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Inside Politics

Medicare Politics; The Dems Next Chapter; Social Security Reform

Aired February 11, 2005 - 15:29   ET

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

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


(BEGIN VIDEOTAPE)
ANNOUNCER: The Democrats strut their stuff. The DNC meetings more than a coronation of Howard Dean. It's a chance for party leaders to test themes and test the waters.

SEN. JOHN KERRY (D), MASSACHUSETTS: This great party of ours doesn't need a makeover.

SEN. JOHN EDWARDS (D), NORTH CAROLINA: We're going to compete everywhere. Everywhere. Everywhere.

ANNOUNCER: Another take on Social Security reform. Is this Republican rejecting the president's main proposal?

Is the state of Virginia for lovers of low-riding pants after all?

(END VIDEOTAPE)

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

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

We begin with a new warning from President Bush to members of Congress to keep their hands off the new Medicare prescription drug benefit. Both Democrats and Republicans have been voicing concerns about rising costs. We get more on Medicare politics now from our senior White House correspondent John King -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Judy, good afternoon.

Not once in his first term did President Bush use his veto pen. Some conservatives didn't like that. They thought the president should have been more aggressive against what they view as excessive federal spending.

Well, the president actually spoke that word today, "veto." He was over at the Department of Health and Human Services swearing in his close friend and his new secretary of Health and Human Services, Mike Leavitt. Both men, of course, former governors. Mr. Leavitt of Utah, President Bush the former governor of Texas. They know each other well from those days. And after the swearing-in ceremony, in remarks Mr. Bush talked a great deal about how the department Mr. Leavitt now heads, Secretary Leavitt now heads, has to implement that new Medicare prescription drug bill. Many in Congress have complained that it's costing a lot more, will cost a lot more than the administration initially estimated.

Some have talked about trying to cut back on the benefits a bit maybe to save some money. Others have talked about allowing the government to buy drugs in bulk, something that is forbidden in the law President Bush signed into law last year. Mr. Bush in his remarks saying -- essentially saying this message to Congress, don't touch that measure.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I signed Medicare reform proudly. And any attempt to limit the choices of our seniors and to take away their prescription drug coverage under Medicare will meet my veto.

(APPLAUSE)

(END VIDEO CLIP)

KING: So who was the president talking about? The White House won't say. They say this is a general veto threat to any efforts to scale back the prescription drug benefit or the major provisions of the new prescription drug law and Medicare overhaul.

Of course there have been discussions in Congress again. Senator Kennedy and Senator McCain talking about a bipartisan effort to give the government the power to lower the cost of drugs by bulk purchasing, others have talked about perhaps some other cost control measures.

But, Judy, the White House simply says it was a message to both Democrats and Republicans in a general way that the president believes the law should be implemented as is, leave it alone. We'll see how that plays out in the days ahead.

WOODRUFF: And John, it looks like Medicare prescription drugs is not only the area the president is having some difficulties with. Social Security, his own Republican speaker of the house, Dennis Hastert, making comments yesterday, saying essentially the American people have yet to be sold that there's a problem of the magnitude the president says there is.

KING: A remarkable statement from the man who has been perhaps the administration's closest ally in Congress. Certainly closest ally and most loyal supporters in the House of Representatives.

The speaker essentially reflecting the public opinion polls that the American people are not sold on this yet. But, Judy, that is one of the reasons you see the president traveling so aggressively. Eight states already. He will travel to New Hampshire early next week to promote his Social Security plan. Essentially the leadership in Congress telling him we can't cast the tough votes for this unless you rally public support for this.

So the president traveling the country for two reasons really. One, to try to change the polls and win support for his plan, especially those private accounts in Social Security. And to try to convince nervous Republicans that he will travel, will continue to travel to give them political cover if they will support his plan and cast those votes.

WOODRUFF: It's a diverse audience the president is trying to reach. All right. John King, thank you.

Well, even with some early ups and downs, a new poll out today suggests President Bush's approval rating is holding relatively steady with about half of Americans giving him good marks. The Gallup poll's 49 percent approval rating is in line with several other surveys out this past week.

Now we turn to the Democrats and their campaign to rebuild their party. DNC members are here in Washington, poised to elect Howard Dean as their new chairman tomorrow. But first, they are getting pep talks of sorts from some of the biggest names in the party.

(BEGIN VIDEOTAPE)

HOWARD DEAN, DNC CHAIR CANDIDATE: Election by election, we are going to take this country back for the people who built it. Thanks very much.

WOODRUFF (voice-over): And Howard Dean starts tomorrow, when he's elected chairman of the Democratic Party. But Dean takes over a party that needs to be more competitive at every level. And as former President Clinton warned last night, needs to stop devouring itself.

WILLIAM JEFFERSON CLINTON, FMR. PRESIDENT OF THE UNITED STATES: We've got to stop eating on each other and redirect our fire toward the people we disagree with.

WOODRUFF: That's topic number one for Democratic leaders from across the country who are meeting here in Washington. Among those speaking, two familiar faces from last year who may have designs on the White House next time around.

KERRY: This great party of ours doesn't need a makeover. This great party of ours doesn't need some massive shift. This party of ours came within inches of winning the presidency thanks to your efforts.

EDWARDS: And for those people, all those people who are saying, "Well, where are the Democrats going to compete? In what parts of the country are they going to compete? Are they going to compete in the blue states, are they going to compete in the red states?" We have an answer for those people. We're going to compete everywhere. Everywhere. Everywhere.

WOODRUFF: Democrats are also honoring the party's outgoing chairman.

TERRY MCAULIFFE, DNC CHAIRMAN: Money is no longer an issue. It is a new day for our party.

WOODRUFF: And that is true. Terry McAuliffe pulled the Democrats out of the red and even out-raised the Republican Party during the last campaign. He built a new headquarters for the Democrats and updated the database. But he came up short where it mattered the most.

Democrats lost seats in Congress in the last two elections and failed to recapture the White House last November. Which brings us back to Dean. A lot of Democrats didn't want him to run the party. But the fence-mending is already under way.

REP. NANCY PELOSI (D-CA), MINORITY LEADER: Tomorrow we will elect a great Democrat as the chairman of the Democratic National Committee, Howard Dean.

(APPLAUSE)

(END VIDEOTAPE)

WOODRUFF: House Minority Leader Nancy Pelosi, who was not for Howard Dean in the early part of that process.

Well, another high-profile Democrat taking part in the DNC winter meeting, New Mexico Governor Bill Richardson. He's chairman of the National Governors Association.

I spoke with him today about the party's future with Howard Dean taking the helm even though Dean was not Richardson's first choice either for the job. I asked him if Dean -- or how Dean had turned him around.

(BEGIN VIDEOTAPE)

GOV. BILL RICHARDSON (D), NEW MEXICO: Well, our first choice was former governor, Senator Bob Kerrey. Howard Dean has turned us around. We were concerned, especially western and southern governors, of the progressive image. But he's promised to reach out, he's promised to rebuild parties at the local level.

So we're positive. But there were some questions.

WOODRUFF: But you still have concerns?

RICHARDSON: There are still some concerns. Governor Dean has a progressive image. I believe that as a governor he was very moderate governor. So he has to deal with the perception that he's only a progressive. And so it's going to take some doing. But I believe the party also needs to recognize that Governor Dean has a substantial base: younger voters, voters that never have participated before. The party base is comfortable with him. What he needs to do is reach out to moderate voters in the heartland, in the West, in the South, voters that are being driven away into the Republican Party.

WOODRUFF: But can Governor Dean do all those things and still be himself?

RICHARDSON: Well, it's important that Governor Dean recognize that party leaders are governors. They're senators, they're congressmen. Main policy should come from the states and from the Congress.

Governor Dean should concentrate primarily on rebuilding the party. Yes, he has to be a public face. And he is articulate. But it's important that we rebuild the party organizationally.

That's his best course of action. But policy needs to be made in the states, by governors, by mayors, by congressmen, by senators, by policies in states that are working, not Washington based.

WOODRUFF: Do you think he gets that? He understands that?

RICHARDSON: I believe he does. I think he's traveled around the country and he's been saying the right things in the South and the West that he intends to rebuild state parties, that he is going to present a moderate image, that we're not just going to criticize the president, that we're going to come out with policies that are alternatives. He's saying the right things, but he has a perception issue he has to deal with.

WOODRUFF: Don't you think the Republicans are going to have a field day with this?

RICHARDSON: Well, the Republicans will always have a field day with this. But they're, I believe, wrong to assume and to underestimate Howard Dean.

I mean, here's a guy who went from nowhere to be a primary contender for the presidency. And with his enthusiasm, energy, with his troops -- and there are a lot of troops that he has -- he could conceivably revitalize the party.

But he has to listen to the West and the South. We cannot be a party that writes off southern states and western states.

WOODRUFF: One other subject, North Korea. You were the last U.S. official to meet with these North Korean leaders. What do you think has provoked this latest statement from them?

RICHARDSON: The Bush administration needs to use diplomacy with North Korea, not a lot of heated rhetoric. They're very sensitive, they're strange, they're difficult. We play right into their own hands. We need to talk to them directly, not say that we're only going to talk to them within the six-party talks of six other countries. Talk to them directly, negotiate.

WOODRUFF: But the administration has ruled that out today.

RICHARDSON: Well, I believe that the administration can have it both ways. They can have bilateral talks with the North Koreans within the six-party talks. What's wrong with that? Six parties, six countries sit together, but then go off in the sideline the U.S. and North Korea.

We want them to dismantle their nuclear weapons. We don't want a conflagration in Asia. We don't need that. And the way to do that is diplomacy.

They will deal only with us. What's wrong with just talking to them. There's nothing wrong with face-to-face diplomacy.

Secretary Rice has promised that. She has said that that's the policy. She's off to a good start with the Middle East and Europe. Why not North Korea?

(END VIDEOTAPE)

WOODRUFF: New Mexico Governor Bill Richardson.

Back to Howard Dean, how did he get where he is today? Still ahead, we'll consider the secret of his successful second act in politics. Or is it a third act?

Up next, is Tom DeLay the real target of a new move by House Democratic leaders?

And President Bush says he wants to hear everyone's ideas about Social Security reform. We'll ask GOP Congressman Clay Shaw about his plan and how it might play with the president.

(COMMERCIAL BREAK)

WOODRUFF: President Bush spent more time on the road this week making the case for his proposed Social Security reforms and his new budget. With me to talk about the president's proposals, Republican Congressman Clay Shaw of Florida. He joins us from Davie, Florida.

Congressman, good see you. You are a loyal Republican. Why not go along with the president's plan as is?

REP. CLAY SHAW (R), FLORIDA: Well, the president -- I might just give him all the accolades that I can possibly give him for bringing this up, because he could wait through his term and let the program -- let the next administration handle it. But he's taken -- taken it on as his project, and I compliment him for it.

You know, Judy, I've chaired this subcommittee for six years, the Social Security Committee, and I have known that the problem has been out there. The president has known the problem has been out there.

The president in the State of the Union address asked for as many ideas as he could possibly get. I think mine is the plan that probably is going to be -- would be the easiest to pass. I'm not going to say it's necessarily the best one, but I think it's the one that satisfies all of the complaints that the Democrats have been making. I've been listening to them for six years.

WOODRUFF: Why is your plan easier to pass? And let's just be clear. The difference is that you would have people contribute money into a personal investment account in addition to what they already pay in the payroll tax. Is that right?

CLAY: No, no, no, no.

WOODRUFF: OK.

CLAY: That's not right.

WOODRUFF: Well, then please clarify for me.

CLAY: I have the government -- the government actually borrows the money and puts it in the individual accounts. And over the years, over 75 years, every bit of the money is paid back, and we create actually a $4.6 trillion surplus over 75 years.

Judy, what we're looking at is, beginning in 2018, we're going to be on a -- on a line where we're going to come up with a $26 trillion cash shortfall. That's $26 trillion. That's unthinkable.

And we've got to do something to take this pay-as-you-go system and bring it into this century and build it up so that our young people, so our kids and our grandkids -- my generation is fine. But our grandkids and our kids are going to have a problem.

WOODRUFF: So how exactly is your plan different from the president's?

CLAY: Well, the president -- what the president does -- and we haven't gotten his complete plan as yet. But what the president does, he takes part of the payroll taxes and puts it into the individual accounts.

Now, what the Democrats are claiming, they claim that, oh, that means you're taking money out of Social Security. Well, I just say, well, let's not -- let's not fight that battle because what he's doing is taking a lot of the surplus in the Social Security trust fund and putting it into the individual accounts.

I say, well, that money is going to go into the deficit anyway, so let's take it out of the general fund and put it into the individual accounts. We'll start paying it all back in 2038. And before long, we'll have paid it back and we'll be creating a surplus.

And we do not -- we do not touch the benefits. We guarantee the benefits all the way down the line because the Social Security system remains there. Judy, the problem that we have -- and it really...

WOODRUFF: So let me just clarify something.

CLAY: OK.

WOODRUFF: So individuals would not pay any money into these accounts?

CLAY: No. There's no increase in taxes.

WOODRUFF: OK.

CLAY: We don't look to -- we don't take money out of the trust fund and we don't take money from the workers or the employer. We just borrow the money and we pay it all back with interest over the period of time that this -- that -- over the next 75 years, is the way all these plans are scored.

WOODRUFF: And in the long run you're saying this saves the government money? It saves all of us money?

CLAY: Oh, it saves a tremendous amount of money. We're looking for a huge cut in benefits or a huge tax increase on the working -- working Americans, unless we act and act now.

So these individual accounts is a good way to go. Also, we create inheritable wealth for people who die before they go into the system. It's a win-win.

WOODRUFF: What about Speaker -- quick last question. Speaker Dennis Hastert suggesting yesterday that the American people are still not sold on the idea that there needs to be a personal savings account add-on -- addition.

CLAY: Well, I hate to disagree with my speaker, because you get on thin ice here. But the polls show the American people, the huge majority, two-thirds, at least two-thirds to even more than that, recognize there's a pending crisis here.

So the president is certainly winning -- winning the game as far as educating the people to the crisis. And a slight majority do favor personal savings accounts. If there's another idea out there, the Congress should look at it.

WOODRUFF: All right.

CLAY: But this is the only idea out there that really saves Social Security for all times. We're going into a situation where we're only going to have two workers per retiree. We can't...

WOODRUFF: We hear you.

CLAY: OK, Judy.

WOODRUFF: Congressman Clay Shaw, I hope we can talk to you some more about this as the weeks go by. We appreciate it. Thank you very much.

CLAY: I'm delighted to be with you. Thank you.

WOODRUFF: Thank you.

Meantime, Senator Tom Harkin is a fixture in Iowa politics. But is he ready for a job change? Up next, Harkin's response to reports that he might want to leave for the Senate -- leave the Senate and make a run for governor.

(COMMERCIAL BREAK)

WOODRUFF: We kick off our Friday "Political Bytes" with a report about Iowa Senator Tom Harkin's political future. There are reports around the Hawkeye State that Harkin is considering a run for governor when Tom Vilsack steps aside next year. But the "Des Moines Register" reports that when Harkin was asked yesterday about a run for the state house, he said in part, "That is not even in my scope right now. I don't think so."

In Massachusetts, state Democrats and some researchers are unhappy with Governor Mitt Romney's statement that he favors banning a specific type of stem cell research. Romney said while he supports stem cell research using fertility clinic embryos, he opposes the creation of new embryos exclusively for new research. Romney's remarks are seen by some political analysts as an attempt to appeal to GOP conservatives since he is considered a potential presidential candidate in 2008.

On Capitol Hill, Democratic House leaders want two recently appointed Republicans removed from the Ethics Committee. Minority Leader Nancy Pelosi says that Congressman Lamar Smith and Tom Cole should not serve because they both donated money to Majority Leader Tom DeLay's legal defense fund.

DeLay has denied any wrongdoing in relation to campaign finance investigation under way in Texas. But he could tap the defense fund if he were to face legal action. A spokesman for House Speaker Dennis Hastert accused the Democrats of trying to "politicize" the Ethics Committee.

In Virginia, meanwhile, a state Senate committee has killed legislation that would have fined anyone who wears so-called low- riding pants that show their underwear. The sponsor of the bill said he proposed the measure because his constituents were tired of seeing young people walk around with their underwear exposed.

Well, his party's out of power at both ends of Pennsylvania Avenue, which means Howard Dean has a big to-do list. Coming up, some advice for the incoming Democratic party chairman from one of his predecessors.

Plus, President Bush gets ready to head to Europe. But will he be abe to live up to some great expectations? We'll get the "Inside Buzz" from our Bob Novak.

(COMMERCIAL BREAK)

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

Hi there, Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: Hi, Judy.

We have a pretty broad-based rally on Wall Street. We have some nice gains for the blue chip average, and that's putting the Dow industrials at their highest close this year. Tech stocks strengthening as well, helped by strong gains in the chip sector.

As the final trades are still being counted, we have the Dow industrials up 49 points at 10798. And the Nasdaq up about 1 percent higher.

Intel rose 3 percent, helping lead both the Dow and the Nasdaq. Investors are anticipating strong demand for computer chips in the coming months.

Apple Computer, the shares jumped nearly 4 percent after the company declared a two for one stock split. Strong sales of Apple iPod have helped the company's stock nearly quadruple over the past year.

Well, we could have another big telecom merger before the weekend is done. According to sources quoted in "The Wall Street Journal," Verizon is close to a deal to buy MCI for more than $6 billion over the weekend.

And that is similar to a bid made last week by Quest Communications. But analysts are placing their bet the MCI deal, teaming up with Verizon because it's considered a stronger, more stable partner. Now, this, of course, follows two other deals recently. SBC agreed to buy AT&T and Sprint is acquiring Nextel.

Walgreen's stands to lose close to 1 million pharmacy customers. The pharmacy chain says General Motors cut Walgreen from its list of approved prescription drug providers. A dispute began between the two companies over the automaker's benefit policy that some chronic disorder drugs can be filled through mail order. That's a strategy that can cut costs. G.M. dropped the pharmacy because it feared that Walgreen would sever ties first. Walgreen's says it wants to continue working with G.M. The pharmacy says it's disappointed with G.M's mail-order practice, saying it does not always offer cost saving for consumers.

Well, coming up on CNN, 6:00 p.m. Eastern on "LOU DOBBS TONIGHT," more than half a million illegal aliens who works on American farms may be granted legalization. California's farm bureau and 63 senators are supporting a bipartisan bill that they believe will make America's food supply safer.

(BEGIN VIDEO CLIP) SEN. LARRY CRAIG (R), IDAHO: It is estimated that anywhere from 72 to 75 percent of those who work in America agriculture today are undocumented foreign nationals. In other words, illegal. And yet they toil in the fields, they pick our food, they help prepare it through the processing plants to get it to the consumer's shelf.

(END VIDEO CLIP)

PILGRIM: Also tonight, a look at the security at our nation's bridges and tunnels in our special report, America's security risks. Plus the effects of President Bush's new budget plan on our communities. Joseph Este (ph) at the National Association of Chiefs of Police says proposed budget cuts could strain police forces. He'll join us tonight.

And then more than ten days after the Iraqi elections, we check in with U.S. foreign policy expert Ian Bremmer to discuss that country's beginnings as a democracy. All of that tonight at 6:00 p.m. Eastern.

But for now, back to Judy Woodruff in Washington -- Judy.

WOODRUFF: Thank you, Kitty, and we'll be watching at 6:00. INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Howard dean's next act. How did the soon-to-be DNC chairman move beyond his rise and fall to rise again?

HOWARD DEAN, DNC CHAIR CANDIDATE: I'm trying to be restrained in my new role here in Washington, though.

UNIDENTIFIED MALE: Contained in the faith of substance of things and the evidence of things unseen.

ANNOUNCER: More Democrats are preaching the political value of values, but are the party faithful convinced?

Remembering Watergate. A Florida grandmother still can't get enough or say enough on the scandal, 30 years later.

UNIDENTIFIED FEMALE: Watergate is the single biggest project of my entire life and I suppose I owe that all to Richard Nixon.

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

(END VIDEOTAPE)

WOODRUFF: Welcome back. In anticipation of his election as DNC chairman tomorrow, Howard Dean says he is not letting anyone congratulate him just yet. After all, he says, he remembers all those pats on the back he was getting just before he crashed and burned in the Iowa caucuses. Whether or not you think Dean's new career is something to celebrate, our Bill Schneider thinks it is something to marvel at -- Bill. WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, Howard Dean, act one, the hot new face of 2003. Act two, the laughing stock of 2004. Act three, the Democratic party takeover in 2005. That third act makes it the "Play of the Week."

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): One word captured the message of the Howard Dean campaign for president last year.

DEAN: Our campaign empowers ordinary people.

SCHNEIDER: Empowerment. Now, he's conquered the Democratic national committee and his message is -- you have the power. The turning point in Dean's campaign for party chairman came on January 31st when state Democratic chairs endorsed Dean. What impressed them was Dean's refusal to go on the defensive.

REP. NEIL ABERCROMBIE (D), HAWAII: Once Howard Dean lost the Iowa primary, there was no licking of wounds, there was no baying at the moon. There was let's move to another stage, then. We got the right idea here.

SCHNEIDER: What did Dean do?

ABERCROMBIE: He formed Democracy for America, which took what was the foundation, the Internet foundation and the enthusiasm, reaching out to the grassroots for his campaign, and made it a national campaign.

SCHNEIDER: Democracy for America brought resources to grassroots Democratic campaigns all over the country.

DEAN: If we can't elect people running for the city council and county commissioner and school board and state assembly -- if we can't elect those people, then we're never going to elect a president of the United States.

SCHNEIDER: Dean put together liberals, who have not been so totally shut out of power since the 1920s...

DEAN: You have the power to take back of our country so that the flag of the United States is no longer the sole property of John Ashcroft and Rush Limbaugh and Jerry Falwell. It belongs to every single one of us again.

SCHNEIDER: And local Democratic activists who feel disempowered by the DNC.

ABERCROMBIE: The Democratic Committee -- National Committee, might as well as been on the moon, as far as connection to real grassroots Democratic activity is concerned.

SCHNEIDER: A coalition of the disempowered has powered the Dean comeback and the political "Play of the Week."

(END VIDEOTAPE)

SCHNEIDER: The Dean takeover is something like the takeover of the Republican party by conservative activists back in the 1960s. Then conservatives felt disempowered after 30 years in the wilderness. In the short run, the goal were to take over looked like a disaster for the GOP. But in the long run, well, look at what happened.

WOODRUFF: But you're not making any forecasts here.

SCHNEIDER: Not a forecast, just an interesting comparison.

WOODRUFF: Just observing.

SCHNEIDER: Yes, sure.

WOODRUFF: Bill Schneider, "Play of the Week." Thank you.

Well, as the Democrats plot a new course for the future, some want to rely more on old fashion values and not be afraid to bring faith into the political dialogue.

Our congressional correspondent Joe Johns talked with one Democrat who's trying to lead the way.

(BEGIN VIDEOTAPE)

REP. JAMES CLYBURN (D), SOUTH CAROLINA: Got everything else in this speech...

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT (voice-over): He talks like a preacher.

CLYBURN: Contained in the faith and substance of things hoped for and the evidence of things unseen.

Thank you, Madame Leader, let me join the chair in...

JOHNS: But he's a politician and he's a Democrat. Jim Clyburn, congressman from South Carolina, is on a mission. This son of an African-American fundamentalist preacher says his party must connect with religious white voters using the language of faith.

CLYBURN: The majority of the people are with us on the issue like Social Security, but we're not going to win that issue unless we learn to talk the talk that will connect our positions to the voting public.

JOHNS (on camera): You're talking actually about arguing the Social Security case sort of in a biblical context?

CLYBURN: Absolutely. I do it all the time. I do it all the time. And you know something? It works.

JOHNS (voice-over): Post-election polls showed that regular churchgoers voted overwhelmingly for President Bush. So House Democratic Leader Nancy Pelosi tapped Clyburn to promote a values- based agenda. Clyburn says his openness about faith has helped his own political career. He fought off a charge that he was un-Christian by quoting the ten commandments.

CLYBURN: And the ninth of which says thou shalt not bear false witness against thy neighbor.

JOHNS: But some say the biggest problem for Democrats isn't the way they communicate, it's what they support.

RICK CIZIK, NAT'L ASSN. FOR EVANGELICALS: It won't work for Democrats to simply talk the talk. They have to walk the walk. And the policy positions of the Democratic party are so antithetical to what most evangelicals believe on many issues -- not all the issues, but on many of these issues. Evangelicals simply aren't going to go out and pull a lever for a Democrat.

CLYBURN: Well, thank you so much, I want...

JOHNS: Clyburn says a get out the vote meeting with ministers in Detroit last year made him realize Democrats were sending the wrong message.

CLYBURN: They were all really upset with Democrats because they thought that our agenda in some way was anti-Christian. That bothered me. Tremendously.

JOHNS: CLYBURN displays the ten commandments in his office and always has a bible close by. He says he knows it won't be easy, but that he'll continue to take his brand of faith-based initiative to the Democratic faithful.

Joe Johns, CNN, Capitol Hill.

(END VIDEOTAPE)

WOODRUFF: Thank you, Joe.

So, are the Democrats on the right track as they prepare to put Howard Dean at the helm of the party? Insiders are sharing their thoughts right and left. Up next, we'll get another view from a former DNC chairman, Bob Strauss (ph).

Plus, the inside buzz on Karl Rove's White House promotion and what he is saying about it. And later, for some, Watergate is political history. For others, it's still an obsession. We'll meet a grandmother who still lives and breathes the scandal.

(COMMERCIAL BREAK)

WOODRUFF: As Democratic Party activists meet here in Washington, there's lots of discussion about which strategies will best serve the party going forward. A little while ago I spoke with long-time party figure and former DNC Chair Bob Strauss, and I started by asking him about his support for somebody other than Howard Dean for party chairman.

(BEGIN VIDEOTAPE)

BOB STRAUSS, FORMER DNC CHAIR: Well, of course, I preferred Martin Frost. I had nothing against Howard Dean, but I had things for Martin Frost, including we both come from Texas. We've fought the same battles together over the years. And if it hadn't been for him, I would have been a pretty disloyal fellow.

WOODRUFF: But now you're on board with Howard Dean?

STRAUSS: Oh yes. Yes.

WOODRUFF: What turned you around?

STRAUSS: Well, to begin with, Frost lost and Dean won. And I would be for whoever won because I'm that kind of Democrat, always have been. Served me well. And I never apologized for being loyal to my convictions or to my friends. Howard Dean is -- was an attractive governor in a state that was, people forget, Judy -- people forget Vermont is probably more rural than most states in this Union. And one of the things the Democratic Party needs to do is appeal to rural voters. We've done a lousy job of it in that and a lot of other things.

WOODRUFF: You talk to people in the Democratic Party all the time. What are they saying about Howard Dean?

STRAUSS: Well, there are people -- any number of people who say, well, he's too far to the left for me, because I talked to a lot of Midwesterners and Southerners and...

WOODRUFF: But are you picking up skepticism from these Southern and Western?

STRAUSS: No. But I think it's more than skepticism. I would say he doesn't fit their image of what they would like to see as chairman of the Democratic Party. I tell these people what I truly believe, Judy, and that is the Democratic Party, to really restructure itself in the way it probably should, and we need to stumble into a first class presidential candidate and that's hard to do.

And I say stumble into it because the process doesn't cough up a logical candidate most of the time. It coughs up a fellow who has built an organization or has an ideological thing going for him at the moment.

WOODRUFF: What does the party need to do? I mean, you have got Republicans over there saying the party has lost its way. You even have Democrats saying the party lost its way.

STRAUSS: Exactly. No question about it. And (UNINTELLIGIBLE) but let me tell you this, you're too young and too pretty to remember like I remember when George McGovern lost so badly.

WOODRUFF: 1972.

STRAUSS: Exactly. And I ran for chairman right after that. WOODRUFF: I actually remember it.

STRAUSS: And I ran because I thought the party needed to be restructured and I thought I could do it. And I had been treasurer and I knew a lot of the state chairmen and they supported me. And so our candidate needs to get broad support early.

WOODRUFF: How different is this party from the party you led back in the '70s?

STRAUSS: The party I led back in the '70s was even more fractured than the Democratic Party is today. It's isn't that we're too fractured today, it's that we don't -- people don't -- we don't know what we stand for today. And we flop around. But when I ran, you'll recall, or you're too young to recall, but you couldn't get three Democrats to talk to each other in the same room.

WOODRUFF: What should the party stand for today?

STRAUSS: Well, the party has to stand for -- I hate to use this term, middle America. We need to center ourselves where the country is and that's not easy to do, to re-center yourself.

(END VIDEOTAPE)

WOODRUFF: Robert Strauss, 86 years young and still vitally interested in his Democratic Party. We thank him for talking to us.

An incumbent Democrat decides not to run for re-election. So why are Republicans disappointed? Up next, Bob Novak reports on why the GOP wanted Senator Mark Dayton to seek a second term.

(COMMERCIAL BREAK)

WOODRUFF: Bob Novak joins us now with some inside buzz.

So Bob, President Bush goes to Europe next week. What are you hearing about this trip?

BOB NOVAK, "CROSSFIRE" CO-HOST: They're putting the out of the White House to expect some triumphs in this trip, not just an ordinary trip that Secretary of State Rice paved the way for him. So I assume there would be some kind of deals with our friends and allies in Europe. But you know, when you raise expectations like that, it puts a little pressure on the president to really come up with something out of that trip.

WOODRUFF: Do they still have time to lower those expectations?

NOVAK: I don't think so.

WOODRUFF: We'll see. All right. The Republican Party, one would think when the Democratic incumbent in the state of Minnesota, Mark Dayton, announced he's not running again, they would be happy about it. NOVAK: They are crying their eyes out because they considered Mark Dayton a sure loser. The polls indicate that his approval rating is only 43 percent and they expected that with Congressman Mark Kennedy probably as the Republican candidate they could beat him. Now it's all up for grab. Perhaps the very popular Democratic Attorney General Mike Hatch will run, or if he doesn't run for governor will run for the Senate. The one person the Republicans don't want to run for the Senate is Rod Graham, you remember, the guy who Dayton beat who they don't think is a very strong candidate.

WOODRUFF: Now, Bob, we know that journalists are not a particularly beloved group in this city, but there's some folks on the Hill who are coming to the rescue of journalists.

NOVAK: Very much overlooked, Judy. Yesterday, Senator Richard Lugar of Indiana, who is a very popular and well-respected person put in a bill to protect journalists from grand jury investigations. As you know there's a couple journalists who are being threatened with jail. This would not affect them. This is not a retroactive bill, but for the future there would be protection. And as soon as Senator Lugar put in the bill, Senator Chris Dodd, Democrat of Connecticut, and Senator Lindsey Graham, Republican of South Carolina, joined him, and I think there is going to be a lot more joining him. So that might be something that has a chance to pass.

WOODRUFF: So, it's bipartisan?

NOVAK: Yes.

WOODRUFF: OK. Finally, Karl Rove, the political mastermind at the White House was promoted. What are you hearing about this?

NOVAK: People are wondering why he was named deputy chief of staff when everybody thought he is more powerful than a chief of staff just as a simple adviser. Well, the story I'm given is that other members of the staff got promotions. Condi Rice named secretary of state, Spellings named secretary of education. Gonzales named attorney general. So they had to give something for Karl who actually is the brain there. Somebody said, you know, do you think -- why should you get it? And he said, I deserve it. That's Karl for you. But he -- it's a little consolation prize that he's not in the cabinet.

WOODRUFF: Well, I guess it's not bad considering other jobs that were left open.

NOVAK: That's right.

WOODRUFF: OK. Bob Novak, have a good weekend.

NOVAK: Thanks very much.

WOODRUFF: Be sure to join Bob this weekend in the "NOVAK ZONE." He'll talk with freshman Congressman Bobby Jindal from Louisiana. That's tomorrow at 2:30 p.m. Eastern right here on CNN.

Up next, a surprising winner in a survey to guess the identity of Watergate's source Deep Throat. We'll have the results.

Plus, a Florida grandmother fascinated by Watergate with a collection of artifacts to prove it.

(COMMERCIAL BREAK)

WOODRUFF: Some reports that the mysterious Watergate source Deep Throat is ill have renewed speculation about Washington's best kept secret. "Editor and Publisher" magazine asked its readers to submit their best guess as to Deep Throat's identity and the winner may surprise you. Chief Justice William Rehnquist, who worked for Nixon attorney general John Mitchell and is now battling cancer, came out on top. Mark Felt, a former assistant director at the FBI was next followed by Fred Fielding and Henry Kissinger. Former presidents George Bush and Gerald Ford also received votes. We wonder about former attorney general L. Patrick Gray. We don't know where he came out.

Watergate has long been a point of fascination for many Americans, but there is one Florida woman we want to tell you about who has collected everything she could find on the subject. Literally.

(BEGIN VIDEOTAPE)

(voice-over): Malka Kornblatt. Your typical Florida grandmother. Well, sort of.

MALKA KORNBLATT: I ate, slept and lived Watergate.

WOODRUFF: Spring, 1972. Divorced, living in St. Louis, raising four sons, teaching at the university. Then, in June, five men broke into the Watergate hotel and Malka Kornblatt's life changed forever.

KORNBLATT: I said to myself, Richard Nixon is guilty and I began collecting everything I could three days after the break in.

WOODRUFF: She devoured the newspapers.

KORNBLATT: It was like living in a novel, a mystery story that every day one little piece of information unfolded after another.

WOODRUFF: But it was a lonely obsession.

KORNBLATT: I had nobody to talk to. I mean, I knew of nobody else in all of St. Louis that, you know, was following it the way I was.

WOODRUFF: Until July of 1974. The whole world was watching.

KORNBLATT: The House judiciary committee was going to begin the impeachment hearings and I just picked up and left and went to Washington, D.C. I went to the Howard Johnson across the street from the Watergate and I asked if I could have the burglar's room. I watched the events happening on the television there right from -- I had the feeling -- I am right here where it all happened. I did something I perhaps shouldn't have done. I kept the key to the burglar's room.

WOODRUFF: She headed for Capitol Hill and she scored her prize possession. What is it? Let's take a little trip. To the bank vault where Malka keeps her most valuable items, transcripts of the Watergate hearing signed, she says, by every single member of the congressional committee.

KORNBLATT: To track down 38 congressmen and seven senators. One person. I don't know how I did it.

WOODRUFF: Back at home Malka reflects on her Watergate heroes. Among them, the reporters who broke the story wide open.

KORNBLATT: Both Woodward and Bernstein had tremendous, tremendous courage to do that, you know. It's like you're looking up at god, and you're saying, god, you're wrong and I'm going to show you. These two young men.

WOODRUFF: Another hero, the secret source. A man who one recent report says may now be at death's door.

KORNBLATT: There were lies and lies and lies and lies and in the middle of all those lies there was somebody who cared about the truth. That was Deep Throat.

WOODRUFF: She calls him the last piece of the puzzle. But enough is enough.

KORNBLATT: I don't think they should wait until he's actually dead. I think that would be wrong. I think they should do it now. I think they should say who Deep Throat is right now so we can all say, thank you.

(END VIDEOTAPE)

WOODRUFF: Malka Kornblatt. And our thanks to producer Clare Brinberg (ph) for telling her story. And you hear that, Woodward and Berstein, we want to know who Deep Throat is now.

That's it for INSIDE POLITICS." I'm Judy Woodruff. "CROSSFIRE" is right now

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


Aired February 11, 2005 - 15:29   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
ANNOUNCER: The Democrats strut their stuff. The DNC meetings more than a coronation of Howard Dean. It's a chance for party leaders to test themes and test the waters.

SEN. JOHN KERRY (D), MASSACHUSETTS: This great party of ours doesn't need a makeover.

SEN. JOHN EDWARDS (D), NORTH CAROLINA: We're going to compete everywhere. Everywhere. Everywhere.

ANNOUNCER: Another take on Social Security reform. Is this Republican rejecting the president's main proposal?

Is the state of Virginia for lovers of low-riding pants after all?

(END VIDEOTAPE)

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

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

We begin with a new warning from President Bush to members of Congress to keep their hands off the new Medicare prescription drug benefit. Both Democrats and Republicans have been voicing concerns about rising costs. We get more on Medicare politics now from our senior White House correspondent John King -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Judy, good afternoon.

Not once in his first term did President Bush use his veto pen. Some conservatives didn't like that. They thought the president should have been more aggressive against what they view as excessive federal spending.

Well, the president actually spoke that word today, "veto." He was over at the Department of Health and Human Services swearing in his close friend and his new secretary of Health and Human Services, Mike Leavitt. Both men, of course, former governors. Mr. Leavitt of Utah, President Bush the former governor of Texas. They know each other well from those days. And after the swearing-in ceremony, in remarks Mr. Bush talked a great deal about how the department Mr. Leavitt now heads, Secretary Leavitt now heads, has to implement that new Medicare prescription drug bill. Many in Congress have complained that it's costing a lot more, will cost a lot more than the administration initially estimated.

Some have talked about trying to cut back on the benefits a bit maybe to save some money. Others have talked about allowing the government to buy drugs in bulk, something that is forbidden in the law President Bush signed into law last year. Mr. Bush in his remarks saying -- essentially saying this message to Congress, don't touch that measure.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I signed Medicare reform proudly. And any attempt to limit the choices of our seniors and to take away their prescription drug coverage under Medicare will meet my veto.

(APPLAUSE)

(END VIDEO CLIP)

KING: So who was the president talking about? The White House won't say. They say this is a general veto threat to any efforts to scale back the prescription drug benefit or the major provisions of the new prescription drug law and Medicare overhaul.

Of course there have been discussions in Congress again. Senator Kennedy and Senator McCain talking about a bipartisan effort to give the government the power to lower the cost of drugs by bulk purchasing, others have talked about perhaps some other cost control measures.

But, Judy, the White House simply says it was a message to both Democrats and Republicans in a general way that the president believes the law should be implemented as is, leave it alone. We'll see how that plays out in the days ahead.

WOODRUFF: And John, it looks like Medicare prescription drugs is not only the area the president is having some difficulties with. Social Security, his own Republican speaker of the house, Dennis Hastert, making comments yesterday, saying essentially the American people have yet to be sold that there's a problem of the magnitude the president says there is.

KING: A remarkable statement from the man who has been perhaps the administration's closest ally in Congress. Certainly closest ally and most loyal supporters in the House of Representatives.

The speaker essentially reflecting the public opinion polls that the American people are not sold on this yet. But, Judy, that is one of the reasons you see the president traveling so aggressively. Eight states already. He will travel to New Hampshire early next week to promote his Social Security plan. Essentially the leadership in Congress telling him we can't cast the tough votes for this unless you rally public support for this.

So the president traveling the country for two reasons really. One, to try to change the polls and win support for his plan, especially those private accounts in Social Security. And to try to convince nervous Republicans that he will travel, will continue to travel to give them political cover if they will support his plan and cast those votes.

WOODRUFF: It's a diverse audience the president is trying to reach. All right. John King, thank you.

Well, even with some early ups and downs, a new poll out today suggests President Bush's approval rating is holding relatively steady with about half of Americans giving him good marks. The Gallup poll's 49 percent approval rating is in line with several other surveys out this past week.

Now we turn to the Democrats and their campaign to rebuild their party. DNC members are here in Washington, poised to elect Howard Dean as their new chairman tomorrow. But first, they are getting pep talks of sorts from some of the biggest names in the party.

(BEGIN VIDEOTAPE)

HOWARD DEAN, DNC CHAIR CANDIDATE: Election by election, we are going to take this country back for the people who built it. Thanks very much.

WOODRUFF (voice-over): And Howard Dean starts tomorrow, when he's elected chairman of the Democratic Party. But Dean takes over a party that needs to be more competitive at every level. And as former President Clinton warned last night, needs to stop devouring itself.

WILLIAM JEFFERSON CLINTON, FMR. PRESIDENT OF THE UNITED STATES: We've got to stop eating on each other and redirect our fire toward the people we disagree with.

WOODRUFF: That's topic number one for Democratic leaders from across the country who are meeting here in Washington. Among those speaking, two familiar faces from last year who may have designs on the White House next time around.

KERRY: This great party of ours doesn't need a makeover. This great party of ours doesn't need some massive shift. This party of ours came within inches of winning the presidency thanks to your efforts.

EDWARDS: And for those people, all those people who are saying, "Well, where are the Democrats going to compete? In what parts of the country are they going to compete? Are they going to compete in the blue states, are they going to compete in the red states?" We have an answer for those people. We're going to compete everywhere. Everywhere. Everywhere.

WOODRUFF: Democrats are also honoring the party's outgoing chairman.

TERRY MCAULIFFE, DNC CHAIRMAN: Money is no longer an issue. It is a new day for our party.

WOODRUFF: And that is true. Terry McAuliffe pulled the Democrats out of the red and even out-raised the Republican Party during the last campaign. He built a new headquarters for the Democrats and updated the database. But he came up short where it mattered the most.

Democrats lost seats in Congress in the last two elections and failed to recapture the White House last November. Which brings us back to Dean. A lot of Democrats didn't want him to run the party. But the fence-mending is already under way.

REP. NANCY PELOSI (D-CA), MINORITY LEADER: Tomorrow we will elect a great Democrat as the chairman of the Democratic National Committee, Howard Dean.

(APPLAUSE)

(END VIDEOTAPE)

WOODRUFF: House Minority Leader Nancy Pelosi, who was not for Howard Dean in the early part of that process.

Well, another high-profile Democrat taking part in the DNC winter meeting, New Mexico Governor Bill Richardson. He's chairman of the National Governors Association.

I spoke with him today about the party's future with Howard Dean taking the helm even though Dean was not Richardson's first choice either for the job. I asked him if Dean -- or how Dean had turned him around.

(BEGIN VIDEOTAPE)

GOV. BILL RICHARDSON (D), NEW MEXICO: Well, our first choice was former governor, Senator Bob Kerrey. Howard Dean has turned us around. We were concerned, especially western and southern governors, of the progressive image. But he's promised to reach out, he's promised to rebuild parties at the local level.

So we're positive. But there were some questions.

WOODRUFF: But you still have concerns?

RICHARDSON: There are still some concerns. Governor Dean has a progressive image. I believe that as a governor he was very moderate governor. So he has to deal with the perception that he's only a progressive. And so it's going to take some doing. But I believe the party also needs to recognize that Governor Dean has a substantial base: younger voters, voters that never have participated before. The party base is comfortable with him. What he needs to do is reach out to moderate voters in the heartland, in the West, in the South, voters that are being driven away into the Republican Party.

WOODRUFF: But can Governor Dean do all those things and still be himself?

RICHARDSON: Well, it's important that Governor Dean recognize that party leaders are governors. They're senators, they're congressmen. Main policy should come from the states and from the Congress.

Governor Dean should concentrate primarily on rebuilding the party. Yes, he has to be a public face. And he is articulate. But it's important that we rebuild the party organizationally.

That's his best course of action. But policy needs to be made in the states, by governors, by mayors, by congressmen, by senators, by policies in states that are working, not Washington based.

WOODRUFF: Do you think he gets that? He understands that?

RICHARDSON: I believe he does. I think he's traveled around the country and he's been saying the right things in the South and the West that he intends to rebuild state parties, that he is going to present a moderate image, that we're not just going to criticize the president, that we're going to come out with policies that are alternatives. He's saying the right things, but he has a perception issue he has to deal with.

WOODRUFF: Don't you think the Republicans are going to have a field day with this?

RICHARDSON: Well, the Republicans will always have a field day with this. But they're, I believe, wrong to assume and to underestimate Howard Dean.

I mean, here's a guy who went from nowhere to be a primary contender for the presidency. And with his enthusiasm, energy, with his troops -- and there are a lot of troops that he has -- he could conceivably revitalize the party.

But he has to listen to the West and the South. We cannot be a party that writes off southern states and western states.

WOODRUFF: One other subject, North Korea. You were the last U.S. official to meet with these North Korean leaders. What do you think has provoked this latest statement from them?

RICHARDSON: The Bush administration needs to use diplomacy with North Korea, not a lot of heated rhetoric. They're very sensitive, they're strange, they're difficult. We play right into their own hands. We need to talk to them directly, not say that we're only going to talk to them within the six-party talks of six other countries. Talk to them directly, negotiate.

WOODRUFF: But the administration has ruled that out today.

RICHARDSON: Well, I believe that the administration can have it both ways. They can have bilateral talks with the North Koreans within the six-party talks. What's wrong with that? Six parties, six countries sit together, but then go off in the sideline the U.S. and North Korea.

We want them to dismantle their nuclear weapons. We don't want a conflagration in Asia. We don't need that. And the way to do that is diplomacy.

They will deal only with us. What's wrong with just talking to them. There's nothing wrong with face-to-face diplomacy.

Secretary Rice has promised that. She has said that that's the policy. She's off to a good start with the Middle East and Europe. Why not North Korea?

(END VIDEOTAPE)

WOODRUFF: New Mexico Governor Bill Richardson.

Back to Howard Dean, how did he get where he is today? Still ahead, we'll consider the secret of his successful second act in politics. Or is it a third act?

Up next, is Tom DeLay the real target of a new move by House Democratic leaders?

And President Bush says he wants to hear everyone's ideas about Social Security reform. We'll ask GOP Congressman Clay Shaw about his plan and how it might play with the president.

(COMMERCIAL BREAK)

WOODRUFF: President Bush spent more time on the road this week making the case for his proposed Social Security reforms and his new budget. With me to talk about the president's proposals, Republican Congressman Clay Shaw of Florida. He joins us from Davie, Florida.

Congressman, good see you. You are a loyal Republican. Why not go along with the president's plan as is?

REP. CLAY SHAW (R), FLORIDA: Well, the president -- I might just give him all the accolades that I can possibly give him for bringing this up, because he could wait through his term and let the program -- let the next administration handle it. But he's taken -- taken it on as his project, and I compliment him for it.

You know, Judy, I've chaired this subcommittee for six years, the Social Security Committee, and I have known that the problem has been out there. The president has known the problem has been out there.

The president in the State of the Union address asked for as many ideas as he could possibly get. I think mine is the plan that probably is going to be -- would be the easiest to pass. I'm not going to say it's necessarily the best one, but I think it's the one that satisfies all of the complaints that the Democrats have been making. I've been listening to them for six years.

WOODRUFF: Why is your plan easier to pass? And let's just be clear. The difference is that you would have people contribute money into a personal investment account in addition to what they already pay in the payroll tax. Is that right?

CLAY: No, no, no, no.

WOODRUFF: OK.

CLAY: That's not right.

WOODRUFF: Well, then please clarify for me.

CLAY: I have the government -- the government actually borrows the money and puts it in the individual accounts. And over the years, over 75 years, every bit of the money is paid back, and we create actually a $4.6 trillion surplus over 75 years.

Judy, what we're looking at is, beginning in 2018, we're going to be on a -- on a line where we're going to come up with a $26 trillion cash shortfall. That's $26 trillion. That's unthinkable.

And we've got to do something to take this pay-as-you-go system and bring it into this century and build it up so that our young people, so our kids and our grandkids -- my generation is fine. But our grandkids and our kids are going to have a problem.

WOODRUFF: So how exactly is your plan different from the president's?

CLAY: Well, the president -- what the president does -- and we haven't gotten his complete plan as yet. But what the president does, he takes part of the payroll taxes and puts it into the individual accounts.

Now, what the Democrats are claiming, they claim that, oh, that means you're taking money out of Social Security. Well, I just say, well, let's not -- let's not fight that battle because what he's doing is taking a lot of the surplus in the Social Security trust fund and putting it into the individual accounts.

I say, well, that money is going to go into the deficit anyway, so let's take it out of the general fund and put it into the individual accounts. We'll start paying it all back in 2038. And before long, we'll have paid it back and we'll be creating a surplus.

And we do not -- we do not touch the benefits. We guarantee the benefits all the way down the line because the Social Security system remains there. Judy, the problem that we have -- and it really...

WOODRUFF: So let me just clarify something.

CLAY: OK.

WOODRUFF: So individuals would not pay any money into these accounts?

CLAY: No. There's no increase in taxes.

WOODRUFF: OK.

CLAY: We don't look to -- we don't take money out of the trust fund and we don't take money from the workers or the employer. We just borrow the money and we pay it all back with interest over the period of time that this -- that -- over the next 75 years, is the way all these plans are scored.

WOODRUFF: And in the long run you're saying this saves the government money? It saves all of us money?

CLAY: Oh, it saves a tremendous amount of money. We're looking for a huge cut in benefits or a huge tax increase on the working -- working Americans, unless we act and act now.

So these individual accounts is a good way to go. Also, we create inheritable wealth for people who die before they go into the system. It's a win-win.

WOODRUFF: What about Speaker -- quick last question. Speaker Dennis Hastert suggesting yesterday that the American people are still not sold on the idea that there needs to be a personal savings account add-on -- addition.

CLAY: Well, I hate to disagree with my speaker, because you get on thin ice here. But the polls show the American people, the huge majority, two-thirds, at least two-thirds to even more than that, recognize there's a pending crisis here.

So the president is certainly winning -- winning the game as far as educating the people to the crisis. And a slight majority do favor personal savings accounts. If there's another idea out there, the Congress should look at it.

WOODRUFF: All right.

CLAY: But this is the only idea out there that really saves Social Security for all times. We're going into a situation where we're only going to have two workers per retiree. We can't...

WOODRUFF: We hear you.

CLAY: OK, Judy.

WOODRUFF: Congressman Clay Shaw, I hope we can talk to you some more about this as the weeks go by. We appreciate it. Thank you very much.

CLAY: I'm delighted to be with you. Thank you.

WOODRUFF: Thank you.

Meantime, Senator Tom Harkin is a fixture in Iowa politics. But is he ready for a job change? Up next, Harkin's response to reports that he might want to leave for the Senate -- leave the Senate and make a run for governor.

(COMMERCIAL BREAK)

WOODRUFF: We kick off our Friday "Political Bytes" with a report about Iowa Senator Tom Harkin's political future. There are reports around the Hawkeye State that Harkin is considering a run for governor when Tom Vilsack steps aside next year. But the "Des Moines Register" reports that when Harkin was asked yesterday about a run for the state house, he said in part, "That is not even in my scope right now. I don't think so."

In Massachusetts, state Democrats and some researchers are unhappy with Governor Mitt Romney's statement that he favors banning a specific type of stem cell research. Romney said while he supports stem cell research using fertility clinic embryos, he opposes the creation of new embryos exclusively for new research. Romney's remarks are seen by some political analysts as an attempt to appeal to GOP conservatives since he is considered a potential presidential candidate in 2008.

On Capitol Hill, Democratic House leaders want two recently appointed Republicans removed from the Ethics Committee. Minority Leader Nancy Pelosi says that Congressman Lamar Smith and Tom Cole should not serve because they both donated money to Majority Leader Tom DeLay's legal defense fund.

DeLay has denied any wrongdoing in relation to campaign finance investigation under way in Texas. But he could tap the defense fund if he were to face legal action. A spokesman for House Speaker Dennis Hastert accused the Democrats of trying to "politicize" the Ethics Committee.

In Virginia, meanwhile, a state Senate committee has killed legislation that would have fined anyone who wears so-called low- riding pants that show their underwear. The sponsor of the bill said he proposed the measure because his constituents were tired of seeing young people walk around with their underwear exposed.

Well, his party's out of power at both ends of Pennsylvania Avenue, which means Howard Dean has a big to-do list. Coming up, some advice for the incoming Democratic party chairman from one of his predecessors.

Plus, President Bush gets ready to head to Europe. But will he be abe to live up to some great expectations? We'll get the "Inside Buzz" from our Bob Novak.

(COMMERCIAL BREAK)

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

Hi there, Kitty.

KITTY PILGRIM, CNN CORRESPONDENT: Hi, Judy.

We have a pretty broad-based rally on Wall Street. We have some nice gains for the blue chip average, and that's putting the Dow industrials at their highest close this year. Tech stocks strengthening as well, helped by strong gains in the chip sector.

As the final trades are still being counted, we have the Dow industrials up 49 points at 10798. And the Nasdaq up about 1 percent higher.

Intel rose 3 percent, helping lead both the Dow and the Nasdaq. Investors are anticipating strong demand for computer chips in the coming months.

Apple Computer, the shares jumped nearly 4 percent after the company declared a two for one stock split. Strong sales of Apple iPod have helped the company's stock nearly quadruple over the past year.

Well, we could have another big telecom merger before the weekend is done. According to sources quoted in "The Wall Street Journal," Verizon is close to a deal to buy MCI for more than $6 billion over the weekend.

And that is similar to a bid made last week by Quest Communications. But analysts are placing their bet the MCI deal, teaming up with Verizon because it's considered a stronger, more stable partner. Now, this, of course, follows two other deals recently. SBC agreed to buy AT&T and Sprint is acquiring Nextel.

Walgreen's stands to lose close to 1 million pharmacy customers. The pharmacy chain says General Motors cut Walgreen from its list of approved prescription drug providers. A dispute began between the two companies over the automaker's benefit policy that some chronic disorder drugs can be filled through mail order. That's a strategy that can cut costs. G.M. dropped the pharmacy because it feared that Walgreen would sever ties first. Walgreen's says it wants to continue working with G.M. The pharmacy says it's disappointed with G.M's mail-order practice, saying it does not always offer cost saving for consumers.

Well, coming up on CNN, 6:00 p.m. Eastern on "LOU DOBBS TONIGHT," more than half a million illegal aliens who works on American farms may be granted legalization. California's farm bureau and 63 senators are supporting a bipartisan bill that they believe will make America's food supply safer.

(BEGIN VIDEO CLIP) SEN. LARRY CRAIG (R), IDAHO: It is estimated that anywhere from 72 to 75 percent of those who work in America agriculture today are undocumented foreign nationals. In other words, illegal. And yet they toil in the fields, they pick our food, they help prepare it through the processing plants to get it to the consumer's shelf.

(END VIDEO CLIP)

PILGRIM: Also tonight, a look at the security at our nation's bridges and tunnels in our special report, America's security risks. Plus the effects of President Bush's new budget plan on our communities. Joseph Este (ph) at the National Association of Chiefs of Police says proposed budget cuts could strain police forces. He'll join us tonight.

And then more than ten days after the Iraqi elections, we check in with U.S. foreign policy expert Ian Bremmer to discuss that country's beginnings as a democracy. All of that tonight at 6:00 p.m. Eastern.

But for now, back to Judy Woodruff in Washington -- Judy.

WOODRUFF: Thank you, Kitty, and we'll be watching at 6:00. INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Howard dean's next act. How did the soon-to-be DNC chairman move beyond his rise and fall to rise again?

HOWARD DEAN, DNC CHAIR CANDIDATE: I'm trying to be restrained in my new role here in Washington, though.

UNIDENTIFIED MALE: Contained in the faith of substance of things and the evidence of things unseen.

ANNOUNCER: More Democrats are preaching the political value of values, but are the party faithful convinced?

Remembering Watergate. A Florida grandmother still can't get enough or say enough on the scandal, 30 years later.

UNIDENTIFIED FEMALE: Watergate is the single biggest project of my entire life and I suppose I owe that all to Richard Nixon.

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

(END VIDEOTAPE)

WOODRUFF: Welcome back. In anticipation of his election as DNC chairman tomorrow, Howard Dean says he is not letting anyone congratulate him just yet. After all, he says, he remembers all those pats on the back he was getting just before he crashed and burned in the Iowa caucuses. Whether or not you think Dean's new career is something to celebrate, our Bill Schneider thinks it is something to marvel at -- Bill. WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, Howard Dean, act one, the hot new face of 2003. Act two, the laughing stock of 2004. Act three, the Democratic party takeover in 2005. That third act makes it the "Play of the Week."

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): One word captured the message of the Howard Dean campaign for president last year.

DEAN: Our campaign empowers ordinary people.

SCHNEIDER: Empowerment. Now, he's conquered the Democratic national committee and his message is -- you have the power. The turning point in Dean's campaign for party chairman came on January 31st when state Democratic chairs endorsed Dean. What impressed them was Dean's refusal to go on the defensive.

REP. NEIL ABERCROMBIE (D), HAWAII: Once Howard Dean lost the Iowa primary, there was no licking of wounds, there was no baying at the moon. There was let's move to another stage, then. We got the right idea here.

SCHNEIDER: What did Dean do?

ABERCROMBIE: He formed Democracy for America, which took what was the foundation, the Internet foundation and the enthusiasm, reaching out to the grassroots for his campaign, and made it a national campaign.

SCHNEIDER: Democracy for America brought resources to grassroots Democratic campaigns all over the country.

DEAN: If we can't elect people running for the city council and county commissioner and school board and state assembly -- if we can't elect those people, then we're never going to elect a president of the United States.

SCHNEIDER: Dean put together liberals, who have not been so totally shut out of power since the 1920s...

DEAN: You have the power to take back of our country so that the flag of the United States is no longer the sole property of John Ashcroft and Rush Limbaugh and Jerry Falwell. It belongs to every single one of us again.

SCHNEIDER: And local Democratic activists who feel disempowered by the DNC.

ABERCROMBIE: The Democratic Committee -- National Committee, might as well as been on the moon, as far as connection to real grassroots Democratic activity is concerned.

SCHNEIDER: A coalition of the disempowered has powered the Dean comeback and the political "Play of the Week."

(END VIDEOTAPE)

SCHNEIDER: The Dean takeover is something like the takeover of the Republican party by conservative activists back in the 1960s. Then conservatives felt disempowered after 30 years in the wilderness. In the short run, the goal were to take over looked like a disaster for the GOP. But in the long run, well, look at what happened.

WOODRUFF: But you're not making any forecasts here.

SCHNEIDER: Not a forecast, just an interesting comparison.

WOODRUFF: Just observing.

SCHNEIDER: Yes, sure.

WOODRUFF: Bill Schneider, "Play of the Week." Thank you.

Well, as the Democrats plot a new course for the future, some want to rely more on old fashion values and not be afraid to bring faith into the political dialogue.

Our congressional correspondent Joe Johns talked with one Democrat who's trying to lead the way.

(BEGIN VIDEOTAPE)

REP. JAMES CLYBURN (D), SOUTH CAROLINA: Got everything else in this speech...

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT (voice-over): He talks like a preacher.

CLYBURN: Contained in the faith and substance of things hoped for and the evidence of things unseen.

Thank you, Madame Leader, let me join the chair in...

JOHNS: But he's a politician and he's a Democrat. Jim Clyburn, congressman from South Carolina, is on a mission. This son of an African-American fundamentalist preacher says his party must connect with religious white voters using the language of faith.

CLYBURN: The majority of the people are with us on the issue like Social Security, but we're not going to win that issue unless we learn to talk the talk that will connect our positions to the voting public.

JOHNS (on camera): You're talking actually about arguing the Social Security case sort of in a biblical context?

CLYBURN: Absolutely. I do it all the time. I do it all the time. And you know something? It works.

JOHNS (voice-over): Post-election polls showed that regular churchgoers voted overwhelmingly for President Bush. So House Democratic Leader Nancy Pelosi tapped Clyburn to promote a values- based agenda. Clyburn says his openness about faith has helped his own political career. He fought off a charge that he was un-Christian by quoting the ten commandments.

CLYBURN: And the ninth of which says thou shalt not bear false witness against thy neighbor.

JOHNS: But some say the biggest problem for Democrats isn't the way they communicate, it's what they support.

RICK CIZIK, NAT'L ASSN. FOR EVANGELICALS: It won't work for Democrats to simply talk the talk. They have to walk the walk. And the policy positions of the Democratic party are so antithetical to what most evangelicals believe on many issues -- not all the issues, but on many of these issues. Evangelicals simply aren't going to go out and pull a lever for a Democrat.

CLYBURN: Well, thank you so much, I want...

JOHNS: Clyburn says a get out the vote meeting with ministers in Detroit last year made him realize Democrats were sending the wrong message.

CLYBURN: They were all really upset with Democrats because they thought that our agenda in some way was anti-Christian. That bothered me. Tremendously.

JOHNS: CLYBURN displays the ten commandments in his office and always has a bible close by. He says he knows it won't be easy, but that he'll continue to take his brand of faith-based initiative to the Democratic faithful.

Joe Johns, CNN, Capitol Hill.

(END VIDEOTAPE)

WOODRUFF: Thank you, Joe.

So, are the Democrats on the right track as they prepare to put Howard Dean at the helm of the party? Insiders are sharing their thoughts right and left. Up next, we'll get another view from a former DNC chairman, Bob Strauss (ph).

Plus, the inside buzz on Karl Rove's White House promotion and what he is saying about it. And later, for some, Watergate is political history. For others, it's still an obsession. We'll meet a grandmother who still lives and breathes the scandal.

(COMMERCIAL BREAK)

WOODRUFF: As Democratic Party activists meet here in Washington, there's lots of discussion about which strategies will best serve the party going forward. A little while ago I spoke with long-time party figure and former DNC Chair Bob Strauss, and I started by asking him about his support for somebody other than Howard Dean for party chairman.

(BEGIN VIDEOTAPE)

BOB STRAUSS, FORMER DNC CHAIR: Well, of course, I preferred Martin Frost. I had nothing against Howard Dean, but I had things for Martin Frost, including we both come from Texas. We've fought the same battles together over the years. And if it hadn't been for him, I would have been a pretty disloyal fellow.

WOODRUFF: But now you're on board with Howard Dean?

STRAUSS: Oh yes. Yes.

WOODRUFF: What turned you around?

STRAUSS: Well, to begin with, Frost lost and Dean won. And I would be for whoever won because I'm that kind of Democrat, always have been. Served me well. And I never apologized for being loyal to my convictions or to my friends. Howard Dean is -- was an attractive governor in a state that was, people forget, Judy -- people forget Vermont is probably more rural than most states in this Union. And one of the things the Democratic Party needs to do is appeal to rural voters. We've done a lousy job of it in that and a lot of other things.

WOODRUFF: You talk to people in the Democratic Party all the time. What are they saying about Howard Dean?

STRAUSS: Well, there are people -- any number of people who say, well, he's too far to the left for me, because I talked to a lot of Midwesterners and Southerners and...

WOODRUFF: But are you picking up skepticism from these Southern and Western?

STRAUSS: No. But I think it's more than skepticism. I would say he doesn't fit their image of what they would like to see as chairman of the Democratic Party. I tell these people what I truly believe, Judy, and that is the Democratic Party, to really restructure itself in the way it probably should, and we need to stumble into a first class presidential candidate and that's hard to do.

And I say stumble into it because the process doesn't cough up a logical candidate most of the time. It coughs up a fellow who has built an organization or has an ideological thing going for him at the moment.

WOODRUFF: What does the party need to do? I mean, you have got Republicans over there saying the party has lost its way. You even have Democrats saying the party lost its way.

STRAUSS: Exactly. No question about it. And (UNINTELLIGIBLE) but let me tell you this, you're too young and too pretty to remember like I remember when George McGovern lost so badly.

WOODRUFF: 1972.

STRAUSS: Exactly. And I ran for chairman right after that. WOODRUFF: I actually remember it.

STRAUSS: And I ran because I thought the party needed to be restructured and I thought I could do it. And I had been treasurer and I knew a lot of the state chairmen and they supported me. And so our candidate needs to get broad support early.

WOODRUFF: How different is this party from the party you led back in the '70s?

STRAUSS: The party I led back in the '70s was even more fractured than the Democratic Party is today. It's isn't that we're too fractured today, it's that we don't -- people don't -- we don't know what we stand for today. And we flop around. But when I ran, you'll recall, or you're too young to recall, but you couldn't get three Democrats to talk to each other in the same room.

WOODRUFF: What should the party stand for today?

STRAUSS: Well, the party has to stand for -- I hate to use this term, middle America. We need to center ourselves where the country is and that's not easy to do, to re-center yourself.

(END VIDEOTAPE)

WOODRUFF: Robert Strauss, 86 years young and still vitally interested in his Democratic Party. We thank him for talking to us.

An incumbent Democrat decides not to run for re-election. So why are Republicans disappointed? Up next, Bob Novak reports on why the GOP wanted Senator Mark Dayton to seek a second term.

(COMMERCIAL BREAK)

WOODRUFF: Bob Novak joins us now with some inside buzz.

So Bob, President Bush goes to Europe next week. What are you hearing about this trip?

BOB NOVAK, "CROSSFIRE" CO-HOST: They're putting the out of the White House to expect some triumphs in this trip, not just an ordinary trip that Secretary of State Rice paved the way for him. So I assume there would be some kind of deals with our friends and allies in Europe. But you know, when you raise expectations like that, it puts a little pressure on the president to really come up with something out of that trip.

WOODRUFF: Do they still have time to lower those expectations?

NOVAK: I don't think so.

WOODRUFF: We'll see. All right. The Republican Party, one would think when the Democratic incumbent in the state of Minnesota, Mark Dayton, announced he's not running again, they would be happy about it. NOVAK: They are crying their eyes out because they considered Mark Dayton a sure loser. The polls indicate that his approval rating is only 43 percent and they expected that with Congressman Mark Kennedy probably as the Republican candidate they could beat him. Now it's all up for grab. Perhaps the very popular Democratic Attorney General Mike Hatch will run, or if he doesn't run for governor will run for the Senate. The one person the Republicans don't want to run for the Senate is Rod Graham, you remember, the guy who Dayton beat who they don't think is a very strong candidate.

WOODRUFF: Now, Bob, we know that journalists are not a particularly beloved group in this city, but there's some folks on the Hill who are coming to the rescue of journalists.

NOVAK: Very much overlooked, Judy. Yesterday, Senator Richard Lugar of Indiana, who is a very popular and well-respected person put in a bill to protect journalists from grand jury investigations. As you know there's a couple journalists who are being threatened with jail. This would not affect them. This is not a retroactive bill, but for the future there would be protection. And as soon as Senator Lugar put in the bill, Senator Chris Dodd, Democrat of Connecticut, and Senator Lindsey Graham, Republican of South Carolina, joined him, and I think there is going to be a lot more joining him. So that might be something that has a chance to pass.

WOODRUFF: So, it's bipartisan?

NOVAK: Yes.

WOODRUFF: OK. Finally, Karl Rove, the political mastermind at the White House was promoted. What are you hearing about this?

NOVAK: People are wondering why he was named deputy chief of staff when everybody thought he is more powerful than a chief of staff just as a simple adviser. Well, the story I'm given is that other members of the staff got promotions. Condi Rice named secretary of state, Spellings named secretary of education. Gonzales named attorney general. So they had to give something for Karl who actually is the brain there. Somebody said, you know, do you think -- why should you get it? And he said, I deserve it. That's Karl for you. But he -- it's a little consolation prize that he's not in the cabinet.

WOODRUFF: Well, I guess it's not bad considering other jobs that were left open.

NOVAK: That's right.

WOODRUFF: OK. Bob Novak, have a good weekend.

NOVAK: Thanks very much.

WOODRUFF: Be sure to join Bob this weekend in the "NOVAK ZONE." He'll talk with freshman Congressman Bobby Jindal from Louisiana. That's tomorrow at 2:30 p.m. Eastern right here on CNN.

Up next, a surprising winner in a survey to guess the identity of Watergate's source Deep Throat. We'll have the results.

Plus, a Florida grandmother fascinated by Watergate with a collection of artifacts to prove it.

(COMMERCIAL BREAK)

WOODRUFF: Some reports that the mysterious Watergate source Deep Throat is ill have renewed speculation about Washington's best kept secret. "Editor and Publisher" magazine asked its readers to submit their best guess as to Deep Throat's identity and the winner may surprise you. Chief Justice William Rehnquist, who worked for Nixon attorney general John Mitchell and is now battling cancer, came out on top. Mark Felt, a former assistant director at the FBI was next followed by Fred Fielding and Henry Kissinger. Former presidents George Bush and Gerald Ford also received votes. We wonder about former attorney general L. Patrick Gray. We don't know where he came out.

Watergate has long been a point of fascination for many Americans, but there is one Florida woman we want to tell you about who has collected everything she could find on the subject. Literally.

(BEGIN VIDEOTAPE)

(voice-over): Malka Kornblatt. Your typical Florida grandmother. Well, sort of.

MALKA KORNBLATT: I ate, slept and lived Watergate.

WOODRUFF: Spring, 1972. Divorced, living in St. Louis, raising four sons, teaching at the university. Then, in June, five men broke into the Watergate hotel and Malka Kornblatt's life changed forever.

KORNBLATT: I said to myself, Richard Nixon is guilty and I began collecting everything I could three days after the break in.

WOODRUFF: She devoured the newspapers.

KORNBLATT: It was like living in a novel, a mystery story that every day one little piece of information unfolded after another.

WOODRUFF: But it was a lonely obsession.

KORNBLATT: I had nobody to talk to. I mean, I knew of nobody else in all of St. Louis that, you know, was following it the way I was.

WOODRUFF: Until July of 1974. The whole world was watching.

KORNBLATT: The House judiciary committee was going to begin the impeachment hearings and I just picked up and left and went to Washington, D.C. I went to the Howard Johnson across the street from the Watergate and I asked if I could have the burglar's room. I watched the events happening on the television there right from -- I had the feeling -- I am right here where it all happened. I did something I perhaps shouldn't have done. I kept the key to the burglar's room.

WOODRUFF: She headed for Capitol Hill and she scored her prize possession. What is it? Let's take a little trip. To the bank vault where Malka keeps her most valuable items, transcripts of the Watergate hearing signed, she says, by every single member of the congressional committee.

KORNBLATT: To track down 38 congressmen and seven senators. One person. I don't know how I did it.

WOODRUFF: Back at home Malka reflects on her Watergate heroes. Among them, the reporters who broke the story wide open.

KORNBLATT: Both Woodward and Bernstein had tremendous, tremendous courage to do that, you know. It's like you're looking up at god, and you're saying, god, you're wrong and I'm going to show you. These two young men.

WOODRUFF: Another hero, the secret source. A man who one recent report says may now be at death's door.

KORNBLATT: There were lies and lies and lies and lies and in the middle of all those lies there was somebody who cared about the truth. That was Deep Throat.

WOODRUFF: She calls him the last piece of the puzzle. But enough is enough.

KORNBLATT: I don't think they should wait until he's actually dead. I think that would be wrong. I think they should do it now. I think they should say who Deep Throat is right now so we can all say, thank you.

(END VIDEOTAPE)

WOODRUFF: Malka Kornblatt. And our thanks to producer Clare Brinberg (ph) for telling her story. And you hear that, Woodward and Berstein, we want to know who Deep Throat is now.

That's it for INSIDE POLITICS." I'm Judy Woodruff. "CROSSFIRE" is right now

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