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CNN Late Edition with Wolf Blitzer

Card Promotes White House Agenda; Levin, Sessions Discuss Defense Spending; Rangel, Dreier Debate Bush's Performance Thus Far

Aired August 05, 2001 - 12:00   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, HOST: It's noon in Washington, 11:00 a.m. in Crawford, Texas, 5:00 p.m. in London and 8:00 p.m. in Moscow. Wherever you're watching from around the word, thanks for joining us for this two-hour LATE EDITION.

We'll get to our interview with White House Chief of Staff Andrew Card shortly, but first, the hour's top story.

We begin with the possibility of a major change in the status of Tropical Storm Barry. Along the Gulf Coast in the southern United States, residents are now bracing for the worst.

(NEWSBREAK)

BLITZER: But turning now to President Bush, after receiving a clean bill of health and scoring some important last minute legislative victories, he's now begun a month-long vacation in Crawford, Texas.

(NEWSBREAK)

BLITZER: And earlier, I spoke with Andrew Card about the president's first six months in office.

Mr. Card, thanks for joining us on LATE EDITION. Good to have you back on the program.

ANDREW CARD, WHITE HOUSE CHIEF OF STAFF: It's great to be with you, thank you.

BLITZER: You probably saw the headline in today's "New York Times" suggesting there's going to be a change of the president's focus after this first six months. He's going to become now more, quote, "compassionate," presumably less conservative. Is that accurate?

CARD: Well, actually, what President Bush was when he was campaigning for president is exactly what he is as president. He is a compassionate conservative. The top priority for this president has been education reform. But you know, with the passage of the bill in the House and we hope the passage of the bill out of the entire Congress after the conference committee gets together...

BLITZER: The patients bill of rights bill?

CARD: No, I'm sorry, education. With that bill passing, we will want to see it become law, get it out of conference committee, become law. And the president will talk about education all during the fall. And this will not be an issue that stops for him after a new law is in place. He will be talking about educating and leaving no child behind, attracting good teachers to teach in our school systems. So he will talk about that in the fall.

He will also be talking about the sense of responsibility that we all have as citizens of this great country and citizens of the world. But this is not something new. This is what the president campaigned on, this is what he has delivered during his first six months as president. And he will continue on with that during the fall.

BLITZER: But is there a sense that he needs to do more in terms of reaching out on this compassionate side in order to attract support from moderates and from women?

CARD: He's actually doing quite well. The polls have shown this president is pretty well positioned. We're not driven by polls. Instead we're driven by what the president feels is important for the country. And he is a compassionate conservative. The agenda that he put forward to Congress is a compassionate conservative's agenda.

It started off with education, moved to tax relief, bringing faith-based initiatives so that we can have real solutions to societal problems in our country by working in partnership between the government and religious institutions. He's talked about the need to reform our military, he's already delivered on the campaign commitment to bring help to the military. And so I think what you saw during the campaign is what you'll see this president delivering on.

BLITZER: One of the areas where he will have an opportunity in the next few weeks to demonstrate his compassionate, let's say, side, at least according to those who support embryonic stem cell research, is to announce his support for federal funding for such research. A, has he already made up his mind what he's going to do?

CARD: This president has worked very, very hard on this issue. He's met with lots of individuals -- ethicists, religious leaders, doctors, scientists. He had some of the NIH officials who are most knowledgeable of stem cell research and its potential. He's also talked with the Pope about stem cell research. He knows that this is a very, very big decision.

The federal government right now does not fund any stem cell research with regard to embryos. And the president is being asked to consider whether or not federal funding should be used. It is not an easy decision. There are obviously the hopes of science and technology, but there are also the concerns of ethics and morality. And this president is taking the decision very seriously. He has not made his mind up. He will, I expect, make his mind up over the next few weeks and make an announcement before Congress comes back into session.

BLITZER: In September?

CARD: It's a very challenging issue, and this president is taking it very seriously. I can tell you he's read thousands of pages, and met with a lot of different people who have very strong views, and he's been very contemplative how he's considered this issue. But this president is deeply committed to the sanctity of life. And he understand the enormity of this decision, and I think that he will make an informed decision that will be good for America.

BLITZER: As you know, many of those who are deeply committed to the sanctity of life as you say, opponents of abortion rights, like Senator Orrin Hatch of Utah are suggesting he should go forward with this kind of research because these embryonic stem cells would be discarded, and indeed, his wife was on "INSIDE POLITICS," Mrs. Bush was interviewed by our own Judy Woodruff this past week. Listen to what she had to say about this sensitive issue.

(BEGIN VIDEO CLIP)

LAURA BUSH, FIRST LADY OF THE UNITED STATES: Because a lot of those embryos will be destroyed anyway or disposed of anyway, so I think that makes it even more difficult. But also, there's certainly, I don't know what he's thinking, these are all my own ideas, but there's certainly a life side of it as well when you think about lives that will be, could be, saved by research.

(END VIDEO CLIP)

BLITZER: Is he inclined to go along with what his wife is at least suggesting?

CARD: I'm not going to predict which way the president will go. This is a decision that he will have to make, and he knows that. I can just tell you that I have great confidence that he is weighing all of the challenges around this decision, both the challenges of opportunity that come through science and technology but also the huge moral implications and ethical challenges that are faced by governments as they consider this very, very tricky issue.

BLITZER: Do you believe that these embryonic stem cells potentially could help scientists, doctors, find cures for Parkinson's, juvenile diabetes, Alzheimer's? I know that -- I believe your father had Parkinson's.

CARD: My mother had Alzheimer's.

BLITZER: So you have a personal interest in this kind of science if, in fact, it could work?

CARD: But I also am committed to a strong sense of morality and ethics, and I know the president has listened to people on all sides of this issue. He is doing the homework so that it's not based -- a decision will not be based on ignorance, it will be based on knowledge.

And he is going to look at his own conscience and his own beliefs, but he's going to do what I think is in the best interest of the country, respecting the principles that he came to office with. It's not an easy decision. I am confident that he will make an informed decision that will be right for this country.

BLITZER: Have you weighed in personally with the president, given him your best recommendations?

CARD: My job is not to offer my personal advice and counsel. My job is to make sure that he gets all of the information that he needs to make an informed decision. And I have been doing that with him.

BLITZER: As you know, the president worked with Representative Charlie Norwood of Georgia this past week, managed to reach a compromise with him on the issue of a patients' bill of rights that narrowly passed the House of Representatives, I think the vote was 218 to 213. But a lot of Democrats remain bitterly opposed to the compromise you worked out with Representative Norwood, including Senator John Edwards, one of the cosponsors and the Democratic majority U.S. Senate.

Listen to what Senator Edwards said about this compromise that was worked out and passed in the House of Representatives.

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS, (D), NORTH CAROLINA: We're very disappointed the other six original sponsors and the deal that he made. It's very important for us to be straight with the American people about this. No. 1, this deal, which was written in the middle of the night, by the way, takes away rights that patients already have across the country.

No. 2, it maintains the privileged special status that HMOs enjoy today. And No. 3, it stacks the deck against patients when they're trying to hold HMOs accountable for what they do.

(END VIDEO CLIP)

BLITZER: Is the negotiation just beginning now in this House- Senate conference committee, because as you know, the Senate passed by a wide margin a much different version of what the House passed?

CARD: Well, Congressman Charlie Norwood has been working on this issue for seven years. He's the most respected member of Congress when it comes to this issue, and he's also a very highly respected in his ability to work with people on both sides of the aisle, in both branches, the House and the Senate. And it was appropriate that we negotiate with Charlie Norwood to try to get a bill that the president could sign into law.

The ultimate objective here is to get a patients' rights bill signed into law. The Senate version could not be signed into law. This bill is a good bill. It would provide patient protection to all 50 states. It would do so in such a way that fewer people would lose health insurance, and there's great concern under the bill that has passed the Senate that there would be a number of people in America who would lose health insurance. We think the negotiated arrangement between Charlie Norwood, respected by the House now, will not jeopardize as many people who have health insurance, and it also provides the flexibility for states that have those plans in place right now. It does provide a sense of understanding what the rules will be, and there will be federal rules on patient protection.

But this bill is written to protect patients, not to protect trial lawyers. And the Senate bill is written more for the trial lawyers than it is for patients.

BLITZER: But as you know, in a House-Senate conference committee, the negotiations begin, additional changes will be made if there's going to be some sort of legislation.

One of the things that Representative Norwood, who's your ally now on this issue, suggested on Meet The Press earlier today that he was open to possibly changing the language from the House version which suggests that "a" proximate cause of injury or death the article A could be changed to "the" proximate cause of injury, your death meaning that if there is some misdiagnosis, some mistake that they're ready -- he's ready to deal on that specific issue. Is the White House ready to change the language in the House version to what is in the Senate version. Change the article from "a" to "the"?

CARD: Well, obviously, the House and the Senate will take a look at every word in the bill that will eventually come to the president's desk. The White House will take a look at every single word. There is an awful lot at stake in these words. The devil is in the detail. We feel very strongly that the version that was passed by the House, negotiated between the White House and Congressman Norwood, is the right version.

And we think that it is sound from a legal point of view, sound from a constitutional point of view, and the right policy for America. And that's what we'll hang to.

BLITZER: Well, explain to our viewers why it's so important for the White House to have the language be "a proximate cause" instead of "the proximate cause"?

Because, as you know, the -- if there are several issues at stake, in terms of the death or injury of a patient, "a" -- it limits the ability for that patient to win damages in a court.

CARD: I think it's "the" is the word that we like, versus "a." But...

BLITZER: With "the" more restrictive.

CARD: We do not want to see kind of the deep-pocket trolling that goes on sometimes in litigation, where trial lawyers are looking for the deepest pockets to sue, rather than for a way to meet the needs of a patient.

And this is one way to accommodate that. BLITZER: Well, is that a potential source of a veto if it is changed from "a" to "the"?

CARD: Well, we'll look at the entire context of the language. There -- this is section nine of the bill, is a very interesting section of the bill, one where we have put an awful lot of time and effort into negotiating. And that's a very important provision in this bill. It's section nine, or paragraph nine, which I actually think has now become paragraph eight. But, in the context of negotiations, it was around paragraph nine.

We'll pay close attention to the details. This bill is very, very important, because we want to sign it into law. The president would like to sign the patients' bill of rights into law. He wants to provide patient protection, for all 50 states, respecting the flexibility that should be there for states that have patients' protection bills already in the law.

Both the version that was passed by the Senate and the one that was passed by the House offered different guidance to the states. They both interrupt some of the activities going on at the state level. We think that the negotiated arrangement between Charlie Norwood and the White House is the best way to go.

This is the result of a lot of compromise that the White House worked on with Charlie Norwood. I have great respect for how Congressman Norwood conducted himself during this process.

And, by the way, the White House did a phenomenal job. Josh Bolten, who's the deputy chief of staff, and his team, were terrific, spending hours and hours and hours in good-faith negotiations. We're confident that good-faith negotiations with the conference committee can produce a bill that the president will sign.

BLITZER: So, will you work with Senator Kennedy, for example? You've worked with him on education. He came out bitterly opposed to this compromise you worked on with Congressman Norwood.

I want you to listen to what he said in anticipation of the debate that's about to begin in September. Listen to this.

(BEGIN VIDEO CLIP)

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: This issue is not going away. They may have had a temporary victory this afternoon, and it'll be a temporary victory. But it is not going away.

(END VIDEO CLIP)

BLITZER: So what do you say? You're ready for more compromises with Democrats and Senator John McCain and other Republicans in the Senate?

CARD: I think you should ask the question of them: Are they ready to make some compromises? So far there's been very little willingness on the part of Senator Kennedy and others to compromise on this issue.

The bill that has passed the Senate will not earn the president's signature. So we have to find whether or not the Democrats are willing to start to compromise, and we'd like to have bipartisan negotiation that will produce positive results. But it's important that the result be principled enough that the president can sign it into law.

We do not want to cause a situation where literally thousands of people will lose their health insurance. The Senate version of the bill would put in jeopardy health insurance to a lot of Americans.

BLITZER: Let's move on and talk about taxes. That's been one of the success stories of the Bush administration. These first six months that the president did sign into law a very impressive $1.3 trillion tax cut, checks are now going out to American taxpayers.

But it now appears that you have to borrow some $51 billion to pay for those checks that are being mailed out to American taxpayers and that the budget surpluses that were projected earlier are simply not going to be there.

Is this going to be a, looking back, a political error that the Bush administration made?

CARD: This was not only -- first of all, it wasn't a political initiative. This was an initiative to return money to the taxpayers. It was also an initiative to stimulate our economy.

Every economist that I've talked to has said that this is the right kind of stimulus at the right time.

CARD: So, this tax relief package is good for America just from its stimulative effect on the economy. Beyond that, we have huge surpluses. In fact, our surpluses are still there. We are not going to get into the Social Security trust fund.

BLITZER: What about the Medicare trust fund?

CARD: The Medicare trust fund, there are two funds to Medicare, A and B. The A fund that you contribute to, not one dime that goes into that account will be used for any other purpose than Medicare. The other trust fund account, B, which is really not a trust fund account, it's an ongoing appropriation from the government, will still be an ongoing appropriation for the government and health care contributions...

BLITZER: So that won't be lockboxed, as they say, the second part of Medicare?

CARD: The second part of Medicare would not be lock-boxed. But, Medicare will increase in its funding and medical services under Medicare will continue to be provided. But, we also need to have reform in Medicare. And that's one thing the president talked about in terms of reforming Medicare. But, this tax relief package is right for America. It was right for the economy. And it's also right for bringing discipline to the federal fiscal system. Congress right now is working on budgets that will have to be signed before the next fiscal year begins. It's very important that they respect the fiscal discipline that the House and Senate have already adopted as they put together the department appropriations. The president will be a good watch dog for the American taxpayer during this process.

BLITZER: Let's go through a few issues because I know your time is limited. On the whole issue of drilling in the Alaskan National Wildlife Refuge up in Alaska.

CARD: I have a tough time with that too, ANWR.

BLITZER: As it's called, ANWR, it passed, drilling passed in the legislation of the House of Representatives. Once again, the Senate Democrats are threatening to filibuster, if necessary, to prevent that kind of drilling up in Alaska. That would require 60 votes to break a filibuster. Do you have those 60 votes in the Senate?

CARD: First, I think it would be a mistake for the Senate to filibuster over that issue. This is a long-term energy program that requires that we look at all aspects of energy, conservation, as well as new resources and getting those resources to marketplace. The president presented a balanced energy plan to Congress. It was not a plan designed for a year or for two years, but it's a comprehensive plan to look out over the next 10, 15, 20 years.

We need to make sure our country is doing all it can to encourage conservation. And it's doing all it can to make sure that we have clean energy to run our power plants, and natural gas is a clean energy to run power plants. And we don't have enough natural gas in this country.

We need to find more, and I think the ANWR area, which is a very small footprint on this huge, vast area -- after all, the Alaskan National Wildlife Refuge is about the size of South Carolina. And we're talking about drilling on an area that is smaller than most airports and with new technologies that are environmentally friendly, I think it's the right thing to do. I think it would be a mistake for the Senators to be shortsighted as they look at the energy policy for Americans.

BLITZER: But, you don't have 60 votes to break a filibuster, do you?

CARD: We'll see. I think it will be an uphill battle. But, the important thing is that there be an honest debate about the energy needs of this country.

BLITZER: Let's move on and talk about some overseas issues, as you know, we're seeing live around the world on this program. The United States is threatening not to participate in a UN conference against racism in South Africa at the end of this month, if there is language in the draft resolution which condemns Zionism as racism or other language attacking Israel. Will the U.S. participate in that conference if such language critical of Israel is included in this draft resolution?

CARD: First, the United States would like to participate in that conference on racism. Secretary Powell would like to participate. I know that the entire government would like to participate.

But we will not participate if the anti-Israeli, the Zionism language is included in that proposal, and we'll be taking a hard look at it. We will work with all our friends around the country to make sure that that language is not there. But, we are not looking to participate in any effort that would discriminate against Israel. And we don't think that it is the right language to be in that provision.

BLITZER: So, if there's any criticism, condemnation of Israel or Zionism, whatsoever in that resolution, the U.S. will boycott that conference?

CARD: Well, I don't like the term boycott. We would like to see the conference respond to the real concerns of racism. And if they're going to attack Israel, it's inappropriate. We don't think we should be a party to that.

BLITZER: Let's move on and talk about a potential presidential veto. It would be his first if Congress goes ahead and bars Mexican trucks from moving forward across the Mexican border, according to the NAFTA, the North American Free Trade Agreement stipulation. If Congress goes ahead and says Mexican trucks can't have that access to U.S. highways, the president might veto that legislation.

CARD: He certainly might. Hopefully the conference committee will find an accommodation so that they are not in violation of the North American Free Trade Agreement. The North American Free Trade Agreement is between Canada, the United States and Mexico.

Canadian trucks are welcome in the United States. U.S. trucks are welcome in Canada. We think that there is discrimination if they don't allow Mexican trucks to come to the United States under the provisions of that agreement. And first of all, we respect the need for safety, and we're confident that the trucks will be safe on America's highways.

BLITZER: Do you think the Mexican trucks are as safe as the Canadian trucks coming in?

CARD: I think that they will be, yes.

BLITZER: And don't represent a danger to American drivers?

CARD: I am confident that Mexican truckers who are going to do long-haul carries in the United States would comply with the safety expectations of this country.

BLITZER: And just to nail it down, the president would veto that bill if it comes out of the Congress as it's now threatening to come out of? CARD: Well, we want...

BLITZER: If it bars the Mexican trucks?

CARD: He would like to look at the language in the conference committee. The conference committee has two versions right now, a version that the House passed and a version that was passed by the Senate. They're very different. They have the same result of denying access for Mexican trucks to the U.S. market, which is discrimination. And we'd like to see that addressed in the conference committee.

Let's hope conferees will meet their responsibility and comply with the North American Free Trade Agreement so that the Mexican economy, the U.S. economy and the Canadian economy can be further integrated.

BLITZER: We're going to talk shortly with two senators about possible military base closings throughout the United States. Is President Bush ready to start closing a bunch more bases in the Southeast, elsewhere in the United States, given the reduced military necessity for those bases?

CARD: The president has called for Secretary Rumsfeld to put together a plan for representing the Defense Department as we are now in the 21st century. We have a strategic plan for the military that is outdated, and Secretary Rumsfeld is taking a look at the needs and obligations of the 21st century, and that plan will be, I think very, very important.

Included in that plan will be an effort to take a look at excess military installations. We will consult with Congress -- in fact consultations started last week with Congress -- on how we would have a system to take a look at the inefficiencies in our installations and trim them back.

The president has not received a report from Secretary Rumsfeld on exactly what that legislation would look like, but I think it's realistic to say that we're going to have to have some mechanism to be more efficient in the use of our military installations.

BLITZER: We are all out of time, but the president is going on vacation for a month to Texas, his ranch.

CARD: It's a working vacation.

BLITZER: The vice president's going to his ranch in Jackson Hole, Wyoming. What about Andy Card, where's he going on vacation?

CARD: I'll be spending a lot of time in the office at the White House, but I do hope to get up to Maine. I've got a place on a small lake in Poland, Maine, that I love to get to, and I want to be there with my children and grandchildren, but I'm not sure I'll get there very many days.

BLITZER: Is that where Poland Spring water comes from?

CARD: Right where Poland Springs water comes from.

BLITZER: Sounds like a good place.

CARD: Great place.

BLITZER: Enjoy yourself.

CARD: Thank you.

BLITZER: Thanks for joining us.

CARD: OK.

BLITZER: And up next, two key senators join us to talk about the battles ahead on Capitol Hill for President Bush's agenda. We'll talk with the Armed Services Committee chairman, Democrat Carl Levin of Michigan and Republican Jeff Sessions of Alabama. LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: This has truly been one of the most remarkable six months I think in any administration. I've been involved, one way or another now at the national level in Washington, going back to about 1968. And this is far and away the most productive period I've ever seen.

(END VIDEO CLIP)

BLITZER: That was the vice president patting the president and himself on the back. But how will the next six months go?

Joining me now to talk about how the president's agenda will fare in the Senate are two key members: From Detroit, Michigan, the armed services committee chairman and Democrat, Carl Levin. And in Pensacola, Florida, armed services committee member Alabama Republican Jeff Sessions.

Senators, welcome back to LATE EDITION. Good to have both of you on the program.

Senator Sessions, thanks for joining us especially today, because of the potential hurricane that's moving towards your direction. Good luck to you on that as well.

But I want to begin with the chairman of the committee, the armed services committee. Senator Levin, you just heard Andy Card say that the president is determined, together with the defense secretary, Don Rumsfeld, to go ahead and eliminate what he called "excess military installations" throughout the United States. Is that a good idea?

SEN. CARL LEVIN (D-MI), ARMED SERVICES COMMITTEE CHAIRMAN: Well, it's a necessary idea. We've been wasting billions of dollars on this excess infrastructure. Senator McCain and I, for the last few years, have tried over and over again to get into place a new round of base closings and base realignments in order to save billions of dollars for much more needed items. And we've never been able to get much more than 40 votes.

We hope that, if the president will put his shoulder to the wheel, that we'll be able to do it this time. This is simply authority that we want to give to the Defense Department and the president to set up a commission as we've had before. This commission is appointed both by Congress and the president. It takes it out of politics. In the past, this has been rejected, the last couple times we tried, because the argument was made that President Clinton had politicized it.

Well, I don't agree he did, but whether or not you feel that he did or not, this is President Bush, and I can't see any justification for not authorizing this round of base closings, particularly in light of the recent General Accounting Office report on base closures, which says that the net savings are very clear from the first rounds of base closings, so let's get on with it, do it fairly, do it non- politically, do it in a bipartisan way, but we've got to save those billions of dollars.

BLITZER: Senator Sessions, the Department of Defense says during the last round of base closings in 1995, that involved some 97 bases and installations between '88 and '95, the government saved $15.5 billion and that if a new round of bases go ahead, are closed up in the coming few years, it could be another $3.5 billion savings. That's a lot of money. Are you supporting the president and the defense secretary in this initiative to go ahead with these base closings?

SEN. JEFF SESSIONS (R-AL), ARMED SERVICES COMMITTEE MEMBER: Well, that is a lot of money. It take at least five years, though, before you start seeing those savings, and I have read the GAO report, and it is encouraging for base closing advocates.

My view is, if those numbers can be sustained and we can see clearly that there's going to be a significant measurable saving over the long-term, that we'll probably have the support to go another round.

But I've looked at the numbers pretty hard. Ninety-five percent of the savings are salaried personnel. I'm not sure that all of those are really saved just because a base is closed. I'm going to look at those numbers pretty carefully.

We had the biggest base closure in the nation in the last round in Alabama before I became a senator, and I spent an awful lot of time helping that community deal it with. And the numbers I have are that it'll be at least 10 years before there's any savings actually accrued from the closing of Fort McClellan.

So we want to look at it carefully. But I think momentum is building. Carl supports it, John McCain supports it, President Clinton and President Bush now support it. The Joint Chiefs support it. So we'll have to see how that goes. I think it has a chance of passing if the numbers hold up, and there's no political chicanery possible in it.

BLITZER: The whole issue, Senator Levin, of defense spending is now obviously before the Congress, the administration seeking an extra $18 billion in additional defense spending. Your leader, the Democratic leader, the majority leader in the Senate, Tom Daschle, spoke out earlier about this. I want you to listen to what he had to say. Listen to Tom Daschle.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: We're supportive of increases in defense spending, but find us a way to pay for it. Find us -- give us the way with which to deal with the $18 billion request that you've now made, and, if we do, if we can find the appropriate offset, if we don't draw into Medicare and Social Security, we'd be happy to support additional increases. We know that some of them are necessary.

(END VIDEO CLIP)

BLITZER: Is the president going to get that $18 billion increase for the defense department?

LEVIN: Well, I think it's going to depend a lot on what is announced in August in terms of the surplus and deficit projections, because the tax cut, which the president pushed so hard, and which so much favored upper-income people, was more than just unfair in that regard. It also put us in a real box. It put us back perhaps in a deficit ditch.

There is great resistance, particularly among Democrats, to going into the Medicare surplus to pay for anything, whether it's defense, where we do need some increase in defense, where it's education. We want to preserve that Medicare surplus. And we want to preserve the Social Security surplus, and there's going to be great resistance unless the president can identify the place where that $18 billion is going to come from in a way which does not cut into the Medicare or Social Security surplus. That's the real challenge the president faces in August and September.

BLITZER: Senator Sessions, you heard Andy Card, the White House chief of staff, acknowledge that the budget surpluses are not going to be as robust as earlier projected, and that the government will have to dip into at least part of the Medicare trust fund to make sure that there is a surplus, that there's no negative spending once again. Are you all for that kind of, that kind of requirement to go into that Medicare trust fund to help make sure that there's no deficit spending?

SESSIONS: I believe we can have and must have a substantial increase in defense spending. The president really has a $33 billion total expenditure increase over last year. It'll be the biggest in 15 years.

Unfortunately, most of that is just going to get us out of the hole that we're in after 10 years of well-below what we needed to spend. We got so many deficits in the Defense Department.

So with a solid increase every year, I believe we can rebuild our defense forces for the 21st century. I am very pleased that the president is looking at every possible way to save money. He has directed his secretary of defense to shake up the department, and he's got communities and military services and contractors all a nervous wreck. But he's doing the things he ought to do to keep the costs down.

And if we do that and contain spending in our other accounts and don't allow them to go abroad, I believe we can do that without certainly no drawing-down of the Social Security Trust Fund and hopefully not either one of the Medicare Trust Funds.

BLITZER: Senators, we have to take a quick break. We have a lot more to talk about. When we return, in addition, your phone calls for Senators Levin and Sessions. LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're continuing our discussion with Senators Levin and Sessions. Senator Sessions, let me begin with you, once again this time.

The whole issue that the president is wrestling with as we heard from Andy Card, his chief of staff, embryonic stem cell research. The president is now expected to make a decision on that federal funding for that kind of research before Congress reconvenes in September.

As you know, many of your colleagues who oppose abortion rights for women like Senator Hatch, Senator Bill Frist and others say that this is an area where there can be some federal funding for embryonic stem cell research because these stem cells would be discarded in any case. Where do you stand on this issue?

SESSIONS: I have not announced how I would vote on that. I'm looking at it very carefully. It is a very troubling issue for me. We certainly don't want to be experimenting with life, altering human beings, and cloning and that sort of thing.

But there may be a way out of this that could be consistent with my beliefs that would allow life, certain embryonic cells to be used. But I have not made that decision.

I listened to the position of Senator Bill Frist, and I respect that. I've heard Senator Sam Brownback talk, and I respect him greatly. I am just going to have to wrestle with it. It's not an easy question. We do not need to make a mistake on this.

BLITZER: All right. Senator Levin, if the president decides to oppose federal funding for this kind of embryonic stem cell research, is there any recourse that you and other Democrats and Republicans might be able to have to overrule his decision?

LEVIN: Well, this isn't a partisan issue, as you know. Republicans, who have opposed abortion rights such as Orrin Hatch, for instance, very much favor the federal funding for embryonic stem cell research because of the lives that can be saved.

It is truly a life-sustaining action to put some federal funds into this research because we know that we can cure diseases by doing it. But, if the president decides to oppose it, I think there is such overwhelming support in the Congress that we will do it anyway and we could override his veto.

So that's a new factor that I think the president is going to have to consider, that in fact if he decides to oppose it, that I think there's two-thirds of both the House and the Senate that are committed to take this life-saving move.

BLITZER: You agree with that, Senator Sessions?

SESSIONS: Well, I think perhaps there is a majority in the Senate that could favor some sort of legislation of that kind if it was controlled strictly. Senator Frist has indicated that he believes there are a number of controls we need to be on it before he would support it. So it's a pretty technical matter.

We need to look at it carefully and make sure what we do is not opening up our ethical, medical system to abuses. I believe, strongly in research. I have supported doubling of the funding for the National Institute of Health. I believe that there is a potential to save more lives than we've ever known before in the years to come. And I intend to support that. But we need to be careful on this issue.

BLITZER: All right. Let's take a caller from Texas. Please go ahead with your question.

QUESTION: Thank you, Wolf. What I wanted to ask Senator Sessions is this: Why in the world is the president going the waste more money trying to come up with a defense missile system? It's stupid. We wasted money on it in the '80s. It does not work. Star Wars is a big balloon idea. I see your little smile. Let's invest that money in the military people and equipment we have now. I'm sick of people like you...

BLITZER: Let's let Senator Sessions answer. Why not use that money to upgrade military capabilities, improve the lifestyles for U.S. men and women in the armed forces instead of going forward with a national missile defense system that may or may not work?

SESSIONS: We have no choice, in my view, but to build a national missile defense system. We already have theater missile systems that are working. And we can complete a national missile defense system. We are leaving this nation vulnerable to attack. We intend to defend our allies like we did with Israel, with our Patriots. But, we are leaving the United States vulnerable to attack.

And let me just say this, in the Gulf War, we overestimated everything that Saddam Hussein could do to us except in one area, and that was missiles. Now we have 28 nations in this world that have ballistic missile capabilities, and it's folly for us not to provide a protection to the heartland of America when we can do so and make it work.

BLITZER: All right, Senator Levin, you're the chairman of the committee, 30 seconds, give us your response.

LEVIN: The issue is whether or not the unilateral ripping up a treaty which provides for some arms reductions will make us more secure or less secure. And if we unilaterally deploy that system, we could very well be at a greater danger.

The greatest threat to us are the terrorist who could use a truck, who could use a ship, who could use a suitcase against us. That system does nothing for that. So, we ought to try to mutually move to a new structure, but not unilaterally rip up the old structure when that would make us less secure, not more secure.

BLITZER: Senator Carl Levin, Senator Jeff Sessions, I want to thank both of you for joining us on LATE EDITION. Senator Sessions good luck in the face of that tropical storm, maybe Hurricane Barry. Be safe over there along the southern coast. Thank you very much.

SESSIONS: Thank you.

LEVIN: I fully concur in that, Jeff, good luck to you..

SESSIONS: Thanks, Carl, look forward to being with you soon.

BLITZER: Thanks to both of you, thank you very much.

And a flurry of activity in the House of Representatives just before the August recess. When we come back, we'll talk about the passage of the patients' bill of rights, the energy bill and much more with Democrat Charles Rangel of New York and Republican David Dreier of California. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. CHARLES NORWOOD, (R), GEORGIA: The bottom line and goal is we want to change the law, and the last time I looked, that's pretty difficult to do without the presidential signature.

(END VIDEO CLIP)

BLITZER: Georgia Republican Charlie Norwood explaining his motivation behind a compromise with the president on the patients' bill of rights.

Welcome back to LATE EDITION. The House handed Mr. Bush a bill he says he can sign. Joining me to talk about that and the flurry of activity last week in the House of Representatives are two key members: in New York, Democrat Charles Rangel and, in St. Louis, Republican David Dreier of California.

Congressmen, we're always glad to have you on the program.

REP. DAVID DREIER (R), CALIFORNIA: Always great to be with both of you.

BLITZER: Thank you so much, and Charlie Rangel, what's wrong with the thinking of Congressman Norwood? You need the president to sign this bill into law. There's so much similarity between both of these versions. Why not accept what Charlie Norwood came up with? He's been so passionately involved in this cause for the past six years.

REP. CHARLES RANGEL (D), NEW YORK: No one challenges the integrity of Charlie Norwood. The fact is that for five years, the Republicans have tried to derail giving patients their rights and protecting the health maintenance organizations.

We put together a bipartisan bill. Everyone agreed it was the right thing to do. Not only did the president threaten to veto it, but he brought Charlie Norwood, just him, to the White House and broke his arms and legs and have him to come back and to say that he agreed with the president and then, in the middle of the night, changed the whole bill, which -- well you know it happened in the middle of the night -- changed the whole bill which really takes away some of the state rights, states who give more protection to the patients can't do it. And it makes it very difficult for a patient that has been wronged to actually prove now that the reason that they were so harmed was because of the HMO. So they raised the standards; they made it very difficult.

BLITZER: All right, let me bring in David Dreier. It's not only Charlie Rangel who says that Congressman Norwood backed away from an agreement that he had with so many of his co-sponsors, a bipartisan bill. But Republican Representative Greg Ganske of Iowa, your colleague, was similarly upset what Charlie Norwood had done. Listen to what Congressman Ganske had to say.

(BEGIN VIDEO CLIP)

REP. GREG GANSKE, (R), IOWA: Charlie was freelancing and he did not have our authorization. This was basically Mr. Norwood's own deal with the White House.

(END VIDEO CLIP)

BLITZER: What do you say about that kind of criticism?

DREIER: Let me just tell you, first of all, Charlie Norwood's arms and legs are intact. He came on his own power to the rules committee. Yes, we did meet late at night, but this is after having spent over six years working on this issue.

And I think Charlie Norwood said it extraordinarily well. He wants to get legislation passed, and you can't do it unless you're going to get the signature of the president of the United States.

And Charlie Rangel is just plain wrong when he says that we have had a goal of undermining the rights of patients. Our goal, President Bush when he campaigned last year made it very clear that he was going to change the tone in Washington. We found from the first six months that he's done just that.

He said he was going to provide tax relief. We've succeed in doing that. We're moving ahead on a bipartisan education bill. And on patients' bill of rights, Wolf, what has happened here is we have now moved towards a package which is geared towards insuring the rights of the individuals, but also to ensure we can have the people in this country, the 40 million uninsured will have an opportunity to get insurance.

So, this is a package which is going to be very helpful to the patients out there, and at the same time, it's not going to be skewed towards those who are trying to increase costs.

BLITZER: And Charlie Rangel, what President Bush said after he reached that compromise agreement with Congressman Norwood was that he's anxious, he wants to work with you and other Democrats to change the tone on these kinds of issues in Washington. Listen to what President Bush had to say.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: He was practicing the art of what is possible, and that's a spirit we need more of in Washington, people who come to this city with the intent of doing what's right, the intent of having accomplishment, the intent of not playing, you know, bickering over politics and getting intransigent because you don't get everything you want.

(END VIDEO CLIP)

BLITZER: Sounds like a president reaching out to the Democrats. Is it?

RANGEL: It sounded like Governor Bush when he was running. But if you remember, Wolf, you didn't find any House Republican campaigning with the president because they're just as mean-spirited and as partisan...

DREIER: Oh come on, Charlie.

RANGEL: ... and as partisan as they've ever been. And if you take a look at any of the bills, take the tax bill, not one Democrat -- when I say not one, I'm the ranking member of the tax committee -- was consulted for the tax cut.

Take the patient bill of rights. To pull a guy out and to hold him hostage in the White House and to have him come and to be embarrassed by his Republican friends, to criticize him for really selling out the Republicans and the bipartisan agreement...

DREIER: Charlie Norwood...

BLITZER: All right.

RANGEL: If you take a look at each and every piece of legislation, they think bipartisanship is holding on to 98 percent of the Republicans and picking up two...

BLITZER: Congressman Rangel, let Congressman Dreier respond, very quickly.

DREIER: Charlie, you and I are great friends. And you know very well that we have reached out to you on the issue of the tax bill. You remember, when we were on this program before talking about the fact that we gave you that Democratic substitute, and you and I have worked together on a wide range of issues.

So please, I mean, don't with a broad brush say that every Republican is somehow mean-spirited and all that.

You're not a mean-spirited guy, Charlie, and I ain't either, and most of my Republican colleagues aren't.

BLITZER: All right, Congressmen, stand by, the both of you. Unfortunately, we have to take another break.

For our international viewers, world news is next.

For our North American audience, stay with us, there's still another hour of LATE EDITION. We'll talk about President Bush's first six months in office, and take your phone calls for Congressmen Rangel and Dreier.

And three top economic minds give us their assessments of the state of the U.S. economy.

Plus our LATE EDITION roundtable and Bruce Morton's "Last Word." It's all ahead in the second hour of LATE EDITION.

(COMMERCIAL BREAK)

BLITZER: This is the second hour of LATE EDITION, the last word in Sunday talk.

(BEGIN VIDEO CLIP)

BUSH: I'm grateful for the good will shown by Congress. And I am pleased with the progress we have made together.

(END VIDEO CLIP)

BLITZER: After six months on the job, how's the president doing? We'll ask two key Congressmen, Democrat Charles Rangel of New York and Republican David Dreier of California.

BLITZER: Also, a push for a leaner federal government. How will that affect the economy? We'll get analysis from former Republican Presidential Candidate Steve Forbes, former Clinton Economic Adviser Gene Sperling, and Chief Economist for Bear Stearns, Wayne Angell.

Plus our LATE EDITION roundtable, Steve Roberts, Susan Page, and David Brooks. And Bruce Morton has the "Last Word" on grading a president. Welcome back to LATE EDITION. We'll continue our conversation with Congressmen Charlie Rangel and David Dreier in just a moment.

But first, here is CNN's Donna Kelley in Atlanta with a check of the hour's top stories.

(NEWSBREAK)

BLITZER: Thank you very much, Donna.

And we're going to continue our discussion now with Congressman Charlie Rangel and Congressman David Dreier.

We have a caller from Colorado. Let's take that caller right now, go ahead with your question, please.

CALLER: Yes, this is for Congressman Rangel. First of all, I want to tell you how much I enjoy your debating skills.

My question is, why can't the Democrats become more cohesive in their arguments, like the Republicans do? They have shifted this argument to the Democrats wanting to take care of lawyers.

RANGEL: One of the reasons is the diversity of the Democratic party and the independence that we have with our party. You should have seen the Republicans when it was time to vote on the Norwood bill, which is the patients' bill of rights. Republicans refused to vote, and the leadership had to beat them out of the cloakrooms and get them to the floor.

I'm telling you, if it wasn't so serious, it'd be hilarious.

No, we do have a Democratic process, we try to get our Democrats to stick together. But we don't have the acts of allegiance or drumming people out of the party or putting primaries against them if they don't abide by the law.

DREIER: Wolf, may I join in saying I admire Charlie's debating skills, as well. He's a terrific guy.

But the fact is, there was no beating people out of the cloakroom.

(LAUGHTER)

DREIER: At the end of the day, guess what, Charlie? We won. We won in a bipartisan way. Democrats and Republicans joined together. This was exactly what President Bush said that he was going to do when he campaigned for president, and the last six months have been absolute vindication of what it is that George Bush said he was going to do.

And we're going to do it on trade as well. I hope very much that, in the next several weeks, upon our return, we'll be able to pry open new markets around the world, so that we can get this economy going and sell U.S. goods and services throughout Latin America and other parts of the world.

So...

RANGEL: We have more agreement on television than we certainly have with Republicans on the floor. One thing is true...

(CROSSTALK)

BLITZER: Congressman Rangel,...

RANGEL: Republicans won, but the patients lost.

DREIER: Oh, no, no, no. They're going to win at the end of the day.

BLITZER: All right. Congressman Rangel, let me talk about another bill that passed the House of Representatives this past week, the energy bill, and on this one there were a bunch of Democrats who joined with the Republicans.

For example, on the energy bill, 36 Democrats supported drilling in the Arctic National Wildlife Refuge. They went ahead and joined most of the Republicans on that front.

And on the issue of increased fuel efficiency for automobiles, 86 Democrats opposed the higher standards that most of the other Democrats of course supported.

So, on this issue, the president, at least in the House of Representatives, did find some bipartisan support.

RANGEL: Well, you know, you're supposed to get bipartisan support before you come to the floor. If the president had sat down with Republicans and Democrats ahead of time, we could have worked out something.

But with the labor unions looking to create jobs and with the automobile industry scaring the employees that they would be losing those jobs, politically, it put a lot of Democrats at risk that it would appear as though they were against the motor industry. The truth of the matter is, our energy policy is being driven by the gang of four from Texas -- President Bush, Vice President Cheney, Dick Armey and Delay -- all of them, the whole thing is drill, drill, drill, drill in the national parks, drill offshore, drill everywhere.

DREIER: Wolf, let me tell you about something that's very overlooked and Charlie won't even acknowledge it. If you look at this bill, improving the environment is a high priority for us.

RANGEL: Oh, boy.

DREIER: Listen to me, Charlie. Conservation is a very important issue. Eighteen percent of the tax incentives in this bill are for the producers of energy. So they can-.

RANGEL: You bet your life they are. DREIER: Charlie, 82 percent of the tax incentives in this bill, the energy bill that passed with bipartisan support, happen to be for conservation so we can improve our environment, so that we can focus on decreasing the use of wasteful energy and look at creative ways to deal with this.

This, once again, is a indication of the kind of thing that the president said he wanted to do. So in a bipartisan way, we're having tremendous victories. I just want Charlie the join with us in bringing these about.

RANGEL: If you want to have some fun, go out and try to sell the Republican Party as the friend of the environment and you'll have, you really will have fun, David.

BLITZER: Congressman Dreier, I want to switch gears dramatically, just for a minute or two, and talk about your colleague, the Democratic Congressman from California, Gary Condit, his entire involvement in the disappearance of Chandra Levy, the former Washington intern.

Senator Diane Feinstein, your colleague from California, she's a Democrat, issued a remarkable statement this past week, saying this: "Congressman Condit's failure to come forward and to be fully candid, combined with the conduct involved, really does violate the public trust and affects his integrity and credibility as a legislator."

Do you agree with her? Do you go further and say that Congressman Condit should resign?

DREIER: No, I will not say that, Wolf. But, I will say that I'm very troubled with this whole situation. And obviously, our first priority is the return of Chandra Levy. We hope very much she is found alive and well.

I am concerned with these developments that have continued to come out over the past few weeks. I suspect that the House Ethics Committee is looking at this whole situation, and we have lawyers involved. There is a process through which we're going. But, I will admit I find the situation very troubling, and I know my friend Charlie does as well.

BLITZER: Congressman Rangel, the Democratic Congressman, Charlie Stenholm, a conservative or Blue Dog Democrat, issued a statement saying through his actions and behaviors, Congressman Condit has brought controversy and discredit to his family, his district and the Congress. He, too, stopped short of calling on Congressman Condit to resign. But, how concerned are you as a Democrat about all of these revelations?

RANGEL: Well, as an American and as a member of Congress, I remember the criticism that was placed on my predecessor, Adam Clayton Powell, and the courts made it abundantly clear that the Constitution requires a person's district, the voters in the district to decide whether or not a person should go to Congress. We have an Ethics Committee, and so far, nobody is charged the Congressman with anything. It's in the Ethics Committee. If they decide that his conduct is such that he should have a reprimand or that he should be censured or that he should be excluded from the Congress, but so far, nobody has given any evidence that any of these sanctions should be used. Embarrassment? That's what happens in life.

BLITZER: Unfortunately, Congressman Dreier, we're out of time. I know we can go on and on, but we don't have time today. We'll do it another time. I want to thank both of you for joining you.

DREIER: Always great to be with you. Have a nice August, Charlie.

RANGEL: Have a good weekend, Dave.

BLITZER: OK. Thank you very much. And up next the president is pushing for a leaner federal government. But how will that affect the economy? We'll get analysis from former Republican Presidential Candidate Steve Forbes, former Clinton Economic Adviser Gene Sperling and Bear Stearns chief economist Wayne Angell. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. The government has begun sending out checks to every U.S. taxpayer, you may have received yours already. But are these checks really a tax rebate, and what effect will their cost have on the U.S. economy?

Joining me now to answer those questions are three distinguished guests: in our New York bureau, the former Republican presidential candidate, Steve Forbes and with me here in Washington, former Clinton Economic Adviser Gene Sperling and the former Federal Reserve Board governor and chief economist at Bear Stearns, Wayne Angell. Thanks to all three of you for joining us.

And Steve Forbes, let me begin with you. Is this, these check that are going out to these millions of American taxpayers, is this going to do the trick in turning around the sluggish U.S. economy?

STEVE FORBES, FORMER REPUBLICAN PRESIDENTIAL CANDIDATE: No, it will have a nice one-shot but the tax bill was much weaker than it should have been. There's unfinished business there. One of the things the administration must do after this recess is push for a significant reduction in the capital gains tax and secondarily, push for an extension of the moratorium on Internet taxes.

If they don't do that, the economy's going to continue to falter and the other thing they have to do, Wolf, after this recess, either privately or publicly is pressure Alan Greenspan to pump real liquidity into the economy. He's lowered the price of money, but he hasn't made it more available. He's doing what the Japanese did. This economy needs help, and he's not providing it.

BLITZER: All right. Gene Sperling, what will that, the recommendations that Steve Forbes just put forward, what will that do to the economy, you think those are good ideas?

GENE SPERLING, FORMER CLINTON CHIEF ECONOMIC ADVISER: Well, I have a different prescription than Steve, probably won't surprise you. I think the rebate that we've done is fine, it's an insurance policy. I actually think the administration probably should have done more to focus on this short-term. Perhaps, there are other thing we could do to spur investment this year. The rebate idea really came from Democrats as you know. It was never in their plan and done more at the end. So I think they should have focused more on what solutions for this year were.

On the other hand, this is where I disagree with Steve, I think this long-term expensive tax cut that is tilted towards upper-income Americans is going to hurt our national savings. It's going to make us more dependent on foreign capital, make our current account deficit more of a problem and, I think, make America a slightly less attractive investment environment.

BLITZER: All right, Wayne Angell, between Steve Forbes and Gene Sperling, where do you stand on these very, very important issues?

WAYNE ANGELL, CHIEF ECONOMIST, BEAR STEARNS: Well, I stand on the side that the Democratic administration under President Clinton, let average income tax rates rise by about one-fourth, and they put a huge increase and household indebtedness. They forgot to tell us that if you want to pay down the national debt, that you've got to increase household debt enough to offset it, and they left us with a households in really the worst shape we've seen households in a long time.

BLITZER: Let me let Gene Sperling since he was the president's -- one of the president's chief economic advisers, let him respond to that.

SPERLING: I don't know which decade Wayne is looking at. Number one, the average tax rate for the median family was at its lowest in 20 years during President Clinton. It went down, not up.

Secondly, household net worth went up, and the average income for family, for households went up about $5,000 in real terms after having declined between 1979 and 1993. Indeed, Wayne, the reason why I think our economy is still holding up is because the strong situation the Clinton economy left average consumers in with low unemployment, higher net worth and five or six years of income growth is probably why this economy is still staying as stable as it is.

BLITZER: All right, let me bring back Steve Forbes. Steve Forbes, how concerned are you that the government is going to have to borrow $51 billion to pay for all these tax checks that are being sent out to the American taxpayers right now?

FORBES: Well, that $51 billion will be gotten in increased revenues latter part of this year, so it's just a short-term maneuver. What is disturbing about the rebates is not the rebates themselves, but the fact they're a one-shot. They do one boost, and then it's gone, and I think we need permanent tax cuts, we need them now and it should have been across the board now and not phased in over five or six or eight years. And on capital gains they did nothing, and I think we need a capital gains tax cut if we're going to get this economy moving.

And two other things, Wolf, that haven't been paid much attention to. I mentioned one is the Federal Reserve, and the other is foreign policy. The International Monetary Fund is continuing to have a very destructive course. Argentina's on the ropes, Brazil is on the ropes, Turkey has already gone down. If we don't have a prosperous international economy, we're all going to be in trouble.

BLITZER: All right we're going to get to that in a second, but I want to bring in Wayne Angell and ask him this question. On these -- what we've been all calling tax rebate checks, the IRS says they're not really tax rebate check. They describe these checks as, quote, "an advance payment of the 2001 tax credit" and they also go onto say, the IRS, this is a reduction of tax and is not taxable income on the federal tax return.

Explain to us, you're a chief economist at Bear Stearns, what the difference is between a tax rebate check and an advance payment of the 2001 tax credit.

ANGELL: Average personal income tax rates rose from 12.25 percent to 15.75 percent between 1995 and 2000.

President Clinton vetoed, or threatened to veto, a tax reduction. It would have been better to have a reduction in income taxes so the 2000 rebate is kind of a make up for what wasn't done in the Clinton administration, a little less powerful than it would be to reduce withholding rates, but it's really right on. And it's absolutely essential.

BLITZER: And Gene Sperling, as you well remember in 1993, the first year of the Clinton administration, there was a significant increase in taxes on the American people.

SPERLING: Well, Wolf, there was a significant tax increase on those people making over $180,000. Now, what happened, Wolf, we had serious deficits. You know, Steve and Wayne, they want to forget what happened in the '80s. We had a huge increase in our debt, and our deficit kept interest rates high, it kept mortgage rates at double- digit. President Clinton came in and showed discipline, brought down the deficit, brought down long-term, low-interest rates.

Now, what really hurts them is that their theory is hurt by the fact after President Clinton did this, our economy was very strong. And Wayne Angell said something very deceptive. For average families, the tax rate went down as percentage of income to its lowest in 20 years. Lower than any year under Ronald Reagan or any year under George Bush. Tax rates were, as the economy, were a little higher because upper income people were doing so well, making so much money in the stock market, so the people who paid more taxes had huge income gains during the 1990s.

BLITZER: Steve Forbes, stand by. We will continue this conversation but we have the take a quick break. When we return, we'll also be taking your phone calls for Steve Forbes, Gene Sperling and Wayne Angell. LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're continuing our conversation with former Republican presidential candidate Steve Forbes, former Clinton economic adviser Gene Sperling, and chief economist for Bear Stearns, Wayne Angell.

Steve Forbes, the unemployment rate came out this past week, 4.5 percent for July. Not as bad as some economists had projected. Do you sense that this is the beginning of the end, that the economy is about to get back on track?

FORBES: I wish it was so, but I don't think it is the beginning of the end.

I think the economy is going to remain rather sluggish. You are going to see more news about layoffs. And that's why we need, I think, to enhance this tax cut, and, by the way, with Gene, the '93 Clinton tax increase did hit all income Americans, the gasoline tax went up, and, the last I looked, maybe Gene doesn't drive a car, but most Americans do.

We need tax reduction. The government's taken too much. The tax burden is too high.

BLITZER: All right. Gene, why don't you respond to that?

SPERLING: Well, you know, let's remember, we inherited a huge deficit. We had to do some tough things. And you're right, there was a 4.3 cent tax increase on gasoline, less than was done under the Bush administration, but overall, our goal was to bring down the deficit. We did put more of the burden on the top 2 percent of Americans, and our hope was that that would strengthen the economy and the stock market.

And the people that we were asking the temporary sacrifice from would benefit enormously, and that's what's happened. And what's great about '90s, unlike the '80s, was that all income groups saw their incomes raise. So everybody's income went up 10 percent.

And I think that, again, is one of the reasons why consumer spending has been stronger, because this has been following a decade where the average family did fairly well.

BLITZER: Wayne Angell, the chairman of the Federal Reserve, Alan Greenspan, this week said the rate of deterioration in the economy is slowing, and, as you know, the federal reserve board is supposed to meet August 21.

Interest rates, is it time for the fed once again to cut interest rates, seeing what's happening in the economy right now?

ANGELL: Wolf, yes, it is. It's time for the federal reserve to get back to the rapid and forceful 50 basis points at a time. Lowering the funds rate is a trial and error process. We have yet to see, through commodity price indicators or the exchange value of the dollar or the equity market, we have yet to see that the fed has succeeded in providing the needed liquidity, and thereby, we are in danger of having real estate deflation, which would really cause us another leg downturn.

BLITZER: All right. Let's take a caller from Virginia. Please go ahead with your question.

QUESTION: Good afternoon, Wolf. My question is for all three of your guests, and good afternoon to you, Mr. Forbes.

My question is this: In 2011, when the tax cut is finished and estate tax and all that, everything goes back up to where the tax rates were in January of 2000, even, are we going to have to pay all of that money back that we are getting in the tax cut now? Or is it going to be a permanent deal?

BLITZER: All right. Let's ask Steve Forbes. Go ahead, please, Mr. Forbes.

FORBES: That was one of the flaws of the tax cut, was that it was not made permanent. They got themselves tangled in crazy rules on how they score tax cuts.

And so the tax cut, you know, you lose it in 2011. The rates go back up, the death tax comes back in. They ought to make it permanent, go back to it, so people can make long-term plans and not have all of this difficult, crazy, complex uncertainty, and they also ought to get to that capital gains tax cut, because, if they want people to invest, take risks, and get this economy moving again, you've got to give people incentives to do It.

And the Bush administration had better get to it, or they're going to pay the political price for it.

BLITZER: Gene Sperling, as many Republicans point out, Bush administration officials from the president, vice president on down, they make the point that the economy began to deteriorate during the final months of the Clinton administration and that you guys, your handling of the economy deserved at least a good chunk of the blame.

SPERLING: Well, Wolf, what I always say is that I'll take all of the blame for anything wrong with the economy in the last few months if you'll give us even half the credit for the lowest unemployment in 30 years, the lowest combined unemployment and inflation in 30 years, the longest expansion in history and the best period of job growth in the history of our country.

But I think what really probably is happening here was that in the private sector, there was an overbuilding in the technology sector. And capacity has now gone from 90 percent to 67.5 percent.

I think what really matters for presidents is how they deal with the hand they were dealt. And what disturbs me with this president, is I think he was dealt the best fiscal situation in the history of our country, and in six short months, we don't have enough for Social Security reform, we don't have enough for a defense increase, and our fiscal future is suddenly looking a lot more questionable.

BLITZER: Wayne Angell, looking ahead, down the road, a lot of our viewers out there want your expertise, your advice. Is this a good time to take money from their money markets, from their savings account, and get back involved in the stock market, heavily?

ANGELL: Investors should have a long-run perspective, and it's time to have a regular commitment to equity investments, but I don't believe that investors should be out there trying to time it.

ANGELL: So I say, put a gradual amount into equities and stay with it through thick and thin and that will pay off.

BLITZER: All right Wayne Angell, Gene Sperling, Steve Forbes, always great to have all of you on our program, thanks again for sharing your insight with us.

FORBES: Thank you, Wolf.

ANGELL: Thank you.

BLITZER: And just ahead, the administration had asked the public to judge President Bush's accomplishments, not at the traditional 100 day mark, but after 180 days. Well, time's up. We'll go round the table on that with Steve Roberts, Susan Page and David Brooks when LATE EDITION continues.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Time now for our LATE EDITION roundtable. Joining me: Susan Page, Washington Bureau Chief for "USA Today," Steve Roberts, contributing editor for "U.S. News and World Report" and David Brooks, senior writer for "The Weekly Standard."

BLITZER: Steve, as you know, former President Jimmy Carter was in Washington this week with all sorts of proposals for electoral reform so that the fiasco that occurred in Florida last year won't recur. Is this something whose time has come right now?

STEVE ROBERTS, "U.S. NEWS AND WORLD REPORT": I certainly hope so. And I think it should be. There are things we know will help. We know if you put more money into more modern machines, that will help. We know that if you have a single registry of voter registry in a state, it will help. We know as Florida passed a law saying if you come to the polls, your name is not on the rolls, let someone vote anyway, and then check it later. These are things that work. Jeb Bush signed a law in Florida incorporating a lot these things. And when he signed the law, he said shame on us if we don't improve our system. That should apply to Congress and probably to his brother in the White House who has not taken the lead on this, as he should be.

BLITZER: David, Jimmy Carter went further in not only a calling for electoral reform, but basically campaign finance reform, saying that the TV networks should do their part in making sure that these candidates don't have to spend all this money, as a result don't have to raise this money. Listen to what President Carter had to say. (BEGIN VIDEO CLIP)

PRESIDENT CARTER: The networks use airwaves, at practically no cost to themselves, and with enormous profit. We feel that the networks and others should be just as patriotic in making some small sacrifice as the people of America, I believe, are eager to make to have a better electoral system.

(END VIDEO CLIP)

BLITZER: Has that time come as well?

DAVID BROOKS, "THE WEEKLY STANDARD": The more political punditry, the better. That's my rule. He also said networks have to not call the election, that was one of the recommendations, not call the election before all the polls close nationwide. Have you ever heard of the Internet? I mean, last elections, the exit poll results were up in the middle of the afternoon.

I think there two good things to come out of this: One, the national holiday on election day, which I think is a good idea. Voting is really important, it's a part of citizenship, having the day off, have parade, a little rum vote, that would be fine.

And second, and this is the crucial argument, is whether the states are going to control the elections or whether there'll be a national federal election. And I think state control with some federal money is the way to go.

BLITZER: What about that, Susan? All these proposals, all these ideas, nobody can say it's a bad idea to avoid electoral reform, but on the specifics, are these likely to be enacted? The ones recommended by this Jimmy Carter panel?

SUSAN PAGE, "USA TODAY": Well, money is one of the keys. If you talk to a local official, it's not that they're against having updated voting machines. It's if they have to choose between paving a road that needs to be paved, or buying a new kind of voting machine, which will they do?

Or fixing a sewer or improving the schools? I mean these are hard choices for localities to make. So, if we think it's a national priority, then even if it continues to be a state system, the federal government needs to offer some money to bring about upgrading some of the things that clearly are going to go awry in the next election if they're not fixed.

ROBERTS: And there's also a whole other dimension to this. That's the legal dimension. If you take the Supreme Court decision in Gore versus Bush seriously, it said it was illegal to count votes differently in different counties. That was the basis of it. If it's illegal to count votes differently, it has to be illegal to cast votes differently. And I think there are court cases making their way that are going to force states to change their system because the current system has got to be illegal under the Supreme Court decision. BLITZER: David, the president went off on his vacation in beautiful Crawford, Texas. He's there right now. Before he left, he and his aides were thrilled, crowing as a result of the last-minute legislative victories on energy, patients' bill of rights in the House of Representatives. Even the "New York Times," which has often been critical of President Bush, wrote this, quote, "But even Mr. Bush's opponents would have to acknowledge that he is on a winning streak, however flawed the legislative results. He has shown far more skill in handling Congress than many people expected."

BROOKS: You know, after a setback, most presidents use the bully pulpit to go speechifying. After the Jeffords setback, after his defection, Bush went into the trenches, negotiating in Congress, going up to Capitol Hill personally, lobbying key people in a nitty-gritty sort of way. And it was all extremely successful. What he has to do for the next six months is the bully pulpit. People really still don't have a sense of what he is and he hasn't defined compassionate conservatism. So, it seems sometimes on more defense than he really is. He has to get out there and actually make an argument for something, which has sort of been the problem, great in the trenches, not so great on the airwaves.

BLITZER: Well, Andy Card seemed to suggest he would do that in the next six months.

PAGE: Well, they do have this strategy of trying to speak out more, be in more informal settings, talk more about values. But, I do want to get back to one of David's very cogent points which was this, these victories that bush had at the end of this, before this recess. It's interesting to look at the victory on ANWR, and drilling in ANWR.

BLITZER: ANWR -- the Arctic National Wildlife Refuge in Alaska.

PAGE: It was interesting because it wasn't a fight the White House had to have. Everyone thought they were going to lose on this. We still think they will lose in the Senate. But they chose to make a battle for it in the House. It makes it a real victory that they chose to fight on (UNINTELLIGIBLE) 34 members of Congress who had voted to oppose drilling in national monument areas turned around and voted in favor in this Arctic refuge area, a clear victory (UNINTELLIGIBLE).

Now, let's not understate the victory because it's got a tough time ahead on a patients' bill of rights and an energy bill that comes to the Senate, but this is a definite victory this week.

BLITZER: All right, we're going to continue this conversation. We have a lot more to talk about. Let's take a quick break.

(COMMERCIAL BREAK)

BLITZER: Welcome back to our roundtable. Steve, the latest ABC News/"Washington Post" poll released this past week had President Bush's job approval rating at 59 percent, disapproval, 38 percent. Those are pretty good numbers for the president.

ROBERTS: Pretty good numbers.

But there is another number in that poll that was more, more bad news than good news. People were asked: Do you understand, does the president understand people like you? 54 percent said no. That's a damaging number.

And that relates to what David was saying. That, you know, Bill Clinton had an ability, for all of his sins, to connect with people on that level. And, in fact, that's fascinating, you hear Bush people talking privately, we have to be more like Clinton, in the sense that we have to use the bully pulpit, we have to connect with people more directly, we have to identify with their problems.

And that poll also showed that, on priorities, Americans are out of step. They prefer government services to the tax cut. They prefer the energy -- the environment to the energy.

So there's some bad news in that poll.

BLITZER: Is the Bush White House looking at the Clinton White House for some guidance?

(LAUGHTER)

BROOKS: No, they know their man can't do what Clinton does, and he can do things that Clinton couldn't do. Listen, they're not going to put him in sort of free-lance wonkery situations where he's talking about subsection C of the patients' bill of rights.

They're going to try to do something which I think, frankly, is a mistake, have a more relaxed atmosphere.

There was a horrible story coming out of the "Washington Post" last Sunday that he was going to have instant e-mail messaging from grandparents to grandkids. This is an idea so small it's an insult to the memory of Dick Morris. I mean, they should just get rid of that kind of stuff.

PAGE: Dick Morris is not dead.

BROOKS: No, but he should be.

(LAUGHTER)

BLITZER: He's just joking.

BROOKS: But what they should do is what they did in the very beginning of the campaign, which was a series of substantive speeches which he gave and really defined himself as a new kind of Republican.

BLITZER: But, Susan, the White House aides acknowledge, they say that the president is not very good in delivering these kinds of written speeches, reading from a teleprompter, that he's much better off the cuff, informally relating his own experiences to the American people. PAGE: Well, there are two issues. One is, how do you deliver the message you're trying to deliver ? But the other is what is the content of that message. And it is true that what the White House seems to be talking about now is small-bore things that are poll- tested, and you know, they're going to be popular, things like school uniforms or e-mailing your grandmother, which I guess we all should be doing.

You know, that's something that the Bush people ridiculed last year, about the Clinton White House. They said this president was going to talk -- President Bush would talk about big issues like changing Social Security in fundamental ways.

And so I do think there's some risk, if he seems to be moving toward things that are popular and small-bore, as opposed to being more visionary, because he did have a very kind of big-picture plan that he laid out last year in the campaign.

ROBERTS: Well, you talked, Susan, about his limits on television. This is not a president who inspires people very much, he's not a president who intimidates people very much.

BLITZER: Yes, but, Steve, he did get a lot of his way. Look, the "Washington Post" quoted several sources as saying that, when he was in that eyeball-to-eyeball negotiation on the patients' bill of rights compromise with Charlie Norwood, the Republican from Georgia, the president is quoted as having said, "So now that I've kissed your rear end, what do I have to do to get a deal?" He was down in the trenches.

ROBERTS: Fair enough, but that was Charlie Norwood, a conservative Republican from Georgia. This was not Ted Kennedy.

Look, every Republican in Congress, particularly in the House, has a vested interest in George Bush's success, because, if he's powerful, they're more powerful. This compromise with Norwood was not about the substance of the bill. It was going to Norwood and saying, "Look, you want to be the agent of George Bush's undoing six months into his presidency? You owe it to us. You're a loyal Republican." Fair enough. But the real problems are going to come in the Democratic Senate.

And let's not read too much into the being able to convince a conservative Republican from Georgia to be with a Republican president.

BLITZER: All right.

Let's move on. I want to bring up another subject, Al Gore. He's sort of been invisible over these past six months, but all of a sudden he pops up, there's a picture of him taken in Spain, David. I think we have a shot of Al Gore. Look at that facial hair on Al Gore at some conference in Spain.

What's going on?

BROOKS: I like the invisible Al Gore.

I'm actually outraged that he plagiarized your beard, that he saw you on CNN International and thought, "I've got to get me one of those." I'm just outraged.

BLITZER: Mine is much...

BROOKS: Fuller.

BLITZER: Yes -- no, no, no, mine's trimmed.

(LAUGHTER)

BLITZER: His is a little wild.

Is this -- is he going to step back in the United States with a beard?

BROOKS: Yes, he -- what's going to be interesting -- no, he's going to shave the beard, because we don't -- there is no elected official with a beard, practically. There are no...

(CROSSTALK)

BROOKS: Well, there are no Republicans with beards. This is how you can tell Republicans from Democrats. Republicans, no beards.

Maybe a moustache.

BLITZER: David Bonior has a beard.

BROOKS: Al Gore...

(CROSSTALK)

BLITZER: Is he coming back?

PAGE: You saw two Democrats coming back this week. You saw Bill Clinton coming back, and Al Gore. And I think you're going to see a certain rivalry emerging about who speaks for the Democratic Party, who is the national spokesman for the Democratic Party. Is it Al Gore or Bill Clinton or Hillary Clinton or Tom Daschle? And I think there are a lot of people who would like to claim that title.

BLITZER: And Bill Clinton did get a thunderous reception in Harlem when he opened up his office.

ROBERTS: Look, as I said earlier, Bill Clinton, enormous flaws and sins which I talked about around this table for a long time, but he has a vitality, he has a magnetism, he has an ability to connect with people that we saw in Harlem. George Bush doesn't have it, and Al Gore didn't have it, frankly. Both of them suffered from comparisons, in terms of those personal qualities Bill Clinton has.

We have -- he's 54 years old. He's not going to go quietly into retirement. BLITZER: All right. Steve Roberts, Susan Page, David Brooks -- David Brooks, we have to announce to our viewers, and they're going to be very disappointed, saddened when they hear this, David Brooks is going to be leaving LATE EDITION to move on -- I guess you can spend more time with your kids and your family.

BROOKS: Everyone says that when they quit, but for me it's really true.

(LAUGHTER)

ROBERTS: It is. It's really true.

BLITZER: But you should know you're always welcome on our program, and we hope you'll join us frequently, even though you'll be doing other things on Sunday afternoons.

BROOKS: OK. Thank you.

BLITZER: David Brooks, thanks for joining us. You've been a welcome addition, and we'll have you back.

Up next, Bruce Morton's "Last Word."

(BEGIN VIDEO CLIP)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): The new man has been on the job six months now, gone off on his first summer vacation. How's he doing?

(END VIDEO CLIP)

BLITZER: Some wins and some losses for the president, but what's the final score?

(COMMERCIAL BREAK)

BLITZER: Welcome back. Now time for Bruce Morton's "Last Word" on the grading of a president.

(BEGIN VIDEOTAPE)

MORTON (voice-over): The new man has been on the job six months now, gone off on his first Summer vacation. How's he doing? Some wins and some losses, of course. Got pretty much the tax cut he wanted and more quickly than many had expected. Gave up parts of his education plans, school vouchers, for instance. And the Senate and House passed differing bills but he seems likely to get much of what he wanted, some kind of testing to tell the cheating schools from failing one's, at least.

Patients' bill of rights, Senate and House don't exactly agree but the president may well get a bill he can sign. The House passed his energy bill, big tax breaks and incentives for the energy industry and permission to open a chunk of the Alaska National Wildlife Refuge for oil drilling. "The New York Times" called this a crushing defeat for environmentalist, still Mr. Bush wanted to drill on 1.5 million acres, The House voted to open just 2,000 acres and even that may well lose in the Senate.

The House voted against requiring better gas mileage for those mammoth SUV's, put the pedal to the metal, baby.

Losses? Well, next term he'll know better than to ask Congress to allow more arsenic in the water.

(BEGIN VIDEO CLIP)

UNIDENTIFIED CHILD: May I please have some more arsenic in my water, mommy?

(END VIDEO CLIP)

MORTON: That's the kind of thing your opponent can use next election. You voted for how much more arsenic, Congressman? Why was that a good idea?

He lost on letting Mexican trucks drive U.S. highways, and his nominee to head the Consumer Product Safety Commission lost in committee, but neither of those defeats is necessarily permanent.

And the most interesting thing he's done? Talked to Vladimir Putin without a doubt. They agreed reports said that changes in the world require discussions about reducing nuclear arsenals and incorporating limited missile defense into a new strategic framework.

Will that work? Will missile defense work? We don't know. But the old Cold War world has changed. The U.S. and Russia don't have to be enemies, and no treaty, not even the ABM treaty lasts forever.

Bush and Putin, the capitalist and the old KGB man are surely right to want to talk about all this however it comes out.

So, some wins, some losses and an interesting question mark after six months on the job. I'll bet the ranch looks pretty good to him.

I'm Bruce Morton.

(END VIDEOTAPE)

BLITZER: Thanks Bruce. Now it's time for you to have the "Last Word."

On the debate over embryonic stem cell research, James from Kansas City writes this: "This is just another issue for politicians to push the envelop on, it will never be solved and neither party will ever be content."

After watching last week's interview with the National Security Adviser Condoleezza Rice, Steve from Denmark writes: "The Bush administration has done an excellent job in instilling confidence into what had been a skeptical Europe. Dr. Rice projected the skills and diplomacy that it takes to deal with this very complicated high tech, high stakes world."

But Andrew from Caribou, Maine says: "President Bush has shown the American people that he made the G8 a G7 with him as the arbitrary leader by pulling out of three major GA policies. I doubt any other G7 nation will tolerate this behavior. Neither will the American people."

As always, we welcome your comments. You can e-mail us at LATE EDITION at CNN.com and don't forget to sign up for my free weekly e- mail, CNN.com/e-mail.

Just ahead, we'll show you what's on the cover of this week's major news magazines. Stay with us.

(COMMERCIAL BREAK)

BLITZER: And now a look at what's on the cover of this week's major news magazines. "TIME" magazine proclaims "Camelot Lives," the Kennedy brand is back: Politics, public service, dysfunction, it's all in the family" on the cover.

BLITZER: "Newsweek" has the "Truth About Fertility: Why more doctors are warning that science can't beat the biological clock," on the cover.

And on the cover of "U.S. News and World Report": "Missing: How Police Crack Their Toughest Cases."

And that's your LATE EDITION for Sunday, August 5. Please join us again next Sunday and every Sunday at noon Eastern for the last word in Sunday talk. And if you missed any of today's program, you can tune in tonight, 7:00 p.m. Eastern, for our one-hour replay of LATE EDITION.

I'll see you tomorrow tonight at 8:00 p.m. Eastern on "WOLF BLITZER REPORTS." Until then, thanks very much for watching, enjoy the rest of your weekend. I'm Wolf Blitzer in Washington.

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