. It's just not going to work.

NOVAK: Senator Kerry, if you had a trigger in this budget, that you would trigger a smaller tax cut when the surplus begins to shrink, you would be saying, in the spirit of Herbert Hoover, "As the economy get's worse, we're going to take more money out in taxes." Is that what you really want?

KERRY: No, that's not what I want, and that's not what I would do. And you're very perceptive, Bob. That's exactly what we don't want to have happen. We don't want a Hoover policy today, and therefore, we can't do anything with respect to any tax cut that's taken effect.

I'm not talking about changing anything with respect to the component of the tax cut that's taken effect.

KERRY: But look at what's taken effect: You have $40 billion of a rebate that went back to people. That was put in by Democrats. As you recall, Bob, there was no economic stimulus in the Bush tax cut. It was our insistence that put some measure of stimulus in there, and according to most of us, it was not enough. I don't believe it was enough.

So the only way, however, that you're going to be able to have the choice of perhaps putting more stimulus into the economy now is to bring back the revision of all the other spending issues and the back end of the tax cut.

HUNT: Now, on Meet the Press last Sunday, you said that you were interested in a possible cut in the capital gains tax rate. Now, an easy way to do that, where you get both sides agreeing on something they like, is to amend an increase in the minimum wage with the cut in the capital gains tax. Would you be willing to go that route?

KERRY: Well, I don't -- not unless -- I mean, you can't even begin to consider -- I said, yes, capital gains could conceivably be one component. I have a targeted capital gains reduction toward the critical technologies which was similar to what we passed in 1993, which really helps to create the highest kick to your high-value-added jobs.

I would consider something even broader than that, Bob, if it embraced a full revision of the existing tax cut. Clearly, you can't afford it in the current context.

NOVAK: Would you put it on the minimum wage bill increase?

KERRY: No, not alone. I don't think that -- I wouldn't do it in that context now. I think it can only be considered as a component of an overall stimulus that is part of a complete revision of the current budget and the current tax program that's in effect.

I mean, this -- look, Bob, under the Bush plan, you're going to pay an additional $600 billion of interest over the course of the next six years. We're going to see the debt of this country rise by a trillion dollars over the course of the next 10 years.

And unfortunately, we're going to see $500 billion taken out of the Social Security Medicare trust funds over the next six years, without even getting to the extension of the R&D tax credit, the low- income housing credit, dealing with the farm subsidies, doing prescription drugs. All of the other things that are part of the Bush budget aren't even contained in that kind of expenditure.

HUNT: Senator Kerry, I'm fascinated with your interest in any kind of capital gains tax cut, because you Democrats have complained not just about the size, but the fact that the Bush tax cut is disproportionately beneficial to the wealthy. And of course, a capital gains tax cut goes almost exclusively to upper-income people.

Moreover, Bob Rubin, who your party has hailed as one of the best treasury secretaries ever, says it doesn't stimulate the economy. Jon Corzine, your colleague in the Senate, used to be chairman of Goldman Sachs, says it doesn't stimulate the economy. What do you know that they don't know?

KERRY: Well, I think there's just a difference -- there's always been a difference of opinion about whether or not that has some impact on the choices that people make with respect to money and the availability of capital for investment.

I would not touch it, as I said, Al, unless it were part of a complete fix on the entire tax structure that we have today, and a revision of the budget process that we have. And it has to be part of a stimulative sort of package that you approach.

And I'm not necessarily -- I mean, the capital gains tax that I propose was a targeted one directed toward the kinds of jobs in the technology sector that are your fastest growing and provide the greatest return to people in terms of wages. And that's where I think we ought to put our attention.

NOVAK: We're going take a break, but I want to ask you one quick question. President Fox of Mexico was in the country, much celebrated as a Mexican reformer.

He wants open borders between the United States and Mexico, starting with amnesty for illegal aliens. Do you think open borders is an achievable goal?

KERRY: Not in the near term. It might be a long-term goal that you try to achieve as you build the relationship between our countries. We want to build that relationship.

We also want to respect, you know, the notion that there are many people contributing to this country today who are here, paying taxes, living by the rules even though they may have come in illegally. And we've dealt with that in the past in various ways. We need to be realistic about it. But we also need to live by the law and uphold the law and make the law mean something.

And I think that it's going to take a period of time to build the kind of trust that President Fox talked about yesterday at the joint session. We want that trust. We need to build it, but it often takes confidence-building measures to help you establish it.

NOVAK: We're going to have to take a break. And when we come back, we'll talk a little presidential politics with John Kerry.

(COMMERCIAL BREAK)

HUNT: Senator Kerry, you have been an unremitting critic of President Bush's missile defense initiative. I talked to one of your colleagues, Chuck Hagel, this week who noted that pre-Clinton Democrats had a reputation for being soft on defense.

Does it worry you if most people in your party oppose these various defense initiatives that you're going to revive that perception as the party that's soft on national security?

KERRY: I'm fascinated by that effort to try to revive something that is so much a part of past history. And I'm also amused by it, as a person who volunteered to fight for my country and takes pride in my service in Vietnam. I'm not going to take second place to anybody on the notion of what it takes to defend our country.

In my judgment, we need to change many things we do in the military to respond to a changed world. There are different kinds of conflicts we face today. I mean, Don Rumsfeld and the Defense Department are currently struggling with this. What kind of lift do you need to get troops to certain kinds of conflicts? Do we still want to maintain a two-theater war strategy at a time where most of the conflicts we face are of a different nature?

And I think the same thing is required of national missile defense. Mind you -- and I please ask you to really note this -- Democrats are not opposed to national missile defense. Democrats believe -- I believe very strongly -- that we should research it and develop it on a reasonable level at a reasonable rate, and we should engage in a process of bringing our allies to the table without breaching the ABM Treaty, without rushing in a unilateral way that is misunderstood by our friends and helps to create an arms race.

I have suggested that what we ought to do is be focusing more on the boost phase component of missile defense and work with our allies, because that doesn't require any breach of the ABM Treaty -- work with people to try to deal with this.

But the bottom line is this: The most significant threat the United States faces today is not from a rogue missile and not from what we are trying to do with respect to missile defense. It's from bioterrorism, it's from fundamentalism around the country, nationalism, various kinds of international crime. And I think we need to respond to those things. NOVAK: Senator, your colleague, Democratic Senator Zell Miller of Georgia, had a letter to the editor of The Washington Post taking issue with Terry McAuliffe, Democratic National Chairman.

He said, "Lately our chairman seems to be shrinking that 10" -- that is, 10 of the Democratic Party -- "to the size of one of those sno-cone cups turned upside down. Well, maybe a little bigger than that -- say, a dunce cap. Every time he speaks, it still sounds to me like fingernails across a blackboard. And he's making more and more moderates see red -- the color that dominated the 2000 election map."

As somebody who might be in the picture for 2004, Senator, don't you think Zell Miller has a point about Terry McAuliffe?

KERRY: Well, I think Zell Miller has a lot of good points, but whether it's a good point about Terry McAuliffe or not, we could debate. I don't think that's worth debating.

I like Zell Miller a lot, and I really respect his view. I listen to him. He is a person who has a pretty good sense of this country, and he's, I think, sharing good advice with our party about how we ought to think about some things.

HUNT: Senator Kerry...

KERRY: Let me just finish one thought.

I don't think the fight, however, is with Zell Miller or people who made a judgment based on information we had six months about the budget. The fight right now is with those people who are unwilling to acknowledge that things have changed; that we have a different level of revenue; we have a different economy, and we cannot live with the situation that was forecast six months ago when we know today that's not the situation we're living in.

HUNT: Senator Kerry, the other day, Donna Brazile, who was Al Gore's campaign manager -- a very liberal Democratic activist -- said, and we'll put it up, and I quote, "John Kerry is far more a liberal than Al Gore." Would you agree with that? And if you should run for president, would you be willing to wear that progressive-liberal mantle?

KERRY: I think the labels are kind of funny in American politics, and I think the -- I guess, since Donna Brazile was the campaign manager for Al Gore, there may be a little bit of positioning going on right now.

I run on my record and on the issues. You know, I was one of the first senators to sign up for and help pass the Gramm-Rudman-Hollings Deficit Reduction Act. I voted for welfare reform. I've been a strong advocate of free trade. I've been a strong advocate of a sensible national missile defense program. I'll stand up against anybody on each issue, and let's stay away from the labels. I think they're unimportant.

Moreover, that's so far down the road it's a silly kind of debate at this point in time. I'm running for reelection in Massachusetts. I've made no decisions about the future. And I think characterizations that appear in the year 2001 regarding 2004 are completely irrelevant.

NOVAK: We're going to have to take another break, and when we come back, we'll have "The Big Question" for John Kerry of Massachusetts.

(COMMERCIAL BREAK)

NOVAK: "The Big Question" for Senator John Kerry of Massachusetts:

Senator, you have said you will filibuster, if necessary, the proposed drilling in the Arctic National Wildlife Reserve in Alaska as proposed by the president. Are you prepared to alienate the Teamsters Union, the carpenters union and 22 construction unions who feel this is very important for jobs for their members?

KERRY: Bob, I have no intention of alienating. I'm going to persuade them that there are many more jobs to be created for them in better ways. There is a better energy policy which will put teamsters and carpenters to work.

I've enjoyed working with them and being supported by them on many occasions. And if you look across the country, there are many other unions who share my view, the SEIU, the communications workers, many others.

I'm going to prove to them that their interests, for their families and their children and their long-term future and particularly for their jobs, is to find much better jobs, higher- paying jobs that come from a different energy plan than the one that's being proposed by the president.

HUNT: Senator Kerry, we've alluded several times in this program to the possibility that you might run for president in 2004. Most Democrats think you're going to.

George Bush faced the same situation four years ago, and he told the voters of Texas during his reelection in 1998 that, hey, if you reelect me I might run for president two years later.

Are you going to be equally candid with the Bay State voters?

KERRY: Well, I have been equally candid. I've said very clearly that's a decision to be made down the road. It's a decision I would like to be in a position to be able to make a judgment about it.

I haven't made the decision yet, and people are getting ahead of themselves on that. I am running for reelection. But I will make a decision about it in the future, and the people of Massachusetts, I think, know that and accept that. And there's no effort to try to hide the notion that it is a possibility.

HUNT: John Kerry, thank you very much for being with us today. My partner, Robert Novak, and I will be back with a comment or two in just a moment.

(COMMERCIAL BREAK)

HUNT: Bob, you know, the Democrats think they have George Bush on the ropes, so they tiptoe around what they would do about the economy or the budget deficit. But John Kerry today also tiptoed away from any embrace of a capital gains tax cut, I thought.

NOVAK: Certainly did. But when you gave him several options -- you want to raise taxes, cut taxes, raise spending, cut spending -- the Democrats won't say what they're going to do. They say, "Well, we've got to sit down with the president." I don't know if that works politically, but they certainly won't be pinned down.

HUNT: You know, I don't know how big an albatross being a Massachusetts liberal is going to be when you run for president, but one thing about John Kerry, even when he seems to go wrong, he's interesting. This is a very, very smart man.

NOVAK: But he also rejected the "L" word. That indicates to me that he is running for 2004.

And he just about canonized Zell Miller of Georgia, the most conservative Democrat in the Senate. He doesn't want to be taken as somebody who is writing off the South. It'll be interesting to watch.

I'm Robert Novak.

HUNT: And I'm Al Hunt.

Coming up in one half hour on "RELIABLE SOURCES," covering the political debate on the economy. Are reporters able to sift through the spin?

And coming up at 7:00 p.m. on "CAPITAL GANG," Senator Byron Dorgan joins the gang to talk about budget demands on President Bush, and Mexican President Vicente Fox's visit.

NOVAK: That's all for now. Thanks for joining us.

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