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CNN Late Edition with Wolf Blitzer

Interview With Condoleezza Rice; Biden, Hagel Discuss U.S. Policy in Middle East; Thornburgh, Black Debate Pledge of Allegiance Ruling

Aired June 30, 2002 - 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, 9 a.m. in Los Angeles, 1 p.m. in Rio de Janeiro, where they're celebrating the World Cup championship, and 7 p.m. in Jerusalem. Wherever you're watching from around the world, thanks for joining us for LATE EDITION.

We'll get to our interview with President Bush's national security adviser, Condoleezza Rice, in just a few minutes, but first, a news alert.

(NEWSBREAK)

BLITZER: Let's get some more now on the U.S. policy toward the situation in the Middle East.

Earlier today, I spoke with President Bush's national security adviser Condoleezza Rice about the just-announced proposals, the U.S. war on terror and more.

(BEGIN VIDEOTAPE)

BLITZER: Dr. Rice, thanks once again for joining us on LATE EDITION.

The president wants a new Palestinian leadership. Who are the candidates, who are the alternatives to Yasser Arafat?

CONDOLEEZZA RICE, NATIONAL SECURITY ADVISER: The president is not trying to determine the character of the new Palestinian leadership, its membership. He's only laying out what we consider to be the facts, which is that, if you look at the record of the current Palestinian leadership, it's very clear that it's been unwilling or unable to deal with the terrorism in its midst, it has been unwilling and unable to do something about the lives of the Palestinian people, it has been corrupt in its financial dealings, and that can't be the basis of institutions for a state moving forward.

And so the president has called for what we Americans and all democratic societies believe in, which is to have democratic elections.

And, by the way, free elections cannot begin on the day of an election. Of course there has to be time for opposition to mobilize, people have to be able to hear the message of those who might present a different choice.

But the president is trusting here in the institutions in which democratic states believe. You have to have new leadership emerge. Not trying to name that new leadership.

BLITZER: So the bottom line is, the president has lost total confidence in Yasser Arafat?

RICE: Well, I think it's pretty clear that the president has been disappointed for a long time in the Palestinian leadership, as it's currently constituted.

And we've certainly tried. There have been numerous efforts to get this Palestinian leadership to take on its responsibilities to deal with terrorism. Hasn't worked. It's time for the Palestinian people to find leadership that can do that.

BLITZER: And Yasser Arafat -- there will be no more meetings between U.S. officials and Yasser Arafat?

RICE: Well, we are not going to focus here on this one man. You know, the very fact that his name comes up so much shows the problem with the Palestinian political landscape.

BLITZER: But he was elected by the Palestinian leaders years ago.

RICE: But the very fact that his name is the only one mentioned shows the problem with the Palestinian political landscape. You need institutions that constrain the power of one person. That's why the president talked about the separation of powers. It's why he talked about a Palestinian legislative council that actually has power of an independent judiciary.

In this day and age, when democracy is coming around the world, the Palestinian people deserve better than to have their fate resting in the hand of one mind.

BLITZER: I just want to be precise. If Secretary of State Colin Powell or other high-ranking U.S. officials return to the Middle East, as of right now, they will not meet with Yasser Arafat?

RICE: Well, Secretary Powell told Chairman Arafat, back after the Passover massacre, that this could be his last meeting with him if things did not change. And I think that that word stands for itself.

There are plenty of Palestinian leaders to work with. We've not broken relations with the Palestinian Authority. There are ways to carry out business with them as we move forward.

But the key here is to -- is to look forward and to begin to develop leadership that respects its Israeli neighbor, that respects the war on terrorism and, perhaps most importantly, respects the needs of its own people.

BLITZER: Let's go through some other Palestinian leaders and get your feedback on what you think about them. There have been some names floated out there as possible alternatives to Yasser Arafat. And we'll put some of them on the screen.

Abu Ala, his real name is Ahmed Qureia, speaker of the Palestinian parliament. Abu Mazen, also known as Mahmoud Abbas, that's his real name, one of the top deputies in the PLO. Marwan Barghouti, he is a West Bank leader of Fatah. He is right now in an Israeli prison. Jibril Rajoub, head of the preventive security forces on the West Bank. Mohammed Dahlan, he was the head of the preventive security forces in Gaza, he is now an adviser to Yasser Arafat. Sheik Ahmed Yassin, the spiritual leader of Hamas. He is in Gaza.

Are any of those individuals acceptable to the United States?

RICE: We're not going to try and determine what the new leadership should be. There are a lot of names there. There are other names as well, people within the Palestinian reform movement that have been trying for a long time to get the ear of the international community about the need for reform and democratization of the Palestinian political landscape.

So we're not going to try and choose leaders. That's what elections do.

But the president was just putting forward a fact, which is that until there is a changed dynamic in the situation in the Middle East, until there is a leadership that will resolutely fight terror, deal with the needs of its people and be a negotiating partner for Israel, it's not going to be possible to move forward.

BLITZER: Who are the other names that you're thinking that are out there? Give us a couple of them.

RICE: Well, I -- again, Wolf, I am not going to try and to promote particular people within the Palestinian leadership. That would be inappropriate for the United States. People will emerge.

But you have to have institutions that allow people to emerge. You have to have a political process that allows people to emerge. Opposition has to be able to form. It's not a secret how one democratizes and how one runs a democratic process. It's high time that the international community stopped focusing on one man and said that the Palestinian people deserve what we've been demanding for people around the world.

BLITZER: What if someone more radical than Yasser Arafat -- and we put one of them on the screen, Sheik Ahmed Yassin, the spiritual leader of Hamas -- what if someone like that is elected in free and democratic elections as the leader of the Palestinians, what do you do then?

RICE: Well, the president's made clear that we respect democratic processes. But he also has sounded some faith in the Palestinian people for wanting to change their future here.

It's very often talked about, the radicalization of the Palestinian people. But it is not mentioned so often that more than 55 Palestinian intellectuals signed an editorial saying suicide bombing has got to stop, that it's killing the future of the Palestinian people. That's absolutely right.

And the Israelis have responsibilities here, because Israel has a stake in the emergence of a democratic Palestinian state that can live side by side in peace with them.

So we trust that the Palestinian people, given a chance, will probably do what people around the world do. When they're given a choice between freedom and tyranny, they choose freedom. When they're given a chance to make lives better for their children, they choose to make life better for their children.

And if the process is right, and if the institutions are built, and if we do what we've done around the world in promoting democracy, we believe the Palestinian people will choose a new future.

Now, the consequence of choosing leadership that continues to cavort with terror and that will not take on the process of dismantling terror, is that we will not be able to move forward. And that's what the president was saying.

BLITZER: Will Secretary of State Powell return to the region any time soon?

RICE: I'm certain that, in time, he will. We expect that the secretary will be talking with his colleagues, probably in the quartet, and also among the Arabs, very shortly here. I think whether that is here or in some other place or in the region is still to be determined.

But the secretary is now seized with going out and making certain that we move forward on the president's agenda. We do not intend to stand still. There is an active agenda in helping the Palestinian people reform. The international community needs to get mobilized behind Palestinian reform.

It's not a secret how to do this. It's been done in Afghanistan, it's been done in East Timor. The building of institutions toward statehood is something that's well understood in international politics.

BLITZER: You're speaking about the quartet, you mean the United Nations...

RICE: Yes.

BLITZER: ... the European Union, the Russians?

RICE: The U.N. and the Russians. That's right.

BLITZER: Will they get together and have this international conference that was so widely anticipated only a few weeks ago?

RICE: Well, as the secretary said himself about the idea of this meeting, conditions on the ground changed pretty dramatically from the time that we were expecting to try to organize a summer conference and now. And so we'll have to see where that meeting fits in the plans for moving forward.

But the secretary's engagement in this has already begun and will intensify over the next few days.

BLITZER: So -- and right now, the president made no mention of an international conference in his speech last Monday. What should we make of that?

RICE: We all felt, and in fact it was Secretary Powell himself who was concerned about raising expectations that a meeting was going to take place immediately, because as he said, conditions, given the suicide bombings and the increased violence in the area, conditions had changed enough that we needed to think about the timing of such an international meeting.

We will think about the timing of an international meeting, but it was just a matter of recognizing that circumstances on the ground had changed a lot from the time that we first contemplated having that meeting.

BLITZER: In the bureaucratic politics leading into the speech, the widely held assumption out there is that Secretary Powell lost because he was much more inclined to give Arafat more of an opportunity, but Rumsfeld and Cheney, perhaps you, others won in getting the heart and mind of the president in a more, let's say, describe it as more pro-Israeli position?

RICE: Right. It's typical, Wolf, that everybody assumes that there is -- that is all a zero-sum game. This is an administration that tries to solve problems and tries to solve problems and put out the truth and speak from principles and values.

It was Secretary Powell who told Yasser Arafat when he met with him shortly after the Passover massacre in April that this could be his last meeting with him if we didn't see a change in the strategic direction of the Palestinian leadership.

Secretary Powell has tried harder than anybody else to work with Chairman Arafat. But I might mention that President Bush himself talked twice to Chairman Arafat.

If you remember, there was an offer for the vice president to meet with Chairman Arafat if he would just meet some simple conditions. He could never manage to get to that place where he was resolutely fighting terror.

And so, everybody who tried very hard finally said, it's just time to move on. We're not going to move forward until we can get new leadership -- through democratic means, elections -- to move forward.

BLITZER: In the end, you were convinced that Yasser Arafat personally was not only endorsing but supporting suicide bombing attempts against the Israelis through his own Al-Aqsa Martyrs Brigade, which is part of Fatah. Is that -- was that your bottom-line conclusion?

RICE: Well, all you had to do was put together the chain of events which was that Al-Aqsa Brigade clearly was a part of the Palestinian Authority. It reported to him. It was created by the Palestinian Authority. And Al-Aqsa Brigade was out there claiming responsibility for suicide bombings. Something was wrong with that picture.

And eventually you had to say, this was not even terrorist who -- with whom the association with the Palestinian Authority was looser. This was a very close association between the Al-Aqsa Brigade and the Palestinian Authority. It simply can't be that you can have a leader or leaders who talk about peace on the one hand and then support the Al-Aqsa Brigade on the other.

BLITZER: In the back-to-back suicide bombings in Jerusalem a week or so ago, the Israelis then came to you with hard evidence that they claimed showed that Arafat was directly linked to payments to the Al-Aqsa Brigade that claimed credit for that second suicide bombing in Jerusalem. Is that what happened?

RICE: Well, we did receive that report but this had been a concern of the administration for quite a long time.

If you remember all the way back to the Karine A, the ship that was bringing arms from Iran into the Palestinian territory where, first, Chairman Arafat did not acknowledge that there was a problem here and then, later on, acknowledged it, yes, there was a problem.

This problem with terrorism, this tendency to both support terrorism and therefore not to be willing to really take it on, that's been there for a long time. This was just one more piece of information -- damaging information, but just one more piece of information.

BLITZER: So going back to the president's definition of a terrorist after September 11, if you aide or harbor terrorists, you're a terrorist. Is Yasser Arafat a terrorist?

RICE: Wolf, we've made very clear our views of the current Palestinian leadership and Palestinian Authority and their relationships with terrorism. It doesn't get us anywhere to go further than that.

But the reason that the president has said what he said, which is that there has to be a new dynamic in the Middle East that begins with new institutions which can check the power of one person, and with new leadership, the reason that he said that is that you can't have somebody who is not resolute in fighting terror.

BLITZER: But you don't want to say flatly that he is a terrorist.

RICE: We just don't see any benefit to it.

BLITZER: You saw that picture, the whole saw that alarming picture of that little baby dressed up as a suicide bomber. The Israelis say they found it in the home of a militant in Hebron. The Palestinians say, well, it was just a joke. It may even be a forgery, some Palestinians are saying.

What do you know about this picture, specifically?

RICE: Well, I don't know very much about that picture. But I would say that it's not a joking matter, given the horrors of suicide bombings and what it's meant for innocent civilians. It's a very sad thing if anyone would dress a baby, an innocent baby, up in -- like a suicide bomber. It's a sad thing when a 17-year-old Palestinian girl becomes a suicide bomber to kill an 18-year-old Israeli girl. It means that something has gone really wrong in the Middle East, where the humanity of all is not really understood and felt.

And so the president, in really laying out a speech that talked about his faith in the people of the region to want to find a different way, the president is betting that humanity can be reborn again if we can simply put in place the right institutions.

(END VIDEOTAPE)

BLITZER: We have to take a quick break. More of my interview with Condoleeza Rice when we return.

One quick correction, we mistakenly noted that President Bush had met twice with Yasser Arafat. President Bush has never met with Yasser Arafat. He did speak on the phone twice with Yasser Arafat, but that's the extent of the contacts between President Bush and Yasser Arafat.

When we return, we'll ask Condoleezza Rice what the United States wants Israel to do to move toward peace. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. We return now to my interview with President Bush's national security adviser, Condoleezza Rice.

(BEGIN VIDEOTAPE)

BLITZER: It's been lost in all of the pressure that the administration was putting on the Palestinians and Arafat, was the challenges that the president also made to the Israeli government, and he made several specific ones. Let's briefly go through some of them.

Dismantling, freezing Jewish settlements on the West Bank. Precisely how far do you want the Israeli government to go right now on the settlement front?

RICE: Well, we've been very clear that we think the continued active settlement activity is incompatible with getting to a lasting peace. And the president continually asks the Israelis and reminds them that, whatever they do, there needs to be a path for peace. The Israelis have a greater stake in the creation of a stable democratic Palestinian state than anybody else, other than the Palestinians themselves. And so that speech, the president's speech, says to the Israelis, as this movement begins, we expect Israel to respond in a way that shows that Israel understands that it has that stake.

Perhaps the thing the Israelis could do most quickly and most importantly,...

BLITZER: Right now.

RICE: ... very, very shortly, as the situation improves -- right now the security situation needs to improve. But as it improves, the Israelis need to restore freedom of movement for the Palestinian people.

BLITZER: Allow Palestinian workers to go back to jobs in Israel?

RICE: Allow Palestinian people to go back to jobs in Israel, because that is what is driving unemployment rates up in the Palestinian territories.

Eventually, as the security situation improves and as reform moves forward, the Israelis are going to have to allow freedom of movement, so that political life can resume and you can begin to do the kinds of things that you need to build free elections in the future.

BLITZER: Right now, 700,000 Palestinians are living under Israeli military curfew. They can't even leave their homes right now. Is that acceptable to the Bush administration?

RICE: The problem is that the Israelis have experienced a series of very horrific acts against them that are coming out of these territories. They need a partner that will do something to dismantle that terrorist threat, so that the IDF isn't trying to simply defend by itself. It needs security cooperation, and we're going to work toward security cooperation.

But the Israelis do have a stake in getting to the place that their Palestinian neighbors are treated in a way in which it isn't a daily humiliation.

And the president's been clear about that, he was clear in the April 4th speech, he's been clear in his discussions, both privately and publicly with the Israelis that the restoration of freedom of movement should be a high priority.

We understand Israel's right to defend itself, and we've been supportive of that. But the Palestinian people as a whole have got to find a way to get a better life, and that begins with economic activity.

BLITZER: Is it a good idea for the Israelis to build a wall or a fence that would separate Israel from these populated areas, Palestinian-populated areas of the West Bank?

RICE: Well, the best outcome here would be to get a process under way that begins to build some confidence between the Israelis and the Palestinians that they can live next to each other.

And we believe very strongly that the way to get going on that is through reform and improvements in the security situation. Checkpoints are going to exist; clearly, security measures are going to exist for some time. But we hope that everybody will look past anything of that kind to a better way forward, rather than trying to wall off Israel from the Palestinians.

BLITZER: Assuming there is a new Palestinian leadership, and that leadership makes the kinds of gestures, concessions that you want on terrorism and on democracy and reforms within the Palestinian community, do you believe that the current prime minister of Israel, Ariel Sharon, is capable of making the kinds of concessions that the U.S. would want, to return to basically the '67 lines, concessions on Jerusalem, concessions on allowing Palestinian refugees to return to homes inside Israel proper? Would Sharon be able to make those kinds of concessions?

RICE: Well, these so-called final status issues that you talked about, what the borders should be -- and let me be very clear, we have said that the borders have to be negotiated between the parties based on Resolutions 242 and 338 of the U.N. Jerusalem will need a solution, it's a very difficult problem. Right of return will have to be addressed.

But those final status issues require a good negotiating partner, somebody who's committed to peace and opposed to terror. When that leadership emerges, and as confidence is built between the two sides, we fully believe that a leader of the Israeli people will want to engage a Palestinian partner in building that future.

Clearly, the Israeli people will want to engage a partner in building that future.

And Israel is a democracy. The Israeli government will hear the voices of the Israeli people to build that future.

And so we have confidence that the steps forward here that need to be taken were outlined by the president. Again, not to simply say "Build your reformed institutions and new elections and we'll wait until you've done it," but to really engage with the Palestinian people through international organizations, through the European Union, through the World Bank.

There are many people and organizations internationally who want to help the Palestinian people get there. And we think that when they get there -- or as they get there, their lives will improve dramatically.

BLITZER: And Sharon is the man potentially who could make those kinds of concessions? RICE: Sharon is the democratically elected prime minister of Israel. He will hear the voices of his people as the opportunities for a peace between the Palestinians and the Israelis emerges.

BLITZER: While I have you, a few brief questions on the war on terror. A report today that al Qaeda is linking up with Hezbollah, the group in Lebanon, Iranian-backed, Syrian-backed, and forming this informal alliance to go after U.S. targets. What do you know about that?

RICE: Well, we are very concerned, and have been concerned for some time, that the network of terrorists is -- that it ought to be understood as a network, that it should not be understood as individual terrorist organizations.

Very often, even though their aims may appear to conflict, at some level they seem to be taking advantage of modern communications, of sources of funding, of training, to present something of a united front toward American interests. And that is deeply concerning.

It is one of the reasons that you cannot allow the infiltration of Hezbollah and Iranian influence into the Middle East, into the West Bank, for instance, because that would be yet another foothold of these terrorist organizations that are linking up, however loosely, to try and undermine American interests.

It is another reason that you need a leadership in the Palestinian territories who is willing to fight not just local terrorism, but the infiltration of an organization like Hezbollah and Iranian influence, which was demonstrated in Karine A. You have got to have somebody to fight that.

So, yes, this is concerning. But the good news is that we have now a worldwide effort to deal with their communications, to deal with their terrorist financing, to try and assault this network with partners around the world.

BLITZER: A report in "TIME" magazine today that Abu Zubaydah, one of the high-ranking al Qaeda operatives who is now under U.S. custody someplace outside of the United States, that U.S. authorities found a letter from Osama bin Laden written to Abu Zubaydah at the end of December some time, suggesting that, at least then, Osama bin Laden was alive.

RICE: I think in everything I've said that nothing changes in what we have said several times. We don't know whether Osama bin Laden is alive or dead. We do know that he is not commanding this organization in the way that he once did, because their home base is gone in Afghanistan.

Yes, we're continuing to fight pockets of al Qaeda and pockets of Taliban inside and outside the country. But we've said for a very long time that we don't have any reason to believe that he is dead, and we have no evidence that he's dead or alive.

BLITZER: What about the Fourth of July? How worried should Americans be that there could be a terror attack on or around the Fourth of July?

RICE: Well, the Fourth of July is important as a symbolic day, of course. And the president would ask of Americans what he's been asking all along, which is that they remain vigilant, that they report anything that looks suspicious. A lot of preparations are being made, particularly by my colleague Tom Ridge and his colleagues, to try and secure obvious sites and the like.

But the fact is that we all want to enjoy the Fourth of July. We want to celebrate the nation's birthday. We should be aware that it's the first July 4th since September 11 and try to be vigilant.

BLITZER: Right now, the country is still on this yellow code alert, sort of in the middle ground. Would it be appropriate to move up one notch to orange?

RICE: Well, the administration looks constantly at the threat level. And right now, we believe that everything that's being done that should be done to try and make July Fourth as safe as possible.

The administration is working on a daily basis, I mean, there are several meetings every day to look at exactly the issue of how to deal with July Fourth. Local law enforcement has been brought in around the country.

And so I think we believe we're doing everything that we can, but again, Americans need to be vigilant.

BLITZER: Before I let you go, the president's health, he had a colonoscopy yesterday. You spent time with him yesterday afterwards. How's he doing?

RICE: He's doing just great. We had lunch. He was in full appetite and he went for a long walk. And I talked to him again this morning. He's doing just fine.

BLITZER: No more polyps, he's free and clear for at least another five years?

RICE: He is. And, you know, he's somebody who believes very strongly in a good, healthful regime and also in taking his doctor's advice. But we're all very glad that he's doing so well.

BLITZER: All right. We're glad he's doing well as well.

Dr. Condoleezza Rice, thanks for joining us.

RICE: Thank you very much.

(END VIDEOTAPE)

BLITZER: And in the next hour of LATE EDITION, we'll get Israeli and Palestinian reaction.

But just ahead, the view from Capitol Hill. Is the Bush administration's call for Yasser Arafat to step aside the right path to peace? We'll talk with two influential members of the Senate Foreign Relations Committee: the chairman, Joe Biden of Delaware, and Republican Chuck Hagel of Nebraska.

LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Peace requires a new and different Palestinian leadership, so that a Palestinian state can be born. I call on the Palestinian people to elect new leaders, leaders not compromised by terror.

(END VIDEO CLIP)

BLITZER: President Bush this past week, laying out his conditions for the establishment of a Palestinian state.

Welcome back to LATE EDITION.

We're joined now by two leading members of the United States Senate Foreign Relations Committee: In his home state of Delaware, the committee's chairman, Joe Biden, and here in Washington, Republican Chuck Hagel of Nebraska.

Senators, welcome back to LATE EDITION.

Senator Biden, I'll begin with you. You heard Condoleezza Rice basically say that Yasser Arafat had his chance, he missed that opportunity, now he's effectively a spent force. Is that a wise stance for the United States to take?

SEN. JOSEPH BIDEN (D), DELAWARE: Well, let me say -- I did hear her say it -- I think the wise stance for the United States to take is there has to be leadership other than an in addition to Yasser Arafat.

And the key here, it seems to me, Wolf, is this new Palestinian charter and who's going to be part of a new Palestinian state. And right now, that's being done, the charter's being drafted. And that charter is going to have a prime minister, is going to have a president, is going to have members of a legislative body. And the Europeans and the Saudis and the Arabs have to be in on the deal and make sure that that charter is presented where we all stand by it.

If that's the case, I don't care as much whether Arafat is in a ceremonial position of the president of a country, as long as there's a prime minister and access for other leadership.

So I'd change it slightly. I think there's a need for -- it'd be wonderful if the Palestinian people, who don't like Arafat much anyway based on the polls, got rid of him. But I don't care so much about him being there as long as he's one of several leaders in a democracy, not one leader in a dictatorship.

BLITZER: But when you say the Palestinian people, Senator Biden, don't like Yasser Arafat according to the polls, all the polls that I've seen over the years, and even recently, is that Arafat is still by far the most popular Palestinian leader out there.

BIDEN: Well, I think that's true, but here's the deal. If you look at the same polls, they show that two-thirds of the people think he's corrupt, his government. Two-thirds of the people think he's inept. Two-thirds of the people think that he's not going to lead them to peace.

And you have a situation, Wolf, where other Palestinians -- and we met with a group of reformers this week, and my staff has been meeting with Palestinian reform groups who represent individuals within the West Bank and Gaza. And they're afraid to come forward when the only choice is choosing between Arafat and Sharon.

But if they're able to actually have an election, where someone stands for the office of -- runs for prime minister, someone runs for the speaker of their version of a parliament, someone runs for president, then they can legitimately, without fear of being viewed as being disloyal to the Palestinian cause, give the Palestinian people another alternative besides Arafat, additional alternatives besides Arafat. And that's what that's about.

But the key here is, the key here is, the Saudis, the Saudis who pay the bills, the Europeans who underpin Arafat, have to say they want a genuine reform of the Authority. If they do not do that, then we have a problem.

BLITZER: Senator Hagel, until a few days ago, really, maybe a few weeks ago, top U.S. officials, including the Secretary of State Colin Powell, the White House press secretary Ari Fleischer, were all saying that Yasser Arafat was the leader of the Palestinians and the U.S. had no choice but to deal with him. The president, of course, moved away from that dramatically in his speech last Monday.

The same question to you, is there an alternative to Yasser Arafat?

SEN. CHUCK HAGEL (R), NEBRASKA: I think what has happened here -- and I don't know if this is an unintended consequence or not, but the fact is, the administration has now made Yasser Arafat the issue. Even though they say he shouldn't be the issue or is not the issue, they have made him the issue.

The issue should be not Yasser Arafat. Whether you think he's a terrorist or not, that's rhetorical sword play. He is part of this process. The process should be the issue. What Senator Biden said about Saudi Arabia, the other Arab nations, their involvement, their leadership, the Palestinian people, those should be decisions made regarding Arafat's fate by them.

By us making him the issue, we, I think, risk radicalizing the process.

BLITZER: So did the president make a mistake this past week? HAGEL: Well, you ask the president that, but what I'm saying is this. Again, they have made Arafat the issue. And we cannot bring peace in this area, and the larger consequences that will flow from this, consequences like terrorism that will go on and on -- Tom Friedman talked about this in his New York Times column this morning -- that would isolate Israel, isolate the United States, until we, in fact, use the quartet that you and Dr. Rice talked about earlier.

And to put so much focus on Arafat when, in fact, they say they're not, I think, deflects from the real key issues here. The Palestinian people, if they are given the choice -- and that choice also has to come as a response of the Israelis pulling back out of some of these areas and letting these people vote and work and have some daily life routine -- and this is a process that you just don't flip a switch on or off.

Last point on this, you don't stop terrorism by rhetoric. You don't stop terrorism by saying that it's bad. You don't stop terrorism by passing a Senate resolution or a congressional resolution against Iran or Syria. You stop it by using all the forces and the integration of the people and the allies that we need to focus on, bringing about some kind of a settlement and a process. That's what was missing in the president's speech.

BLITZER: Senator Biden, what does the White House need to do, the Bush administration, right now to get this process going, the process that you and Senator Hagel clearly want?

BIDEN: Well, unsolicited advice, I would just stop talking about Arafat, number one. Get Arafat off the board. Stop talking about Arafat.

Focus on the thing that has to be done, and that is the mechanism which Condoleezza Rice and the president and the secretary of state, with whom I spoke at length about this, want set up: a new institutional framework to replace the Palestinian Authority. That rests with the Saudis, that rests with the Europeans and us. That should be the focus.

The second piece of the focus here should be offering a political horizon to the Palestinian people, over 60 percent of whom want to see an independent Israel and independent Palestinian state. The president talked about and offered, as well as the secretary of state, in detail, the ability to set up a provisional Palestinian state once this new authority, a genuine democratic authority, were put in place.

And the third thing is to make it clear -- and I had long discussions, as did Chuck, with Prime Minister Sharon. The Israelis, in my view, if this new Palestinian structure is put in place, should be abandoning those settlements in those sparsely settled areas where very few people are and stop new settlements.

Again, this is a process all going toward 338 -- well, the two U.N. resolutions. So, I think we should stop talking about Arafat, focus on the establishment of this new Palestinian Authority to allow new leadership to rise up. BLITZER: All right. Senators, stand by, we have to take a quick commercial break.

When we return, we'll move on, talk about the war on terror. We'll also be taking your phone calls. Senators Hagel and Biden will be back with us right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. We're continuing our conversation with Democratic Senator Joe Biden of Delaware and Republican Senator Chuck Hagel of Nebraska.

Senator Hagel, Al Gore, the former vice president, was speaking tough this weekend. I want to read to you a couple of comments he made on foreign policy issues. "They," referring to the Bush administration, "haven't gotten Osama bin Laden. They refuse to allow enough international troops to enter Afghanistan to make sure this country doesn't slide back under the control of these warlords."

He went on to say at a Democratic Party fund-raiser in Memphis last night, he said this, "President Bush has allowed his political team to use this war" on terrorism "as a political wedge issue to score political points and to divide this nation."

Is that criticism from Al Gore fair?

HAGEL: Well, I think you have to understand the context of all this. He was at a political rally, he's going to have to say some political things, and he's probably not going to say anything too positive about this administration.

(LAUGHTER)

Afghanistan is a very, very serious issue. It is where our focus should be. Just like in the Middle East. I think there is a legitimate question. We talked about it -- Senator Biden, I'm sure, will express his views on this in a moment -- at a hearing Senator Biden held this week in foreign relations.

I, too, am concerned about some of these issues that the vice president talked about. But to say that this administration is using this issue, the war generally, as a political issue is a bit of an overstatement. But, in any event, it was a political rally.

BLITZER: Senator Biden, it sounds like Al Gore may be seriously thinking about running for president again. What do you think?

BIDEN: I wish him luck.

(LAUGHTER)

Look...

BLITZER: What about the substance of his criticism?

BIDEN: I'm not going to comment on what he said. Let me tell you what I think about Afghanistan.

Chuck and I basically agree, as a lot of us agree, and that is, I firmly believe we have to extend the international security force in Afghanistan. I firmly believe the president should be encouraging that force and our participation, in terms of not additional men but a commitment to that force, so that we can make sure the Karzai government has a serious chance of succeeding.

I don't think we should rely as much on the warlords as we have been doing, like, for example, Ismail Khan. I know you're familiar with this, Wolf, over on the Iranian border, he's maintaining peace, but he's also working with the Iranians. That's not a good thing. It undermines the Karzai government.

So I think there's reason to legitimately disagree with the administration's position as to how they are engaging the prospects of a central government coming to fruition in Afghanistan.

I'm not going to Monday-morning quarterback. I'm not a military man. I'm not going to Monday-morning quarterback on the criticism coming out of Great Britain and other places about whether or not we've gone after al Qaeda the right way.

But I do say that, if we fail to stay the course in Afghanistan -- and that means militarily, international security forces, as well as economically -- I think we will have made a gigantic mistake, undermined the Pakistani government, and jeopardized our ability to get consensus to move on Iraq in the future.

So, it's a big deal. There's real disagreement about how to proceed in Afghanistan. But I wouldn't put it in a political context. I think the president is doing honestly what he thinks is the best thing to do in Afghanistan, and I think there's Republicans and Democrats like us on this show who have some degree of difference with him in how he should be proceeding.

BLITZER: Senator Hagel, the Democratic leader in the Senate, Tom Daschle, John Kerry of Massachusetts, another Democratic senator, others, have said that unless Osama bin Laden is arrested, found, killed, the whole U.S. strategy in Afghanistan may have been a failure. I'm paraphrasing, obviously, what their -- the thrust of their remarks were.

HAGEL: Oh, I don't agree with that. The Osama bin Laden part of this is important, and we will get him if we haven't already. And I don't know.

But the fact is, this challenge, this new threat, this new scourge to all of mankind is much larger than Osama bin Laden. He is something that is a symbol and, of course, is directly responsible for what happened in this country on September 11. And for that reason alone we must get him, and we will get him.

But this represents, this threat, something far larger than Osama bin Laden. And I think, to say that it is all about him doesn't factor in the larger consequences and challenges of what's before us. I mean, the fact is, Afghanistan, Pakistan, Indonesia, the Middle East, many parts of the world are now part of this great challenge. And in fact, you could even, I think, go so far as to say our problems in South America, what's happening in Colombia, all related to terrorism of some sort.

BLITZER: All right, Senators, once again we're going to take a quick break.

Much more to discuss with Senators Biden and Hagel, including the controversial court ruling here in the United States on the Pledge of Allegiance. They'll also be taking phone calls.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIPS)

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: This decision is just nuts.

REP. RICHARD ARMEY (R-TX), MAJORITY LEADER: It's got to be one of the most asinine things I've ever heard of.

SEN. ROBERT BYRD (D), WEST VIRGINIA: I hope the Senate will waste no time in throwing this back in the face of the stupid judge.

(END VIDEO CLIPS)

BLITZER: A bipartisan thumbs-down on Capitol Hill this past week for federal circuit court ruling that the Pledge of Allegiance is unconstitutional because it includes the phrase, "One nation under God." The ruling was stayed by the court pending possible appeals.

Welcome back to LATE EDITION. We're talking with two leading members of the United States Senate, Democrat Joe Biden of Delaware, Republican Chuck Hagel of Nebraska.

Senator Biden, what the ruling did say was that since the words, "under God" were inserted in the '50s, this has no business being allowed to be recited by public schools given the long-standing separation of church and state here in the United States.

What's wrong with that court decision?

BIDEN: Let me give you a constitutional answer to that, if I can, and not just the political one.

First of all, it's a stupid decision. But it's not -- also it's constitutionally wrong.

There is a case in 1943 called Barnett (ph), written by none other than Justice Brennan, one of the most liberal justices on the court. And he made the point that you're allowed to use religious phrases and invoke God in ceremonial purposes. He said, "You cannot expect this nation to be devoid of religious phrases. That's ridiculous."

The fact that we added, "in God," which was already on our -- you know, in our coins and on our, you know, over the entrances to the Senate, et cetera, in no way changes that fundamental ruling.

To put it another way, the First Amendment, which is not only free speech but religious freedom, says you cannot establish a religion, the so-called establishment clause. This in no way chooses to say, "in God we trust", to say that "under God" in no way chooses one religion over another.

And to conclude, constitutionally we can be and are a theistic nation. Nobody ever intended that not to be the case. We just can't choose one religion over another.

It's a crazy decision. It'll be overruled within a week.

BLITZER: All right. Senator Hagel -- and Senator Biden speaks as a long-standing member of the Judiciary Committee, I should point out. But the individual that brought this suit is an atheist. He doesn't believe in God, and he says this, in effect, is prejudicial toward him and other atheists out there.

HAGEL: Well, my reading of the history of this country and what led up the founding of this great nation leads me to one very obvious conclusion: Our founding fathers didn't fear religion, they feared oppressive government. And I think it's quite clear through all the papers and the documents and then the Constitution itself.

I think Joe had it about right. I think my three colleagues that you highlighted here on their reaction had it about right. And I think Senator Biden's exactly right, this will be overruled very quickly.

BLITZER: And finally, Senator Biden, what's the responsibility of the Supreme Court to take into consideration, on these kinds of very sensitive judicial issues, public opinion. Because, as you and Senator Hagel know, the public opinion is overwhelmingly in support of the Pledge of Allegiance.

BIDEN: There's a famous old phrase -- I can't remember who it's attributed to and I don't want to make a mistake, but it's not mine -- and it says the court reads the newspapers too.

And the fact of the matter is, we are three branches of the government, co-equal, they should take into consideration, consistent with the Constitution, what in fact the American people think.

And this is just set clear. There is no real debate here among constitutional scholars.

And by the way, the gentleman is an atheist. He is entitled to be an atheist in this country. He is entitled not to say the pledge. No one is making him say the pledge. We are entitled to recognize, under our Constitution, the existence of a God. That was never intended otherwise. It's totally consistent with the Constitution. BLITZER: Senator Biden, Senator Hagel, thanks for joining us. And have a happy Fourth of July later this week to both of you. Appreciate it very much.

BIDEN: Thanks a lot.

Thanks, Chuck. Nice being with you.

HAGEL: Thanks, Joe.

BLITZER: Thank you.

Coming up on LATE EDITION, mayors from around the United States talk about preparing for the Fourth of July amid concerns about possible terrorist attacks.

Then, the Israeli and Palestinian views of President Bush's new blueprint for Middle East peace.

Plus, what's going on in corporate America? We'll get some insight into the mounting financial scandals.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

We'll talk with three U.S. mayors about how they're dealing with terrorist threats in just a moment, but first here's CNN's Fredricka Whitfield in Atlanta with a news alert.

(NEWSBREAK)

BLITZER: Thursday, of course, is the Fourth of July, and unlike in years past the United States is prepared to celebrate its birthday with the possibility of terror attacks in mind.

Joining us now to talk about how the nation's cities are responding, Las Vegas Mayor Oscar Goodman, here in Washington, D.C., Mayor Anthony Williams, and shortly we'll be speaking also with Greg Nickels, the mayor of Seattle.

Let me begin with you, Mayor Williams. Here in Washington there was an item in The Washington Post, your hometown newspaper, my hometown newspaper, today: Added Precautions to Bring Forth Security. Police will funnel the crowds through 24 checkpoints, search collar and bags for items that are deemed unsafe or threatening and occasionally use metal detecting wands to scan visitors.

The FBI and other law enforcement are going to be all over the Mall looking for the possibility of terrorists. How worried are you?

MAYOR ANTHONY WILLIAMS, WASHINGTON, D.C.: You know, since September 11 we're all concerned, we're all vigilant about the possibility and prospect of terrorism. But I think one thing we've shown in this city and, indeed, Americans have shown is that we're not going to be cowered by terrorism. People have come back to this city. They're visiting this city once again. And I think we can show what we've shown over the last few months, that we can have an open city and a safe city.

People have to allow more time now for the July 4th activities, but it's going to be a safe and a good event.

BLITZER: It's not going to be an easy ordeal for people who want to go out on the Mall and watch those fireworks this year, is it?

WILLIAMS: It's going to be a little -- it's going to take more time, there's no question about it. And we've had a discussion with the Park Service, a good one I think, dialogue. There's been some tension always between an open city and safe city.

But I think what we're doing right now, keeping 14th Street open -- which is, for those viewers who don't live in Washington, our major corridor -- keeping that open during the day until nightfall is a step in the right direction. I'd like to see all the subway stops open, as well.

BLITZER: All right, let me bring the mayor of Las Vegas in.

Mayor Goodman, the last time we spoke, you'll probably remember, there was that individual in Las Vegas who said he overheard by accident a phone conversation in Arabic in which some individuals were talking about striking your city, Las Vegas, on the Fourth of July because of the nature of the gambling and everything else that goes on in Las Vegas.

And that individual, I take it, flunked a lie detector test, is that right?

MAYOR OSCAR GOODMAN, LAS VEGAS, NEVADA: That's putting it mildly. That's a forget-about-it type situation. This fellow apparently has a modus operandi where he goes to the media whenever he has a thought in his head, and the head is mostly empty most of the time. And this is his way of doing things.

GOODMAN: And they made short shrift of him, and fortunately the media has stopped allowing him to go into a frenzy and using them to his advantage. So he was a joke.

BLITZER: What is the FBI telling you, though, about security preparations that your city should be engaged in as we approach the Fourth of July?

GOODMAN: The truth of the matter is, it's business as usual here. Every day I get briefed by our emergency operations manager. He's in constant communication with the FBI office, as well as with our metropolitan police department.

And I spoke to them this morning in anticipation of coming on the show. They said that there's nothing special that's taking place. We're all going to be vigilant, as my good friend the mayor of Washington has said. We'll keep our eyes open, but nothing extraordinary, no special searches. We're going to have our parade, we're going to have our symphonies, our concerts, and everyone's going to have a good time.

At this point in time, nothing different is taking place as a result of the Fourth of July being celebrated here.

BLITZER: Mayor Williams, what have federal law enforcement officials told you about special preparations that your city, Washington, D.C., should accept?

WILLIAMS: Well, that we ought to take special preparations, because we are the nation's capital, but that we can take these preparations working together in a way that insures security and, at the same time, openness.

I mean, you know, look, I mean, the best way to be safe is all of us move into the middle of the desert and live in some kind of subterranean cavern, but we can't do that. We have to live our lives and show that these terrorists aren't going to be successful, and that we will do on July 4th.

Again, people are going to have to allow a little more time for their July 4th activities here in the nation's capitol, but it's going to be a safe event and a great event.

BLITZER: Mayor Goodman, there's a new Newsweek poll that just came out this weekend, similar to a CNN-"USA Today" poll that we spoke about about a week or so ago. Asked the question how likely is it that more terrorist attacks will be carried out against major U.S. cities, buildings or national landmarks during the Fourth of July holiday? And look at this, if you add the first two numbers up, 57 percent believe it's either very or somewhat likely that there will be these kinds of attacks.

How is that affecting tourism to Las Vegas, which of course is so important to the economic well-being of your community?

GOODMAN: There's no question, tourism is our lifeblood, as far as economics is concerned. But the bottom line really is that it's going to be an overwhelmingly successful weekend here. The hotels have full reservations. The highways are being opened up and making preparations for folks to drive in here. The airlines are full.

I just don't believe that people who want to come to Las Vegas, who want to get away from that kind of feeling, who want to experience freedom, who want to leave their cares and woes someplace else, I think this is a natural place for them to come, and we're not going to be affected by polls like that.

BLITZER: All right. Let me bring in the mayor of Seattle, Greg Nickels, who is joining us now.

Mr. Mayor, thanks for you joining us as well. I woke up this morning, read an item in The Washington Post, I believe it was an Associated Press item. The headline of The Washington Post was very simple: "FBI: Terrorists See Seattle as Easy Target." It goes on to say, "Muslim terrorists consider Seattle an easy target because of bad policing, the FBI has warned area officials."

I'm sure you're familiar with this story. Give us the background. Is Seattle an easy target for terrorists?

MAYOR GREG NICKELS, SEATTLE, WASHINGTON: Well, Wolf, since September 11 all of us at the local level have been working hard to make sure that we are prepared as we possibly can be.

We have an outstanding police force here in Seattle. We have a great chief and great men and women who keep us safe, and they're going to be on duty over the weekend, over the 4th. We've created a new division within our police department of emergency preparedness, with a full-time assistant chief overseeing the coordination between Seattle police and our regional and national partners.

So we feel as though we're ready. Our goal is to be the most prepared city in the United States for anything that might happen.

BLITZER: Mr. Mayor, though, we know that at the millennium celebrations, Seattle was definitely a target. Have you been notified by federal law enforcement authorities, the FBI or anyone else, that Seattle possibly could be a target on the Fourth of July?

NICKELS: Well, we know that Seattle is mentioned frequently. You and I talked earlier this year when a computer was found in Afghanistan showing pictures of Seattle-area landmarks.

And so we are in constant contact with the FBI and with other federal authorities. Our police chief meets regularly with Governor Ridge and his people to make sure we have absolutely the most up-to- date information.

We have had no specific or credible threats, but we don't take that as any kind of comfort. We know we need to be ready, and we know that vigilance is the price of freedom.

BLITZER: So the bottom line, though, is Seattle ready right now?

NICKELS: Seattle is ready. We have taken the steps that we need to take, and we're getting better every day. We're getting better with our communication from the federal government, we're getting better in terms of our preparedness and that of our citizens.

BLITZER: Mayor Williams, the District of Columbia, like Seattle, like Las Vegas, like a lot of communities around the United States, dependent on tourism for its economic well-being.

There's a commercial that you've authorized, that you've released. I want to play for our viewers in the United States and around the world a brief excerpt, so that they get a flavor of what you're trying to do.

(VIDEO CLIP OF COMMERCIAL WITH MEMBERS OF CONGRESS SINGING)

BLITZER: Looks like a pretty bipartisan commercial for the District of Columbia. You had a lot of help to try to get some tourism. But fundamentally, since 9/11, it's not been as robust tourism, by far, as you would like, has it?

WILLIAMS: It has -- well, in some ways, actually in the last couple of months, it actually has come back, believe it or not. The Cherry Blossom Festival, we had 20 percent more people at the Cherry Blossom Festival this year over last year. Hotels are now at 90 percent occupancy. Underlying fundamentals of the hotel are stronger and stronger.

I think the real threat to our city, though, is continued business investment in our cities, and that's why I'm a big supporter of some kind of federal backstop for insurance, because we could find our visitors coming back to cities like Washington, Las Vegas and Seattle. But if businesses choose to leave cities because of that risk premium associated with a specter of terrorism, we're in deep trouble. That's a big issue for us.

BLITZER: All right, let me ask Mayor Goodman.

Do you agree with Mayor Williams on that issue of insurance?

GOODMAN: Oh, absolutely. We have to be able to maintain our economic viability.

But we haven't had any experiences in Las Vegas where people have said they're not going to come here in order to set up a business because of 9/11. There may be other reasons they may not want to set their business up here, but terrorism has really not been in the picture as far as an expression on the part of the industries as far as making Las Vegas their home.

BLITZER: Mayor Nickels, in Seattle, as we know -- Seattle, as I pointed out, was once targeted, at least once ...

NICKELS: Yes.

BLITZER: ... and there have been other suggestions that Seattle might have been targeted.

Do you have confidence in the federal government's coding -- the orange code -- the yellow alert level right now, the various color codings, the information you're getting from Washington? Or are they going overboard and giving you too much information and, in a sense, getting a jittery public out in Seattle more needlessly worried than it should be?

NICKELS: The communication that we've had has been getting better and better every day. After September 11, we were in a new world and we were feeling our way, trying to figure out how we could respond, how we could be ready. But as the months have gone by, the communication has gotten more clear, more direct and, I think, more effective.

Obviously, when you reach the Fourth of July or other major milestones in our country, we're going to have more generalized concern. We need to be prepared, and we're learning more and more how to be ready for that more generalized concern.

But again, we have not gotten specific or credible threats. And I believe if the federal government had that kind of information, we would have that information in hand and be ready to deal with it.

BLITZER: All right. I've got to leave it right there, unfortunately. Mayor Nickels, Mayor Goodman, Mayor Williams, three great cities, three beautiful cities, three cities I love to visit, three cities, I hope, like all cities in the United States, will be calm and peaceful during this Fourth of July. Thanks to all of you for joining us.

NICKELS: Thank you.

GOODMAN: Thank you.

WILLIAMS: Thank you.

BLITZER: And just ahead, can the Palestinian leader, Yasser Arafat, be persuaded to step aside for a new leader, and is that a key to Israeli-Palestinian peace? We'll get perspective from Israeli foreign policy adviser Dore Gold and the chief Palestinian negotiator, Saeb Erakat.

LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: My vision is two states living side by side in peace and security. There is simply no way to achieve that peace until all parties fight terror.

(END VIDEO CLIP)

BLITZER: Welcome back to LATE EDITION.

Joining us now from Cairo, Egypt, is the chief Palestinian negotiator, Saeb Erakat.

Mr. Erakat, welcome back to LATE EDITION.

I don't know if you had a chance to hear Condoleezza Rice on my program earlier or if you heard Secretary of State Colin Powell's remarks earlier today on some of the Sunday television talk shows here in the United States. But both of them were very firm in saying the Bush administration is finished dealing with Yasser Arafat.

Is there an alternative among Palestinian leaders to Yasser Arafat? SAEB ERAKAT, CHIEF PALESTINIAN NEGOTIATOR: Well, what I heard from Dr. Rice and Mr. Powell is absolutely unacceptable. I wasn't an ancient Greek, you know, to witness the birth of democracy. But I am a citizen of the international system, contemporary system today. I am witnessing the birth of "demoBush," actually, not democratic.

President Arafat was directly elected by the Palestinian people in fair and free elections that were supervised by the international community, including President Carter, including the Europeans, Japanese and others. And now you see this administration turning the issue -- turning from the real issue of occupation, turning from the real issue of de-escalation and deconfliction in order to save lives of Israeli and Palestinians, and talking about who leads the Palestinians, who rules the Palestinians.

They are not taking into account that President Arafat called for free elections as early as next January. And we are asking the international community to help us in order to lift the curfews, the siege, the closures, the occupation of our towns. More than 1 million Palestinians are under curfews, prisoners inside their homes.

But this administration, I would tell you that, you know, they have no plan, no agenda, no road map, no process, no substance. What I can describe their talk to be is really a stability of tragedy and bloodshed of Palestinians and Israelis. And that's no way -- that's no way. Palestinians and Israelis should not be left under the circumstances they live under.

We have a government of Mr. Sharon that's reoccupying the West Bank, that's end game is very clear: destroying the Palestinian Authority, destroying the peace process.

And, Wolf, let me be very frank with you. The alternative to President Arafat, the elected leader of the Palestinians to the end, the way the Americans are handling them is chaos, anarchy, more violence.

And for Sharon, he may carry this out and say to you that "I want to make peace, I want to make the painful concessions for peace, but I don't have partners." Because if the United States...

BLITZER: Are you working...

ERAKAT: ... of America treats -- go ahead, Wolf.

BLITZER: Are you working under the assumption that Yasser Arafat will definitely run for election in January? You've called for these new elections between January 10 and January 20.

ERAKAT: That's not the point. President Arafat heads a political party. And that political party, Fatah, will have to meet in its congress and conference and decide as to who the candidates. But the real problem is this tune of writing an elected leader off.

I would ask the international world leaders, elected leaders to watch out for the "demoBush" style. Any leader on the world now who is not to the likes of President Bush may be asked to step down, may be sacked, asking the people to interfere in their business.

For God's sakes, Palestinian people are 99 percent literacy rate. I heard Ms. Condoleezza Rice saying about Sharon that he is democratically elected leader to the Israelis. Why can't this be applicable to Arafat? What does she have to respect the democratic choice of Israelis but then undermine the democratic choice of Palestinians?

And what's the problem? She says Palestinian neighbors. We are -- we want to be neighbors with Israel. I would love to be neighbors with Israel, my state next to the state of Israel. But at this stage, Palestinians are not neighbors. They are under Israeli occupation.

And the point here is the Israeli occupation. And we need a road map. We need an end game. We need weigh stations. We need time lines to end the Israeli occupation because that's the only way to save lives of Israelis and Palestinians.

Unfortunately, this American administration had taken the cost- free road. Maybe it's cost-free to slug Arafat, to blame it on the Palestinians. They don't want to counter the powerful Israeli lobby or the Congress or the Senate. But that will not be conducive to save a single Israeli life and a single Palestinian life.

If President Bush will concentrate on his internal agenda as how to sway the votes he want to sway in the next November elections, this will be at the cost of more bloodshed of Palestinians and Israelis. And what we needed is a leadership, a vision and wisdom that is conducive to saving lives of Israelis and Palestinians. And unfortunately, we haven't seen this yet.

BLITZER: We only have a limited amount of time, Mr. Erakat, so let me get to this. The administration says -- administration officials, they have evidence that Yasser Arafat authorized a $20,000 payment to members of the Al-Aqsa Martyr's Brigade, which is affiliated with his political party, Fatah, and that's one of the reasons why they decided it was time for Arafat to go.

ERAKAT: I challenge them to present it to CNN.

And enough. Yesterday, they destroyed 367 rooms, a whole building, in Hebron, saying that there were 15 Palestinians, without presenting their names, what they did.

So now every Palestinian is standing condemned and dead until proven otherwise. This cannot be acceptable. This cannot go on. Because at the end of the day, you know, Jericho will be 50 kilometers from Tel Aviv. I know that Sharon and Netanyahu and others may gang the Congress on us, may gang the Senate on us, but that's not going to save the lives, that's not going to revive the peace process and put it back on track.

What Palestinians and Israelis need, they need help to get out of this vicious cycle. They need help to go on the right track of peace. They need light at the end of the tunnel. And they don't need more vision, they need a concrete policies of a road map that is very specific in time line.

And that's what we hope the international community will try to convince the American administration of doing, because otherwise things will be slipping outside of our hands, not only between Palestinians and Israelis, but it's going to be chaos, destruction, bloodshed and vicious cycles throughout the Middle East. And that's it.

BLITZER: We only have a few seconds left. But I want you to have a chance to respond to that picture of that baby dressed up as a suicide bomber that the Israelis claim they found in home in Hebron.

I assume you've looked into this. What is the story behind this picture?

ERAKAT: Wolf, I called so many people in Hebron. Nobody knew anything about it. Nobody knew the family.

But let me tell you that if this turns out to be true and what some news media said as a joke, I found this inappropriate, distasteful and absolutely unacceptable. Palestinian children must be shown the way to peace, to freedom, to hope, and that's what we need. But I'm afraid that the current situation of destroying Palestinian life.

You know, Wolf, I just want to end by saying one sentence. I want to tell President Bush one thing. An infrastructure of terror is a mind void of hope. And when you see Palestinians now out of their schools, out of their universities, their farms being destroyed and burned, when there is no hope whatsoever on the horizons, where they're confined to their homes, jailed without any future whatsoever, sir, you don't fight the violence with this. You fight it with hope. You fight it with a complete plan. With time lines to end the Israeli occupation.

And then you establish -- you talk about a vision of establishing a Palestinian state next to the state of Israel through concrete steps, through concrete road map, through concrete time lines. And that what is lacking from the speech that President Bush delivered.

BLITZER: Saeb Erakat joining us today from Cairo. Thank you very much for joining us on LATE EDITION.

And up next, we'll hear from the Israeli foreign policy adviser, Dore Gold. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: You're looking at a live picture of President Bush just back from Camp David, walking into the White House, greeting some friends, tourists who have come to the South Lawn of the White House to see the president.

About 24, a little bit more than 24 hours after he had a colonoscopy, the doctor's giving him a clean bill of health, saying he's fine, no polyps discovered. The president yesterday, after that colonoscopy, actually had a bite to eat and then went out for a brief walk, more than four miles actually, with some of his staff.

We're going to watch the president as he shakes some hands on the South Lawn of the White House. If he decides to speak to reporters as he goes into the residence of the White House, we'll bring you the president's remarks live.

But in the meantime, let's go to Jerusalem and bring in Dore Gold, the foreign policy adviser to the Israeli prime minister, Ariel Sharon; Dore Gold a former Israeli ambassador to the United Nations.

Thanks for joining us.

Let me briefly ask you about something that Saeb Erakat just mentioned. The Israelis over the weekend went ahead and blew up the Palestinian Authority security compound in Hebron in a huge explosion, saying it was looking for 15 Palestinian militants inside. No one was apparently found.

What was the whole point of that?

DORE GOLD, FOREIGN POLICY ADVISER TO ISRAELI P.M. ARIEL SHARON: Well, unfortunately the Palestinian-controlled areas still are a source of terrorist attacks against the population of Israel.

Just this morning in the area of Lod, an Israeli train was attacked. Luckily we had no losses, but we could have lost hundreds of lives. Just like when a jumbo jetliner is taken down in a terrorist attack. Fortunately that hasn't occurred.

But we have to, right now, go into certain Palestinian cities on a basis of specific intelligence information, in order to rout out the terrorism that's grown there.

BLITZER: Did you find anybody inside that building in Hebron? GOLD: In that particular building, it was a long siege that occurred. Certain activities that they might have planned were prevented. But in the end, no one was in the building.

The Israeli defense minister, Benjamin Ben-Eliezer, says that the Israeli military's going to dismantle about 10 illegal Jewish settlements on the West Bank. Is that going forward right now, even as we speak?

GOLD: Well, I think there's a discussion going on between the government and the members of the settlement community, to discuss whether these are independent illegal activities, or whether these are within the boundaries of the specific settlements, within their municipal borders. And that process is under way as we speak.

BLITZER: So the actual dismantling by the Israeli military has not started, is that right?

GOLD: Well, this may occur. Right now we have a very serious security problem emanating from Palestinian cities at present. That's really the focus of our attention. Had, of course, Mr. Arafat's Palestinian Authority lived up to the Oslo Agreements, and policed those areas, we wouldn't be with a massive presence in West Bank cities right now. But the focus of our attention is not a few points where you have, you know, an extra mobile home or not. The focus of our attention right now is providing Israel with security against an ongoing threat of suicide bombings.

BLITZER: But the defense minister says that protecting what he describes as these illegal, unauthorized Jewish settlements is overburdening the Israeli military. And as a result, from the security standpoint, it's a bad idea to allow these settlements to exist.

GOLD: Well, I don't think you're talking about whole settlements. I think you're talking about a situation where you have one, two, or maybe three mobile homes that are on a hill, which is sometimes within the municipal boundary of an existing settlement, in any case, sometimes beyond it. Those issues have to be thrashed out between the leaders of the settlement community in Judaea and Samaria and the ministry of defense, and I imagine that is being worked out.

But the real focus of our attention is the ongoing threat of the suicide bombers from Palestinian-controlled areas.

BLITZER: One thing President Bush, in his speech Monday, did say about settlements was this. He said, "Consistent with the recommendations of the Mitchell committee, Israeli settlement activity in the occupied territories must stop."

Is Israel prepared to stop or freeze settlement activity in the West Bank?

GOLD: Well, this National Unity government of Israel has decided not to build new settlements. That was decided even before the Mitchell Committee was formed or before its results, certainly, were revealed.

You know, the settlement issue is many times overblown. You're talking about Israeli communities sitting on about 1.5 percent of the entire West Bank. We view the West Bank and Gaza as disputed territories, where we have territorial claims as well as the Palestinians. When we resolve the land issue, the settlement issue will resolve itself.

BLITZER: Condoleezza Rice, the president's national security adviser, on this program about an hour or so ago, made the point that Israel should allow Palestinian workers to resume going back inside Israel proper for jobs, that will help alleviate some of the tensions under way right now.

Is that going to happen any time soon?

GOLD: Well, I think she's absolutely right, that would be a good move for us to adopt, if terrorism is vanquished. Right now, if we let masses of Palestinian workers come back into Israel, there will be terrorist organizations that will exploit our opening, infiltrate suicide bombers into Tel Aviv, into Haifa, into Jerusalem, and cause large-scale deaths to Israeli citizens.

Therefore, there's a clear order of what has to be done. We have to establish security, we have to vanquish the terrorist organizations, which Mr. Arafat's security forces failed to do, and then we can begin to chart out a new future between ourselves and the Palestinians, and hopefully a new Palestinian government that will behave very differently from Mr. Arafat's government.

And as we continue to watch President Bush greet friends and tourists on the South Lawn of the White House, he's just back from Camp David. He did say Monday in his speech, referring to a challenge he made to the Israeli government, he said Israel should release frozen Palestinian revenues into honest, accountable hands.

BLITZER: There are millions and millions of dollars that the Israelis have froze in Palestinian money. Is Israel prepared to return that money to the Palestinian Authority?

GOLD: Well, you know, the process is as follows. We collect certain taxes here in Israel, which relate to, you know, goods that the Palestinians are purchasing, and then we usually pass over those tax funds to the Palestinian Authority.

Now, here's the problem. The bulk of the terrorism today does not come from Hamas and Islamic Jihad, fundamentalist opposition organizations that are still friendly with Mr. Arafat. The bulk of the terrorism comes from organizations loyal to Yasser Arafat, like the Tanzim, like the Al-Aqsa Martyr Brigades that you mentioned earlier in your discussion with Saeb Erakat.

Now, what happens if turn over those funds and those funds go to pay for the very people who are shooting at us or engaging in suicide bombings at us? That doesn't make much sense. Unfortunately, the European Union recently decided to provide cash to Mr. Arafat's government, which they can't control, which can go back into the hands of many terrorist organizations.

We believe we have to be very careful about unaccounted-for dollars, especially when there is no accountability in the current Palestinian regime.

BLITZER: If there are free and fair Palestinian elections in January, as Saeb Erakat promises there will be, and Arafat is elected, will you -- what will you do then, the Israeli government?

GOLD: Well, here's the real problem. You know, if you go back to the president's speech, it pretty much speaks for itself. But the problem that the president raises, and rightfully so, with the current Palestinian leadership, is not that they weren't elected democratically or he has questions about the elections that took place in '96. The question, the problem of President Bush, and it's the problem of all Israelis as well, is that this currently leadership...

BLITZER: Dore Gold...

GOLD: ... dabbled in terrorism. BLITZER: ... Dore, stand by. I want to see if the president's going to comment as he walks in the White House. Let's listen.

BUSH: The good news is that I don't have to have this procedure for another five years.

I also highly recommend people over 50 for getting -- having this procedure. It's important. They say it will help reduce the incident of colon cancer. And as unpleasant as it may sound, it is necessary and worth it for people to take precautionary measures.

I feel great. I got up this morning and went for a nice run, and went to church. Thanks for asking. Appreciate it.

BLITZER: And so there you have it, there you have it. The president saying he feels great, went for a run this morning, following his colonoscopy yesterday. Urging all individuals over the age of 50 to go ahead and get this procedure done. It could help, of course, prevent colon cancer.

Dore Gold, on that note, we're going to have to leave it with you. I hope everyone in Israel decides to get colonoscopies as well. The president wants people all over the world to make sure that they don't have to deal with colon cancer, and he's trying to set an example.

Thanks to Dore Gold...

GOLD: Maybe the Middle East needs a colonoscopy.

(LAUGHTER)

BLITZER: Thanks to all of you -- thanks to you for joining us, and thanks to the president for sharing his words with our viewers in the United States and around the world as well.

When we return, we'll shift gears. We'll talk about corporate meltdown. Business giants WorldCom and Xerox acknowledge misreporting billions of dollars, as employees and investors brace for the fallout. We'll get insight into how businesses are cooking their books and what could be done to reverse that, with former Securities and Exchange Commission Chairman Richard Breeden and former Goldman Sachs CEO and current New Jersey Senator Jon Corzine, and financial analyst Vince Farrell.

LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: We expect high standards in our schools. We expect high standards in corporate America as well, and I intend to enforce the law to make sure that there are high standards.

(APPLAUSE) (END VIDEO CLIP)

BLITZER: President Bush speaking out on the issue of corporate responsibility. Welcome back to LATE EDITION.

Joining us now with insight into the latest financial scandals here in the United States are three guests: In Las Vegas the former CEO of the brokerage firm Goldman Sachs, now Democratic Senator from New Jersey Jon Corzine. In New York, the former chairman of the Security and Exchange Commission Richard Breeden. And also in New York, Vince Farrell, he's a financial analyst and the chairman of SBSF Capital Management.

Gentlemen, welcome to LATE EDITION.

Senator Corzine, let me begin with you. You're in a unique position, you're in the government now but you were also heavily, obviously, involved in what's going on in Wall Street and corporate America.

Are these individual cases -- the WorldCom, the Enron, the Adelphia, the Xerox -- or is there a problem here, an epidemic going on in corporate America?

SEN. JON CORZINE (D), NEW JERSEY: Well, first of all, I think it's not indicative of all of corporate America or even the majority, but unfortunately when you have a substantial number of people who have played lose and free with the rules, it undermines everybody's creditability.

And so I think you have a systemic issue that is a function of really a breakdown in sort of the corporate mores that came with the various significant expansion we had, and I think it led to greed, revealed by people manipulating their earnings so they could improve their stock values.

BLITZER: But, Richard Breeden, you used to head the SEC. How is this possible? Corporations around the world, individuals all over the world, outside the United States, always looked to the United States for corporate integrity and honest bookkeeping. And now people not only here in the U.S., but around the world are stunned, shocked by this kind of -- this kind of misreporting of expenses, in effect, as assets.

RICHARD BREEDEN, FORMER SEC CHAIRMAN: Well, Wolf, I think the senator's comments were accurate. We shouldn't assume that every American company is doing the kinds of things we've seen in some of these bad cases, but unfortunately we've seen abundant proof that our system was not quite as good as we thought it was.

I think we still have the best system for public reporting and public capital markets, but obviously the long-period boom time led to a feeling among a number of companies that they could get away with pumping helium into their numbers. And that's something we have to look at ways to fix. BLITZER: Well, Vince Farrell, with all the auditors out there and all the regulations and oversight by the Securities and Exchange Commission, explain to our viewers in the United States and around the world how this was possible for companies like WorldCom and Enron and Xerox to engage in this kind of, and I'll be polite, fuzzy math.

VINCE FARRELL, CHAIRMAN, SBSF CAPITAL MANAGEMENT: Fuzzy math's too polite a word, Wolf. It's out and out fraud, in my opinion. If you go back long enough, what we did is we got caught up in the cult of stock options and giving executives grants that got so big as the juggernaut rolled along that the temptation to fudge the numbers if things looked slightly bad was overwhelming in many cases because you wanted the numbers to look good and you wanted your stock price to stay up.

Now, you can get away with it because there's a certain level of trust that we as analysts always placed on corporate America. If they said their revenues were a million dollars, we accepted the revenues were a million dollars. If they said their expenses on an operating side were X and on a capital side were Y, we kind of accepted those numbers as being true.

Because shy of doing an independent audit and going out and seeing all the receipts and the bills, you can't do otherwise. So, you can get away with it by simply starting at the top and saying, I'm going lie, and that's what so many companies did.

BLITZER: On that specific point, Senator Corzine, I've looked at some of the revenues, some of the income that people at WorldCom, this company that's about perhaps to go under, were making. Take a look. Bernard Ebbers, who was, of course, the leader until recently of WorldCom, in 2000-2001, he got a million dollars a year in salary. But look at this, 2000 retention bonus, I don't even know what that means, $10 million. I assume that's $10 million just to stay on the job.

To a lot of Americans who are out there, that sounds obscene, but give us your sense.

CORZINE: Well, I think there has been this corporate excess that's been driven by the options mentality, the compensation mentality, as opposed to performing for the clients that the companies were intended to perform for.

The value of the stock became the major objective, not delivering services to clients.

I want to say that what Vince talked about, though, is really the platform for real debate. People trusted the numbers. And unfortunately, we've got a system that doesn't provide enough checks and balances in how those numbers are presented.

The accounting industry is responsible for giving audited, certified numbers. And there are too many conflicts in auditors' relationship with companies. And there is not enough oversight to make sure that the auditors are doing their jobs properly. And that's one of the reasons that I think we need real systemic reform, so that the checks and balances are in place. And that's what the debate in Washington is going to be about. How strong do we make those measures to make sure that auditors are independent, that the numbers are true so that investors can make good, solid decisions as we go forward.

BLITZER: Mr. Breeden, where was the SEC throughout all the -- as these companies were coming up with these phony numbers, what was the responsibility of the SEC, the Securities and Exchange Commission?

BREEDEN: Well, the SEC monitors ongoing disclosures of these companies and also stock offerings.

But where was the SEC? It's been underfunded for about 60 years. And you have a relatively small group of people at the SEC trying to oversee 17,000 public companies. And no investor should believe that the SEC can catch every bit of wrongful activity when it's happening. The SEC can come along and provide accountability and punishment later. But it's not a real-time detection agency validating every balance sheet and P&L out there.

BLITZER: Now, before I take a quick break, Vince Farrell, the SEC, is it just -- is that simply the issue? It was underfunded, understaffed?

FARRELL: I think so. But I think the bigger issue, Wolf, is that as investors, we became lax. All we wanted to do was get rich by Tuesday. That was part of the boom.

I think the investing community now has to rise up and vote down egregious pay packages and demand that executive compensation be tied to corporate performance, not to stock price performance, but to return in equity goals, to profitability goals. And hold the executives accountable for reaching certain financial standards before they get paid.

BLITZER: All right. We're going to take a quick break right now, but we have a lot more to talk about.

Our discussion with our guests will continue. They'll also be taking your phone calls, so get ready. LATE EDITION will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: A wave of corporate scandal and abuse has rocked our nation's psyche, causing a serious decline in confidence in our markets.

(END VIDEO CLIP)

BLITZER: The U.S. House of Representatives Democratic leader, Richard Gephardt, offering his assessment of the toll of recent corporate scandals.

Welcome back to LATE EDITION.

We're continuing our conversation with New Jersey Democratic Senator and former Goldman Sachs CEO Jon Corzine, former SEC Chairman Richard Breeden, and financial analyst Vince Farrell.

Senator Corzine, you're now in the world of politics. The Center for Responsive Politics did some arithmetic, they came up with these numbers. Since 1997, WorldCom donations -- WorldCom the company at the center of a lot of the scandal this past week -- Republicans received $2.5 million in political contributions. Democrats received more than $1.5 million in contributions.

You won't be surprised to know that the American public by and large is pretty cynical when it sees these numbers, and wonders what happened? And assuming that political contributions to Washington helped WorldCom get to where it was.

CORZINE: You know, the campaign finance reform, the McCain- Feingold initiative, I think, got its momentum coming out of the Enron issue. There is a lot of cynicism about political contributions interfering with the process, and with good reason.

This stock option issue would have been addressed in the mid '90s if there hadn't been a lot of political interference with the accounting-standards-setting process that was really driven by corporations lobbying politicians.

Similarly, the separation of auditing from consulting services likely would have been addressed by the last administration or SEC Chairman Levitt if it had not been from political interference that was driven in large part by companies lobbying folks that they had given money to.

So I think there's some reason for some concern about that interference that comes from political-fund-raising efforts.

BLITZER: Mr. Breeden, one of your successors, Harvey Pitt, the current chairman of the SEC, he was on television earlier today, and speaking about the WorldCom fiasco, what's going on with WorldCom, he had some pointed words -- actually on Wednesday. I wanted to listen to what he had to say.

(BEGIN VIDEO CLIP)

HARVEY PITT, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION: We're filing today an action against WorldCom, charging it with fraud. And we're seeking orders that will prevent any dissipation of assets or payouts to senior corporate officers, past or present, and preventing any destruction of documents.

(END VIDEO CLIP)

BLITZER: And Mr. Pitt went on to say today that he wants to hit these individuals where it hurts the most, in their pocketbook right now.

Well, what can the SEC effectively do to hit some of these corporate leaders who played around with the books in their own personal pocketbooks?

BREEDEN: Well, it's a combination, Wolf, of what the SEC can do and also what the Justice Department can do. The SEC principally has administrative sanctions. It can bar people from serving as officers or directors of public companies with board approval, and it can get injunctions against wrongful activity.

But when people like Ken Lay are getting paid $100 million or Kozlowski getting in the mid-$60 million and Bernie Ebbers with a $400 million loan from WorldCom and huge comp on top of that, an injunction from the SEC isn't going to stop the wrongful activity. The threat of jail time is really the most meaningful sanction, just like it was when we had the Milken scandals with $400 million being made. An injunction not to do it again isn't enough.

So the criminal process has a very important role to play in these cases. And there the SEC helps build the cases, but works closely with the Justice Department.

BLITZER: Vince Farrell, amid all of this, a lot of our viewers have been closely following the Martha Stewart story, the allegations she was engaged in insider trading, allegations that have by no means been proved.

But briefly, give us your sense how this has played into the current cynicism that seems to be unfolding in the American public vis-a-vis corporate America.

FARRELL: Wolf, my read on this is that the moral compass just got tilted. And it stayed tilted and started to spread throughout corporate ranks to the point where there was a sense of entitlement created. And the entitlement was that the rules don't apply to me.

Now, these are allegations, and nothing's been proven. But, if correct, the idea that the normal rules don't apply toward me, just as an extension of the fabulous pay packages that were spread about, and the fact that -- despite the fact that financial performance might have been mediocre for the corporation under your guidance, you still got paid a king's ransom.

I think we have to roll back. I agree that jail time is required. I think they ought to give back the money. And I think any hint of wrongdoing ought to be prosecuted extremely severely, because most white-collar workers are not of the criminal mind, and I think a few people in jail is going to make the rest of us very honest very quickly.

BLITZER: All right. Good advice from Vince Farrell. Thanks to you for joining us.

Senator Corzine, as usual, thanks for joining us as well.

Richard Breeden, the former chairman of the SEC, appreciate it very much.

And it's time now to say goodbye to our international viewers. Thanks very much for watching.

Coming up for our North American audience, the next hour of LATE EDITION. We'll get analysis on the Pledge of Allegiance court ruling, some insight into the Elizabeth Smart case and other big legal stories of the week, plus your phone calls and our Final Round.

LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

BLITZER: This was a week of major legal news. Joining us now to help sort it all out are two of the best in the business. Dick Thornburgh is the former United States attorney general, and in Miami, the criminal defense attorney, Roy Black.

Gentlemen, welcome back to LATE EDITION.

Roy, let me begin with you and read to you what the ruling was that that U.S. court of appeals decision in San Francisco on the Pledge of Allegiance, saying that the Pledge of Allegiance should not be allowed to be said in public schools.

The opinion said, among other things, it said, "In the context of the pledge, the statement that the United States is a nation, quote, "under God", is an endorsement of religion. It is a profession of a religious belief, namely a belief in monotheism."

What, if anything, is wrong with that opinion?

ROY BLACK, DEFENSE ATTORNEY: Well, there is nothing wrong with people believing in God, of course. The problem with the law here is that the First Amendment to the United States Constitution says Congress shall make no law respecting an establishment of religion. And no law supposedly means no law.

When you do a strict construction of the Constitution, you're going to have an opinion like this in which the court says, by requiring school children to recite every morning the words, "under God," you are tending to establish a religion and that violates the First Amendment.

BLITZER: Dick Thornburgh, the point that Roy Black is making is that Congress did pass a law inserting the words in the Pledge of Allegiance, "under God."

DICK THORNBURGH, FORMER U.S. ATTORNEY GENERAL: Wolf, the first thing you've got to remember is this was a decision made by a retired judge on a court that is infamous for being overturned in the Supreme Court. Eighty-four percent of its decisions in the last six years have been overturned by the Supreme Court. That's the Ninth Circuit Court of Appeals in California.

The opinion purported to tie together those cases that prohibited prayer in the schools and prohibited a compulsory Pledge of Allegiance. The only problem with that is that this isn't a prayer and it wasn't compulsory. There was no requirement that the students participate in the pledge. And therefore the argument that Roy made, I think, falls a little short of the mark.

This was really a reach, it seems to me, and an excess of political correctness that leads you to believe, what's next? And of course you can conjure up all kinds of consequences.

BLITZER: Roy Black, certainly an unpopular decision, if you look at the polls. Political correctness, was that it, though?

BLACK: Oh, of course. Every politician is jumping on the bandwagon to criticize this judge, for obvious reasons. I mean, who wants to vote against God?

So every politician in the land wants to jump on this, and of course that's why Congress did it back in 1954, because it was very popular. And Congress admitted, when it did it in the mid-'50s, it was doing it to say that America was a religious, mainly Christian nation, and that was the whole import of it.

So the court saying -- and I think this is -- you know, it's a de minimis kind of thing. I mean, having the children say this is hardly establishing a church or something like that. But nevertheless it seems to violate the First Amendment, and the court so held.

BLITZER: You know, the polls -- a poll in Newsweek just out this weekend, Dick Thornburgh, asked the question, do you think the phrase "under God" should or should not be part of the pledge of allegiance? 87 percent say it should, 9 percent say it should not.

I guess I'm only surprised that 9 percent -- as many as 9 percent -- normally, if you take a look at the U.S. Senate, it was 99 to nothing in the U.S. Senate.

But the popularity of an issue, should that be a factor when judges at the court of appeals level or the Supreme Court level, when they consider an issue like this?

THORNBURGH: Well, I think someone aptly characterized this decision as a solution in search of a problem. And if there is a problem, it is much greater than the Pledge of Allegiance, because we'll have to dispatch thought police throughout our schools to make sure that children aren't reading the Declaration of Independence, the United States Constitution, Lincoln's Gettysburg Address, that they aren't singing America the Beautiful or God Bless America. All of these contain references to a deity, and they are incidental to the secular purpose, which is an expression of patriotism.

This is a foolish decision. It will be overturned posthaste not -- either in the Ninth Circuit en banc or in the Supreme Court.

BLITZER: Either by the full court of appeals in California or the Supreme Court.

Do you agree, will it be overturned, Roy Black?

BLACK: Well, particularly considering the next day the United States Supreme Court came out with this Cleveland school district case saying that it was constitutional to supply tax money to religious schools under their school voucher program, obviously the Supreme Court is not on the same page with the Ninth Circuit.

Now, the Ninth Circuit ruling I don't think is of any consequence at all. You know, people can get upset over it, but it doesn't change our lives at all. However, the Supreme Court opinion saying that you can use our tax dollars to pay for Bibles and Korans and religious teaching, I think, is a far more dangerous case.

BLITZER: All right. We're going to move into that, but I think you want to make a quick point?

THORNBURGH: I think, when they get to the Supreme Court, if they do get there, I think the lawyers will be somewhat taken aback when the session is opened by the crier saying, "God bless the United States and this honorable court." Is that unconstitutional? I think not.

BLITZER: All right. Let's get into the whole issue of school vouchers, another Supreme Court decision, saying that, yes, your taxpayer dollars could be used to send poor kids away from public schools into private schools, including religious schools, parochial schools.

Roy Black, Clint Bolick, he's a conservative here in Washington, the vice president of the Institute for Justice, he defended this Supreme Court decision, a 5-4 ruling. Listen to what he said.

(BEGIN VIDEO CLIP)

CLINT BOLICK, INSTITUTE FOR JUSTICE: So what's being decided today is that, if parents want to choose religious schools for their kids, that is constitutionally permissible. And I don't think anyone should feel threatened by that, because these kids are getting a good education, and they weren't before.

(END VIDEO CLIP)

BLITZER: In the end, Roy Black, isn't it important, when all is said and done, that kids who are going to a bad public school at least have the opportunities that you and I had and go to a better school, and let the government help out if necessary?

BLACK: Oh, I agree with you. I think it's a great idea having these school vouchers trying to help children in poor schools get into better schools, and everybody's very sympathetic with them. The only problem with that is that the United States Constitution says it's unconstitutional. I mean, First Amendment, as we just said, it says: "Congress shall make no law respecting an establishment of religion." And by this process, whether voluntary or however it happens, our tax dollars are funneled to religious schools who indoctrinate children into that religion. And we should not be subject to that. And it doesn't make any difference whether it's the same religion of ours or some other religion, American taxpayers, under the Constitution, should not be supporting religious schools.

BLITZER: Dick Thornburgh?

THORNBURGH: Well, it's the parents who make the choice. And if we carry this to its logical extreme, we would then outlaw all grants for higher education, for example, that make Pell Grants or give credits for school attendance. They don't restrict that to non- sectarian schools.

I think the answer here is that you've got a whole group of parents, mostly low-income, who feel that their children are imprisoned in underperforming schools, and this offers them an option, a way out.

And it's not surprising that this kind of experimentation is taking place. Cleveland and in cities like Philadelphia in my home state, I think the consensus is that it couldn't get any worse, and that this is really an opportunity to use our good common sense, our innovative skills and take the advantage of the competition.

BLITZER: You know, Roy Black, go ahead -- I just want to rephrase a point that Dick Thornburgh just made, what seems to me a very logical point. If the federal government can provide funds, grants, these Pell grants, these scholarships for kids to go to Georgetown University or Notre Dame or Holy Cross, Catholic schools or Yeshiva University in New York, a Jewish religious institution in New York City, upper college, what's wrong with just letting the money go to high schools and elementary schools as well?

BLACK: You know, Wolf, there's a great dissenting opinion by Justice Stevens, who addresses all these kind of things, and says, we can go into these factual materials, we're all sympathetic with the parents. We all think that the schools are doing poorly. Something needs to be done.

However, the First Amendment says specifically, tax dollars cannot go to these kinds of programs. It makes no difference whether the parents make the choice or the government makes the choice, it is still taxpayer money that's being funneled into these various religious institutions. And in effect, we have our government now supporting religious schools.

And the Founders did this because they were afraid of the government either helping religion or hindering religion, and the idea is that government has to be totally neutral when it comes to religion. And I think it's a great policy that our Founders put into the First Amendment and we should abide by it.

BLITZER: So you're saying that the Pell grants shouldn't go to Catholic colleges in the United States?

BLACK: I don't think that any federal tax dollars or state tax dollars should go to an institution that teaches religion. It can go to any secular schools it wants, but it cannot be used, according to the First Amendment, to support religious schools.

BLITZER: All right. Dick Thornburgh?

THORNBURGH: Got an uphill case, I think, when it comes to the college thing.

But there's one thing I think that's important to mention here. There's a hidden hurdle here to the full realization of the voucher program, and that is the presence in 37 state constitutions of the so- called blame provisions, which are state constitutional prohibitions against using tax dollars to support education at religious institutions.

The Supreme Court will have no say over those, and those battles are going to be fought out in those 37 states. And you've got relentless opposition to this voucher plan by the state teachers unions and other interested parties.

BLITZER: We're going to take a quick break, but as we do, I want to just show our viewers what a recent poll, in fact a CNN-"USA Today" Gallup poll, showed on this specific question, whether government money should help children attend religious schools. Look at this, 43 percent say yes; 54 percent oppose it.

The country, when you add in the margin of error, about 3 percent, sort of roughly, evenly divided on this specific issue, a source of discussion certainly to come.

In our discussion with Dick Thornburgh and Roy Black, we'll move in on other legal issues of the week, your phone calls as well. LATE EDITION will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION.

There's a news conference going on in Arizona right now. Earlier today in Arizona a man was charged with starting a massive wildfire, the largest in that state's history. Let's listen in to see what they're saying.

PETE PIERCE, TASK FORCE: ... first, and then we'll open it for questions and answers at the end. Paul.

PAUL CHARLTON, U.S. ATTORNEY, DISTRICT OF ARIZONA: Thank you, Pete. Good afternoon. Good morning. My name is Paul Charlton, I'm the United States attorney for the District of Arizona.

Yesterday afternoon, agents from the Bureau of Indian Affairs law enforcement services, the Federal Bureau of Investigation and the Forest Service law enforcement arrested Leonard Gregg on charges of violating 18 United States Code Section 1855, starting a timber fire.

Two-count complaint was filed this morning with Magistrate Judge Vercamp (ph) in Flagstaff, Arizona. The maximum penalties and charges for these offenses are five years incarceration and $250,000 fine for each charge, and restitution as owing for all losses.

This is an outstanding example of joint law enforcement. And with us here today are other individuals from those different law enforcement agencies who will have an opportunity to briefly speak with you as well. On behalf of the United States Department of Justice, we want to extend our sympathy to those individuals on the White Mountain Apache Indian Reservation for their losses and to those residents here in northern Arizona for their losses as well.

Thank you, Pete.

PIERCE: Before I continue, I'd like to tell you that after the media briefing, there is a release that's available and copies of the criminal complaint will be available for you also. Next we have...

BLITZER: And so you have it, the official announcement that an individual has been arrested and charged with starting that huge wildfire in Arizona. One Leonard Gregg, 29 years old, a Bureau of Indian Affairs employee. This coming on the heels of another individual in Colorado charged with starting the big portion of the fire in Colorado. Someone who's a firefighter supposedly trying to protect us from fires being charged with starting a fire in Colorado. Now a similar kind of situation unfolding in Arizona. The park ranger starting a fire allegedly in Colorado, now a Bureau of Indian Affairs employee being charged starting the fire in Arizona.

We're going to continue to follow, of course, these important developments; more information will be made available. As it is, we'll bring it to you.

Let me bring back the former attorney general of the United States, Dick Thornburgh, and the criminal defense attorney Roy Black.

Briefly, I want to get your opinion on this. What do you make of these situations where we're seeing individuals charged with protecting us being accused now of engaging in this kind of allegedly criminal behavior?

THORNBURGH: It's strange indeed and tragic, of course, for the people involved. And it calls for a maximum application of the criminal justice system, because a message has to be sent that these kinds of acts will be prosecuted without any favor.

BLITZER: It's one of the things about the law, Roy Black, no matter how closely we watch it, no matter how closely we try to understand what's going on, there are still occasions, as there are right now with these two individuals accused of starting fires, where we can be shocked, isn't that right?

BLACK: True, but there is some precedent for this. There have been firemen charged in the past with arson-type offenses.

You know, earlier this week I was in Denver for a couple of days and, you know, read all the stories and about the arrests there. And that's going to be extremely difficult for that woman to get a fair trial because, you know, the population is just outraged over what's happening.

BLITZER: Well, how does the government, the prosecution make sure that someone like that park ranger in Colorado or this Bureau of Indian Affairs employee in Arizona, how do you make sure they do get fair trials, Roy?

BLACK: Well, it's very difficult when Zacarias Moussaoui's going to be tried two miles from the Pentagon. I can't imagine any chance they're going to grant a change of venue to either one of these two people, and jury selection's going to be very tough.

BLITZER: Are you worried about that, Dick Thornburgh -- you're a former attorney general -- that these people are entitled, of course, to a fair trial?

THORNBURGH: Yes, well, the theory behind a change of venue is to remove the person who's accused from the community in which the prejudices will run high against him or her. That was done, as you recall, in the Oklahoma City bombing case, where it was quite clear that those individuals could not get a fair trial in the Oklahoma City area.

It's up to the judge. The judge has wide discretion, and I wouldn't be surprised if, in this case, a change of venue were granted.

BLITZER: Roy Black, the U.S. Supreme Court wrapped up its session this past week. It was very busy, it made a lot of decisions. One of the decisions allowed us to stand, the Justice Department, the U.S. government's efforts to keep immigration hearings. Right now these alleged individuals suspected of being involved in terrorism sealed, closed. Nobody can have access to these immigration hearings if they're not U.S. citizens.

What do you make of that decision?

BLACK: Well, I'm not surprised that the government won on this, because the country is obviously very concerned about the investigation into terrorism.

However, by publicizing what occurs at these hearings and by releasing the names of the people in custody, it gives the news media an opportunity to investigate to see if they are legitimately being held.

And the problem that I see, you know, in this zeal to go after terrorism, we are arresting people, holding them incommunicado, denying them the rights to lawyers, not giving them trials, having all this secrecy, and we know when our government gets involved in secret proceedings, many times, disasters occur. And there is nothing better than having, you know, the news media and the public see what goes on with law enforcement, with the Department of Justice and in the courts.

So I think it's a terrible precedent.

BLITZER: Dick Thornburgh?

THORNBURGH: Well, these cases are a close call, to be sure. But there is a very good reason for holding these hearings in secret. It's not secrecy for secrecy's sake, as the court made clear. Having these hearings in public could expose the names of witnesses, make them vulnerable to retribution. It could expose sources and methods by which evidence was gathered, and provide a road map for terrorists to carry out further attacks.

So I think it's got to be watched very carefully, as Roy says. But I think that there is very good reason for the court authorizing these to be closed.

BLITZER: I want to wrap up this session, Dick Thornburgh, get your comment, and from Roy also, on an article that you, Dick Thornburgh, wrote in the New York Times yesterday complaining about the FBI right now, that it's being overstretched. It's stretched too thin.

Among other things, you write this: "Now with the threat of terrorism within the United States clear to everyone, continuing to ask federal law enforcement agents to duplicate the efforts of state and local police threatens to stretch thin the very agencies that are best suited to preventing new terrorist attacks."

The thrust of your argument is what?

THORNBURGH: Well, during the last two decades or so, there has been a deluge of federal legislation making violations of essentially state and local laws into federal offenses. This has the potential to divert much-needed resources from things like financial fraud and anti-terrorism efforts into duplicating what state and local officials can do.

I think it's high time that the Congress took a very close look at what it's been doing with regard to enacting laws. For example, I think probably the worst case is a federal law against car-jacking, which is clearly illegal under local laws.

BLITZER: That was the example somebody gave yesterday.

Very briefly, I assume, Roy, and correct me if I'm wrong, on this particular issue, the federal government passing too many federal statutes on too many laws that should really be done by state and local authorities. I'm guessing you'll agree with Dick Thornburgh.

BLACK: Yes, I have to say that I support Dick 100 percent. One of the most embarrassing things we found out is right after September 11, we find out the FBI is investigating prostitution in New Orleans. And they spent a year tracking down 12 prostitutes and a pimp. And any tourist could have done it in less than a week.

In any event, why are we spending, you know, FBI resources on cases like that? They ought to be, you know, focused on what's really important.

BLITZER: On that note of agreement, we have to wrap it up. Roy Black and Dick Thornburgh, as usual, thanks for coming in on a Sunday. Happy Fourth of July coming up to both of you. Appreciate it very much.

Coming up next, our Final Round. Our panel weighs in on the debates from the Sunday shows and all the political news of the week. The Final Round, right after a news alert.

(COMMERCIAL BREAK)

(NEWSBREAK)

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Time now for our LATE EDITION Final Round. Joining me, Julianne Malveaux, the syndicated columnist, Peter Beinart of the "New Republic," Jonah Goldberg of the National Review Online, and Robert George of the "New York Post."

We begin with President Bush's call for new Palestinian leadership. Earlier today, his national security adviser, Condoleezza Rice, expressed confidence when I interviewed her that the Palestinians eventually will find another leader besides Yasser Arafat.

(BEGIN VIDEO CLIP)

RICE: We trust that the Palestinian people, given a chance, will probably do what people around the world do. When they're given a choice between freedom and tyranny, they choose freedom.

(END VIDEO CLIP)

BLITZER: Is she right, Peter?

PETER BEINART, NEW REPUBLIC: I hope so, but I'm afraid not. I mean, if you look -- Yasser Arafat has traditionally been most popular when he's considered to be under siege from abroad. I mean, the only thing this man does well actually is play the martyr.

If the Bush administration wants to promote moderate Palestinians, Palestinians who believe in democracy and peace with Israel, in the elections coming up in January, they have to give them something to run on. And what is that? That is a real path to a real Palestinian state, a nonviolent state.

The problem is, you have a government in Israel that doesn't really support that, and a government in the United States that won't put pressure on the Israeli government.

BLITZER: Jonah. JONAH GOLDBERG, NATIONAL REVIEW ONLINE: I basically thought the speech was a home-run, as I think a lot of conservatives do. I think we thought that it was a great job.

And my view on this is, generally, yes, Arafat may get elected again, and that will make things more difficult, but it's better to be honest in where you see things. And the honesty is that you need to have elections, you need to get rid of terrorists, and it put Bush on the right side of the issue.

BLITZER: Did you think it was a home-run?

JULIANNE MALVEAUX, SYNDICATED COLUMNIST: No, I didn't think it was a home-run. I do think that it's right that there need to be elections, but I think there is an arrogance in telling people who they should select as their leaders. And I think when you do that, as Peter says, you put people's back up against the wall. Arafat does that very well.

I listened to Condoleezza's comments. To describe Arafat as a terrorist, to say, you know, choosing between freedom and tyranny, it's wonderful rhetoric, but it's not going to play with the Palestinians.

GOLDBERG: It also happens to be the truth, though.

MALVEAUX: But it's not going to play with the Palestinians.

If we believe in self-determination, we have to believe it there, just like we believe it here. And I think that that's the problem.

ROBERT GEORGE, NEW YORK POST: I mean, a similar problem is what's going on in Venezuela, where you've also got a democratically elected tyrant in Chavez. And I think that's the fear that we might have here, and there's no real fallback situation.

The other thing is, Condoleezza Rice says that most people will choose democracy. But there are a lot of democratic countries that will refuse to be pressured to vote for the one that the outside nations...

BLITZER: I want to move on to some other subjects, but, Jonah, if the Palestinians in January have their elections and Yasser Arafat is elected, what does the Bush administration do then?

GOLDBERG: I'm not sure. But one thing we'll know, which will be helpful to prove to a lot of people who doubt if for some reason, is that Palestinians don't necessarily reject terrorism, because they've just elected another terrorist.

MALVEAUX: I think you're overstating the case quite a bit here, Jonah. I think that what you might find is that Palestinians look through some of the rhetoric and decide that they want to pick their own leaders.

I think that you make a mistake when you put words in people's mouths. I think there are a whole lot of other things you could do to nudge people toward someone more moderate than to sell woof tickets that you really, frankly, can't cash.

BLITZER: (UNINTELLIGIBLE) woof tickets?

(LAUGHTER)

MALVEAUX: Woof tickets.

BLITZER: I don't know what that means.

MALVEAUX: You know what I mean...

BLITZER: I don't know what that means.

BEINART: I'll buy one.

(LAUGHTER)

BLITZER: But it sounds pretty good, that...

BEINART: Are you Ticketmaster? I didn't know.

(LAUGHTER)

BLITZER: I don't know what they are.

Let's move on.

MALVEAUX: I walked right into that.

(LAUGHTER)

BLITZER: From the Middle East to mounting financial scandals here in the United States, the corporate giant WorldCom is facing civil fraud charges for misstating expenses of nearly $4 billion.

Today the chairman of the Securities and Exchange Commission insisted the SEC is making corrupt corporations pay.

(BEGIN VIDEO CLIP)

PITT: With some of these people, the way to hit them where they really hurt is in their pocketbooks and in their ability to ever do this again.

What we're doing is, we're stripping them of their salaries, their bonuses, their options, and we're getting the courts to give us orders that make it certain that they will never be able to serve in another public company.

(END VIDEO CLIP)

BLITZER: All right. Does he go far enough, Julianne? Are you happy with that? MALVEAUX: Not at all. I mean, let's put some people behind bars, and let's talk about how they're really stripping. Xerox paid a $10 million fine for overstating $6.4 billion in earnings. You're talking about less than two-tenths of one -- two one-hundredths of 1 percent that they're being fined. I mean, that does not hit anyone in their pocketbook. The real losers are the small investors who haven't hedged sufficiently.

So I think, you know, I'm loathe to criticize Mr. Pitt now. I think that he has not had sufficient resources to do what he had to do. But I think he makes a big mistake if he thinks that simple civil penalties are enough.

BLITZER: You know, a $10 million fine for overstating expenses by what, $6 billion, that does seem like a pittance, doesn't it?

GEORGE: Well, it's like a paraphrase of the old saying, you know, a billion here, a billion there, and pretty soon you're talking about real money.

I mean, I'm surprised to say this, but I have to agree with Julianne here. People need to go to jail, because it's not just a matter of lining their own pockets. What they've done is seriously undermine people's trust in the stock market and undermine...

BLITZER: But, Peter, is it more than that, more than just going to jail? Taking away their money and giving it back to whatever stockholders may still be out there?

BEINART: Yes, and the problem is here, is that, on the day after a big event like WorldCom or Xerox or Enron, conservative Republicans in the Bush administration are all up in arms. But the truth is, when these leave the front pages, they go back to fighting the reforms that we need to change the system.

The Bush administration now all of a sudden says, yes, fund the SEC. Where have they been for the last year and a half when they've fighting attempts to fund the SEC? I don't trust that they're going to continue this effort.

BLITZER: Jonah?

GOLDBERG: Well, we've got two issues here. One, I'm all in favor of people going to jail if they actually deserve to go to jail. We'll see.

But this notion that civil charges aren't enough or that these fines are too low, whenever the SEC levels these kinds of fines against these companies, these are basically a cash cow for all the shareholder lawsuits that come in for hundreds of millions of dollars.

So it's not as if the only penalties these people are paying are just these small fines. They're also paying the penalty to the people who were ripped off, which is what we want in the reality ...

BEINART: Trial lawyers? GOLDBERG: Well, the people who are suing who have lost value, you know.

But lastly, your point about the idea that somehow you don't trust the Republicans. Fine, we can have that argument about what reforms we want, but that's part of the larger argument, which says that somehow in the last 18 months that these scandals, which have been developing for over a decade, are somehow the responsibility of a Republican administration. I don't get that.

BEINART: No, lack of enforcement is the problem fault of the Republican administration...

BLITZER: All right, all right, all right. We're going to leave it right there. Lack of enforcement, I've got to enforce the clock.

(LAUGHTER)

We have to take a quick break. Coming up next, Al Gore takes on President Bush about the war on terrorism. That and much more. Our Final Round will be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back to our Final Round.

If you look at the polls, not many people agree with the circuit court's ruling this past week that the Pledge of Allegiance, when uttered in public schools, is unconstitutional because of the phrase, "one nation under God."

Earlier today the vice president's wife, Lynne Cheney, suggested the ruling was a result of liberal judges.

(BEGIN VIDEO CLIP)

LYNNE CHENEY, WIFE OF VICE PRESIDENT RICHARD CHENEY: We have this Ninth Circuit that is issuing a ruling that has resulted in such widespread condemnation tells you that perhaps we need a few more judges in the Ninth Circuit. And the way to get those, of course, is for the Democrats in the Senate to allow the president's nominees to go forward.

(END VIDEO CLIP)

BLITZER: A fair criticism from Lynne Cheney?

GEORGE: Partly. I mean, the Ninth Circuit is the most liberal in the country, and it regularly gets overturned.

BLITZER: It's in San Francisco.

GEORGE: In San Francisco.

Unfortunately the chief author of this particular decision happens to be a Republican that was appointed by Richard Nixon. So you never can tell exactly what dumb decision's going to come down even if it's by a Republican judge.

MALVEAUX: It's not clear that it's a dumb decision at all. I mean, the fact is that while people -- we may pledge allegiance, the "under God" is problematic for many, many people. I mean, everyone is not a Christian. I am, but everyone isn't. And we shouldn't impose our values on other people.

The original Pledge of Allegiance did not have the phrase "under God" in it. Why do we have to hold to that?

I mean, I personally don't pledge at all, but that's another question, I won't go there.

BLITZER: Well, on that point, and I want to bring in Peter. We got a e-mail from a woman named Mesa (ph) who makes the point, "Why do people forget that the Bill of Rights is there to protect the minority, not to go along with whatever the majority might chose?"

BEINART: Well, we do have protections for minorities, and you don't have to take the pledge. You can leave the classroom.

I think that liberals, just as conservatives, have to do this sometimes, have to recognize that even if there is law that we might not have agreed with originally, after it has settled into the United States for a certain period of time and our country has kind of come to terms with it, you don't make these radical decisions by judicial fiat.

So I think -- I think this is kind of one that you want to leave -- let sleeping dogs lie.

GOLDBERG: In one particular sense, I think Julianne is right, is that, according to precedent in the last 40 years, this decision isn't outlandish. But sort of to paraphrase Dickens, if precedent says this then precedent's an ass.

The idea that somehow you can look at this through any other prism, through common sense, through American constitutional history, and somehow believe that the word "God" is unconstitutional in the Pledge of Allegiance when the entire civic structure of this country is peppered with the word "God" is, to me, absurd.

BLITZER: All right. We're going to move on but even our currency, I believe, has the word "God" on -- "in God we trust."

GEORGE: The same administration actually put it in there.

BLITZER: All right.

GEORGE: 1950s.

BLITZER: Well, let's move on to talk about something else, such as this. The former Vice President Al Gore is beginning to criticize President Bush on the war against terrorism. At a Democratic Party fund-raiser this past weekend, this is what he said. He said: "President Bush has allowed his political team to use this war as a political wedge issue to score political points and to divide this nation."

He then goes on to say: "They haven't gotten Osama bin Laden. They've refused to allow enough international troops to enter Afghanistan to make sure this country doesn't slide back under the control of these warlords."

Jonah, is Al Gore starting his 2004 bid for the presidency?

GOLDBERG: I think he is, and I think he's doing it exactly the wrong way. Last week I praised Senator John Kerry for, you know, politicizing the war issue, for making legitimate criticisms of how Bush (UNINTELLIGIBLE). I think Democrats have not only a right but a responsibility to criticize where they see fit.

But Al Gore himself has so little credibility when it comes to the war on terrorism, when it was his administration that basically allowed Americans to get killed time and again by al Qaeda and did nothing -- they even turned down opportunities to get Osama bin Laden. I don't think that this is a strong issue for Gore because he is the one Democrat who is tainted about the war on terrorism.

BLITZER: All right. Julianne.

MALVEAUX: I agree with Jonah in the first part of his comments about John Kerry. I don't necessarily agree that Al Gore is tainted here.

However, what I found surprising was the tone, given the tone he didn't have at the end of the 2000 election. If he had any of that backbone in October, November of 2000, he might well have been the president of the United States.

So, it's too little, too late. And there are other Democrats who've staked a claim now for the presidency. I think he's going to have to fight for it.

BEINART: I actually totally disagree with Jonah. I mean, it's true the Clinton administration was asleep at the wheel, but the truth is basically everyone in American politics were. I mean, the Republicans in Congress were no better.

And Gore actually has hawkish credentials that most of his Democratic competitors don't. He supported the Gulf War. He was pushing within the Clinton administration to go after Bosnia and Kosovo militarily.

I think if he takes this one step further and signals his willingness to go to Baghdad this time and support an attack against Saddam Hussein, he'll be in a very good position.

GEORGE: Well, I mean, I think Jonah is pretty much correct.

Actually, I'm kind of glad that Gore is coming forward with this, because I think we do need to have an honest debate. Because I think if we -- we have to decide if the war on terrorism is a real war with, like, a definable goal and victory, or if it's going to be like the war on drugs, which is kind of this amorphous thing that everybody is technically against but there is no definable winning strategy.

BLITZER: Let's go around the table. Very quickly, yes or no, is Al Gore already running for president 2004?

GOLDBERG: More or less, yes.

MALVEAUX: Yes.

GEORGE: Yes.

BEINART: And he's the front runner.

BLITZER: He's the front runner?

MALVEAUX: I don't know about that.

GOLDBERG: But will not get the nomination.

BLITZER: All right.

(LAUGHTER)

Let's take another quick break. Our Lightning Round is just ahead. Concerns about terrorist threats overshadow, at least in part, our Fourth of July ceremonies. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Time now for our Lightning Round.

The Fourth of July is Thursday. Robert, you live in New York City. Are you more concerned about anything beyond just fireworks?

GEORGE: To be honest, no, not really. I mean, not any more than any other time in, like, the last seven or eight months. Obviously, the war on terrorism, however we define it, is still going on and something to be wary about. But we can't completely change our everyday lives.

BLITZER: How concerned, if at all, are you, Peter?

BEINART: I totally agree. You know, I'm going to enjoy the Fourth of July. I don't want to give them the satisfaction. And just enjoy the fact that we all live in a country that's not only safe but also free.

BLITZER: Your plans changing at all because of these alerts out there?

GOLDBERG: I just moved into a new house, so I'll be unpacking regardless of the bombs blowing up.

(LAUGHTER)

BLITZER: You know, it's still a yellow -- still a yellow color- coded alert. You're wearing orange, which is one step above. (LAUGHTER)

MALVEAUX: Don't mean to send out any signals at all.

BLITZER: You're not sending out any signals. You're going to go about and watch the fireworks here in the District of Columbia.

MALVEAUX: You know what...

GEORGE: Julianne's comments are alarming as it is.

(LAUGHTER)

MALVEAUX: I don't celebrate the Fourth of July. I get up in the morning and read Frederick Douglas' "The Meaning of the Fourth of July to the Negro" and then I grouse for the rest of the day, so. I did that last year. I'll do it this year. I may get to the fireworks because I have my 15-year-old nephew, but that'd be the only reason.

GEORGE: How can you say things like that?

BLITZER: She's saying it.

GEORGE: How can you say that?

BLITZER: She's saying it because that's her right. This is a free country.

GEORGE: Yes, yes, yes.

MALVEAUX: Well, that's what I do, he asked.

BLITZER: The College Board, meanwhile, is overhauling the SAT to include an essay section and more overall time for the test.

Should we keep the SAT or scrap it? Jonah?

GOLDBERG: Absolutely we should keep the SAT. Intelligence tests work. I don't think they should, by any measure, be the only measure, the only factor. But for a lot of people who come from terrible schools, it is the one way to get around subjective standards, and it's a great tool.

BLITZER: Some people have said the SAT is unfair to minorities.

MALVEAUX: Unfair to minorities. Unfair to women. I say toss it. Four hundred colleges already have. There are other ways to evaluate people. There is an implicit bias in some of the multiple choice questions. I'd rather see us make decisions, admissions decisions, without it. I think we get a more diverse and a better- qualified applicant.

BEINART: I'm a big fan of standardized tests, but perhaps not the...

BLITZER: You probably got 700s on each one. (LAUGHTER)

GOLDBERG: Yes, he's one of those kind of guys.

(LAUGHTER)

BEINART: No, no, no, not at all. Don't say that.

I think the problem with the SAT is that you can game the system with these expensive classes. Achievement tests, which are also standardized tests but actually based on subject matter, I would prefer them.

BLITZER: You got 1600 on both, tell us the truth.

BEINART: I wish.

BLITZER: Robert?

GEORGE: I mean, I don't have a particular program with the SAT as it's constituted. These reforms that they're doing now, adding the essay stuff which actually increases the subjectivity level, I think is actually a bad move.

BLITZER: All right. Let's move on and talk about the president. He's up and running, as we saw live on this program just a little while ago. Only yesterday, he underwent a colonoscopy.

Is too much being made, Julianne about the president's health when the president goes in for a procedure like this? We led our show Friday at 5 o'clock with that news.

MALVEAUX: Well, when he transfers power to the vice president, I don't think too much is being made of it. I mean, some of the nuts and bolts and the details, you're not the Today Show. You didn't do a Katie Couric thing and show the whole thing.

So, you know, the news for me was the transferring of power. And I think also in terms of these kinds of tests, we do need to raise people's awareness. I'd rather we didn't focus so heavily on it, but...

BLITZER: And he said, Jonah, that he was transferring power to Vice President Cheney because he said we're in a period of war right now.

GOLDBERG: Yes. I mean, some of this media thing with the president's health is a relic of the Cold War where we were worried about, you know, the button being pushed and all that kind of thing. But I think, you know, the height of it was the ridiculousness of President Reagan's skin cancer on his nose, an issue which was picked to death.

(LAUGHTER)

And I basically think we've probed this issue too far. (CROSSTALK)

GEORGE: To what bowels will the media stoop, you know, to go..

(CROSSTALK)

MALVEAUX: You could not resist. Were you saving that?

GEORGE: Of course.

(LAUGHTER)

GOLDBERG: It's a visceral issue.

(LAUGHTER)

BLITZER: But isn't there some benefit out of all of this? At least a lot of Americans, hopefully, will be encouraged to go in for a colonoscopy.

GEORGE: Americans and people over in the Middle East, from your...

(CROSSTALK)

(LAUGHTER)

GEORGE: It may be. But if it -- on the margins, that's a good thing.

BEINART: And I think a lot of people were shocked to hear that President Bush transferred power to Vice President Cheney. You know, that was redundant.

(LAUGHTER)

BLITZER: Let's go on and talk about some other political...

(CROSSTALK)

BLITZER: U.S. News & World Report is reporting this week that the White House is concerned some conservatives -- I'll ask Jonah -- claim the president is not adhering to the conservative agenda. Putting together a report, they're saying that he needs to do a little bit better.

GOLDBERG: He does need to do a little bit better. He is not popular with -- I think he's fine with his base right now. He is very popular with his base. But he's not particularly -- he's losing points with conservative leaders, with activists, with conservative journalists who think that he needs to pick some better fights, veto a few things and get out there and really fight for what he believes in.

BLITZER: Not conservative enough, as far as Jonah is concerned.

MALVEAUX: So what are you all going to do, support Al Gore? I mean, come on. He may be losing a couple of points, but he's not going to lose so much support.

He is supposed to be the president of the United States, not the president of the conservatives. I think this is ridiculous.

GEORGE: Julianne is right. Actually, he's fine actually with the broad base of conservatives across the country. As Jonah said, it's primarily, you know, the New York and D.C.-based conservatives.

However, I will say -- I will say this, though, his single worst decision, which may still come back to haunt him, is the steel tariff issue. And if that continues to have ripple effects on the economy, then he is going to have problems not just with the conservative base.

BEINART: Yes, but if he had any problems on last Sunday, I think he erased them on Monday when he gave the speech. Although a speech I didn't like, a speech that conservatives had to love on the Middle East. I think that if he didn't have his base in his pocket before then, I think he does now.

BLITZER: I want to thank our Final Round for always coming in and sharing their insight with us.

Time now for another look at some thoughts, from war and peace to religion and politics. Bruce Morton weighs in on the week that was.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): This has been a very strange week. First, President Bush told the Palestinians what he wants them to do.

BUSH: I call on the Palestinian people to elect new leaders.

MORTON: They should hold semi-free elections. That is, they should vote, but they should not vote for Yasser Arafat, whom the president regards, probably correctly, as an unreliable sleaze.

Anyway, nevermind self-determination, a number of European leaders at that economic summit with Mr. Bush said the Palestinians should choose their leader, not Mr. Bush.

He disagreed, adding that if they re-elect Arafat, which many who study the region think they will, the U.S. will cut off foreign aid.

That's something the president and Congress could do, of course. They could come to that, threaten to cut off aid to Israel if it didn't, say, set a timetable for closing down settlements in the West Bank.

Mr. Bush won't do that, or anything like that, because his Middle East policy is almost exactly the same as Prime Minister Sharon's, who Bush describes as a man of peace. That's a stretch, since Sharon's biggest success, his 1973 campaign against Egypt, his biggest controversy, the 1982 attacks on Palestinian refugee camps in Lebanon, and his time as prime minister have all been marked by the aggressive use of force. But it was a strange week. Arafat did badly, at least with the president. Sharon did well. And God had a great week.

It started when a three-judge appeals court panel ruled that the phrase "under God" didn't belong in the Pledge of Allegiance to the flag, because it violated the separation of church and state. Well.

Congress thundered its support for religion, for the phrase, which was inserted during the Cold War 1950s.

BYRD: I tell you, the people of America are not going to stand for this.

MORTON: Robert Byrd of West Virginia, who voted for that insertion, swore that he would worship, not that anyone had said he shouldn't, and that if atheists didn't like it, they should leave the country.

It was emotional enough that a bill stripping U.S. atheists of their citizenship just might have passed if anyone had proposed it.

And then of course WorldCom turned out to have cooked its books big time. Coming on the heels of other corporate scandals, this may make Americans more leery of stocks. And it produced a statement from Treasury Secretary Paul O'Neill, a former CEO himself, that corporate executives who falsify company finances should go to jail.

Well, yes, why was that even news?

It's been a very strange week.

I'm Bruce Morton.

(END VIDEOTAPE)

BLITZER: Strange week indeed. Thank you very much, Bruce.

That's your LATE EDITION for Sunday, June 30. Please join us again next Sunday and every Sunday at noon Eastern for the last word in Sunday talk.

And please join me Monday through Friday, 5 p.m. Eastern for "WOLF BLITZER REPORTS."

So for now, thanks very much for watching. Enjoy the rest of your weekend. Have a happy and safe Fourth of July.

Congratulations to Brazil for winning the World Cup, 2-nil.

I'm Wolf Blitzer in Washington.

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