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CNN Late Edition with Wolf Blitzer

Showdown: Iraq

Aired January 05, 2003 - 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.


JUDY WOODRUFF, GUEST HOST: It is noon in Washington, 9:00 a.m. in Los Angeles, 8:00 p.m. in Baghdad, and 2:00 a.m. in Pyongyang, North Korea. Wherever you're watching from around the world, thanks for joining us for LATE EDITION, Showdown: Iraq.
I'm Judy Woodruff, sitting in today for Wolf Blitzer.

We will talk with two leading senators about the North Korean nuclear threat, as well as the showdown with Iraq, in just a few minutes, but first a news alert.

(NEWSBREAK)

WOODRUFF: With us now to weigh in on not only the Middle East but how the Bush administration is handling two of the three parts of what it describes as an axis of evil, two members of the United States Senate.

Joining us from his home state of Indiana is Democrat Evan Bayh, who serves on the Senate Intelligence Committee, and here in Washington, Republican Chuck Hagel, a member of the Senate Foreign Relations Committee.

Senators, welcome to LATE EDITION.

Senator Hagel, to you first. The Middle East -- the administration has been so focused on Iraq and has been dealing with North Korea -- I'm going to ask you about that in a moment -- but ever-mindful, it seems to me, it must be, of the violence that keeps happening in the Middle East.

SEN. CHUCK HAGEL (R), NEBRASKA: Well, I think what we're seeing here, Judy, is just another clear example of how volatile and dangerous the world is today. When we look at North Korea, the Middle East, Iraq, Indonesia, almost any part of the world, there is a volatile dynamic that we are having to deal with at one time.

This leads us back, I believe, to one conclusion. If the United States is to lead the world in this fight against this violence and this terrorism and what is plaguing mankind today, it's going to be through an enhancement relationship, enhancement of our relationships with other nations, working through the United Nations, coalitions of common interests. We cannot do this alone.

Intelligence-gathering, intelligence-sharing, all the pieces that will now have to be put into play, probably unlike any time since World War II, is what we are going to have to do. That's what's ahead of us, and we have to understand that. It won't be just the military dynamic that brings peace to the Middle East or disarms Saddam or finds a way out of North Korea.

WOODRUFF: Given that, Senator Bayh, given what Senator Hagel is saying about how the administration has got to talk about, think about enhanced relationships, it can't be just the military, right now the Bush administration is saying Iraq is the greater threat when compared to North Korea, which has kicked out inspectors, weapons inspectors, is now seeking, actively seeking a way to increase the number of nuclear weapons it has.

At this point, which is the greater threat, Iraq or North Korea?

SEN. EVEN BAYH (D), INDIANA: Well, Judy, they're both very substantial threats. It's hard to say today which is greater, but they are both unacceptable threats which require the active engagement of our country to protect the national security interests of both the United States and our allies.

BAYH: I'm very concerned about the North Korean situation. They have a nuclear capability today. They have the ability to deliver that capability to the Korean Peninsula and possibly Japan. They're working on advanced missile technology that in the not-too-distant future might be able to deliver a nuclear weapon to Hawaii, Alaska or even the West Coast. They have threatened to create several more nuclear devices and possibly could be engaging in nuclear blackmail.

This is a very troubling situation, but we have a window here of about six months in which to deal with that before their reprocessing will produce enough plutonium to construct those devices.

At the same time, Saddam has biological and chemical weapons. We know that. He is working feverishly to develop a nuclear capability also, and unlike the Koreans, Judy, he has demonstrated the willingness to actually use these weapons of mass destruction.

So which is the greater? You pick them. They're both unacceptable rinks to the United States, both require our very active attention and engagement.

WOODRUFF: Yes, but at this point the president and his administration are arguing, and I would say this both to Senator Bayh and Senator Hagel, they're arguing that they can deal with North Korea diplomatically even as they plan military force against Iraq.

Let's listen to what the president said just a few days ago.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There's strong consensus not only amongst the nations in the neighborhood and our friends, but also with international organizations such as the IAEA, that North Korea ought to comply with international regulations. I believe this can be done peacefully through diplomacy, and we will continue to work that way. (END VIDEO CLIP)

WOODRUFF: Senator Hagel, is the president right that the United States can deal diplomatically, successfully with North Korea, given the threat?

HAGEL: We hope we can. That is the appropriate and responsible track to be on right now.

As you know, the new South Korean president is going to put forward a plan tomorrow. We need to listen carefully to that. As you also know, the South Koreans and the Japanese are going to be in Washington tomorrow to talk with us about that. The South Korean vice foreign minister has been in Russia and China.

This issue will be resolved through those relationships that we have with Russia, China, Japan and South Korea.

WOODRUFF: But the U.S. has said that it doesn't want to negotiate with the North, that it wants the North to get rid of this nuclear program, weapons program, before it'll even talk.

Is the U.S. -- I guess what I'm asking, is the Bush administration going to have to back down?

HAGEL: Well, I don't know if I would say back down, but this is my sense of it. We need to cut right through the fog here, and somebody better be talking to North Korea. And...

WOODRUFF: But that's not the administration policy right now.

HAGEL: Well, right now I have some confidence in Colin Powell, that the tactics of this are within his purview, and I think he'll do it it the right way.

But we have to be careful we're not too cute here. The fact is this is just as dangerous as Senator Bayh has said it is, and it may be more dangerous. We're not quite sure. We've got an unstable leader with nuclear weapons.

So we better get off the high horse here and deal as directly as we need to deal with this. Because when you look at all the other pieces, as you mentioned at the beginning of this show, what's happening, exploding around us, around the world, we could find ourselves in a lot of trouble this year if we don't handle this right. And that means if we've got to go to the source, we go to the source.

WOODRUFF: Senator Bayh, there are those who are saying that the Bush administration mishandled North Korea almost from the beginning, when it took a much harder line against the North than had the Clinton administration.

BAYH: Well, Judy, there may be something to that. The president took a very hard line, basically denounced their leader personally, indicated they were part of the axis of evil, gave a little bit of the cold shoulder to the South Korean president when he came to Washington.

And I think what we've learned here, Judy, is if you're going to use tough rhetoric -- and I tend to favor the president's more muscular approach to foreign policy -- but if you're going to use tough rhetoric you better be prepared to back it up.

And what we've had here is the North Korean regime has basically called our bluff and said, "Fine, we're going to engage in proliferation, or we're going to engage in nuclear blackmail. United States of America and President Bush, what are you going to do about it?"

And I agree with my friend Chuck Hagel. We ought to all hope that negotiations work. But I hope it's not the triumph of hope over experience.

We had an agreement with them. They violated it, and what the reason for believing that Kim Jong Il is a more reliable negotiating partner than Saddam Hussein, I think that's a questionable assumption.

So let's negotiate, let's try and bring this to a diplomatic resolution. I think Chuck is exactly right about that but, Judy, I think we need to be prepared, when it comes to it, to back up our tough rhetoric with actions to protect our country.

WOODRUFF: But how does the U.S. do that, Senator Hagel, when the North Koreans, we read, if they reinstate their missile program, which is now on hold, they, as I read today in the New York Times, could have a missile reaching the United States carrying a nuclear payload?

HAGEL: Well, how you do it is the way we are working at it right now, is through our relationships. But the fact is, we are going to have to maneuver in some way here to incentivize the North Koreans, as they were in '94 incentivized.

Now, you can say that didn't count, they lied, they cheated, maybe we shouldn't have done it. Well, that's passed. The fact is, we've got a very dangerous situation here now, and it is not going to be enough to threaten and, just as Senator Bayh said, not be prepared to back up that threat.

Let's not forget something: We have 37,000 Americans trapped on that peninsula right now.

WOODRUFF: Troops.

HAGEL: That's right, troops, American troops, right between North and South Korea. They are captive to whatever happens there.

Now, that's one of the reasons the North Korean situation, in my opinion, is far more serious than Iraq.

WOODRUFF: All right. We'll see whether the Bush administration is listening.

We have much more to talk about with Senators Hagel and Bayh, and we're going to continue our conversation with them. We're also going to take your phone calls, when LATE EDITION, Showdown: Iraq, returns.

(COMMERCIAL BREAK)

(AUDIO GAP)

BAYH: ... this whole exercise of the inspections was to try and convince our allies in the court of world opinion to support us in the difficult steps that may be necessary to disarm Saddam if he's unwilling to do it voluntarily.

So if this game of hide and seek continues, and we're unable to show tangible evidence, it makes our diplomatic challenge greater and it makes it more difficult to rally allies to our side, but ultimately it will not keep us from doing what is necessary militarily to protect the American people.

WOODRUFF: But, Senator Hagel, seriously speaking here, is this report from the U.N. weapons inspectors -- there's supposed to be a report from Mr. Blix on January the 27th -- is this going to have any validity, or is the U.S., frankly the Bush administration, just planning to go ahead regardless?

HAGEL: Well, I have spoken personally on a number of occasions with Dr. Rice recently, Secretary Powell recently, what the president has said recently, that there have been no decisions made regarding going to war with Iraq. They want to look at that report. I take them at their word. I hope...

WOODRUFF: But no evidence yet.

HAGEL: Well, I hope they're being honest with this, and I assume they are, because if they have another agenda, and that is, "Well, we'll just dismiss whatever report in the process, and we will go to war," then we may find ourselves, the United States, very lonely in this effort.

I have said for a long time that the way to do this is to continue in the track that we're in, the Security Council working through the United Nations, and that's the way to deal with all of these issues.

But if we would veer off abruptly for whatever reason and say, "Well, this is, as Senator Bayh says, a cat and mouse game, I'm sorry, we're going to take him down, and we'll do that with or without you," we run a big, big risk in the world if we do that.

WOODRUFF: Well, if there's military action, we heard this week the president's budget director, Mitch Daniels, say that the cost could run something like $50 billion to $60 billion. We had heard earlier the president's former chief economic adviser, Larry Lindsey, said it could run $100 billion to $200 billion.

Given all that, Senator Bayh, it's been reliably reported now, the president is about to unveil on Tuesday of this week a $600 billion economic stimulus plan, including tax breaks for businesses. It may be accelerating individual tax cuts, dividend tax cuts, with some assistance to the states, unemployment insurance.

Is what you're hearing about this plan, is this sounding like the right remedy for the struggling U.S. economy?

BAYH: Well, the economy isn't good enough, Judy, and we have to take strong measures to increase demand for our goods and services and also to increase business investment.

I think you'll see some bipartisan support for some major elements that you just indicated: assistance for those who have lost work through no fault of their own, assistance to the states to offset the budget tightening they're going to need to be doing, some targeted tax cuts to individuals, particularly those that will get money into the pockets of the middle class, who are likely to put it back into the economy and spend it.

Where you may see some difference of opinion is on the upper brackets, because those individuals, I mean, Bill Gates, Donald Trump, they're fine people, but they're unlikely to take an additional tax cut and spend it to put it back into the economy to create jobs and get the economy moving.

So you may see some fine-tuning of the president's program to make it more effective, to actually get more bang for the buck. But I think you'll see broad bipartisan support for targeting tax cuts and investment incentives and aid to the states and unemployed, to kind of provide us an insurance policy to get job creation moving.

WOODRUFF: Senator Hagel, are you worried the administration may tilt too much to the wealthy with this tax plan they're going to unveil?

HAGEL: Well, what we know today, and we'll know more about it obviously when the president gives his speech on Tuesday, I think it's well balanced.

Why do I say that? He focuses on the unemployed, as Senator Bayh has noted. He's going to focus, I think, on more child tax credit help for parents. He's going to talk about investments. He's going to talk about capital pooling. He's going to talk about businesses.

And I think that's good, because, let's remember something, the government doesn't create wealth. The government doesn't produce anything. Wall Street produces nothing. Our productivity, which is the engine of our growth, comes from capital investment. That's the private sector. And I think that is the smart way, the only way to grow the economy. And the other part of that is for the long-term obligations this government has.

So I'm anxious to see what the president's laying out. As Senator Bayh said, there may be some fine-tuning, but I think generally the president's on the right track.

WOODRUFF: Senator Bayh, is the test going to be, though, whether this plan stimulates the economy in the short run? BAYH: I think that has to be the test, Judy. Well, three tests. First, what gives us the biggest bang for the buck, in terms of getting this economy moving with job creation and investment? And all the economists, or almost all of them, will tell you that putting money into the pockets of the middle class is most likely to do that. And so that's what we ought to be focusing on.

The second thing is, what will help ease the burden of those who've suffered through no fault of their own because of this downturn? Assistance for the unemployed, aid to states to make sure they don't have to slash school budgets and throw the less fortunate out of their health care, and then finally long-term fiscal discipline, to make sure we get the budget back into balance and don't go back to the days of just running up huge debts with higher interest rates.

Those are the three tests I think we need to apply to this stimulus effort.

WOODRUFF: A quick change of topic here as we run out of time.

Senator Hagel, it's been -- we now know that Senator Trent Lott, the former majority leader, has been given the possession of chairman of the Rules Committee, the powerful Rules Committee, which determines what legislation gets to the floor in the Senate.

Is this an appropriate responsibility for somebody who so recently was in the middle of a controversy over his comments about segregation?

HAGEL: Judy, the Senate Rules Committee does not have that function. We have a different situation in the Senate. We don't take a bill to the floor of the Senate with Rules. The House does.

What the Rules Committee does essentially in the Senate is serve as a landlord, has purview, overview over all parking places and office space and other things. And I don't mean to minimize it.

WOODRUFF: Oh, my apologies.

HAGEL: No, I don't mean to minimize the role of the chairman of the Rules Committee because it is a big deal. But I think what was worked out -- I was not part of that, but I'm just a lowly, regular senator. But what was worked out I think is probably appropriate and I think is a good fit for Senator Lott.

WOODRUFF: Senator Bayh, are you comfortable with that?

BAYH: That's an internal matter for Chuck's party, and I think he answered your question very ably.

(LAUGHTER)

WOODRUFF: And quickly, Senator Bayh, are you going to be supporting your good friend John Edwards, who announced this week that he's going to run for president? I gather you two were jogging partners.

BAYH: We do run together in a jogging sense, not a political sense, though, Judy.

(LAUGHTER)

But, you know, Tom Daschle, John Kerry, Joe Lieberman, these are all colleagues and friends of mine. We're blessed with an abundance of good candidates, Judy, and I'm going to root them all on right now.

WOODRUFF: Spoken like a diplomat.

(LAUGHTER)

HAGEL: Judy, I'd like to announce that I'm going to support George Bush.

WOODRUFF: And by the way, we see that you're running for president in '08, but we'll ask you about that the next time.

HAGEL: Yeah, well, I don't know about that. I just want won reelection, and I'm grateful for that.

WOODRUFF: Senator Chuck Hagel, Senator Evan Bayh, it's so good to see both of you. Thank you for coming by.

BAYH: Thank you, Judy.

HAGEL: Thank you.

WOODRUFF: Moving along, Turkey was a key base for U.S. military operations during the 1991 Gulf War. Just ahead, we'll talk with Turkey's prime minister, Abdullah Gul, about what role his country might play this time if the United States goes to war against Iraq.

And later, what's in store for U.S. troops in the Gulf and the Korean Peninsula from two military experts.

LATE EDITION continues after this.

(COMMERCIAL BREAK)

WOODRUFF: Two explosions this morning in Tel Aviv. CNN's Mike Hanna is live now with us from Israel for the very latest on the casualties there.

(NEWSBREAK)

WOODRUFF: To Turkey now, a country whose newly elected parliament recently approved a six-month extension that permits the United States and Great Britain to continue using that country's air bases for no-fly zone patrols over Iraq. Turkey is also readying its own troops for the possibility of a new war with Iraq.

Joining us now from Cairo, one of his stops on a tour of Arab states, is Turkey's prime minister, Abdullah Gul. Mr. Prime Minister, thank you for joining us, and welcome to LATE EDITION.

ABDULLAH GUL, PRIME MINISTER, TURKEY: Well, thank you very much, indeed. It's my pleasure.

WOODRUFF: You say that in talking with other Arab leaders, you hope to prevent a military action in Iraq. But isn't the decision really up to Iraq's Saddam Hussein and the United States?

GUL: Well, of course we all have responsibility in search of peace. We are, in this region, we are a neighboring country, so we have to come together and consult, of course, for a non-violent solution. That's why I am here. That's why I'm talking with the leaders of this region.

And I think still there's a chance to find a peace, so we have to exhaust all the possibilities.

WOODRUFF: What arguement...

GUL: War is nobody's choice, in fact.

WOODRUFF: What argument do you use to Saddam Hussein, to President Saddam Hussein, to get him to reveal all the information about his weapons of mass destruction?

GUL: Well, of course, the responsibility is on Iraq, and they have to fulfill the U.N. resolution, and they have to cooperate. They have to be transparent and open, and they have to take all the steps to convince that Iraq is free of these dangerous weapons.

WOODRUFF: Do you believe that they have done this, that they've cooperated fully?

GUL: Of course the experts know this, and they will submit their report to the United Nations, and if so (ph), we will know this. But they are there and they are searching, and as far as we know, that the Iraqi regime is cooperating with them.

Of course, I want to repeat it again, responsibility is on Iraq, and they have to cooperate with the U.N. They have to fulfill all the resolution.

WOODRUFF: There was a public opinion poll done in your country, in Turkey, and it showed that 83 percent of the people in Turkey oppose giving the United States the right to use Turkish air bases to launch strikes against Iraq. Does this sound correct to you?

GUL: Well, of course, nobody wants military conflict. In fact, in Turkey, we have been suffering a lot. During the first Gulf War, we suffered a lot economically, politically and also there was a political recruitment (ph) in northern Iraq and there was terrorist activities and they found a safe haven there.

That's why the people of Turkey, they are very much concerned about the war. In fact, everywhere, people, they don't want military action, of course. That's why we have responsibility to search and to consult and to find the ways and means for nonviolent solution.

WOODRUFF: But the United States, the Bush administration has asked you for permission to base its troops and its flights in Turkey, to launch these strikes into Iraq using Turkish bases. Will you give them that permission? They're asking for an answer very quickly.

GUL: Well, of course the parliament will decide for that. I mean, we are a democratic country, of course. According to our constitution, there are certain things that only parliament decides for that.

But I think, before that, we have to exhaust all the diplomatic ways, because the question of the war will be very dangerous and very wide in the region. I'm sure that Iraq regime and Mr. Saddam Hussein should understand this, and he should cooperate with the United Nations.

Of course, as I said, nobody wants war. The recent statement of President Bush and Secretary Powell, Secretary General Kofi Annan, they also emphasize on peace. Means that still there's a last chance for peace.

WOODRUFF: However, the United States is trying very hard to get this permission from Turkey to base these military flights in Turkey, and the U.S. is prepared to help Turkey, to give it aid, to help you enter the European Union.

At this point, do you believe Turkey will give this permission?

GUL: Well, of course, we always appreciate United States for that. We are strategic allies. We want to deepen, strengthen our relation with United States, of course. Our relation is very deep, very old. And in future, definitely we will cooperate.

WOODRUFF: Saddam Hussein, is it possible that he could be given exile in one of the Arab countries in the region?

GUL: Well, of course, I don't know this. I mean, I'm here to search nonviolent solution, as I said. We are exchanging the views and talking on different recent means (ph). We have to prove that we have done everything before the war.

WOODRUFF: So, no comment on Saddam Hussein.

Mr. Prime Minister, we will let you go. Prime Minister Abdullah Gul, we thank you very much for talking with us.

GUL: Well, I thank you.

WOODRUFF: When LATE EDITION returns, mobilizing the troops. U.S. servicemen and women prepare for possible war in the Persian Gulf, but will they face a fortified Iraqi army, and how far will Saddam Hussein go with his forces? Meanwhile, North Korea flexes its military muscle. We'll get insight into what U.S. troops are facing on the front lines of global hotspots, from retired U.S. Army Brigadier General David Grange and retired U.S. Air Force Major General Don Shepperd.

LATE EDITION continues after this.

(COMMERCIAL BREAK)

BUSH: Wherever you serve, or wherever you may be sent, you can know that America is grateful and your commander in chief is confident in your abilities and proud of your service.

(END VIDEO CLIP)

WOODRUFF: President Bush rallying U.S. troops at Fort Hood, Texas, this week as they prepare for the possibility of a new war with Iraq.

Joining us now with some insight into the military challenges presented by the showdown with Iraq and North Korea, two highly decorated combat veterans. In Tucson, Arizona, retired U.S. Air Force Major General Don Shepperd, a CNN military analyst. And in Oak Brook, Illinois, retired U.S. Army Brigadier General David Grange, also a CNN military analyst.

Gentlemen, good to have you back on LATE EDITION.

General Grange, to you first. We didn't get a final answer, of course, on this from the Turkish prime minister, but how important is it that the United States have access to those Turkish air bases to launch any strikes, if needed, into Iraq? And how important would it be for U.S. ground troops to be in Turkey?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, it's extremely important for the air operations. Shortens the legs of combat operations, which eliminates some of the air refueling, obviously, gives us the reach.

But for ground forces it would advantageous, as well. For helicopter operations and also if they could just drive armored forces right across the border.

And that part, I think, is the tough issue. The air I think we'll get. The ground force issue is still up in the air, I believe.

WOODRUFF: General Shepperd, any doubt in your mind that the U.S. will get the permission it seeks?

MAJ. GEN. DONALD SHEPPERD (RET.), CNN MILITARY ANALYST: I think eventually we'll get the permission, Judy, but one thing you're seeing in all of the countries around there, they don't want to give the United States a blank check and say, "Sure, you can use our bases, do whatever you want."

They want to keep pressure on the United States to bring this to a diplomatic solution, without war if at all possible, and they want to know what the end-game is, and those aren't unreasonable questions.

I do think we'll get the support we need in the end, if we can make the case against Saddam that we have to do this, Judy.

WOODRUFF: General Grange, something like 60,000 U.S. troops in the region around Iraq now. They're saying we'll have 100,000 there by the end of January, much more than that by the end of February.

When will the U.S. actually be ready to initiate a military action?

GRANGE: I believe, Judy, the timing is set so troop build-up will coincide with, I guess, anticipated triggers that would start a war. And you're looking at, with coalition forces, probably closer to a 250,000 number of all the different services and countries involved.

And like Don Shepperd said, what you're going to see is some countries are on the fence that'll make a decision to support the United States and Great Britain at the last minute. They just can't openly do that right now.

So it'll continue to build up. I think more like halfway through February they'll be ready than into March.

WOODRUFF: General Shepperd, I want to turn just quickly, or rather bring North Korea into this discussion, because while the Bush administration says it wants to deal with North Korea diplomatically, you have the defense secretary, Donald Rumsfeld, saying just a few days ago that the U.S. has the capacity to fight two wars at the same time, one in the Persian Gulf, one presumably on the Korean Peninsula simultaneously.

Is it accurate, in your view, that the U.S. could do this, has this capacity?

SHEPPERD: Yes, absolutely, but a big "but" here, Judy. Our conventional forces were cut by almost 40 percent, and appropriately so, at the end of the Cold War when the Soviet Union came down. And so we are much more stressed now with things going on, and we have less capability to do two than we did before.

But what you do is you play the hand that's on your plate. We're well into Iraq. When other things break out, you decide which is the most important. You shift forces to that new theater if necessary, and then you come back and play a clean-up game.

We can do one, we can do two, we can do three or four, but it's not easy and the forces are stressed because we have considerably fewer of them than before, Judy.

WOODRUFF: Well, let me just read -- General Grange, let me read what the conservative columnist Charles Krauthammer wrote in The Washington Post this week. He said "Militarily, we're not even in a position to bluff. Defense Secretary Rumsfeld was duty-bound to affirm America's capacity to fight two wars at once. Unfortunately, that capacity went by the boards at least a decade ago, and the North Koreans know it."

Who's right here, the secretary or Charles Krauthammer?

GRANGE: Well, I think the secretary is right. And the reason I say that is because you're not going to decisively win both wars simultaneously. One would have to be a holding action. And we can inflict considerable damage with certain means of power on, let's say, North Korea, if we were already engaged in Iraq, but it would be very tough.

The one thing about our military that's unusual compared to other militaries in the world is the adaptability of our leadership to shift from one kind of mission to another very rapidly and the flexibility built in the forces to do that. But there is some severe shortages in certain types of specialties that we only have enough for one theater at one time.

WOODRUFF: Well, General Shepperd, right now we're told the North Koreans have a more than 1 million man army in uniform. They've got something like an additional 2 or 3 million men in reserve. Whereas -- and they're 30 miles, the DMZ, the demilitarized zone, is 30 miles from Seoul.

I mean, what sort of threat are we looking at when we consider North Korea and what it might pose to the -- not just to the peninsula but to the United States?

SHEPPERD: Well, it's a considerable threat, Judy. We have 37,000 American troops stationed over there.

The outcome is not in doubt. The United States and South Korea could prevail in a military conflict over North Korea even despite its million-man army with 2 or 3 million reservists.

The problem, as you cited, is that much of the territory of Korea would be at risk. The capital of Seoul, 50 miles south of the border, would be at great risk. There'd be great destruction on there.

And so although the end game is known, it could be very messy. It could ruin the economy of South Korea. Nobody wants to see a war in Korea. We're going to find a diplomatic way out of this, is my prediction.

WOODRUFF: General Grange, are you as optimistic?

GRANGE: We'll win in Korea, but Korea's tough. If I had the choice to fight in Korea or Iraq, I would vote to lead my soldiers in Iraq. A lot of casualties will happen in a war of Korea, especially civilians, especially around Seoul.

I served a year and a half on the DMZ in Korea, and we trained every day against this enemy. And they're very tough opponents. They're dug into the mountains. They have a lot of fire power. But we would win, but it would be costly.

WOODRUFF: And gentlemen both, I want to ask you both, just quickly before we close out here. Last week on LATE EDITION, New York Congressman Charles Rangel said what the United States needs to do is reinstate the draft.

Is that something the U.S. should even be thinking about right now? General Shepperd?

SHEPPERD: That's a political question. I'd certainly like to see national service out there with the military option being one of them. I think we lost a lot when we lost the draft before.

But there has to be political consensus for that, Judy. We don't need it from the standpoint of numbers. And so we'll have to leave that one to the politicians, from my standpoint.

WOODRUFF: And General Grange?

GRANGE: Well, to give some recommendation to the politicians on that subject, I would say no draft, but I would say definitely some sort of national service, not only for the military, but for firefighters, police and other things that are critical to homeland defense and the future of this nation.

WOODRUFF: All right. General David Grange, General Don Shepperd.

We're going to have a short break, but we'll continue our discussion with our two generals right after this. They'll also be taking your phone calls when LATE EDITION returns.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to LATE EDITION. We are talking about the challenges of a military face-off in the Persian Gulf and the Korean Peninsula with retired U.S. Air Force Major General Don Shepperd and retired U.S. Army Brigadier General David Grange.

Gentlemen, we have a call from the Republic of Georgia. You are on the air. Go ahead with your question.

CALLER: Hello?

WOODRUFF: Yes, go ahead with your question.

CALLER: If there is a war with Iraq, can the U.S. soldiers defend themselves against chemical and biological weapons?

WOODRUFF: General Shepperd, you want to take that first?

SHEPPERD: Yes, we can. We're trained in chemical warfare. It's a stupid way of warfare. The results are very localized. It slows things down and invites massive retaliation, if you will, by the other side. On the other hand, our troops are trained in how to fight with equipment and how to decontaminate that equipment.

Bio is a little more mysterious, because that's basically handled through inoculations, and you don't know what threats you're up against.

But we can do it. We don't want to do it. We're doing everything to make sure that Saddam knows that he invites the worst if he employs chemicals and biological weapons.

WOODRUFF: General Grange, are you as optimistic?

GRANGE: Very much so. I had the opportunity to be at a training site where a nerve agent was released, and our equipment is very -- it gets your attention, obviously, and our equipment is very good.

But it does slow things down, and it makes things very uncomfortable. And like Don said, the retaliation would be probably very impressive against the enemy if they in fact tried to do that.

WOODRUFF: Well, while we're talking about casualties, it's been reliably reported this week that the Bush administration is expecting relatively low casualties on the part of the U.S. if there is a military action, a war. One general was quoted as saying, "Absolutely minimal casualties."

General Shepperd, the U.S. lost something like 148, I believe, service men and women back during the Persian Gulf War, 12 years ago. Do you believe the numbers will be as minimal as what we're told the administration expects?

SHEPPERD: There's no way to predict that for sure, Judy. I suspect that the casualties will be low.

We also, with our precision weapons now, have the ability to hit the things that we're after, rather than doing any kind of carpet bombing, such as we did during World War II. So we're minimizing both our own casualties, and the casualties of the other side.

And we're going after smaller and smaller weapons, because collateral damage is always a problem when it occurs, particularly when it's always covered by the media.

So I don't know how to predict the casualties out there, but I tell you, our casualty numbers are really headed in the right direction, and I hope this time they're zero, not 140-plus.

WOODRUFF: General Grange, is it realistic to expect absolutely minimal casualties?

GRANGE: There'll be casualties, and you just -- it's so hard to predict this, because war today is not as much attrition, it's more of a maneuver and positional advantage, and so it's not a mathematical equation. It's very difficult to predict.

However, there's a good chance, if we have to do more in Baghdad than we'd like to, there would be more casualties.

WOODRUFF: We have a caller in Maryland. Caller, if you're on the line, go ahead with your question. CALLER: Yes, my question is, a couple of weeks back, there was affair about the smoking gun and the evidence and the proof that Saddam Hussein has weapons of mass destruction. Is that still on the table? Do we need to show proof to the world community?

WOODRUFF: General Shepperd?

SHEPPERD: Well, when Hans Blix makes his declaration on the 27th, we are going to have to have some justification for going to war. And so we're going to have to convince the American public and the world community that whatever we're doing is justified.

And that's the problem with getting allies, getting the access to bases. It's not that we're just going to launch off immediately on the 27th, if Hans Blix has not found anything.

So there's much to play out, and much of it is diplomatic, back and forth, before we launch any military action. The good news is, that gives us time to find a solution without combat, Judy.

WOODRUFF: But, General Grange, at this point, no hard evidence.

GRANGE: Well, no hard evidence that's been released. I believe it'll come about in time, mainly because it's up to Saddam to prove that he doesn't have the stuff, since some reports say he has -- there's no records of it being destroyed.

And so, I think it eventually will happen, it'll come out, several different items that'll produce a trigger.

WOODRUFF: All right, we are going to leave it at that.

General David Grange, General Don Shepperd, it's wonderful to see both of you again. We appreciate you joining us on LATE EDITION.

GRANGE: Thank you.

SHEPPERD: Thank you.

WOODRUFF: And coming up in the next hour of LATE EDITION, is there still a chance for diplomacy to resolve the showdown with Iraq? Two former U.S. national security advisers weigh in.

And President Bush prepares to outline his plan for rejuvenating the economy. But will it be at the expense of state governments? We'll speak with two governors.

Plus, more of your phone calls and Bruce Morton's essay, when LATE EDITION returns.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to LATE EDITION.

In just a few minutes, we'll get the perspective on the showdowns with Iraq and North Korea from two former U.S. presidential advisers. But first, Fredricka Whitfield is in Atlanta with a news alert.

(NEWSBREAK)

WOODRUFF: Well, joining us now to help sort out the many diplomatic and security obstacles regarding Iraq and North Korea are two guests. General Brent Scowcroft served as a national security adviser during the Ford and the first Bush administration. And Zbigniew Brzezinski was the national security adviser to former President Carter.

Gentlemen, welcome to LATE EDITION.

BRENT SCOWCROFT, FORMER NATIONAL SECURITY ADVISER: Nice to be with you, Judy.

WOODRUFF: It's not only North Korea and Iraq, it's the Middle East, ever-present violence recurring in the part of the world.

This morning, The Washington Post lead editorial said, among other things, "This president Bush enters the third year of his presidency facing the most daunting array of international challenges encountered by an American leader since the height of the Cold War."

General Scowcroft, is he up to these challenges?

SCOWCROFT: Oh, I think he's up to the challenges. It's a very new world. It's a world beset by forces which are alien to the world most of us know which is the world of the Cold War. And they're disparate. We don't know who the good guys are, we don't know who the bad guys are.

And there are these unknown or new, novel forces like terrorism, for example, that require different means of coping. And they tend to -- they're accumulating as time goes on. It's going to be a very difficult period.

WOODRUFF: But, Dr. Brzezinski, you've written recently about the U.S. being in a precarious situation right now, about how important it is that the U.S. handles the situation, particularly with Iraq, correctly.

Do you believe President Bush is up to this unprecedented challenge since the height of the Cold War?

ZBIGNIEW BRZEZINSKI, FORMER NATIONAL SECURITY ADVISER: I certainly hope he is. And it's not just him, it's the administration, it's the Congress, it's the American people. We have to understand that at stake right now is the international system and America's role in it. I think the year 2003 could be in many ways a decisive year.

How we respond to the challenge posed in the Middle East, including Iraq, how we deal with North Korea, how we deal with the these vaguer issues that Brent mentioned, will test our ability to create an international system that collectively copes with problems, that will increasingly be beyond the power even of the omni- superpower. And if we do not, this year could begin the slide into a global anarchy that could prove devastating in the course of the decade.

WOODRUFF: Some very strong words there. Right now, General Scowcroft, the Bush administration, just looking at Iraq and North Korea, they are clearly planning military action against Iraq, which has allowed inspectors in now for weeks now to go from site to site looking for weapons of mass destruction, while on the other hand saying they will use diplomacy to deal with North Korea, which has kicked out weapons inspectors and says that it will actively go ahead building nuclear weapons. Somebody would like at this and say, this doesn't make sense.

SCOWCROFT: Well, each of the situations has to be treated as a generic problem. The problem really started with the axis of evil, where they were dumped together with recipes that were supposed to handle the whole problem. They're very different issues.

Right now, I believe the approach is correct in the sense that we're now mobilized with respect to Iraq. And to back that off, whatever you think of North Korea, and shift around would be a terrible military burden, almost impossible.

So, I don't disagree with the focus right now, but it does not mean that we can ignore North Korea and that we don't have to deal with them in whatever manner is required.

WOODRUFF: But, Dr. Brzezinski, does the contradiction, the obvious contradiction here disturb you?

BRZEZINSKI: It bothers me potentially, though I think there is a possibility that we'll succeed in addressing both problems the way I think they ought to be addressed.

We're doing basically the right thing vis-a-vis Iraq. That is to say, we have mobilized the international community. We have established credibly our determination to use force. And I think there is a possibility that Iraq, in fact, will be disarmed under collective pressure and monitored by international inspectors. And I hope we'll have the wisdom ...

WOODRUFF: You do believe that's possible?

BRZEZINSKI: I think it's possible. But I also hope we will have the wisdom to accept that. The worst outcome, in my view, would be if we then decide to use force unilaterally in spite of the U.N., punishing Iraq for defying the U.N., allegedly, but ourselves defying the U.N., and in the meantime not doing much about Korea.

But if we handle Iraq correctly, we can use the same procedure for North Korea: international mobilization, pressure, but also some carrots if North Korea accommodates.

WOODRUFF: General Scowcroft, is it possible that the Bush administration could do what Dr. Brzezinski said would be a dangerous thing to do, and that is to go ahead without international support, without U.N. support, and punish Iraq when there is questionable evidence about the presence of weapons of mass destruction? SCOWCROFT: Well, I think it's certainly possible. I think the administration faces a very difficult problem at the end of this month when the inspectors make their first report. I don't know what will be in the report, but from all that one reads it will be at least an inconclusive report, that they have not found anything decisive in terms of Iraqi violations and they ask for more time.

And that will be a point at which the administration has to decide whether to give them more time, whether to produce intelligence they have not produced yet in order to make the casus belli which the inspectors will probably not have found.

So, I don't know which way the administration is going to go, and I don't know how Saddam Hussein will behave during that period either.

WOODRUFF: All right, we have much more we want to talk to General Brent Scowcroft and Dr. Zbigniew Brzezinski about. We're also going to be taking your phone calls for our guests, when LATE EDITION continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: We're not waiting for another attack, we can't wait for another attack, to employ the full power of America in this cause. We're acting now to protect the American people.

(END VIDEO CLIP)

WOODRUFF: The U.S. commander in chief, President Bush, pulling no punches about his top priority, national security.

And we're continuing our discussion with former national security advisers Brent Scowcroft and Zbigniew Brzezinski.

Gentlemen, I've just been handed a statement from the White House, from White House spokesman Adam Levine. He says, quote, "The president was informed aboard Air Force One about the bombings today in Tel Aviv. We know that at least 15 are dead, 30 or 40 injured." He said, "The president condemns these brutal acts of terror in the strongest possible terms. For those who want to derail the peace process, we are not deterred. People have a right to live in peace and security."

Dr. Brzezinski, you were just saying he should issue these statements when the other side suffers casualties as well.

BRZEZINSKI: That's true. And the president says we're not deterred from pursuing the peace process, but the fact is, we're totally passive.

And unless the United States and the international community step in, these kinds of atrocious acts of terror, and then continuing atrocities of the kind that The Washington Post editorialized about last Friday against the Palestinians, will continue. These parties to the conflict are now locked into a mutual hatred from which they cannot extricate themselves, and only we can help them do that, and we're being passive.

WOODRUFF: General Scowcroft, should the United States have been and should it now be doing more to prevent this kind of violence in the Middle East?

SCOWCROFT: Yes, I believe we should. I believe that it is a priority at least as important as the others that we face.

As Zbig said, the two sides in the Israeli-Palestinian conflict cannot solve it by themselves. It has gone beyond that point. And, rightly or wrongly, only the United States can make the difference. And so far, we have not engaged.

WOODRUFF: But the Bush administration, Dr. Brzezinski, says it's doing all that it can, that it's sent envoys, that it's -- you know, that it's really up to the parties involved.

BRZEZINSKI: Well, if it says "up to the parties involved," it's washing its hands, and that's precisely the problem.

The parties involved cannot reach peace. On both sides, the extremists are determined to push the other side into extremism. The Palestinian extremists don't want moderate Israelis, who I think still represent the majority of the people, to come to power. They prefer the fanatics. On the Israeli side, they want to destroy the Palestinian moderates. They also prefer the Palestinian fanatics, because each side, each extreme, thinks it'll then get its victory in total (ph).

This is the problem. Unless the international community steps in, outlines what the peace ought to be like, and then pushes the two parties on the road to peace, this kind of stuff that we are so tragically witnessing today is going to be repeated over and over and over again, to the detriment of the well-being of the Israelis and the Palestinians.

WOODRUFF: Very grim analysis.

Brent Scowcroft, I want to go back to something you said a few minutes ago, when we were talking about North Korea and the so-called axis of evil. You said the problem started with the axis of evil, when these countries were put together in one basket -- Iraq, Iran, and North Korea.

Was it wrong for the president to lump these three together?

SCOWCROFT: Well, it's never been clear to me exactly why they were lumped together, other than it was a very catchy phrase in the State of the Union address.

The only thing they have in common, well, they're all dictatorships. The only thing they have in common is a dislike of the United States. They are different kinds of issues, and they require different means to deal with them. And the administration is now dealing with Iraq and with North Korea and with Iran in a different way.

But now they're subjected, "Well, you said this about the axis of evil. Now, why are you dealing with Iraq this way, dealing with North Korea that way?" That's the problem they've gotten themselves into.

WOODRUFF: And you're saying that this is a problem of their own making?

SCOWCROFT: Well, it is, in a way. What I'm saying is, dealing with them differently is right, but people say, "Well, where's the axis of evil? You said this will not be tolerated, and on the one hand you're dealing with Iraq with military force, and on the other hand you're saying North Korea is a diplomatic problem."

WOODRUFF: From the beginning, Dr. Brzezinski, the Bush administration took a harder line against North Korea, in contrast to the Clinton administration. Was there a miscalculation there?

BRZEZINSKI: I don't think so. I don't think there was a miscalculation about the tougher line. I think there has been, however, a lack of consistency and of a larger strategy.

Simply condemning the North Koreans for being, as Brent says, part of the axis of evil is not good enough. We have to ask ourselves, how do we deal with this problem?

And in the northeastern Asian context, we can only deal with it by mobilizing the support of Japan, of China, of Russia, and working closely with the South Koreans and then putting North Korea under sufficient pressure so that it then has an incentive to accommodate. And we haven't done this.

WOODRUFF: But the Bush administration, right now, General Scowcroft, is saying, "We won't talk to you, we won't negotiate with you until you get rid of whatever plans you have to make nuclear weapons."

SCOWCROFT: Yes, they are. And...

WOODRUFF: And the South Koreans, by the way, which has been a U.S. ally, is saying, you know, "That doesn't make sense to us."

SCOWCROFT: Well, the South Koreans are now undertaking an initiative on their own, which I applaud, to try to bring the two sides together.

WOODRUFF: They'll be in Washington this week, as a matter of fact.

SCOWCROFT: They'll be in Washington this week.

And I think the one thing we have to remember is that we should not act in this area, about North Korea, except in the closest consultation with South Korea. They are intimately involved in this. They are the ones that are under the gun. They are allied, they are not simply a client state. And we need to think of them very, very differently.

WOODRUFF: Are you concerned about the division between the United States and South Korea on how to deal with North Korea right now?

BRZEZINSKI: Oh absolutely, because unless we work with the South Koreans we can't deal with the problem in North Korea.

And I sense the emergence of a kind of old Korean nationalism that could easily turn against us, be oriented more toward China. That would have far-reaching implications for the posture of Japan, for Japan's potential re-militarization.

So at making here are some really fundamental changes in the international set-up, just as there are in Iraq. And we have to be extremely careful to fashion a strategy that not only deals with the immediate problem, but creates momentum toward international effectiveness in dealing with these very sporadic, increasingly anarchistic global threats.

WOODRUFF: I should note that General Scowcroft is nodding as you're making that point.

We're going to take another short break, but we will get more insight from our national security advisers and take your phone calls. LATE EDITION will be right back.

(COMMERCIAL BREAK)

WOODRUFF: More violence in Israel this morning. For the very latest on two explosions in Tel Aviv, let's go to our correspondent Kelly Wallace on the scene.

(NEWSBREAK)

WOODRUFF: With us now is the chief Palestinian negotiator, Saeb Erekat, joining us by telephone from -- on television, I should say, from Ramallah.

Mr. Erekat, we heard a spokesman for the Israeli Prime Minister Sharon say a moment ago, Mr. Gissin, he said that this is just further evidence that the campaign of terror against Israel continues. And he said it is instigated and supported by the Palestinian authority and their leader. How do you respond to that?

SAEB EREKAT, CHIEF PALESTINIAN NEGOTIATOR: Well, Judy, let me, on behalf of President Arafat and the Palestinian Authority, condemn this attack or any attacks that aims at killing civilians, whether Israelis or Palestinians.

And at this broken record that I've been hearing from the Israeli officials, assigning blame and finger-pointing at us, we totally reject this. Since November 21st, there haven't been any suicide bombers. So the Sharon government claims credit to itself. And when something goes wrong, they blame it on us.

I should remind the world, Judy, that in November and December, the number of Palestinians that have been killed have been 154, mostly women and children. And these are the statements and the records and the numbers of the Palestinian Red Crescent, very accurate numbers.

And I believe today that we can sit down and start shooting blame at each other, assigning blame at each other. I don't think the Sharon government is fighting terror. The Sharon government is fighting the Palestinian cause. They want to defeat the Palestinian cause. They want to defeat the Palestinian peace process.

But I urge President Bush tonight, when this massive numbers of people who killed -- he always condemns the killing of Israelis, and I wish one day he would condemn the killing of Palestinian children.

But I believe that President Bush must refocus his attention, must refocus from building the alliance for war in Iraq to bring the breeze of peace between Palestinians and Israelis. We want to see an American administration that is reengaged in order to bring about hope in the minds of Palestinians and Israelis.

The shortest way to save Israeli lives and Palestinian lives is not going to be through me blaming or assigning blame on anybody but through a revival of a meaning peace process.

We need the help of a third party. We need the help of the American administration, because the trust level between us and Mr. Sharon is below zero.

WOODRUFF: Saeb Erekat is the Palestinian chief negotiator. We thank you very much for talking with us, Mr. Erekat.

Indeed, he is echoing, Dr. Brzezinski and General Scowcroft, the points that the two of you made just a few minutes ago, that the United States cannot leave this to the parties involved.

WOODRUFF: And while that is sitting on the table, I want to bring us back, as we consider the Middle East, let's bring back in Iraq and North Korea, because what we have seen recently in the countries surrounding Iraq, and now in South Korea, increasing demonstrations against the United States. In Germany, we've just had an election conducted where you heard a lot of anti-American rhetoric. The same thing in the South Korean election that was just completed.

Is this something that is going to spread? These are two countries that have been reliable, strong allies of the U.S. Is this the kind of sentiment that is out there that we can expect to grow, General Scowcroft?

SCOWCROFT: I think we're going have that kind of sentiment just because of the fact that we're so big, we're so dominant, and people expect us to solve every problem around the world. And so when we don't do it their way, they're going to object.

But a lot of it is due to the way we have been seen to behave, that is, with arrogance, unilateral and so on, without reaching out.

WOODRUFF: In the last two years by this administration? Is that what you're saying?

SCOWCROFT: No, I think it went back, really, it goes back over a decade where we have appeared to act sort of indifferently to our friends and allies rather than reach out and work through them.

That's a harder way to do it. But unless we focus on that, we will be isolated and we will be the subject of hostility from our putative friends and allies.

WOODRUFF: Dr. Brzezinski, is this turning against the U.S. by formerly reliable allies inevitable, or has it been exacerbated by some of the language, the new doctrine of the Bush administration, which includes preemption, which includes keeping America the superior military power in the world?

BRZEZINSKI: I think there is something to that. I don't want to turn this into a political debate. But I am concerned over the fact that the United States is increasingly becoming the focal point of global hatred.

I have spent my professional life dealing with issues of power politics, and I believe in the necessity of power, and I believe in American power, and I believe in American idealism. But I have always felt that idealism and power have to be balanced.

I think recent times, maybe in part because of what Brent says, because we are so powerful, the balance has been skewed in favor of power. And we have become increasingly assertive, self-righteous. The rhetoric of the last two years, in particularly the last year since 9/11, strikes me as very demagogic.

And I have the increasing sense of uneasiness that we are really not differentiating sufficiently carefully between prudence in dealing with the new global problems and panic about the global problems. And if we become too frightened, too concerned of our security, we'll turn America into an isolated, fortified outpost, paramount but not omnipotent, and increasingly isolated.

WOODRUFF: You have the same concerns?

SCOWCROFT: I do have the same concern.

But, you know, we've been all gloom and doom here. I think the important thing to remember is that the problems we deal with, complicated as they are, are not the intractable problem that we had with the Soviet Union during the Cold War. We can deal with all these issues. We can deal with them and produce a world that is far more stable and far more prosperous than ever before.

WOODRUFF: On the current path?

SCOWCROFT: If we act with wisdom and prudence and listen to our friends. BRZEZINSKI: That's right. I completely agree, particularly that last point. Because in every one of the problems we're talking about, there is a way out: whether Iraq, if we know how to define victory and we're prepared to accept a victory when it's handed to us, if it works out that way; on the Middle East, if we are willing to be engaged for peace, which we are not; and on North Korea, if we're willing to develop a wider strategy. Then we can handle these problems.

WOODRUFF: Dr. Zbigniew Brzezinski, General Brent Scowcroft, it's always good to see both of you. We really appreciate your being with us with your insights. Thank you.

And when we return, in addition to dealing with international hotspots, the White House says it's also working on the U.S. economy. But are the states being left behind in a cash crisis? We'll talk with two governors, incoming Pennsylvania Democrat Ed Rendell and Colorado Republican Bill Owens.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I will talk about how to create jobs, how best to create jobs, as well as how to take care of those who don't have a job.

(END VIDEO CLIP)

WOODRUFF: President Bush giving a preview of the economic plan that he's set to unveil on Tuesday.

Welcome back to LATE EDITION.

And while the president is expressing optimism about getting the economy back on track, U.S. governors are painting a much dimmer outlook. We're now going to get two views on what the states are facing.

Joining us from Denver is Colorado's Republican governor, Bill Owens. He's the head of the Republican Governors' Association. And in Philadelphia, former Democratic National Committee chairman and now Pennsylvania's governor-elect, Ed Rendell. He'll be sworn into office in just a few weeks.

Gentlemen, welcome to LATE EDITION.

Now, we are reading -- I guess you'd have to say reliably it's being reported -- that the president is going to unveil on Tuesday a $600 billion plan to stimulate the U.S. economy. We're looking at tax cuts here, as you can see, tax breaks to businesses, accelerating individual tax cuts, perhaps, tax cuts on dividends, a lot of discussion about that.

There's also talk that there's going to be aid -- additional unemployment assistance for those who are out of work, and help to cash-strapped states, which the two of you know about better than anything.

Governor Rendell, is this the making, the shape of a plan that you believe is going to help your state and other states that are in trouble?

GOVERNOR-ELECT ED RENDELL (D), PENNSYLVANIA: Well, sure, it'll help if there's a significant amount of money, and we hear talk of $3 billion, $4 billion that will go to the states. That will help us. The states this year, Judy, by June will a cumulative deficit of $68 billion, $68 billion. And what's happened, as the federal government has been cutting taxes, the effect on the states has been such that we've had to raise taxes. The 50 states have raised $8.3 billion of taxes just this fiscal year alone.

Now Governor Owen, of course, he walks on water...

(LAUGHTER)

... and Colorado has a surplus. But for most of us, we need that help.

But I think the approach that the president's taking, and even the Democrats in Congress are taking, is not really the right approach to stimulate the economy. You know, the money to the states is good, certainly the money to extend unemployment benefits will be helpful.

But tax cuts, first of all, they don't even affect anybody until next year, because you don't get the benefit of the tax cut until 2004. And secondly, there's no evidence, there's never been any evidence that that money goes into the economy.

If we are going to have a stimulus package, we ought to do things that will guarantee growth in jobs: investment in rebuilding our infrastructure, our roads, our bridges, build up passenger rail systems for this country. Do things that will dramatically have an effect on people getting to work and doing something good for the country.

WOODRUFF: So, Governor Owens, is the president's plan headed in the wrong direction?

GOV. BILL OWENS (R), COLORADO: No, it's not headed in the wrong direction. And I think that my friend Ed Rendell, the former chairman of the Democratic Party, when he was running for governor, he really touted the tax cuts that he had used to help get Philadelphia going again. If you look on his webpage, even look at his biography, he clearly understands that by reducing taxes you can increase economic growth.

It was true in Philadelphia, it's been true in Pennsylvania, and I think it's been true across this country, that the way to get this economy going, the way to help all of our state budgets, is to get that national economy going. And the best way to do that, not through more federal spending necessarily, it's really through reducing taxes and letting this economic engine of the private sector do its job. WOODRUFF: So the aid that we're hearing, Governor Owens, that the president may want to parcel out to the states to help with unemployment insurance, to extend that aid, to assist the states with Medicaid, among other things, you're saying that's not necessary?

OWENS: No, Judy, I didn't even indicate anywhere that that wasn't necessary. But what I do believe is, that, while the states do need an and appreciate and respect that help -- and I think we're going to get it in significant dollar amounts from the Bush administration and from Congress -- the most important underlying principle we should always remember is that the private sector and individuals make this economy.

The way to get this economy going is not to increase taxes, it's not to increase necessarily federal spending. The way to lift all boats, as President John Kennedy used to be so proud to say, was to get the economy going.

And I think that Ed's shown that in Philadelphia. He cut taxes and helped increase its economic growth. We have seen it happen across this country.

WOODRUFF: Governor-elect Rendell, Governor Owens seems to know what you've done in Philadelphia, and he says you've already found out that cutting taxes is good for the economy.

RENDELL: Well, we cut taxes to give incentives to companies to invest in growth and in jobs. But at the same time we were cutting taxes, what Bill didn't say is we invested over $1 billion -- federal, state and city money -- into an economic stimulus plan that was directly related to growth, to building things, to projects, to factories, to helping business add more jobs.

And that's why today Philadelphia has an economy that its tax base continues to grow, its revenues continue to grow, even though all around us people are having big deficits.

We need to take a look at repairing our infrastructure, building, as I said, a passenger rail system. We ought to have tax cuts, but those tax cuts ought to be keyed to creating jobs.

For example, I am for, and Senator Santorum, a conservative Republican, is for, eliminating the capital gains tax if we can show that the investment goes to producing jobs. Let's produce jobs. Let's put people to work. Those are the right type of tax cuts.

WOODRUFF: Governor Owens, a fair amount of news coverage in the last days about whether states across the country have enough money to do the job of fighting domestic terrorism, to support the firefighters, the police, the first responders, the rescuers and others.

What is the situation in Colorado right now? Are you in a position to do what you think must be done to fight terrorism on American soil? OWENS: Well, I think we can always do more, and there isn't a governor in the country that wouldn't appreciate more assistance from Washington, D.C., just as there isn't a county commissioner in the country who would (ph) appreciate more assistance from their state leadership.

I think the important thing to remember in terms of fighting terrorism is, first, there is more we can do. There is more that the Bush administration, with Congress, will be providing this next session.

But secondly, the real fight against terrorism is occurring right now overseas, in Indonesia, in Yemen, in Afghanistan and certainly in the Mideast. And that the way to defeat terrorism has been not to try to harden all of our sights in Pennsylvania and Colorado and put armed troops around every bridge and building. The way to defeat terrorism is to go after these terrorists where they live, work and train. That's what we on a bipartisan basis in this country are doing as we speak.

WOODRUFF: All right. We'll ask Governor-elect Wendell to respond to that when we come back.

We're going to ask both our gentlemen, our guests, to stay with us. We'll continue our conversation with them. We're also going to take your phone calls when LATE EDITION returns.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back. We're talking about the cash crunch facing the states with Colorado Republican Governor Bill Owens and the Democratic Governor-elect of Pennsylvania, Ed Rendell.

Mr. Rendell, what about the point that Governor Owens was making just before the break, that the focus in the war on terrorism should be overseas rather than in hardening up vulnerable sites here in the United States, bridges and other potential targets of terror here?

RENDELL: Well, I don't know if Bill has said exactly that, but I think he was right. The first emphasis ought to be going after groups like al Qaeda and cracking them overseas.

We can't, no matter how much money the federal government would give us, we can't absolutely protect all of our sites. So he's right about the emphasis.

I don't think he said that we shouldn't try to increase our security in the states.

OWENS: That's correct.

RENDELL: And I think we all should do that. I think the Bush administration was generous initially in its appropriation for things like the First Responder Program, Judy. But that money has not flowed yet, not much of it has flowed to the states. I'd like to see that money fast-tracked so we could begin to build up our local response here, as well.

WOODRUFF: Well, in connection with all this, Governor Owens, we've seen some reports in the last few days about localities and perhaps states worried about enough money to carry out these smallpox vaccinations that are supposed to be administered to first responders around the country.

Is Colorado going to be able to handle the expense of that?

OWENS: You know, Judy, I think we are. And I understand the way this system works, there's a program, the people who have to pay for the program and provide it will always say, typically, as today in the New York Times, they don't get enough money from the federal government. In some cases that's true, in some cases that's pleading.

We would like more money from the federal government. I think that I would speak for every one of the other 49 governors when we could always use their assistance. But being realistic, the federal government does have a deficit. There is not enough money to go for every good purpose.

And so what we have to do, as Ed is doing in Pennsylvania and has done in Philadelphia, we have to balance and prioritize. And we also have to realize that until we know what the program is, until we know what the funding is, it's very difficult to suggest whether or not we have enough money.

Would we like more? Absolutely. Are we going to get it? I'm certain we are, it's just a question of how much additional funding we're going to receive.

WOODRUFF: Let's move quickly to education. President Bush said in his weekly radio address yesterday that he'd like to see a 9 percent increase in federal education spending, something like another billion dollars, especially aimed at poor students.

Governor-elect Rendell, is that going to make a difference in the state of Pennsylvania?

RENDELL: Well, it'll be helpful, Judy, especially if it's targeted to the areas that there's the greatest need, urban and rural areas which have the highest degree of poor students. It'll be helpful.

But one point I wanted to make in response to what you and Bill said is, you know, the interesting thing if you listen to Bill's response is, well, of course, we're doing the belt-tightening in the states, we're raising the taxes. $8.3 billion of state taxes increased in this last year alone, not by Bill and not by me, but by governors who were strapped.

At this time it doesn't make any sense to me, when we're cash- strapped, when Washington has to fight a war, has to fight terrorism, when we need to stimulate the economy, why in God's name are we continuing with a tax cut that doesn't make a difference in the quality of life of people earning $40,000, $50,000 and gives tax breaks that aren't needed to people who are very wealthy and many of them have said they don't need them?

RENDELL: Let's spend that money taking care of our problems. Let's spend that money -- Senator Hutchison has a great plan, you know, the very successful low-income housing tax credit. She wants to have a low-income economic tax credit for businessmen who invest in low-income areas, to produce jobs and produce new development.

Why don't we do things like that, instead of just this random cutting taxes?

WOODRUFF: What about that, Governor Owens?

OWENS: Well, Judy, first of all, it's important to note that the Bush administration has increased spending on education by 40 percent in the last two years. And so we're starting from a very high base as we continue to invest in education, which is obviously a priority of the president and all 50 governors.

But secondly, I'd like to remind everyone listening today that the federal budget is getting dramatically larger each and every year. And all that the tax relief would do is slow that rate of increase slightly, so that we can make sure that the people who actually pay the bills get some of the relief.

I really believe that a dollar spent in the private sector by Americans for their own needs is, in many cases, far more effectively spent than a dollar spent by government.

Do we need more help with Medicaid? Absolutely. Do we need better assistance in terms of waivers? You bet. But I think it's also important to realize that states had a very good string of years in the 1990s, and it's not a tragedy if for a year or two we have to tighten our belts, just like Americans do, and live within a real budget.

WOODRUFF: Governor-elect Rendell, two-word response?

RENDELL: Well, I agree with Bill about states. But what about people? Why don't we spend the money doing things we know will put people to work? That's the best way to drive this economy.

WOODRUFF: All right. I think we're getting to the heart of this argument. Governor Bill Owens, Governor-elect Ed Rendell, it's great to see both of you, and we appreciate your being with us today.

OWENS: Thanks.

RENDELL: Happy New Year.

OWENS: Same to you.

WOODRUFF: Thank you very much for talking with us.

And coming up next, Bruce Morton's essay.

(BEGIN VIDEO CLIP) BRUCE MORTON, CNN CORRESPONDENT: Once or twice, Mr. Bush said he thought U.S. foreign policy should be humble. Well, that's a couple of years ago and before, of course, the terrorist attacks of September 11, 2001.

(END VIDEO CLIP)

WOODRUFF: Should the United States act as the world's policeman?

(COMMERCIAL BREAK)

WOODRUFF: And now Bruce Morton with some thoughts on whether the United States is calling the shots on global behavior.

(BEGIN VIDEOTAPE)

MORTON (voice-over): Come back for a moment to Campaign 2000 and listen to the Republican presidential candidate in the closing moments of his first debate with Al Gore, the Democrat.

BUSH: I don't want to try to put our troops in all places at all times. I don't want to be the world's policeman.

MORTON: And once or twice, Mr. Bush said he thought U.S. foreign policy should be humble.

BUSH: But in order to keep the peace, our nation must be humble.

MORTON: Well, that's a couple of years ago and before, of course, the terrorist attacks of September 11th, 2001. Still, the then-candidate, now president, has changed some.

We do not have troops everywhere of course, but we have them in a great many countries. Mr. Bush has said that American Democratic ideals are what's best for all people everywhere.

He has said that the United States has the right to start wars, not simply to strike back if someone else attacks them. The adjective used is "preemptive," which implies the United States thinks the other side is planning an attack. But the clear message is the U.S. has the right to start the fight.

So the administration seems to be preparing to invade Iraq. Will it act alone if allies don't come forward? Probably. Is this because Iraq is planning to attack America, or because Saddam Hussein once tried to kill this president's father, or because the president, who grew up in the oil business, wants to secure Iraqi oil or lessen U.S. dependence on Saudi oil? Hard for non-White House insiders to know, but the war does seem to be coming.

On the other hand, while Iraq may have or be working on nuclear arms, North Korea, U.S. experts say, already has nukes, one or two anyway, and long-range missiles. But there, Mr. Bush seems to prefer diplomacy.

That may be because North Korea's army is bigger than the United States' or because of all of those thousands of artillery pieces within a few miles of Seoul, capital of South Korea. It may be because South Korea wants to talk to the North, not threaten it. It may be because nobody can imagine what the North's fairly loopy dear leader, Kim Jong Il, will do next.

Whatever, we should probably be glad that Mr. Bush doesn't seem to be contemplating three simultaneous wars: on terror, Iraq and North Korea. Two -- and we seem headed for two -- will probably cause enough grief to go around.

I'm Bruce Morton.

(END VIDEOTAPE)

WOODRUFF: Thank you, Bruce.

And now, your letters to LATE EDITION. We received a large response to New York Congressman Charlie Rangel's call last week to reinstate the military draft in the United States.

Sharon from New Mexico writes, "Rangel's implication that only minorities and poor people serve in the military is wrong. I have an income in the top 10 percent. My son is joining the Marines after his graduation in May."

Jim from Louisiana declares, quote, "I hope Rangel is serious. The worst thing Nixon did was to stop the draft. Reactivating it would be a positive step."

And finally, President Bush received support from Steve in Missouri who writes, quote, "Why is everybody blaming President Bush for the economy? The responsibility belongs with the thieves on Wall Street. Put the people in jail that did it and confidence will come back."

We always welcome your comments. The e-mail address is lateedition@cnn.com.

And for our international viewers, we want to thank you for joining us on LATE EDITION.

For our North American audience, we will sort through the political battles on the horizon for the new year with former Clinton White House press secretary Joe Lockhart and Republican strategist Ed Gillespie.

And don't miss our Final Round. LATE EDITION continues after this.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back. We'll talk about the political landscape as 2003 begins in just a moment, but first, here's Fredricka Whitfield in Atlanta with a news alert.

(NEWSBREAK) WOODRUFF: Well, even as we keep an eye on events in the Middle East and elsewhere around the world, here in the United States this week the 108th Congress opens, with Republicans in control of both the House and the Senate, as well as the White House. It's the first time this has happened since Dwight Eisenhower was president.

Meanwhile, Democrats are already lining up to take back the White House in 2004.

With us to talk about this and other key issues likely to emerge in the weeks ahead, former Clinton White House press secretary Joe Lockhart and Republican strategist Ed Gillespie.

Good to have you both with us again on LATE EDITION.

ED GILLESPIE, REPUBLICAN STRATEGIST: Good to be here, Judy.

WOODRUFF: Thanks for being here.

Let's start out with the president's economic plan. He's going to talk about it on Tuesday. And just roughly, we assume that he's going to propose tax breaks, perhaps accelerating those for individuals, tax cuts on dividends, maybe even the possibility of no taxes on dividends.

Joe Lockhart, is this generally the outline of what is needed to stimulate the American economy?

JOE LOCKHART, FORMER WHITE HOUSE PRESS SECRETARY: Not at all, actually. One would have hoped that when he fired his economic team from the first two years, from the last Congress, they would have come in with some fresh new ideas. Instead, we're getting more of the same.

It is the same basic policy, it's the same idea that, if you somehow increase the tax burden on the upper brackets, that there'll be a trickle-down effect to the rest of the economy.

It didn't work in the first two years, it's not going to work now. And I think we're going to see a real debate over this.

WOODRUFF: Ed Gillespie, we have Nancy Pelosi commenting. Let me just have you listen to what she said about what she -- at least, what she's heard so far about what the president's going to propose.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D), CALIFORNIA: The speculation that I see doesn't indicate that there's much stimulus in the package. I think what you see is the administration perhaps using the term "stimulus" as a Trojan horse to wheel in some favorite tax breaks for the high end that they're so fond of. And so what remains to be seen, what the president will do.

(END VIDEO CLIP) WOODRUFF: So you have the incoming minority leader, Democratic leader, in the House critical. You've heard what Joe Lockhart had to say.

GILLESPIE: Right.

WOODRUFF: What's the president going to say on all this?

GILLESPIE: I suspect the president's going to say, we have to get this economy moving again, and one way to do that is to eliminate the double taxation that we have on dividends today that would help encourage greater participation in the marketplace and greater activity in the stock market, which would help reinvigorate the stock market, which is sagging right now, which in turn would lead to greater job creation and reinstate and replenish our 401(k)s and college funds. It's a good idea.

LOCKHART: But, Judy, there isn't an economist in this country who believes that somehow cutting the tax on dividends is going to stimulate the economy.

GILLESPIE: Sure, there are. Yes, there are economists in this country who believe that, Joe.

LOCKHART: No.

GILLESPIE: You and I are not economists. There are economists who believe that. You can't make a blanket statement, "There's not an economist in the country who believes that." There are many who do believe it's a good idea.

LOCKHART: What...

GILLESPIE: None that you agree with.

LOCKHART: Yes.

(LAUGHTER)

Well, listen. You're right, I'm not an economist, but what we need is something that both stimulates the economy in the short term and puts us back on the kind of right fiscal track we were in the '90s, where you make targeted tax cuts to those who need them, targeted investments to parts of industry and people that will stimulate growth. And we get back to a surplus.

Listen, if we were still in the time of surpluses like we were in the '90s, you might want to get rid of a double taxation on dividends. We don't have the luxury because of the first tax cut.

WOODRUFF: Ed Gillespie, let me just cite you what the Tax Policy Center, the analysis that they did. And again, this is one source...

GILLESPIE: Right.

WOODRUFF: ... but they're finding in looking at what the savings would be for someone making over $1 million a year, $24,000 a year. For someone making $40,000 to $50,000 a year, $76 in savings.

Now, is the administration -- should the administration be worried about appearing that it's tilting to the wealthy?

GILLESPIE: Well, I'm not familiar with this organization or people that have different views on things.

But the fact is this: If you're going to decrease taxes for people who pay income taxes, we have a very progressive code in this country right now. About the bottom half of earners hardly pay anything in income taxes. If you're going to reduce income taxes, by definition you're going to reduce taxes on those in the top 50 percent. The top 10 percent are paying 60 percent of the income taxes.

Any income tax relief is going to result in those who pay the taxes getting relief. And the people who pay the taxes tend to be concentrated at the high end.

That's going to stimulate economic activity, though. We have to help folks all across the board. And job creation is going to help people most in this country, and that's what we need right now. We're at 6 percent unemployment, and rising possibly. We've got to address that.

WOODRUFF: And, Joe Lockhart, I mean, Republicans would say, you know, "What do the Democrats want, do they want to raise taxes today?"

LOCKHART: No, I think the Democrats want to stimulate the economy. There's a lot of good ideas out there. One is to do a tax holiday on Social Security, something that doesn't add to the long- term structural deficit.

But I think, you know, there's a lot of evidence out there that this approach doesn't work. In 1993...

WOODRUFF: Which approach?

LOCKHART: The approach to sort of take across-the-board tax cuts. In 1993, 1 percent, the top 1 percent, had their taxes raised. The sort of targeted tax cuts that we were able to do and the investments we were able to do meant that in the 1990s the millionaires did better in that decade than any other decade.

The economic approach doesn't work. And, you know, you're right, we've got to get the economy going, but this president and his policies have been killing 70,000 jobs a month, as opposed to 200,000 jobs created in the last administration.

GILLESPIE: What we're seeing here is what we saw going into the last midterm election, which is that the Democrats are very good at being critical of the president, but we have yet to see them put forward their own agenda.

LOCKHART: You'll see it tomorrow. You'll see it tomorrow. GILLESPIE: Well, Nancy Pelosi is critical of the president. Let's see what they have to put forward to try to get the economy moving again.

Right now, their agenda, I look at it the way I look at this Raelian clone baby, you know, I'd like to see evidence of it before I believe it, and I haven't seen any evidence of a Democratic agenda yet.

LOCKHART: Well, unfortunately, going to cloning, the economic team has been cloned, and they've got bad policies. It's not the personalities, it's the policies.

And what an unemployed worker in this country who is denied extension of his benefits by the Republicans, they don't need a new PR plan, they don't need new packaging, they need different policies that work.

WOODRUFF: Ed Gillespie, I want to read, and again this is, consider the source, it's the minority staff of the House Appropriations Committee, so this is a Democratic source.

They looked at job growth over the last six decades. I mean, looking at even going back before President Carter, but when you look at under President Carter you had 218,000 jobs; under President Reagan, 100,000; Reagan's second term, 200,000; Bush Sr. so on and so on. In every one of these administrations, the last six or seven, jobs were up. Under President Bush, so far, 69,000 jobs lost.

Is this a problem for this president going into an effort to get reelected?

GILLESPIE: But this administration inherited an economic problem, as the data now demonstrate. They acted quickly to avert what would have been an even worse economic condition. They're trying now to further rescusitate the economy, and I think they're pursuing the right track.

But, yes, in 2004 the economy is going to be an issue, as is, by the way, foreign policy and national security, which are two other things that this president has had to confront in his administration, a war against terror, the terrorist attacks, a possible war with Iraq. These are all things that also have effects on the economy, but they're unavoidable and were inevitable when he took office.

LOCKHART: I think the "It's not my fault" excuse isn't going to work.

GILLESPIE: No one's saying it's not his fault, Joe, I'm talking about economic data.

LOCKHART: We've had two years of economic failure. We had eight years of economic growth before that, and the difference...

WOODRUFF: That's pretty harsh. LOCKHART: But this isn't just about political, it isn't about spin, it's about two very different approaches. One that says, you do across-the-board tax cut and you keep cutting taxes and you let the deficit go wherever it wants -- and most importantly the reason that we're not growing jobs right now is that the market has lost confidence in the president and the administration.

What we had in the early '90s was, when we went and attacked the deficit and made the targeted tax cuts...

WOODRUFF: But the market was up on Thursday, the first day it was open after...

LOCKHART: I don't know about you, but my 401(k) is pretty anemic, and Thursday didn't solve it.

GILLESPIE: Joe, the market has not lost faith in the president. You never had faith in the president, which is fine, you're entitled to that view. But don't attribute your view to the entire stock market and the entire investment community. That's not the case.

The fact is, the data show that this administration inherited poor economic conditions. They acted to correct it. They're acting now to correct it further. And that's what the situation we're dealing with at this moment.

LOCKHART: You're using the same, old, tired and, I think, wrong ideas. And if we continue on this path, 2004 will be about the economy.

GILLESPIE: Hang on, it's clear now, too, that many of the gains in the market of those eight years of the Clinton presidency were very illusory, they were hyped by cooked books and by other problems in the marketplace.

(CROSSTALK)

WOODRUFF: We can go on with this for a long time. We're going to leave it here.

(CROSSTALK)

WOODRUFF: You're not going to change each other's minds.

We're going to take a quick break, and when we return we are going to take your phone calls for Ed Gillespie and Joe Lockhart. Lots of questions about politics. We'll be right back.

(BEGIN VIDEO CLIP)

BUSH: I've got my mind on the peace and security of the American people, and politics will sort itself out.

(END VIDEO CLIP)

WOODRUFF: President Bush trying to stay above the political fray, as the jockeying among Democrats to retake the White House begins.

We're continuing our conversation and we're going to be taking your phone calls for former White House press security Joe Lockhart and Republican strategist Ed Gillespie.

Ed Gillespie, let's go down the list of the Democrats who've already announced that they want to run for president: Howard Dean, the governor of the state of Vermont; John Kerry, the senator from Massachusetts; John Edwards of North Carolina let us know this week he's running; and Al Sharpton, Reverend Al Sharpton has made it pretty clear he's going to run.

Now, these are some other names we're expecting: Dick Gephardt of Missouri, no surprise there; Joe Lieberman of Connecticut is expected to run; Tom Daschle, the Senate about-to-be minority leader; and possibly Bob Graham of Florida.

Which one are the Republicans most concerned about, Ed Gillespie?

(LAUGHTER)

GILLESPIE: And I would be doing a person a favor if I...?

(LAUGHTER)

I don't think -- look, this is a large and growing field. There are formidable candidates in that field, some more formidable than others.

But whoever emerges from this Democratic primary has an opportunity to recast the Democratic Party and to put a stamp on it, a new approach to governing, a new ideology. I'm sure it would be more liberal in nature than the Republican ideology, but there's an opportunity here for the Democratic Party, in much the same way that President George W. Bush recast the Republican Party with compassionate conservatism. And whoever emerges, I think, will be a strong nominee. I am not a Polyanna this. I think that '04, the parties are in parity, will be a strong contest for the presidency. I obviously believe that President Bush is stronger and will win, but we'll see.

WOODRUFF: And right now, he's high in the public opinion polls...

GILLESPIE: Sure.

WOODRUFF: ... and Joe Lockhart, that makes it hard for any one of these guys, but I want to put you on the spot. Who do you think stands the best chance at this point?

LOCKHART: Well, I don't think it makes -- it makes it hard in sort of the silly atmosphere that we have before voters get involved, when it's just us talking about it. And as much as I love talking about it, it's not that meaningful.

When we actually get to one person going against another person and a set of ideas and doing it on a fairly level playing field -- which it isn't now. It is a fact here in Washington that the president has the loudest voice, whether he's a Democrat or Republican. It's very hard for Democrats who are senators and congressman or governors to get into the debate and fight with the president.

But I think you've seen in the last couple of weeks, now that people have "presidential hopeful" in front of them, you're listening a little more. And I think that's going to continue.

I think Democrats -- you can sort of put them in two different groups. They're sort of new faces that the country doesn't know that well -- that would be, you know, Senator Kerry, Governor Dean, Senator Edwards -- that are going to be out introducing themselves. And, you know, one of them will emerge as someone that the public and Democrats as a group are attracted to.

And you've got people like Dick Gephardt and Tom Daschle who've been around, who have strength, and Joe Lieberman, within the Democratic Party. And I think, you know, by a year from now, you know, maybe 13 months from now, we're going to have a very clear idea.

WOODRUFF: And, Ed Gillespie, you know, you have a president who has said the Democrats are going to sort this out, but the White House has already started making pointed criticism of some of these people. We heard the White House making a statement about John Edwards the other day.

Is it smart for the White House to, from time to time, point out the weaknesses of these people and to...

GILLESPIE: Well, and I don't -- maybe I missed it, but I didn't see the White House put out anything. I saw the Republican National Committee put out something about it.

WOODRUFF: I stand corrected, but clearly there's very close coordination between the White House...

GILLESPIE: I think the Republican National Committee should not sit by and let any candidate in the Democratic Party -- and it won't just be Edwards, he's not the Lone Ranger here, others will be afforded that same privilege of having their records highlighted, in terms of how they've voted in the past and things that they've said.

That's the job of the Republican Party apparatus. I served as communications director there. Joe has been in similar positions. That's what you do, and they should be pointing out and making sure the reporters have a little dossier on the voting records of each of the candidates.

LOCKHART: Yes, but it's not done by chance. You clearly put your energy and time into those that kind of worry you more. And I think if you look at the efforts that come out of the RNC, they're worried about John Edwards, they're worried about Tom Daschle. And, you know, as others emerge, they're going to get worried about them. WOODRUFF: 108th Congress about to get under way this week. Ed Gillespie, Republicans in control of the House and Senate as well as the White House. As we've pointed out, first time in decades.

Is the president going to get everything or almost everything he wants from this friendly Congress?

GILLESPIE: Well, I think he's going to get a lot. The president has set the agenda. This is the first time ever that a Republican president has gained seats in a midterm election. And I think that the representatives and senators on Capitol Hill recognize the influence that the president has, the esteem with which he's held by the American public.

But they also understand that they're elected in their own right as senators and members the House. They're going to work out the legislation and the details, but the president is clearly setting the agenda.

WOODRUFF: Can the Democrats stop what they want to stop from this president?

LOCKHART: I think they can. And I think really what this is going to come down to is how much the White House wants to work with the Democrats. Because if you look at the accomplishments in the first two years, the vast majority, from my point of view, are where the president said, "OK. That's a Democratic idea, but it's a good idea, and now I'm for it."

If you look at the Transportation Security Agency federalizing the workers, having a Homeland Security Department. If you look at the education bill, a lot of the work came from Ted Kennedy. Campaign finance reform. These were all important accomplishments, and they were all originally Democratic ideas.

If he follows that model that he did in the first two years, then I think we can get a lot done. If we start getting caught up in presidential politics and ideology, which this stimulus package looks like it was built, then I think we're going to have gridlock.

WOODRUFF: Ed Gillespie, what about the new Republican leader in the Senate? New Majority Leader Bill Frist about to be formerly elected. Very little experience in that leadership role. Clearly a distinguished career as a surgeon. But how tough a time is he going to have, do you think?

GILLESPIE: Well, he's a very smart guy, as we all know, and he's very talented, and he has a very good leadership team around him, as well. He has a history of legislating. He is a legislator in his brief time on Capitol Hill.

GILLESPIE: But he will be learning the ropes as he goes forward in scheduling the floor of the Senate, which is a very complicated place to be. But I think he's going to have the staff, the leadership team around him and his own smarts and natural ability, as well as a president strongly pushing forward the agenda, to get things done. WOODRUFF: Joe Lockhart, but at the same time he presents a more moderate face for the Republican Party. Doesn't that make it more difficult for Democrats to paint Republicans as out of touch, too conservative?

LOCKHART: Well, we're going to have to look at what they do. I don't think this is about appearance and perception. You know, I think, for instance, he has been brought in the context of racial insensitivity.

WOODRUFF: With Trent Lott's departure.

LOCKHART: With Trent Lott, not his own obviously.

Now, having meetings and photo-ops are nice to sort of create a picture, but you've got to actually have the policies. And I think it would be smart for Frist and the president to set a goal, to say, you know, "In the '90s, we got African-American poverty down to the lowest level in history, and now it's gone back up; that we're going to take 12 months and we're going to pursue policies -- uninsured, which disproportionately hurts minorities. We're going to reverse that trend of the uninsured going up on health care coverage."

And find something specific and say, "Here's what we're going to do. This is what our promise -- this is what our outreach will be." Because otherwise it's all just words and I don't think all that meaningful.

WOODRUFF: We're going to have to leave it there. It's great to see both of you. Ed Gillespie, Joe Lockhart, thank you very much for being with us on LATE EDITION.

LOCKHART: Thanks for having us.

WOODRUFF: Take care. We'll see you.

And up next, LATE EDITION's "Final Round." Our panel squares off on the week's big stories. That's the "Final Round," right after a new alert.

(COMMERCIAL BREAK)

(NEWSBREAK)

(COMMERCIAL BREAK)

WOODRUFF: Time now for the "Final Round." With me, Democratic strategist Donna Brazile, Michele Cottle of the "New Republic," Jonah Goldberg of the "National Review Online," and Robert George of the "New York Post."

Thanks to you all for being here.

It is a new year, and the White House is trying to hit the ground running on the economy. On Tuesday, as we've been discussing, President Bush will unveil a new proposal that includes eliminating taxes on stock dividends.

Earlier today, the Senate's second-ranking Republican and Democrat sparred over who benefits from the president's plan.

(BEGIN VIDEO CLIPS)

SEN. DON NICKLES (R), OKLAHOMA: People just want to play class warfare, and they say, "Oh, well, wait a minute, if you have tax cuts, it's going to benefit the wealthy." Well, the wealthy are paying most of the tax cuts. You ought to have tax cuts for taxpayers.

SEN. HARRY REID (D), NEVADA: When they direct their tax programs to benefit the very, very, very few, and eliminate the majority from any benefit of these tax cuts, it is class warfare. That's their job.

(END VIDEO CLIPS)

WOODRUFF: Senators Nickles and Reid appearing on NBC.

Robert George, is this the right plan the president is about to unveil, as much as we know about it?

ROBERT GEORGE, NEW YORK POST: As much as we know about it. Yes, it's kind of funny when Democrats say that a tax-cutting proposal that is aimed at stock dividends only benefits the very few, when well over 50 percent of American families have some kind of stock now.

I think it's a good idea, especially last year, when there was so much corporate mistrust and malfeasance, we need to send a signal that it's basically a good idea to start reinvesting again. And I think it's the right tax cut at the right time.

WOODRUFF: Donna Brazile, the right tax cut at the right time?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: No, it's more of the same.

And unfortunately, Robert, it's not going to stimulate the economy. It's misleading, because it's supposed to be a growth package, and the only thing that's growing is the deficit.

And it's unfair, because, again, it continues to put money in the hands of the top 1 percent, and not in the hands of the people who will go out there and spend it, go to Walmart, go wherever they may shop, as well as help, you know, grow the economy again.

WOODRUFF: Jonah Goldberg?

JONAH GOLDBERG, NATIONAL REVIEW ONLINE: Well, look, first of all, I agree with both Donna and Robert a little bit. The issue with dividends isn't some -- I think Donna's right, it's not a stimulus. But what it is is to move toward better corporate governance, and that's one of the things we're supposed to be in favor of after Enron and all of that.

And by encouraging people to buy stocks that give dividends, and by encouraging corporations to give dividends, you're going to make the corporations more receptible and more responsible to stockholders, which is something everyone here was screaming about just six months ago.

And in that sense, it's a very good idea, but it is not a great stimulus. But there are other things in the package that are stimulative.

WOODRUFF: Michelle?

MICHELLE COTTLE, NEW REPUBLIC: And it's interesting that the Republicans are very careful when they talk about how the top-end taxpayers are the ones paying most of the taxes. But we're talking about income taxes. I mean, if you wanted to stimulate really growth in the economy, then what you do is, you work on the Social Security payroll tax, which affects lower-income taxpayers, who are more likely to spend extra dollars when they get them back.

WOODRUFF: Robert George, why shouldn't the administration -- why wouldn't the administration take that approach?

GEORGE: Well, as we know, I don't think -- they haven't announced everything yet. I mean -- and that's actually something to look at.

However, I think a Republican administration is especially sensitive that anything that looks like it's going to damage the Social Security trust fund, they don't want to touch it. If they want -- if Democrats want to step forward and say, keep cutting payroll taxes, then maybe they'll take a look at it.

WOODRUFF: All right. Well, even as the president grapples with the economy, he's now facing dual international flashpoints in Iraq and North Korea.

Today, Republican Senator John McCain on CBS said both situations are equally critical.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: The North Koreans are more limited in their military capability, even though Iraq's is quite weak. It's hard for me to compare the two. But I don't think that you can -- that you have to abandon our efforts to restrain Iraq from acquiring a position that North Korea has attained.

(END VIDEO CLIP)

WOODRUFF: Jonah, which is the bigger threat, Iraq or North Korea?

GOLDBERG: Frankly, I don't know. It might be North Korea.

But my problem with the question, not coming from you, Judy, but in general, the way the question is posed out there, is that people are saying North Korea is a bigger threat, therefore we should do more about North Korea than Iraq. But the whole point of going after Iraq is to prevent it from becoming a nuclear power like North Korea, which could cause vastly more havoc.

And there is this notion out there, which I find very disingenuous, by people saying that, because North Korea might be a bigger threat, therefore we should put Iraq on the back burner. They are not saying this because they really think we should be doing something about Iraq. They're basically -- it's basically an anti-war argument made to sound like good statesmanship.

WOODRUFF: Is that...

BRAZILE: Well, I think the problem is that the administration seem not to have a policy now on how to re-engage the North Koreans. They've isolated the country. They pointed their finger in their face. And now the North Koreans are coming back and saying, "OK, you called us out, now we're ready."

So I think it's important for the South Koreans, who are coming here this week to talk to our government, will find a peaceful solution and hopefully someone who is willing to talk and listen to them downtown (ph).

WOODRUFF: Robert?

GEORGE: Yes, well, we basically found out that your options become a lot more limited when a given country becomes a nuclear power. If Saddam is allowed to become a nuclear power and has influence over the entire Middle East region, the United States' options would be limited. So that's why they want to prevent that from happening now.

WOODRUFF: Michelle?

COTTLE: Sure, but you're looking at the axis of evil, and we now know North Korea has been working on its nuclear program. It looks like Iran may be more ahead of Iraq in this situation.

So what the administration has to be able to do is explain itself a little bit better in terms of why Saddam is so different. I mean, we're looking at a situation where anti-American sentiment is likely to go up and we're going to have more terrorist attacks because people think that a lot of this is just about going after the Middle East and the oil in the Arab nations.

WOODRUFF: So you're saying it's just a matter of how the U.S. explains itself?

COTTLE: No, I'm saying that's one of the things they have to be able to do. I mean, they have to explain why -- you know, they say, "Saddam's irrational. Containment didn't work. You know, we tried diplomatic pressure." All these things are true with North Korea as well, and still they continue on this course. So obviously...

GEORGE: And North Korea got to the nuclear weapons goalpost before Iraq did, and we're trying to stop Saddam from getting it too (ph).

(CROSSTALK)

COTTLE: And when we approached South Korea about stopping the oil experts, they said don't do that or they're going to restart their nuclear power program.

I mean, we're not -- we say that we need to have one voice with all of our allies, but right now Russia, China and South Korea completely disagree with us on these things.

WOODRUFF: All right.

GOLDBERG: We can have one voice, but that doesn't mean we have to say the same exact things to everybody around the globe. I mean, the Soviet Union was a much bigger threat than a few communists in Grenada. But we could stop the communists in Granada, and we did so, even though we couldn't kick them out of Moscow.

COTTLE: No, no, they're saying we have to have one voice with our allies on North Korea, but we can't even get South Korea and Russia and China to stop being upset publicly with us. I mean, they made it very clear they disagree.

GOLDBERG: But that's the problem with their foreign policy, not ours.

BRAZILE: Not to mention Japan, who's also concerned about the North Koreans and the threat that they pose. And again, they don't want to nuke up the neighborhood, so to speak...

(LAUGHTER)

... but I think it's important that we sit around and start talking to the North Koreans and engage.

GEORGE: There goes the neighborhood.

(LAUGHTER)

WOODRUFF: Moving back to the Persian Gulf, meanwhile some Arab leaders are floating the idea of Saddam Hussein going into exile in order to avoid another U.S.-Iraq war.

While no government has weighed in officially on that prospect, countries being mentioned are Sudan and Somalia. Some others being considered include Libya, Egypt, North Korea...

(LAUGHTER)

What would happen if North Korea harbored Saddam Hussein? And Cuba.

All right, Michele, is Saddam Hussein going into exile, is that an option that makes sense?

COTTLE: No, and certainly not in a lot of these countries. I mean, do you really want him running amok in the Sudan? This is a man whose entire reason for living is to hold onto the power he has accumulated. I think the AP story that was talking about this had this great line about back in '82 when they were suggesting that to prevent war with Iran he considered stepping down, the Ayatollah was saying that would be a good condition. The minister of health suggested, you know, just strategically maybe he should consider that. They took him in the next room and shot him.

I mean, this man is not going without -- you know, he's got that last bullet. He's going to use it himself before he steps down.

GEORGE: I think we're looking for the "Saturday Night Live" skit on Saddam in exile.

(LAUGHTER)

But no, the thing is, if he left it would really depend on -- I mean, if he leaves just for his sons to take power, that would not be acceptable.

WOODRUFF: Donna?

BRAZILE: I think that you will see a lot of bipartisan support for this regime change of getting him to move on and find someplace to throw all his palaces and his Viagra...

(LAUGHTER)

... and his girlfriends and all...

(CROSSTALK)

BRAZILE: But I think the Arab leaders are right to try to get Saddam to focus on, you know, the eventual reality that he's about to lose his job.

GOLDBERG: Yes, I think that's right. I mean, look, conceivably, it could be a worthwhile solution if he could get the entire Ba'ath regime, all his cronies, all his thugs and murderers to all get up and leave, but then he basically becomes like a James Bond villain, Osama bin Laden type, creating havoc from North Korea or wherever else.

But I do think that this is part of a sign that the region realizes that the guy's got to go. And it may be more of a trial balloon for forcing a coup than anything else, which would be good.

WOODRUFF: We're still trying to get this idea of Saddam Hussein in exile in our heads.

(LAUGHTER)

But meanwhile, we have to take a quick. But just ahead, the Democrats lining up to take on President Bush in '04. Who's the best bet to emerge from the pack? That and more, when the Final Round comes back.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to the "Final Round."

North Carolina Senator John Edwards is vying for President Bush's job in 2004. The freshman Democrat announced his plans this week, and today he pressen his theme of working for the needs of, in his words, "regular people."

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D), NORTH CAROLINA: These are the people that I fought for for 20 years as a lawyer, they're the reason I ran for the Senate, they are the essence of the reason of why I want to be president.

My entire life I have seen things through their eyes, and I think I understand what their concerns, what their hopes, what their fears are.

(END VIDEO CLIP)

WOODRUFF: John Edwards on ABC.

Donna, does a multimillionaire lawyer talking about the needs of "regular people" pass muster?

BRAZILE: Absolutely. Especially one that, I believe, understands the crisis that's going on in this country today as well as the international crisis.

John Edwards, although he's relatively new to the United States Senate, he is perhaps a good politician. He understands and would focus on the needs of what he calls "regular people," people like John and Robert, of course, and perhaps Michelle.

But also, you know, John will also help the Democratic Party regain the South and focus on issues of concern to that region, the economy, education and job and health care.

So I think it's important that John Edwards get out there and make a real good head start by talking about these issues.

WOODRUFF: Is he going to be lucky enough to have Donna Brazile working on his case?

BRAZILE: No, I'm still using up all my frequent-flyer miles from the Gore campaign, so I'll wait a couple of months.

WOODRUFF: All right, but we're going to keep asking that question. All right, Robert George?

GEORGE: I'm not sure whether a multimillionaire trial lawyer is actually a perfect representative of regular folks. The thing is, though, that some of the recent polls I saw, he would be behind 17 to 19 percent against Bush in his home state of North Carolina. Actually what his running for the White House, along with Tom Daschle's apparent run for the White House, actually does, it really opens up the possibility that the Republicans could actually end up expanding their majority in the Senate because I think Edwards's seat would be vulnerable, Daschle's seat would certainly be vulnerable.

WOODRUFF: Michele?

COTTLE: He's certainly got that folksy charm quality that Al Gore lacked and American voters really like. I mean, George Bush is absolutely not a regular guy, but he would turn on that cowboy baloney on the trail and people would just melt.

So, obviously, Edwards at least has this going for him. Now, whether or not he's ready for prime time in terms of policy discussions remains to be seen.

GOLDBERG: In terms of policy discussions, I thought this regular people thing was a veiled reference to cloning.

(LAUGHTER)

But I think the -- you know, look, I mean, the cliche around town is that Edwards is basically taking the Clinton strategy from 1992, this unknown guy who's going to have the courage to challenge a popular president named Bush, during wartime, blah, blah, blah, blah, blah. And everyone says, you know, that Edwards is Clinton without the baggage -- attractive, Southern, all that stuff.

The problem is, is that the circumstances of 1992 aren't the same today. We have all of the heavyweights getting into the race right now, and you can't recreate 1992 unless you're going to recreate -- your opponents are going to be Paul Tsongas and Bruce Babbitt and these other second-rate guys. This time around, you know, I don't see how Edwards' thing will work.

WOODRUFF: Well, it doesn't end with John Edwards, because tomorrow Missouri Democratic Congressman and former House Democratic Leader Dick Gephardt will take the first formal step of the 2004 White House bid with the establishment of a presidential exploratory committee.

Now, Michele, should Dick Gephardt expect success given what happened in the mid-term elections where the Democrats didn't do so well?

COTTLE: Well, it doesn't look good, but I think Jonah's reference to the first Bush run is very much what's going on here. Everybody backed out of the race and none of the heavy hitters wanted to go up against Poppy, so they seeded the field to this complete yokel from Arkansas and suddenly, that was who their candidate was.

They're not going to let that happen again. They're going to jump -- everybody's going to be in here. We were trying to figure this out earlier. We came up with about 10 names from the Democratic side who are going to jump in this race. WOODRUFF: And that includes Gary Hart. I mean, you...

COTTLE: No, it did not include Gary Hart, but Gary Hart is 11. It was like, you know, everyone from Al Sharpton to Bob Graham...

(CROSSTALK)

COTTLE: Wesley Clark. I mean, there is a huge field.

WOODRUFF: Robert?

GEORGE: Yes. I mean, the big question is, can a man with no eyebrows ever be elected president. I mean, this is the question.

(LAUGHTER)

No, I mean...

WOODRUFF: Wait a minute, who has no eyebrows?

(CROSSTALK)

GEORGE: Dick Gephardt.

(CROSSTALK)

WOODRUFF: You really are getting detailed.

GEORGE: No, but I think the problem is, I mean, I think he looks at this as a good way to go out of the House. Gephardt, I mean Gephardt ran, what, in 1998. It'll be 16 years, and I don't really think -- yes, he's got union backing, but I don't necessarily think he really has a message that's going to resonate in 2004.

WOODRUFF: Donna, I know you're going to say nice things about Dick Gephardt.

BRAZILE: Absolutely. I worked for Dick Gephardt in 1998, and I welcome Dick Gephardt in the race. I think he will bring a lot of assets to the party.

First of all, let's go back to 1994, the Democrats got clobbered and Dick Gephardt, over the last six years, has helped to reposition the Democrats back in Houses. It's no -- people understand that it's very difficult to win back the House when you don't have a lot of competitive seats.

I think Dick Gephardt has a national network of donors, a national network of activists and just remember, I was a couple of miles away from St. Louis.

BRAZILE: So I think Dick Gephardt will be a very formidable candidate.

WOODRUFF: Jonah. GOLDBERG: Yes, I listened to you earlier asking Ed Gillespie about who the White House fears most, and I think the reality is at this point, is that every new Democrat who gets in, the White House is happy, because it diminishes the stature of everybody. I mean, it -- think about...

WOODRUFF: The Seven Dwarfs.

GOLDBERG: Right, Seven Dwarves in '88, and now it's up to 10 or...

(CROSSTALK)

GOLDBERG: Perfect Storm, whatever, and you got this situation now where, you know, the Democratic debates are going to look like the Sergeant Pepper's album cover.

(LAUGHTER)

GOLDBERG: I mean, this huge crowd of people over there, and you have Gephardt yelling with Sharpton. And I mean, I think it looks great for Republicans.

WOODRUFF: You guys have some great lines this afternoon.

All right. We have to move to take another break, but the Lightning Round is just ahead. So you must stay with us.

(COMMERCIAL BREAK)

WOODRUFF: Time now for our "Lightning Round."

On Tuesday, the new Congress convenes for the first time with Republicans now in control of the House and the Senate.

Should President Bush expect smooth sailing from his friends on Capitol Hill, Michele?

COTTLE: Oh, absolutely not. There are too many Democrats on the Hill who are going to run for president, and they need to stake out their ground.

WOODRUFF: Robert?

GEORGE: Exactly. And in fact you've also got a lot of moderate Republicans that aren't going to be completely on board with a tax cut. It's going to be dicy.

WOODRUFF: Donna?

BRAZILE: No question. Democrats, they found their voice, their soul, and they're going to be the loyal opposition, with -- and I'm underlining "opposition."

GOLDBERG: Yes, it's a democracy, you're supposed to have people not allowing presidents to have smooth sailing. So he shouldn't expect it.

GEORGE: The pollsters helped them find their voice, I understand.

(LAUGHTER)

WOODRUFF: Well, there's a new racial controversy involving the Republican Party. In California, the party vice chairman, a man named Bill Back (ph), who is running for the state party's top job, is in hot water. It was reported this weekend that Back (ph) sent out an e- mail in 1999 that contained an essay which said history may have turned out better had the South won the Civil War. Back (ph) says he strongly disagreed with the article, and he's apologized for sending it out.

But my question is to Jonah: Is the Republican Party shooting itself in the foot on racial issues, especially given what happened to Trent Lott?

GOLDBERG: Well, I mean, this thing happened three years before Trent Lott, and I -- it seems to me this is overkill. You can have interesting arguments about the Civil War. The problem is, the Civil War has become synonymous with ending slavery, and so this guy got himself in trouble, but I don't think this has a lot of legs.

WOODRUFF: Donna.

BRAZILE: The Republican Party continues to have to explain itself on racial issues. They have 40 years of explaining to do. And I think this is just part and parcel of what's going to happen over the next couple of months.

GEORGE: Yes...

WOODRUFF: Is this going to continue?

GEORGE: The party secretary in California, the Republican Party secretary, Shannon Reeves (ph), who is African-American, is rather outraged over this. And so it may have some legs in California, but I don't think it really has to reflect on the Republican Party in general.

WOODRUFF: It's not going to help him as he tries to get elected to the party top job.

GEORGE: No, it wouldn't.

(LAUGHTER)

WOODRUFF: Michele?

COTTLE: The problem now is that people are sensitized to this. So any small, you know, no matter how loony or how fringe or how long ago, people are going to jump on it.

WOODRUFF: All right, next item, in West Virginia, more than two dozen surgeons are on strike to protest what they say are the high costs of medical malpractice insurance. Is curbing malpractice lawsuits and damage awards, is that the solution to this problem, and should doctors be striking, Donna?

BRAZILE: No, absolutely not. Look, in some states they have a cap on these awards and the costs are still going up. We need a healthy debate over our health care prices in this country, and I hope that somehow or another Congress will put aside their affinity for one side or the other and really find a solution.

WOODRUFF: Robert?

GEORGE: Doctors shouldn't be striking, but I think the medical malpractice issue has been bubbling for a while, and I think we may really get an actual debate.

GEORGE: And it will actually be interesting to see how John Edwards, for example, argues some of those issues.

COTTLE: Yes, it's hard to go after the doctors on this. Somebody reported that in West Virginia some doctor was paying $100,000 a year. I mean, this is not California. That's a lot of money for these guys.

But I think the insurance companies have something to answer for.

GOLDBERG: I mean, there's a problem with the Hypocratic Oath, but at the same time you can't force people to go into livelihoods that are going to bankrupt them. And we shouldn't be turning the medical business into a lottery for people to get rich.

WOODRUFF: Last but not least, this week America West Airlines will begin selling meals, selling meals, on some of its flights that cost from $3 to $10. Other major airlines, we are told, are also considering doing this.

Would you pony-up money, Robert, when you get on an airplane? Remember when we worried about safety? Now we're talking about buying food.

GEORGE: Yes, it seems like it was just a few years ago when a meal was actually part of it. I think it's easier just to get a burger or a pizza before you get on board and then just go with that.

WOODRUFF: Which, Donna, you said somebody was -- you were sitting with somebody on a plane and they whipped out ...

BRAZILE: They had a shoe box, and it was fried chicken and ham and potato salad. It was on America West, and I'm like, "Oh my God, I need to do this next time."

(LAUGHTER)

GOLDBERG: You should have bought it from her.

(LAUGHTER)

BRAZILE: You know what, I was thinking about it. But I'm going to make my own jambalaya and gumbo and serve that on the plane.

(LAUGHTER)

WOODRUFF: And I know for a fact it's good, because she made it for Inside Politics.

(LAUGHTER)

GOLDBERG: This is a good sign. Airlines have become a commodity, travel's become a commodity. Anything that adds value to the inside of the planes is long overdue.

WOODRUFF: Very quick.

COTTLE: I think it should be an option. I get really hungry over Chicago.

GEORGE: TV on JetBlue is better than food, anyway, so....

WOODRUFF: We're going to watch you all the next time you climb on an airplane.

Thank you all. Jonah, Donna, Robert and Michele, great to see all of you.

That's it for LATE EDITION this first Sunday of 2003. Be sure to join Wolf next Sunday and every Sunday at noon Eastern for the last word in Sunday talk.

Until then, thank you for watching. I'm Judy Woodruff in Washington.

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







Aired January 5, 2003 - 12:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, GUEST HOST: It is noon in Washington, 9:00 a.m. in Los Angeles, 8:00 p.m. in Baghdad, and 2:00 a.m. in Pyongyang, North Korea. Wherever you're watching from around the world, thanks for joining us for LATE EDITION, Showdown: Iraq.
I'm Judy Woodruff, sitting in today for Wolf Blitzer.

We will talk with two leading senators about the North Korean nuclear threat, as well as the showdown with Iraq, in just a few minutes, but first a news alert.

(NEWSBREAK)

WOODRUFF: With us now to weigh in on not only the Middle East but how the Bush administration is handling two of the three parts of what it describes as an axis of evil, two members of the United States Senate.

Joining us from his home state of Indiana is Democrat Evan Bayh, who serves on the Senate Intelligence Committee, and here in Washington, Republican Chuck Hagel, a member of the Senate Foreign Relations Committee.

Senators, welcome to LATE EDITION.

Senator Hagel, to you first. The Middle East -- the administration has been so focused on Iraq and has been dealing with North Korea -- I'm going to ask you about that in a moment -- but ever-mindful, it seems to me, it must be, of the violence that keeps happening in the Middle East.

SEN. CHUCK HAGEL (R), NEBRASKA: Well, I think what we're seeing here, Judy, is just another clear example of how volatile and dangerous the world is today. When we look at North Korea, the Middle East, Iraq, Indonesia, almost any part of the world, there is a volatile dynamic that we are having to deal with at one time.

This leads us back, I believe, to one conclusion. If the United States is to lead the world in this fight against this violence and this terrorism and what is plaguing mankind today, it's going to be through an enhancement relationship, enhancement of our relationships with other nations, working through the United Nations, coalitions of common interests. We cannot do this alone.

Intelligence-gathering, intelligence-sharing, all the pieces that will now have to be put into play, probably unlike any time since World War II, is what we are going to have to do. That's what's ahead of us, and we have to understand that. It won't be just the military dynamic that brings peace to the Middle East or disarms Saddam or finds a way out of North Korea.

WOODRUFF: Given that, Senator Bayh, given what Senator Hagel is saying about how the administration has got to talk about, think about enhanced relationships, it can't be just the military, right now the Bush administration is saying Iraq is the greater threat when compared to North Korea, which has kicked out inspectors, weapons inspectors, is now seeking, actively seeking a way to increase the number of nuclear weapons it has.

At this point, which is the greater threat, Iraq or North Korea?

SEN. EVEN BAYH (D), INDIANA: Well, Judy, they're both very substantial threats. It's hard to say today which is greater, but they are both unacceptable threats which require the active engagement of our country to protect the national security interests of both the United States and our allies.

BAYH: I'm very concerned about the North Korean situation. They have a nuclear capability today. They have the ability to deliver that capability to the Korean Peninsula and possibly Japan. They're working on advanced missile technology that in the not-too-distant future might be able to deliver a nuclear weapon to Hawaii, Alaska or even the West Coast. They have threatened to create several more nuclear devices and possibly could be engaging in nuclear blackmail.

This is a very troubling situation, but we have a window here of about six months in which to deal with that before their reprocessing will produce enough plutonium to construct those devices.

At the same time, Saddam has biological and chemical weapons. We know that. He is working feverishly to develop a nuclear capability also, and unlike the Koreans, Judy, he has demonstrated the willingness to actually use these weapons of mass destruction.

So which is the greater? You pick them. They're both unacceptable rinks to the United States, both require our very active attention and engagement.

WOODRUFF: Yes, but at this point the president and his administration are arguing, and I would say this both to Senator Bayh and Senator Hagel, they're arguing that they can deal with North Korea diplomatically even as they plan military force against Iraq.

Let's listen to what the president said just a few days ago.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There's strong consensus not only amongst the nations in the neighborhood and our friends, but also with international organizations such as the IAEA, that North Korea ought to comply with international regulations. I believe this can be done peacefully through diplomacy, and we will continue to work that way. (END VIDEO CLIP)

WOODRUFF: Senator Hagel, is the president right that the United States can deal diplomatically, successfully with North Korea, given the threat?

HAGEL: We hope we can. That is the appropriate and responsible track to be on right now.

As you know, the new South Korean president is going to put forward a plan tomorrow. We need to listen carefully to that. As you also know, the South Koreans and the Japanese are going to be in Washington tomorrow to talk with us about that. The South Korean vice foreign minister has been in Russia and China.

This issue will be resolved through those relationships that we have with Russia, China, Japan and South Korea.

WOODRUFF: But the U.S. has said that it doesn't want to negotiate with the North, that it wants the North to get rid of this nuclear program, weapons program, before it'll even talk.

Is the U.S. -- I guess what I'm asking, is the Bush administration going to have to back down?

HAGEL: Well, I don't know if I would say back down, but this is my sense of it. We need to cut right through the fog here, and somebody better be talking to North Korea. And...

WOODRUFF: But that's not the administration policy right now.

HAGEL: Well, right now I have some confidence in Colin Powell, that the tactics of this are within his purview, and I think he'll do it it the right way.

But we have to be careful we're not too cute here. The fact is this is just as dangerous as Senator Bayh has said it is, and it may be more dangerous. We're not quite sure. We've got an unstable leader with nuclear weapons.

So we better get off the high horse here and deal as directly as we need to deal with this. Because when you look at all the other pieces, as you mentioned at the beginning of this show, what's happening, exploding around us, around the world, we could find ourselves in a lot of trouble this year if we don't handle this right. And that means if we've got to go to the source, we go to the source.

WOODRUFF: Senator Bayh, there are those who are saying that the Bush administration mishandled North Korea almost from the beginning, when it took a much harder line against the North than had the Clinton administration.

BAYH: Well, Judy, there may be something to that. The president took a very hard line, basically denounced their leader personally, indicated they were part of the axis of evil, gave a little bit of the cold shoulder to the South Korean president when he came to Washington.

And I think what we've learned here, Judy, is if you're going to use tough rhetoric -- and I tend to favor the president's more muscular approach to foreign policy -- but if you're going to use tough rhetoric you better be prepared to back it up.

And what we've had here is the North Korean regime has basically called our bluff and said, "Fine, we're going to engage in proliferation, or we're going to engage in nuclear blackmail. United States of America and President Bush, what are you going to do about it?"

And I agree with my friend Chuck Hagel. We ought to all hope that negotiations work. But I hope it's not the triumph of hope over experience.

We had an agreement with them. They violated it, and what the reason for believing that Kim Jong Il is a more reliable negotiating partner than Saddam Hussein, I think that's a questionable assumption.

So let's negotiate, let's try and bring this to a diplomatic resolution. I think Chuck is exactly right about that but, Judy, I think we need to be prepared, when it comes to it, to back up our tough rhetoric with actions to protect our country.

WOODRUFF: But how does the U.S. do that, Senator Hagel, when the North Koreans, we read, if they reinstate their missile program, which is now on hold, they, as I read today in the New York Times, could have a missile reaching the United States carrying a nuclear payload?

HAGEL: Well, how you do it is the way we are working at it right now, is through our relationships. But the fact is, we are going to have to maneuver in some way here to incentivize the North Koreans, as they were in '94 incentivized.

Now, you can say that didn't count, they lied, they cheated, maybe we shouldn't have done it. Well, that's passed. The fact is, we've got a very dangerous situation here now, and it is not going to be enough to threaten and, just as Senator Bayh said, not be prepared to back up that threat.

Let's not forget something: We have 37,000 Americans trapped on that peninsula right now.

WOODRUFF: Troops.

HAGEL: That's right, troops, American troops, right between North and South Korea. They are captive to whatever happens there.

Now, that's one of the reasons the North Korean situation, in my opinion, is far more serious than Iraq.

WOODRUFF: All right. We'll see whether the Bush administration is listening.

We have much more to talk about with Senators Hagel and Bayh, and we're going to continue our conversation with them. We're also going to take your phone calls, when LATE EDITION, Showdown: Iraq, returns.

(COMMERCIAL BREAK)

(AUDIO GAP)

BAYH: ... this whole exercise of the inspections was to try and convince our allies in the court of world opinion to support us in the difficult steps that may be necessary to disarm Saddam if he's unwilling to do it voluntarily.

So if this game of hide and seek continues, and we're unable to show tangible evidence, it makes our diplomatic challenge greater and it makes it more difficult to rally allies to our side, but ultimately it will not keep us from doing what is necessary militarily to protect the American people.

WOODRUFF: But, Senator Hagel, seriously speaking here, is this report from the U.N. weapons inspectors -- there's supposed to be a report from Mr. Blix on January the 27th -- is this going to have any validity, or is the U.S., frankly the Bush administration, just planning to go ahead regardless?

HAGEL: Well, I have spoken personally on a number of occasions with Dr. Rice recently, Secretary Powell recently, what the president has said recently, that there have been no decisions made regarding going to war with Iraq. They want to look at that report. I take them at their word. I hope...

WOODRUFF: But no evidence yet.

HAGEL: Well, I hope they're being honest with this, and I assume they are, because if they have another agenda, and that is, "Well, we'll just dismiss whatever report in the process, and we will go to war," then we may find ourselves, the United States, very lonely in this effort.

I have said for a long time that the way to do this is to continue in the track that we're in, the Security Council working through the United Nations, and that's the way to deal with all of these issues.

But if we would veer off abruptly for whatever reason and say, "Well, this is, as Senator Bayh says, a cat and mouse game, I'm sorry, we're going to take him down, and we'll do that with or without you," we run a big, big risk in the world if we do that.

WOODRUFF: Well, if there's military action, we heard this week the president's budget director, Mitch Daniels, say that the cost could run something like $50 billion to $60 billion. We had heard earlier the president's former chief economic adviser, Larry Lindsey, said it could run $100 billion to $200 billion.

Given all that, Senator Bayh, it's been reliably reported now, the president is about to unveil on Tuesday of this week a $600 billion economic stimulus plan, including tax breaks for businesses. It may be accelerating individual tax cuts, dividend tax cuts, with some assistance to the states, unemployment insurance.

Is what you're hearing about this plan, is this sounding like the right remedy for the struggling U.S. economy?

BAYH: Well, the economy isn't good enough, Judy, and we have to take strong measures to increase demand for our goods and services and also to increase business investment.

I think you'll see some bipartisan support for some major elements that you just indicated: assistance for those who have lost work through no fault of their own, assistance to the states to offset the budget tightening they're going to need to be doing, some targeted tax cuts to individuals, particularly those that will get money into the pockets of the middle class, who are likely to put it back into the economy and spend it.

Where you may see some difference of opinion is on the upper brackets, because those individuals, I mean, Bill Gates, Donald Trump, they're fine people, but they're unlikely to take an additional tax cut and spend it to put it back into the economy to create jobs and get the economy moving.

So you may see some fine-tuning of the president's program to make it more effective, to actually get more bang for the buck. But I think you'll see broad bipartisan support for targeting tax cuts and investment incentives and aid to the states and unemployed, to kind of provide us an insurance policy to get job creation moving.

WOODRUFF: Senator Hagel, are you worried the administration may tilt too much to the wealthy with this tax plan they're going to unveil?

HAGEL: Well, what we know today, and we'll know more about it obviously when the president gives his speech on Tuesday, I think it's well balanced.

Why do I say that? He focuses on the unemployed, as Senator Bayh has noted. He's going to focus, I think, on more child tax credit help for parents. He's going to talk about investments. He's going to talk about capital pooling. He's going to talk about businesses.

And I think that's good, because, let's remember something, the government doesn't create wealth. The government doesn't produce anything. Wall Street produces nothing. Our productivity, which is the engine of our growth, comes from capital investment. That's the private sector. And I think that is the smart way, the only way to grow the economy. And the other part of that is for the long-term obligations this government has.

So I'm anxious to see what the president's laying out. As Senator Bayh said, there may be some fine-tuning, but I think generally the president's on the right track.

WOODRUFF: Senator Bayh, is the test going to be, though, whether this plan stimulates the economy in the short run? BAYH: I think that has to be the test, Judy. Well, three tests. First, what gives us the biggest bang for the buck, in terms of getting this economy moving with job creation and investment? And all the economists, or almost all of them, will tell you that putting money into the pockets of the middle class is most likely to do that. And so that's what we ought to be focusing on.

The second thing is, what will help ease the burden of those who've suffered through no fault of their own because of this downturn? Assistance for the unemployed, aid to states to make sure they don't have to slash school budgets and throw the less fortunate out of their health care, and then finally long-term fiscal discipline, to make sure we get the budget back into balance and don't go back to the days of just running up huge debts with higher interest rates.

Those are the three tests I think we need to apply to this stimulus effort.

WOODRUFF: A quick change of topic here as we run out of time.

Senator Hagel, it's been -- we now know that Senator Trent Lott, the former majority leader, has been given the possession of chairman of the Rules Committee, the powerful Rules Committee, which determines what legislation gets to the floor in the Senate.

Is this an appropriate responsibility for somebody who so recently was in the middle of a controversy over his comments about segregation?

HAGEL: Judy, the Senate Rules Committee does not have that function. We have a different situation in the Senate. We don't take a bill to the floor of the Senate with Rules. The House does.

What the Rules Committee does essentially in the Senate is serve as a landlord, has purview, overview over all parking places and office space and other things. And I don't mean to minimize it.

WOODRUFF: Oh, my apologies.

HAGEL: No, I don't mean to minimize the role of the chairman of the Rules Committee because it is a big deal. But I think what was worked out -- I was not part of that, but I'm just a lowly, regular senator. But what was worked out I think is probably appropriate and I think is a good fit for Senator Lott.

WOODRUFF: Senator Bayh, are you comfortable with that?

BAYH: That's an internal matter for Chuck's party, and I think he answered your question very ably.

(LAUGHTER)

WOODRUFF: And quickly, Senator Bayh, are you going to be supporting your good friend John Edwards, who announced this week that he's going to run for president? I gather you two were jogging partners.

BAYH: We do run together in a jogging sense, not a political sense, though, Judy.

(LAUGHTER)

But, you know, Tom Daschle, John Kerry, Joe Lieberman, these are all colleagues and friends of mine. We're blessed with an abundance of good candidates, Judy, and I'm going to root them all on right now.

WOODRUFF: Spoken like a diplomat.

(LAUGHTER)

HAGEL: Judy, I'd like to announce that I'm going to support George Bush.

WOODRUFF: And by the way, we see that you're running for president in '08, but we'll ask you about that the next time.

HAGEL: Yeah, well, I don't know about that. I just want won reelection, and I'm grateful for that.

WOODRUFF: Senator Chuck Hagel, Senator Evan Bayh, it's so good to see both of you. Thank you for coming by.

BAYH: Thank you, Judy.

HAGEL: Thank you.

WOODRUFF: Moving along, Turkey was a key base for U.S. military operations during the 1991 Gulf War. Just ahead, we'll talk with Turkey's prime minister, Abdullah Gul, about what role his country might play this time if the United States goes to war against Iraq.

And later, what's in store for U.S. troops in the Gulf and the Korean Peninsula from two military experts.

LATE EDITION continues after this.

(COMMERCIAL BREAK)

WOODRUFF: Two explosions this morning in Tel Aviv. CNN's Mike Hanna is live now with us from Israel for the very latest on the casualties there.

(NEWSBREAK)

WOODRUFF: To Turkey now, a country whose newly elected parliament recently approved a six-month extension that permits the United States and Great Britain to continue using that country's air bases for no-fly zone patrols over Iraq. Turkey is also readying its own troops for the possibility of a new war with Iraq.

Joining us now from Cairo, one of his stops on a tour of Arab states, is Turkey's prime minister, Abdullah Gul. Mr. Prime Minister, thank you for joining us, and welcome to LATE EDITION.

ABDULLAH GUL, PRIME MINISTER, TURKEY: Well, thank you very much, indeed. It's my pleasure.

WOODRUFF: You say that in talking with other Arab leaders, you hope to prevent a military action in Iraq. But isn't the decision really up to Iraq's Saddam Hussein and the United States?

GUL: Well, of course we all have responsibility in search of peace. We are, in this region, we are a neighboring country, so we have to come together and consult, of course, for a non-violent solution. That's why I am here. That's why I'm talking with the leaders of this region.

And I think still there's a chance to find a peace, so we have to exhaust all the possibilities.

WOODRUFF: What arguement...

GUL: War is nobody's choice, in fact.

WOODRUFF: What argument do you use to Saddam Hussein, to President Saddam Hussein, to get him to reveal all the information about his weapons of mass destruction?

GUL: Well, of course, the responsibility is on Iraq, and they have to fulfill the U.N. resolution, and they have to cooperate. They have to be transparent and open, and they have to take all the steps to convince that Iraq is free of these dangerous weapons.

WOODRUFF: Do you believe that they have done this, that they've cooperated fully?

GUL: Of course the experts know this, and they will submit their report to the United Nations, and if so (ph), we will know this. But they are there and they are searching, and as far as we know, that the Iraqi regime is cooperating with them.

Of course, I want to repeat it again, responsibility is on Iraq, and they have to cooperate with the U.N. They have to fulfill all the resolution.

WOODRUFF: There was a public opinion poll done in your country, in Turkey, and it showed that 83 percent of the people in Turkey oppose giving the United States the right to use Turkish air bases to launch strikes against Iraq. Does this sound correct to you?

GUL: Well, of course, nobody wants military conflict. In fact, in Turkey, we have been suffering a lot. During the first Gulf War, we suffered a lot economically, politically and also there was a political recruitment (ph) in northern Iraq and there was terrorist activities and they found a safe haven there.

That's why the people of Turkey, they are very much concerned about the war. In fact, everywhere, people, they don't want military action, of course. That's why we have responsibility to search and to consult and to find the ways and means for nonviolent solution.

WOODRUFF: But the United States, the Bush administration has asked you for permission to base its troops and its flights in Turkey, to launch these strikes into Iraq using Turkish bases. Will you give them that permission? They're asking for an answer very quickly.

GUL: Well, of course the parliament will decide for that. I mean, we are a democratic country, of course. According to our constitution, there are certain things that only parliament decides for that.

But I think, before that, we have to exhaust all the diplomatic ways, because the question of the war will be very dangerous and very wide in the region. I'm sure that Iraq regime and Mr. Saddam Hussein should understand this, and he should cooperate with the United Nations.

Of course, as I said, nobody wants war. The recent statement of President Bush and Secretary Powell, Secretary General Kofi Annan, they also emphasize on peace. Means that still there's a last chance for peace.

WOODRUFF: However, the United States is trying very hard to get this permission from Turkey to base these military flights in Turkey, and the U.S. is prepared to help Turkey, to give it aid, to help you enter the European Union.

At this point, do you believe Turkey will give this permission?

GUL: Well, of course, we always appreciate United States for that. We are strategic allies. We want to deepen, strengthen our relation with United States, of course. Our relation is very deep, very old. And in future, definitely we will cooperate.

WOODRUFF: Saddam Hussein, is it possible that he could be given exile in one of the Arab countries in the region?

GUL: Well, of course, I don't know this. I mean, I'm here to search nonviolent solution, as I said. We are exchanging the views and talking on different recent means (ph). We have to prove that we have done everything before the war.

WOODRUFF: So, no comment on Saddam Hussein.

Mr. Prime Minister, we will let you go. Prime Minister Abdullah Gul, we thank you very much for talking with us.

GUL: Well, I thank you.

WOODRUFF: When LATE EDITION returns, mobilizing the troops. U.S. servicemen and women prepare for possible war in the Persian Gulf, but will they face a fortified Iraqi army, and how far will Saddam Hussein go with his forces? Meanwhile, North Korea flexes its military muscle. We'll get insight into what U.S. troops are facing on the front lines of global hotspots, from retired U.S. Army Brigadier General David Grange and retired U.S. Air Force Major General Don Shepperd.

LATE EDITION continues after this.

(COMMERCIAL BREAK)

BUSH: Wherever you serve, or wherever you may be sent, you can know that America is grateful and your commander in chief is confident in your abilities and proud of your service.

(END VIDEO CLIP)

WOODRUFF: President Bush rallying U.S. troops at Fort Hood, Texas, this week as they prepare for the possibility of a new war with Iraq.

Joining us now with some insight into the military challenges presented by the showdown with Iraq and North Korea, two highly decorated combat veterans. In Tucson, Arizona, retired U.S. Air Force Major General Don Shepperd, a CNN military analyst. And in Oak Brook, Illinois, retired U.S. Army Brigadier General David Grange, also a CNN military analyst.

Gentlemen, good to have you back on LATE EDITION.

General Grange, to you first. We didn't get a final answer, of course, on this from the Turkish prime minister, but how important is it that the United States have access to those Turkish air bases to launch any strikes, if needed, into Iraq? And how important would it be for U.S. ground troops to be in Turkey?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, it's extremely important for the air operations. Shortens the legs of combat operations, which eliminates some of the air refueling, obviously, gives us the reach.

But for ground forces it would advantageous, as well. For helicopter operations and also if they could just drive armored forces right across the border.

And that part, I think, is the tough issue. The air I think we'll get. The ground force issue is still up in the air, I believe.

WOODRUFF: General Shepperd, any doubt in your mind that the U.S. will get the permission it seeks?

MAJ. GEN. DONALD SHEPPERD (RET.), CNN MILITARY ANALYST: I think eventually we'll get the permission, Judy, but one thing you're seeing in all of the countries around there, they don't want to give the United States a blank check and say, "Sure, you can use our bases, do whatever you want."

They want to keep pressure on the United States to bring this to a diplomatic solution, without war if at all possible, and they want to know what the end-game is, and those aren't unreasonable questions.

I do think we'll get the support we need in the end, if we can make the case against Saddam that we have to do this, Judy.

WOODRUFF: General Grange, something like 60,000 U.S. troops in the region around Iraq now. They're saying we'll have 100,000 there by the end of January, much more than that by the end of February.

When will the U.S. actually be ready to initiate a military action?

GRANGE: I believe, Judy, the timing is set so troop build-up will coincide with, I guess, anticipated triggers that would start a war. And you're looking at, with coalition forces, probably closer to a 250,000 number of all the different services and countries involved.

And like Don Shepperd said, what you're going to see is some countries are on the fence that'll make a decision to support the United States and Great Britain at the last minute. They just can't openly do that right now.

So it'll continue to build up. I think more like halfway through February they'll be ready than into March.

WOODRUFF: General Shepperd, I want to turn just quickly, or rather bring North Korea into this discussion, because while the Bush administration says it wants to deal with North Korea diplomatically, you have the defense secretary, Donald Rumsfeld, saying just a few days ago that the U.S. has the capacity to fight two wars at the same time, one in the Persian Gulf, one presumably on the Korean Peninsula simultaneously.

Is it accurate, in your view, that the U.S. could do this, has this capacity?

SHEPPERD: Yes, absolutely, but a big "but" here, Judy. Our conventional forces were cut by almost 40 percent, and appropriately so, at the end of the Cold War when the Soviet Union came down. And so we are much more stressed now with things going on, and we have less capability to do two than we did before.

But what you do is you play the hand that's on your plate. We're well into Iraq. When other things break out, you decide which is the most important. You shift forces to that new theater if necessary, and then you come back and play a clean-up game.

We can do one, we can do two, we can do three or four, but it's not easy and the forces are stressed because we have considerably fewer of them than before, Judy.

WOODRUFF: Well, let me just read -- General Grange, let me read what the conservative columnist Charles Krauthammer wrote in The Washington Post this week. He said "Militarily, we're not even in a position to bluff. Defense Secretary Rumsfeld was duty-bound to affirm America's capacity to fight two wars at once. Unfortunately, that capacity went by the boards at least a decade ago, and the North Koreans know it."

Who's right here, the secretary or Charles Krauthammer?

GRANGE: Well, I think the secretary is right. And the reason I say that is because you're not going to decisively win both wars simultaneously. One would have to be a holding action. And we can inflict considerable damage with certain means of power on, let's say, North Korea, if we were already engaged in Iraq, but it would be very tough.

The one thing about our military that's unusual compared to other militaries in the world is the adaptability of our leadership to shift from one kind of mission to another very rapidly and the flexibility built in the forces to do that. But there is some severe shortages in certain types of specialties that we only have enough for one theater at one time.

WOODRUFF: Well, General Shepperd, right now we're told the North Koreans have a more than 1 million man army in uniform. They've got something like an additional 2 or 3 million men in reserve. Whereas -- and they're 30 miles, the DMZ, the demilitarized zone, is 30 miles from Seoul.

I mean, what sort of threat are we looking at when we consider North Korea and what it might pose to the -- not just to the peninsula but to the United States?

SHEPPERD: Well, it's a considerable threat, Judy. We have 37,000 American troops stationed over there.

The outcome is not in doubt. The United States and South Korea could prevail in a military conflict over North Korea even despite its million-man army with 2 or 3 million reservists.

The problem, as you cited, is that much of the territory of Korea would be at risk. The capital of Seoul, 50 miles south of the border, would be at great risk. There'd be great destruction on there.

And so although the end game is known, it could be very messy. It could ruin the economy of South Korea. Nobody wants to see a war in Korea. We're going to find a diplomatic way out of this, is my prediction.

WOODRUFF: General Grange, are you as optimistic?

GRANGE: We'll win in Korea, but Korea's tough. If I had the choice to fight in Korea or Iraq, I would vote to lead my soldiers in Iraq. A lot of casualties will happen in a war of Korea, especially civilians, especially around Seoul.

I served a year and a half on the DMZ in Korea, and we trained every day against this enemy. And they're very tough opponents. They're dug into the mountains. They have a lot of fire power. But we would win, but it would be costly.

WOODRUFF: And gentlemen both, I want to ask you both, just quickly before we close out here. Last week on LATE EDITION, New York Congressman Charles Rangel said what the United States needs to do is reinstate the draft.

Is that something the U.S. should even be thinking about right now? General Shepperd?

SHEPPERD: That's a political question. I'd certainly like to see national service out there with the military option being one of them. I think we lost a lot when we lost the draft before.

But there has to be political consensus for that, Judy. We don't need it from the standpoint of numbers. And so we'll have to leave that one to the politicians, from my standpoint.

WOODRUFF: And General Grange?

GRANGE: Well, to give some recommendation to the politicians on that subject, I would say no draft, but I would say definitely some sort of national service, not only for the military, but for firefighters, police and other things that are critical to homeland defense and the future of this nation.

WOODRUFF: All right. General David Grange, General Don Shepperd.

We're going to have a short break, but we'll continue our discussion with our two generals right after this. They'll also be taking your phone calls when LATE EDITION returns.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to LATE EDITION. We are talking about the challenges of a military face-off in the Persian Gulf and the Korean Peninsula with retired U.S. Air Force Major General Don Shepperd and retired U.S. Army Brigadier General David Grange.

Gentlemen, we have a call from the Republic of Georgia. You are on the air. Go ahead with your question.

CALLER: Hello?

WOODRUFF: Yes, go ahead with your question.

CALLER: If there is a war with Iraq, can the U.S. soldiers defend themselves against chemical and biological weapons?

WOODRUFF: General Shepperd, you want to take that first?

SHEPPERD: Yes, we can. We're trained in chemical warfare. It's a stupid way of warfare. The results are very localized. It slows things down and invites massive retaliation, if you will, by the other side. On the other hand, our troops are trained in how to fight with equipment and how to decontaminate that equipment.

Bio is a little more mysterious, because that's basically handled through inoculations, and you don't know what threats you're up against.

But we can do it. We don't want to do it. We're doing everything to make sure that Saddam knows that he invites the worst if he employs chemicals and biological weapons.

WOODRUFF: General Grange, are you as optimistic?

GRANGE: Very much so. I had the opportunity to be at a training site where a nerve agent was released, and our equipment is very -- it gets your attention, obviously, and our equipment is very good.

But it does slow things down, and it makes things very uncomfortable. And like Don said, the retaliation would be probably very impressive against the enemy if they in fact tried to do that.

WOODRUFF: Well, while we're talking about casualties, it's been reliably reported this week that the Bush administration is expecting relatively low casualties on the part of the U.S. if there is a military action, a war. One general was quoted as saying, "Absolutely minimal casualties."

General Shepperd, the U.S. lost something like 148, I believe, service men and women back during the Persian Gulf War, 12 years ago. Do you believe the numbers will be as minimal as what we're told the administration expects?

SHEPPERD: There's no way to predict that for sure, Judy. I suspect that the casualties will be low.

We also, with our precision weapons now, have the ability to hit the things that we're after, rather than doing any kind of carpet bombing, such as we did during World War II. So we're minimizing both our own casualties, and the casualties of the other side.

And we're going after smaller and smaller weapons, because collateral damage is always a problem when it occurs, particularly when it's always covered by the media.

So I don't know how to predict the casualties out there, but I tell you, our casualty numbers are really headed in the right direction, and I hope this time they're zero, not 140-plus.

WOODRUFF: General Grange, is it realistic to expect absolutely minimal casualties?

GRANGE: There'll be casualties, and you just -- it's so hard to predict this, because war today is not as much attrition, it's more of a maneuver and positional advantage, and so it's not a mathematical equation. It's very difficult to predict.

However, there's a good chance, if we have to do more in Baghdad than we'd like to, there would be more casualties.

WOODRUFF: We have a caller in Maryland. Caller, if you're on the line, go ahead with your question. CALLER: Yes, my question is, a couple of weeks back, there was affair about the smoking gun and the evidence and the proof that Saddam Hussein has weapons of mass destruction. Is that still on the table? Do we need to show proof to the world community?

WOODRUFF: General Shepperd?

SHEPPERD: Well, when Hans Blix makes his declaration on the 27th, we are going to have to have some justification for going to war. And so we're going to have to convince the American public and the world community that whatever we're doing is justified.

And that's the problem with getting allies, getting the access to bases. It's not that we're just going to launch off immediately on the 27th, if Hans Blix has not found anything.

So there's much to play out, and much of it is diplomatic, back and forth, before we launch any military action. The good news is, that gives us time to find a solution without combat, Judy.

WOODRUFF: But, General Grange, at this point, no hard evidence.

GRANGE: Well, no hard evidence that's been released. I believe it'll come about in time, mainly because it's up to Saddam to prove that he doesn't have the stuff, since some reports say he has -- there's no records of it being destroyed.

And so, I think it eventually will happen, it'll come out, several different items that'll produce a trigger.

WOODRUFF: All right, we are going to leave it at that.

General David Grange, General Don Shepperd, it's wonderful to see both of you again. We appreciate you joining us on LATE EDITION.

GRANGE: Thank you.

SHEPPERD: Thank you.

WOODRUFF: And coming up in the next hour of LATE EDITION, is there still a chance for diplomacy to resolve the showdown with Iraq? Two former U.S. national security advisers weigh in.

And President Bush prepares to outline his plan for rejuvenating the economy. But will it be at the expense of state governments? We'll speak with two governors.

Plus, more of your phone calls and Bruce Morton's essay, when LATE EDITION returns.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to LATE EDITION.

In just a few minutes, we'll get the perspective on the showdowns with Iraq and North Korea from two former U.S. presidential advisers. But first, Fredricka Whitfield is in Atlanta with a news alert.

(NEWSBREAK)

WOODRUFF: Well, joining us now to help sort out the many diplomatic and security obstacles regarding Iraq and North Korea are two guests. General Brent Scowcroft served as a national security adviser during the Ford and the first Bush administration. And Zbigniew Brzezinski was the national security adviser to former President Carter.

Gentlemen, welcome to LATE EDITION.

BRENT SCOWCROFT, FORMER NATIONAL SECURITY ADVISER: Nice to be with you, Judy.

WOODRUFF: It's not only North Korea and Iraq, it's the Middle East, ever-present violence recurring in the part of the world.

This morning, The Washington Post lead editorial said, among other things, "This president Bush enters the third year of his presidency facing the most daunting array of international challenges encountered by an American leader since the height of the Cold War."

General Scowcroft, is he up to these challenges?

SCOWCROFT: Oh, I think he's up to the challenges. It's a very new world. It's a world beset by forces which are alien to the world most of us know which is the world of the Cold War. And they're disparate. We don't know who the good guys are, we don't know who the bad guys are.

And there are these unknown or new, novel forces like terrorism, for example, that require different means of coping. And they tend to -- they're accumulating as time goes on. It's going to be a very difficult period.

WOODRUFF: But, Dr. Brzezinski, you've written recently about the U.S. being in a precarious situation right now, about how important it is that the U.S. handles the situation, particularly with Iraq, correctly.

Do you believe President Bush is up to this unprecedented challenge since the height of the Cold War?

ZBIGNIEW BRZEZINSKI, FORMER NATIONAL SECURITY ADVISER: I certainly hope he is. And it's not just him, it's the administration, it's the Congress, it's the American people. We have to understand that at stake right now is the international system and America's role in it. I think the year 2003 could be in many ways a decisive year.

How we respond to the challenge posed in the Middle East, including Iraq, how we deal with North Korea, how we deal with the these vaguer issues that Brent mentioned, will test our ability to create an international system that collectively copes with problems, that will increasingly be beyond the power even of the omni- superpower. And if we do not, this year could begin the slide into a global anarchy that could prove devastating in the course of the decade.

WOODRUFF: Some very strong words there. Right now, General Scowcroft, the Bush administration, just looking at Iraq and North Korea, they are clearly planning military action against Iraq, which has allowed inspectors in now for weeks now to go from site to site looking for weapons of mass destruction, while on the other hand saying they will use diplomacy to deal with North Korea, which has kicked out weapons inspectors and says that it will actively go ahead building nuclear weapons. Somebody would like at this and say, this doesn't make sense.

SCOWCROFT: Well, each of the situations has to be treated as a generic problem. The problem really started with the axis of evil, where they were dumped together with recipes that were supposed to handle the whole problem. They're very different issues.

Right now, I believe the approach is correct in the sense that we're now mobilized with respect to Iraq. And to back that off, whatever you think of North Korea, and shift around would be a terrible military burden, almost impossible.

So, I don't disagree with the focus right now, but it does not mean that we can ignore North Korea and that we don't have to deal with them in whatever manner is required.

WOODRUFF: But, Dr. Brzezinski, does the contradiction, the obvious contradiction here disturb you?

BRZEZINSKI: It bothers me potentially, though I think there is a possibility that we'll succeed in addressing both problems the way I think they ought to be addressed.

We're doing basically the right thing vis-a-vis Iraq. That is to say, we have mobilized the international community. We have established credibly our determination to use force. And I think there is a possibility that Iraq, in fact, will be disarmed under collective pressure and monitored by international inspectors. And I hope we'll have the wisdom ...

WOODRUFF: You do believe that's possible?

BRZEZINSKI: I think it's possible. But I also hope we will have the wisdom to accept that. The worst outcome, in my view, would be if we then decide to use force unilaterally in spite of the U.N., punishing Iraq for defying the U.N., allegedly, but ourselves defying the U.N., and in the meantime not doing much about Korea.

But if we handle Iraq correctly, we can use the same procedure for North Korea: international mobilization, pressure, but also some carrots if North Korea accommodates.

WOODRUFF: General Scowcroft, is it possible that the Bush administration could do what Dr. Brzezinski said would be a dangerous thing to do, and that is to go ahead without international support, without U.N. support, and punish Iraq when there is questionable evidence about the presence of weapons of mass destruction? SCOWCROFT: Well, I think it's certainly possible. I think the administration faces a very difficult problem at the end of this month when the inspectors make their first report. I don't know what will be in the report, but from all that one reads it will be at least an inconclusive report, that they have not found anything decisive in terms of Iraqi violations and they ask for more time.

And that will be a point at which the administration has to decide whether to give them more time, whether to produce intelligence they have not produced yet in order to make the casus belli which the inspectors will probably not have found.

So, I don't know which way the administration is going to go, and I don't know how Saddam Hussein will behave during that period either.

WOODRUFF: All right, we have much more we want to talk to General Brent Scowcroft and Dr. Zbigniew Brzezinski about. We're also going to be taking your phone calls for our guests, when LATE EDITION continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: We're not waiting for another attack, we can't wait for another attack, to employ the full power of America in this cause. We're acting now to protect the American people.

(END VIDEO CLIP)

WOODRUFF: The U.S. commander in chief, President Bush, pulling no punches about his top priority, national security.

And we're continuing our discussion with former national security advisers Brent Scowcroft and Zbigniew Brzezinski.

Gentlemen, I've just been handed a statement from the White House, from White House spokesman Adam Levine. He says, quote, "The president was informed aboard Air Force One about the bombings today in Tel Aviv. We know that at least 15 are dead, 30 or 40 injured." He said, "The president condemns these brutal acts of terror in the strongest possible terms. For those who want to derail the peace process, we are not deterred. People have a right to live in peace and security."

Dr. Brzezinski, you were just saying he should issue these statements when the other side suffers casualties as well.

BRZEZINSKI: That's true. And the president says we're not deterred from pursuing the peace process, but the fact is, we're totally passive.

And unless the United States and the international community step in, these kinds of atrocious acts of terror, and then continuing atrocities of the kind that The Washington Post editorialized about last Friday against the Palestinians, will continue. These parties to the conflict are now locked into a mutual hatred from which they cannot extricate themselves, and only we can help them do that, and we're being passive.

WOODRUFF: General Scowcroft, should the United States have been and should it now be doing more to prevent this kind of violence in the Middle East?

SCOWCROFT: Yes, I believe we should. I believe that it is a priority at least as important as the others that we face.

As Zbig said, the two sides in the Israeli-Palestinian conflict cannot solve it by themselves. It has gone beyond that point. And, rightly or wrongly, only the United States can make the difference. And so far, we have not engaged.

WOODRUFF: But the Bush administration, Dr. Brzezinski, says it's doing all that it can, that it's sent envoys, that it's -- you know, that it's really up to the parties involved.

BRZEZINSKI: Well, if it says "up to the parties involved," it's washing its hands, and that's precisely the problem.

The parties involved cannot reach peace. On both sides, the extremists are determined to push the other side into extremism. The Palestinian extremists don't want moderate Israelis, who I think still represent the majority of the people, to come to power. They prefer the fanatics. On the Israeli side, they want to destroy the Palestinian moderates. They also prefer the Palestinian fanatics, because each side, each extreme, thinks it'll then get its victory in total (ph).

This is the problem. Unless the international community steps in, outlines what the peace ought to be like, and then pushes the two parties on the road to peace, this kind of stuff that we are so tragically witnessing today is going to be repeated over and over and over again, to the detriment of the well-being of the Israelis and the Palestinians.

WOODRUFF: Very grim analysis.

Brent Scowcroft, I want to go back to something you said a few minutes ago, when we were talking about North Korea and the so-called axis of evil. You said the problem started with the axis of evil, when these countries were put together in one basket -- Iraq, Iran, and North Korea.

Was it wrong for the president to lump these three together?

SCOWCROFT: Well, it's never been clear to me exactly why they were lumped together, other than it was a very catchy phrase in the State of the Union address.

The only thing they have in common, well, they're all dictatorships. The only thing they have in common is a dislike of the United States. They are different kinds of issues, and they require different means to deal with them. And the administration is now dealing with Iraq and with North Korea and with Iran in a different way.

But now they're subjected, "Well, you said this about the axis of evil. Now, why are you dealing with Iraq this way, dealing with North Korea that way?" That's the problem they've gotten themselves into.

WOODRUFF: And you're saying that this is a problem of their own making?

SCOWCROFT: Well, it is, in a way. What I'm saying is, dealing with them differently is right, but people say, "Well, where's the axis of evil? You said this will not be tolerated, and on the one hand you're dealing with Iraq with military force, and on the other hand you're saying North Korea is a diplomatic problem."

WOODRUFF: From the beginning, Dr. Brzezinski, the Bush administration took a harder line against North Korea, in contrast to the Clinton administration. Was there a miscalculation there?

BRZEZINSKI: I don't think so. I don't think there was a miscalculation about the tougher line. I think there has been, however, a lack of consistency and of a larger strategy.

Simply condemning the North Koreans for being, as Brent says, part of the axis of evil is not good enough. We have to ask ourselves, how do we deal with this problem?

And in the northeastern Asian context, we can only deal with it by mobilizing the support of Japan, of China, of Russia, and working closely with the South Koreans and then putting North Korea under sufficient pressure so that it then has an incentive to accommodate. And we haven't done this.

WOODRUFF: But the Bush administration, right now, General Scowcroft, is saying, "We won't talk to you, we won't negotiate with you until you get rid of whatever plans you have to make nuclear weapons."

SCOWCROFT: Yes, they are. And...

WOODRUFF: And the South Koreans, by the way, which has been a U.S. ally, is saying, you know, "That doesn't make sense to us."

SCOWCROFT: Well, the South Koreans are now undertaking an initiative on their own, which I applaud, to try to bring the two sides together.

WOODRUFF: They'll be in Washington this week, as a matter of fact.

SCOWCROFT: They'll be in Washington this week.

And I think the one thing we have to remember is that we should not act in this area, about North Korea, except in the closest consultation with South Korea. They are intimately involved in this. They are the ones that are under the gun. They are allied, they are not simply a client state. And we need to think of them very, very differently.

WOODRUFF: Are you concerned about the division between the United States and South Korea on how to deal with North Korea right now?

BRZEZINSKI: Oh absolutely, because unless we work with the South Koreans we can't deal with the problem in North Korea.

And I sense the emergence of a kind of old Korean nationalism that could easily turn against us, be oriented more toward China. That would have far-reaching implications for the posture of Japan, for Japan's potential re-militarization.

So at making here are some really fundamental changes in the international set-up, just as there are in Iraq. And we have to be extremely careful to fashion a strategy that not only deals with the immediate problem, but creates momentum toward international effectiveness in dealing with these very sporadic, increasingly anarchistic global threats.

WOODRUFF: I should note that General Scowcroft is nodding as you're making that point.

We're going to take another short break, but we will get more insight from our national security advisers and take your phone calls. LATE EDITION will be right back.

(COMMERCIAL BREAK)

WOODRUFF: More violence in Israel this morning. For the very latest on two explosions in Tel Aviv, let's go to our correspondent Kelly Wallace on the scene.

(NEWSBREAK)

WOODRUFF: With us now is the chief Palestinian negotiator, Saeb Erekat, joining us by telephone from -- on television, I should say, from Ramallah.

Mr. Erekat, we heard a spokesman for the Israeli Prime Minister Sharon say a moment ago, Mr. Gissin, he said that this is just further evidence that the campaign of terror against Israel continues. And he said it is instigated and supported by the Palestinian authority and their leader. How do you respond to that?

SAEB EREKAT, CHIEF PALESTINIAN NEGOTIATOR: Well, Judy, let me, on behalf of President Arafat and the Palestinian Authority, condemn this attack or any attacks that aims at killing civilians, whether Israelis or Palestinians.

And at this broken record that I've been hearing from the Israeli officials, assigning blame and finger-pointing at us, we totally reject this. Since November 21st, there haven't been any suicide bombers. So the Sharon government claims credit to itself. And when something goes wrong, they blame it on us.

I should remind the world, Judy, that in November and December, the number of Palestinians that have been killed have been 154, mostly women and children. And these are the statements and the records and the numbers of the Palestinian Red Crescent, very accurate numbers.

And I believe today that we can sit down and start shooting blame at each other, assigning blame at each other. I don't think the Sharon government is fighting terror. The Sharon government is fighting the Palestinian cause. They want to defeat the Palestinian cause. They want to defeat the Palestinian peace process.

But I urge President Bush tonight, when this massive numbers of people who killed -- he always condemns the killing of Israelis, and I wish one day he would condemn the killing of Palestinian children.

But I believe that President Bush must refocus his attention, must refocus from building the alliance for war in Iraq to bring the breeze of peace between Palestinians and Israelis. We want to see an American administration that is reengaged in order to bring about hope in the minds of Palestinians and Israelis.

The shortest way to save Israeli lives and Palestinian lives is not going to be through me blaming or assigning blame on anybody but through a revival of a meaning peace process.

We need the help of a third party. We need the help of the American administration, because the trust level between us and Mr. Sharon is below zero.

WOODRUFF: Saeb Erekat is the Palestinian chief negotiator. We thank you very much for talking with us, Mr. Erekat.

Indeed, he is echoing, Dr. Brzezinski and General Scowcroft, the points that the two of you made just a few minutes ago, that the United States cannot leave this to the parties involved.

WOODRUFF: And while that is sitting on the table, I want to bring us back, as we consider the Middle East, let's bring back in Iraq and North Korea, because what we have seen recently in the countries surrounding Iraq, and now in South Korea, increasing demonstrations against the United States. In Germany, we've just had an election conducted where you heard a lot of anti-American rhetoric. The same thing in the South Korean election that was just completed.

Is this something that is going to spread? These are two countries that have been reliable, strong allies of the U.S. Is this the kind of sentiment that is out there that we can expect to grow, General Scowcroft?

SCOWCROFT: I think we're going have that kind of sentiment just because of the fact that we're so big, we're so dominant, and people expect us to solve every problem around the world. And so when we don't do it their way, they're going to object.

But a lot of it is due to the way we have been seen to behave, that is, with arrogance, unilateral and so on, without reaching out.

WOODRUFF: In the last two years by this administration? Is that what you're saying?

SCOWCROFT: No, I think it went back, really, it goes back over a decade where we have appeared to act sort of indifferently to our friends and allies rather than reach out and work through them.

That's a harder way to do it. But unless we focus on that, we will be isolated and we will be the subject of hostility from our putative friends and allies.

WOODRUFF: Dr. Brzezinski, is this turning against the U.S. by formerly reliable allies inevitable, or has it been exacerbated by some of the language, the new doctrine of the Bush administration, which includes preemption, which includes keeping America the superior military power in the world?

BRZEZINSKI: I think there is something to that. I don't want to turn this into a political debate. But I am concerned over the fact that the United States is increasingly becoming the focal point of global hatred.

I have spent my professional life dealing with issues of power politics, and I believe in the necessity of power, and I believe in American power, and I believe in American idealism. But I have always felt that idealism and power have to be balanced.

I think recent times, maybe in part because of what Brent says, because we are so powerful, the balance has been skewed in favor of power. And we have become increasingly assertive, self-righteous. The rhetoric of the last two years, in particularly the last year since 9/11, strikes me as very demagogic.

And I have the increasing sense of uneasiness that we are really not differentiating sufficiently carefully between prudence in dealing with the new global problems and panic about the global problems. And if we become too frightened, too concerned of our security, we'll turn America into an isolated, fortified outpost, paramount but not omnipotent, and increasingly isolated.

WOODRUFF: You have the same concerns?

SCOWCROFT: I do have the same concern.

But, you know, we've been all gloom and doom here. I think the important thing to remember is that the problems we deal with, complicated as they are, are not the intractable problem that we had with the Soviet Union during the Cold War. We can deal with all these issues. We can deal with them and produce a world that is far more stable and far more prosperous than ever before.

WOODRUFF: On the current path?

SCOWCROFT: If we act with wisdom and prudence and listen to our friends. BRZEZINSKI: That's right. I completely agree, particularly that last point. Because in every one of the problems we're talking about, there is a way out: whether Iraq, if we know how to define victory and we're prepared to accept a victory when it's handed to us, if it works out that way; on the Middle East, if we are willing to be engaged for peace, which we are not; and on North Korea, if we're willing to develop a wider strategy. Then we can handle these problems.

WOODRUFF: Dr. Zbigniew Brzezinski, General Brent Scowcroft, it's always good to see both of you. We really appreciate your being with us with your insights. Thank you.

And when we return, in addition to dealing with international hotspots, the White House says it's also working on the U.S. economy. But are the states being left behind in a cash crisis? We'll talk with two governors, incoming Pennsylvania Democrat Ed Rendell and Colorado Republican Bill Owens.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I will talk about how to create jobs, how best to create jobs, as well as how to take care of those who don't have a job.

(END VIDEO CLIP)

WOODRUFF: President Bush giving a preview of the economic plan that he's set to unveil on Tuesday.

Welcome back to LATE EDITION.

And while the president is expressing optimism about getting the economy back on track, U.S. governors are painting a much dimmer outlook. We're now going to get two views on what the states are facing.

Joining us from Denver is Colorado's Republican governor, Bill Owens. He's the head of the Republican Governors' Association. And in Philadelphia, former Democratic National Committee chairman and now Pennsylvania's governor-elect, Ed Rendell. He'll be sworn into office in just a few weeks.

Gentlemen, welcome to LATE EDITION.

Now, we are reading -- I guess you'd have to say reliably it's being reported -- that the president is going to unveil on Tuesday a $600 billion plan to stimulate the U.S. economy. We're looking at tax cuts here, as you can see, tax breaks to businesses, accelerating individual tax cuts, perhaps, tax cuts on dividends, a lot of discussion about that.

There's also talk that there's going to be aid -- additional unemployment assistance for those who are out of work, and help to cash-strapped states, which the two of you know about better than anything.

Governor Rendell, is this the making, the shape of a plan that you believe is going to help your state and other states that are in trouble?

GOVERNOR-ELECT ED RENDELL (D), PENNSYLVANIA: Well, sure, it'll help if there's a significant amount of money, and we hear talk of $3 billion, $4 billion that will go to the states. That will help us. The states this year, Judy, by June will a cumulative deficit of $68 billion, $68 billion. And what's happened, as the federal government has been cutting taxes, the effect on the states has been such that we've had to raise taxes. The 50 states have raised $8.3 billion of taxes just this fiscal year alone.

Now Governor Owen, of course, he walks on water...

(LAUGHTER)

... and Colorado has a surplus. But for most of us, we need that help.

But I think the approach that the president's taking, and even the Democrats in Congress are taking, is not really the right approach to stimulate the economy. You know, the money to the states is good, certainly the money to extend unemployment benefits will be helpful.

But tax cuts, first of all, they don't even affect anybody until next year, because you don't get the benefit of the tax cut until 2004. And secondly, there's no evidence, there's never been any evidence that that money goes into the economy.

If we are going to have a stimulus package, we ought to do things that will guarantee growth in jobs: investment in rebuilding our infrastructure, our roads, our bridges, build up passenger rail systems for this country. Do things that will dramatically have an effect on people getting to work and doing something good for the country.

WOODRUFF: So, Governor Owens, is the president's plan headed in the wrong direction?

GOV. BILL OWENS (R), COLORADO: No, it's not headed in the wrong direction. And I think that my friend Ed Rendell, the former chairman of the Democratic Party, when he was running for governor, he really touted the tax cuts that he had used to help get Philadelphia going again. If you look on his webpage, even look at his biography, he clearly understands that by reducing taxes you can increase economic growth.

It was true in Philadelphia, it's been true in Pennsylvania, and I think it's been true across this country, that the way to get this economy going, the way to help all of our state budgets, is to get that national economy going. And the best way to do that, not through more federal spending necessarily, it's really through reducing taxes and letting this economic engine of the private sector do its job. WOODRUFF: So the aid that we're hearing, Governor Owens, that the president may want to parcel out to the states to help with unemployment insurance, to extend that aid, to assist the states with Medicaid, among other things, you're saying that's not necessary?

OWENS: No, Judy, I didn't even indicate anywhere that that wasn't necessary. But what I do believe is, that, while the states do need an and appreciate and respect that help -- and I think we're going to get it in significant dollar amounts from the Bush administration and from Congress -- the most important underlying principle we should always remember is that the private sector and individuals make this economy.

The way to get this economy going is not to increase taxes, it's not to increase necessarily federal spending. The way to lift all boats, as President John Kennedy used to be so proud to say, was to get the economy going.

And I think that Ed's shown that in Philadelphia. He cut taxes and helped increase its economic growth. We have seen it happen across this country.

WOODRUFF: Governor-elect Rendell, Governor Owens seems to know what you've done in Philadelphia, and he says you've already found out that cutting taxes is good for the economy.

RENDELL: Well, we cut taxes to give incentives to companies to invest in growth and in jobs. But at the same time we were cutting taxes, what Bill didn't say is we invested over $1 billion -- federal, state and city money -- into an economic stimulus plan that was directly related to growth, to building things, to projects, to factories, to helping business add more jobs.

And that's why today Philadelphia has an economy that its tax base continues to grow, its revenues continue to grow, even though all around us people are having big deficits.

We need to take a look at repairing our infrastructure, building, as I said, a passenger rail system. We ought to have tax cuts, but those tax cuts ought to be keyed to creating jobs.

For example, I am for, and Senator Santorum, a conservative Republican, is for, eliminating the capital gains tax if we can show that the investment goes to producing jobs. Let's produce jobs. Let's put people to work. Those are the right type of tax cuts.

WOODRUFF: Governor Owens, a fair amount of news coverage in the last days about whether states across the country have enough money to do the job of fighting domestic terrorism, to support the firefighters, the police, the first responders, the rescuers and others.

What is the situation in Colorado right now? Are you in a position to do what you think must be done to fight terrorism on American soil? OWENS: Well, I think we can always do more, and there isn't a governor in the country that wouldn't appreciate more assistance from Washington, D.C., just as there isn't a county commissioner in the country who would (ph) appreciate more assistance from their state leadership.

I think the important thing to remember in terms of fighting terrorism is, first, there is more we can do. There is more that the Bush administration, with Congress, will be providing this next session.

But secondly, the real fight against terrorism is occurring right now overseas, in Indonesia, in Yemen, in Afghanistan and certainly in the Mideast. And that the way to defeat terrorism has been not to try to harden all of our sights in Pennsylvania and Colorado and put armed troops around every bridge and building. The way to defeat terrorism is to go after these terrorists where they live, work and train. That's what we on a bipartisan basis in this country are doing as we speak.

WOODRUFF: All right. We'll ask Governor-elect Wendell to respond to that when we come back.

We're going to ask both our gentlemen, our guests, to stay with us. We'll continue our conversation with them. We're also going to take your phone calls when LATE EDITION returns.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back. We're talking about the cash crunch facing the states with Colorado Republican Governor Bill Owens and the Democratic Governor-elect of Pennsylvania, Ed Rendell.

Mr. Rendell, what about the point that Governor Owens was making just before the break, that the focus in the war on terrorism should be overseas rather than in hardening up vulnerable sites here in the United States, bridges and other potential targets of terror here?

RENDELL: Well, I don't know if Bill has said exactly that, but I think he was right. The first emphasis ought to be going after groups like al Qaeda and cracking them overseas.

We can't, no matter how much money the federal government would give us, we can't absolutely protect all of our sites. So he's right about the emphasis.

I don't think he said that we shouldn't try to increase our security in the states.

OWENS: That's correct.

RENDELL: And I think we all should do that. I think the Bush administration was generous initially in its appropriation for things like the First Responder Program, Judy. But that money has not flowed yet, not much of it has flowed to the states. I'd like to see that money fast-tracked so we could begin to build up our local response here, as well.

WOODRUFF: Well, in connection with all this, Governor Owens, we've seen some reports in the last few days about localities and perhaps states worried about enough money to carry out these smallpox vaccinations that are supposed to be administered to first responders around the country.

Is Colorado going to be able to handle the expense of that?

OWENS: You know, Judy, I think we are. And I understand the way this system works, there's a program, the people who have to pay for the program and provide it will always say, typically, as today in the New York Times, they don't get enough money from the federal government. In some cases that's true, in some cases that's pleading.

We would like more money from the federal government. I think that I would speak for every one of the other 49 governors when we could always use their assistance. But being realistic, the federal government does have a deficit. There is not enough money to go for every good purpose.

And so what we have to do, as Ed is doing in Pennsylvania and has done in Philadelphia, we have to balance and prioritize. And we also have to realize that until we know what the program is, until we know what the funding is, it's very difficult to suggest whether or not we have enough money.

Would we like more? Absolutely. Are we going to get it? I'm certain we are, it's just a question of how much additional funding we're going to receive.

WOODRUFF: Let's move quickly to education. President Bush said in his weekly radio address yesterday that he'd like to see a 9 percent increase in federal education spending, something like another billion dollars, especially aimed at poor students.

Governor-elect Rendell, is that going to make a difference in the state of Pennsylvania?

RENDELL: Well, it'll be helpful, Judy, especially if it's targeted to the areas that there's the greatest need, urban and rural areas which have the highest degree of poor students. It'll be helpful.

But one point I wanted to make in response to what you and Bill said is, you know, the interesting thing if you listen to Bill's response is, well, of course, we're doing the belt-tightening in the states, we're raising the taxes. $8.3 billion of state taxes increased in this last year alone, not by Bill and not by me, but by governors who were strapped.

At this time it doesn't make any sense to me, when we're cash- strapped, when Washington has to fight a war, has to fight terrorism, when we need to stimulate the economy, why in God's name are we continuing with a tax cut that doesn't make a difference in the quality of life of people earning $40,000, $50,000 and gives tax breaks that aren't needed to people who are very wealthy and many of them have said they don't need them?

RENDELL: Let's spend that money taking care of our problems. Let's spend that money -- Senator Hutchison has a great plan, you know, the very successful low-income housing tax credit. She wants to have a low-income economic tax credit for businessmen who invest in low-income areas, to produce jobs and produce new development.

Why don't we do things like that, instead of just this random cutting taxes?

WOODRUFF: What about that, Governor Owens?

OWENS: Well, Judy, first of all, it's important to note that the Bush administration has increased spending on education by 40 percent in the last two years. And so we're starting from a very high base as we continue to invest in education, which is obviously a priority of the president and all 50 governors.

But secondly, I'd like to remind everyone listening today that the federal budget is getting dramatically larger each and every year. And all that the tax relief would do is slow that rate of increase slightly, so that we can make sure that the people who actually pay the bills get some of the relief.

I really believe that a dollar spent in the private sector by Americans for their own needs is, in many cases, far more effectively spent than a dollar spent by government.

Do we need more help with Medicaid? Absolutely. Do we need better assistance in terms of waivers? You bet. But I think it's also important to realize that states had a very good string of years in the 1990s, and it's not a tragedy if for a year or two we have to tighten our belts, just like Americans do, and live within a real budget.

WOODRUFF: Governor-elect Rendell, two-word response?

RENDELL: Well, I agree with Bill about states. But what about people? Why don't we spend the money doing things we know will put people to work? That's the best way to drive this economy.

WOODRUFF: All right. I think we're getting to the heart of this argument. Governor Bill Owens, Governor-elect Ed Rendell, it's great to see both of you, and we appreciate your being with us today.

OWENS: Thanks.

RENDELL: Happy New Year.

OWENS: Same to you.

WOODRUFF: Thank you very much for talking with us.

And coming up next, Bruce Morton's essay.

(BEGIN VIDEO CLIP) BRUCE MORTON, CNN CORRESPONDENT: Once or twice, Mr. Bush said he thought U.S. foreign policy should be humble. Well, that's a couple of years ago and before, of course, the terrorist attacks of September 11, 2001.

(END VIDEO CLIP)

WOODRUFF: Should the United States act as the world's policeman?

(COMMERCIAL BREAK)

WOODRUFF: And now Bruce Morton with some thoughts on whether the United States is calling the shots on global behavior.

(BEGIN VIDEOTAPE)

MORTON (voice-over): Come back for a moment to Campaign 2000 and listen to the Republican presidential candidate in the closing moments of his first debate with Al Gore, the Democrat.

BUSH: I don't want to try to put our troops in all places at all times. I don't want to be the world's policeman.

MORTON: And once or twice, Mr. Bush said he thought U.S. foreign policy should be humble.

BUSH: But in order to keep the peace, our nation must be humble.

MORTON: Well, that's a couple of years ago and before, of course, the terrorist attacks of September 11th, 2001. Still, the then-candidate, now president, has changed some.

We do not have troops everywhere of course, but we have them in a great many countries. Mr. Bush has said that American Democratic ideals are what's best for all people everywhere.

He has said that the United States has the right to start wars, not simply to strike back if someone else attacks them. The adjective used is "preemptive," which implies the United States thinks the other side is planning an attack. But the clear message is the U.S. has the right to start the fight.

So the administration seems to be preparing to invade Iraq. Will it act alone if allies don't come forward? Probably. Is this because Iraq is planning to attack America, or because Saddam Hussein once tried to kill this president's father, or because the president, who grew up in the oil business, wants to secure Iraqi oil or lessen U.S. dependence on Saudi oil? Hard for non-White House insiders to know, but the war does seem to be coming.

On the other hand, while Iraq may have or be working on nuclear arms, North Korea, U.S. experts say, already has nukes, one or two anyway, and long-range missiles. But there, Mr. Bush seems to prefer diplomacy.

That may be because North Korea's army is bigger than the United States' or because of all of those thousands of artillery pieces within a few miles of Seoul, capital of South Korea. It may be because South Korea wants to talk to the North, not threaten it. It may be because nobody can imagine what the North's fairly loopy dear leader, Kim Jong Il, will do next.

Whatever, we should probably be glad that Mr. Bush doesn't seem to be contemplating three simultaneous wars: on terror, Iraq and North Korea. Two -- and we seem headed for two -- will probably cause enough grief to go around.

I'm Bruce Morton.

(END VIDEOTAPE)

WOODRUFF: Thank you, Bruce.

And now, your letters to LATE EDITION. We received a large response to New York Congressman Charlie Rangel's call last week to reinstate the military draft in the United States.

Sharon from New Mexico writes, "Rangel's implication that only minorities and poor people serve in the military is wrong. I have an income in the top 10 percent. My son is joining the Marines after his graduation in May."

Jim from Louisiana declares, quote, "I hope Rangel is serious. The worst thing Nixon did was to stop the draft. Reactivating it would be a positive step."

And finally, President Bush received support from Steve in Missouri who writes, quote, "Why is everybody blaming President Bush for the economy? The responsibility belongs with the thieves on Wall Street. Put the people in jail that did it and confidence will come back."

We always welcome your comments. The e-mail address is lateedition@cnn.com.

And for our international viewers, we want to thank you for joining us on LATE EDITION.

For our North American audience, we will sort through the political battles on the horizon for the new year with former Clinton White House press secretary Joe Lockhart and Republican strategist Ed Gillespie.

And don't miss our Final Round. LATE EDITION continues after this.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back. We'll talk about the political landscape as 2003 begins in just a moment, but first, here's Fredricka Whitfield in Atlanta with a news alert.

(NEWSBREAK) WOODRUFF: Well, even as we keep an eye on events in the Middle East and elsewhere around the world, here in the United States this week the 108th Congress opens, with Republicans in control of both the House and the Senate, as well as the White House. It's the first time this has happened since Dwight Eisenhower was president.

Meanwhile, Democrats are already lining up to take back the White House in 2004.

With us to talk about this and other key issues likely to emerge in the weeks ahead, former Clinton White House press secretary Joe Lockhart and Republican strategist Ed Gillespie.

Good to have you both with us again on LATE EDITION.

ED GILLESPIE, REPUBLICAN STRATEGIST: Good to be here, Judy.

WOODRUFF: Thanks for being here.

Let's start out with the president's economic plan. He's going to talk about it on Tuesday. And just roughly, we assume that he's going to propose tax breaks, perhaps accelerating those for individuals, tax cuts on dividends, maybe even the possibility of no taxes on dividends.

Joe Lockhart, is this generally the outline of what is needed to stimulate the American economy?

JOE LOCKHART, FORMER WHITE HOUSE PRESS SECRETARY: Not at all, actually. One would have hoped that when he fired his economic team from the first two years, from the last Congress, they would have come in with some fresh new ideas. Instead, we're getting more of the same.

It is the same basic policy, it's the same idea that, if you somehow increase the tax burden on the upper brackets, that there'll be a trickle-down effect to the rest of the economy.

It didn't work in the first two years, it's not going to work now. And I think we're going to see a real debate over this.

WOODRUFF: Ed Gillespie, we have Nancy Pelosi commenting. Let me just have you listen to what she said about what she -- at least, what she's heard so far about what the president's going to propose.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D), CALIFORNIA: The speculation that I see doesn't indicate that there's much stimulus in the package. I think what you see is the administration perhaps using the term "stimulus" as a Trojan horse to wheel in some favorite tax breaks for the high end that they're so fond of. And so what remains to be seen, what the president will do.

(END VIDEO CLIP) WOODRUFF: So you have the incoming minority leader, Democratic leader, in the House critical. You've heard what Joe Lockhart had to say.

GILLESPIE: Right.

WOODRUFF: What's the president going to say on all this?

GILLESPIE: I suspect the president's going to say, we have to get this economy moving again, and one way to do that is to eliminate the double taxation that we have on dividends today that would help encourage greater participation in the marketplace and greater activity in the stock market, which would help reinvigorate the stock market, which is sagging right now, which in turn would lead to greater job creation and reinstate and replenish our 401(k)s and college funds. It's a good idea.

LOCKHART: But, Judy, there isn't an economist in this country who believes that somehow cutting the tax on dividends is going to stimulate the economy.

GILLESPIE: Sure, there are. Yes, there are economists in this country who believe that, Joe.

LOCKHART: No.

GILLESPIE: You and I are not economists. There are economists who believe that. You can't make a blanket statement, "There's not an economist in the country who believes that." There are many who do believe it's a good idea.

LOCKHART: What...

GILLESPIE: None that you agree with.

LOCKHART: Yes.

(LAUGHTER)

Well, listen. You're right, I'm not an economist, but what we need is something that both stimulates the economy in the short term and puts us back on the kind of right fiscal track we were in the '90s, where you make targeted tax cuts to those who need them, targeted investments to parts of industry and people that will stimulate growth. And we get back to a surplus.

Listen, if we were still in the time of surpluses like we were in the '90s, you might want to get rid of a double taxation on dividends. We don't have the luxury because of the first tax cut.

WOODRUFF: Ed Gillespie, let me just cite you what the Tax Policy Center, the analysis that they did. And again, this is one source...

GILLESPIE: Right.

WOODRUFF: ... but they're finding in looking at what the savings would be for someone making over $1 million a year, $24,000 a year. For someone making $40,000 to $50,000 a year, $76 in savings.

Now, is the administration -- should the administration be worried about appearing that it's tilting to the wealthy?

GILLESPIE: Well, I'm not familiar with this organization or people that have different views on things.

But the fact is this: If you're going to decrease taxes for people who pay income taxes, we have a very progressive code in this country right now. About the bottom half of earners hardly pay anything in income taxes. If you're going to reduce income taxes, by definition you're going to reduce taxes on those in the top 50 percent. The top 10 percent are paying 60 percent of the income taxes.

Any income tax relief is going to result in those who pay the taxes getting relief. And the people who pay the taxes tend to be concentrated at the high end.

That's going to stimulate economic activity, though. We have to help folks all across the board. And job creation is going to help people most in this country, and that's what we need right now. We're at 6 percent unemployment, and rising possibly. We've got to address that.

WOODRUFF: And, Joe Lockhart, I mean, Republicans would say, you know, "What do the Democrats want, do they want to raise taxes today?"

LOCKHART: No, I think the Democrats want to stimulate the economy. There's a lot of good ideas out there. One is to do a tax holiday on Social Security, something that doesn't add to the long- term structural deficit.

But I think, you know, there's a lot of evidence out there that this approach doesn't work. In 1993...

WOODRUFF: Which approach?

LOCKHART: The approach to sort of take across-the-board tax cuts. In 1993, 1 percent, the top 1 percent, had their taxes raised. The sort of targeted tax cuts that we were able to do and the investments we were able to do meant that in the 1990s the millionaires did better in that decade than any other decade.

The economic approach doesn't work. And, you know, you're right, we've got to get the economy going, but this president and his policies have been killing 70,000 jobs a month, as opposed to 200,000 jobs created in the last administration.

GILLESPIE: What we're seeing here is what we saw going into the last midterm election, which is that the Democrats are very good at being critical of the president, but we have yet to see them put forward their own agenda.

LOCKHART: You'll see it tomorrow. You'll see it tomorrow. GILLESPIE: Well, Nancy Pelosi is critical of the president. Let's see what they have to put forward to try to get the economy moving again.

Right now, their agenda, I look at it the way I look at this Raelian clone baby, you know, I'd like to see evidence of it before I believe it, and I haven't seen any evidence of a Democratic agenda yet.

LOCKHART: Well, unfortunately, going to cloning, the economic team has been cloned, and they've got bad policies. It's not the personalities, it's the policies.

And what an unemployed worker in this country who is denied extension of his benefits by the Republicans, they don't need a new PR plan, they don't need new packaging, they need different policies that work.

WOODRUFF: Ed Gillespie, I want to read, and again this is, consider the source, it's the minority staff of the House Appropriations Committee, so this is a Democratic source.

They looked at job growth over the last six decades. I mean, looking at even going back before President Carter, but when you look at under President Carter you had 218,000 jobs; under President Reagan, 100,000; Reagan's second term, 200,000; Bush Sr. so on and so on. In every one of these administrations, the last six or seven, jobs were up. Under President Bush, so far, 69,000 jobs lost.

Is this a problem for this president going into an effort to get reelected?

GILLESPIE: But this administration inherited an economic problem, as the data now demonstrate. They acted quickly to avert what would have been an even worse economic condition. They're trying now to further rescusitate the economy, and I think they're pursuing the right track.

But, yes, in 2004 the economy is going to be an issue, as is, by the way, foreign policy and national security, which are two other things that this president has had to confront in his administration, a war against terror, the terrorist attacks, a possible war with Iraq. These are all things that also have effects on the economy, but they're unavoidable and were inevitable when he took office.

LOCKHART: I think the "It's not my fault" excuse isn't going to work.

GILLESPIE: No one's saying it's not his fault, Joe, I'm talking about economic data.

LOCKHART: We've had two years of economic failure. We had eight years of economic growth before that, and the difference...

WOODRUFF: That's pretty harsh. LOCKHART: But this isn't just about political, it isn't about spin, it's about two very different approaches. One that says, you do across-the-board tax cut and you keep cutting taxes and you let the deficit go wherever it wants -- and most importantly the reason that we're not growing jobs right now is that the market has lost confidence in the president and the administration.

What we had in the early '90s was, when we went and attacked the deficit and made the targeted tax cuts...

WOODRUFF: But the market was up on Thursday, the first day it was open after...

LOCKHART: I don't know about you, but my 401(k) is pretty anemic, and Thursday didn't solve it.

GILLESPIE: Joe, the market has not lost faith in the president. You never had faith in the president, which is fine, you're entitled to that view. But don't attribute your view to the entire stock market and the entire investment community. That's not the case.

The fact is, the data show that this administration inherited poor economic conditions. They acted to correct it. They're acting now to correct it further. And that's what the situation we're dealing with at this moment.

LOCKHART: You're using the same, old, tired and, I think, wrong ideas. And if we continue on this path, 2004 will be about the economy.

GILLESPIE: Hang on, it's clear now, too, that many of the gains in the market of those eight years of the Clinton presidency were very illusory, they were hyped by cooked books and by other problems in the marketplace.

(CROSSTALK)

WOODRUFF: We can go on with this for a long time. We're going to leave it here.

(CROSSTALK)

WOODRUFF: You're not going to change each other's minds.

We're going to take a quick break, and when we return we are going to take your phone calls for Ed Gillespie and Joe Lockhart. Lots of questions about politics. We'll be right back.

(BEGIN VIDEO CLIP)

BUSH: I've got my mind on the peace and security of the American people, and politics will sort itself out.

(END VIDEO CLIP)

WOODRUFF: President Bush trying to stay above the political fray, as the jockeying among Democrats to retake the White House begins.

We're continuing our conversation and we're going to be taking your phone calls for former White House press security Joe Lockhart and Republican strategist Ed Gillespie.

Ed Gillespie, let's go down the list of the Democrats who've already announced that they want to run for president: Howard Dean, the governor of the state of Vermont; John Kerry, the senator from Massachusetts; John Edwards of North Carolina let us know this week he's running; and Al Sharpton, Reverend Al Sharpton has made it pretty clear he's going to run.

Now, these are some other names we're expecting: Dick Gephardt of Missouri, no surprise there; Joe Lieberman of Connecticut is expected to run; Tom Daschle, the Senate about-to-be minority leader; and possibly Bob Graham of Florida.

Which one are the Republicans most concerned about, Ed Gillespie?

(LAUGHTER)

GILLESPIE: And I would be doing a person a favor if I...?

(LAUGHTER)

I don't think -- look, this is a large and growing field. There are formidable candidates in that field, some more formidable than others.

But whoever emerges from this Democratic primary has an opportunity to recast the Democratic Party and to put a stamp on it, a new approach to governing, a new ideology. I'm sure it would be more liberal in nature than the Republican ideology, but there's an opportunity here for the Democratic Party, in much the same way that President George W. Bush recast the Republican Party with compassionate conservatism. And whoever emerges, I think, will be a strong nominee. I am not a Polyanna this. I think that '04, the parties are in parity, will be a strong contest for the presidency. I obviously believe that President Bush is stronger and will win, but we'll see.

WOODRUFF: And right now, he's high in the public opinion polls...

GILLESPIE: Sure.

WOODRUFF: ... and Joe Lockhart, that makes it hard for any one of these guys, but I want to put you on the spot. Who do you think stands the best chance at this point?

LOCKHART: Well, I don't think it makes -- it makes it hard in sort of the silly atmosphere that we have before voters get involved, when it's just us talking about it. And as much as I love talking about it, it's not that meaningful.

When we actually get to one person going against another person and a set of ideas and doing it on a fairly level playing field -- which it isn't now. It is a fact here in Washington that the president has the loudest voice, whether he's a Democrat or Republican. It's very hard for Democrats who are senators and congressman or governors to get into the debate and fight with the president.

But I think you've seen in the last couple of weeks, now that people have "presidential hopeful" in front of them, you're listening a little more. And I think that's going to continue.

I think Democrats -- you can sort of put them in two different groups. They're sort of new faces that the country doesn't know that well -- that would be, you know, Senator Kerry, Governor Dean, Senator Edwards -- that are going to be out introducing themselves. And, you know, one of them will emerge as someone that the public and Democrats as a group are attracted to.

And you've got people like Dick Gephardt and Tom Daschle who've been around, who have strength, and Joe Lieberman, within the Democratic Party. And I think, you know, by a year from now, you know, maybe 13 months from now, we're going to have a very clear idea.

WOODRUFF: And, Ed Gillespie, you know, you have a president who has said the Democrats are going to sort this out, but the White House has already started making pointed criticism of some of these people. We heard the White House making a statement about John Edwards the other day.

Is it smart for the White House to, from time to time, point out the weaknesses of these people and to...

GILLESPIE: Well, and I don't -- maybe I missed it, but I didn't see the White House put out anything. I saw the Republican National Committee put out something about it.

WOODRUFF: I stand corrected, but clearly there's very close coordination between the White House...

GILLESPIE: I think the Republican National Committee should not sit by and let any candidate in the Democratic Party -- and it won't just be Edwards, he's not the Lone Ranger here, others will be afforded that same privilege of having their records highlighted, in terms of how they've voted in the past and things that they've said.

That's the job of the Republican Party apparatus. I served as communications director there. Joe has been in similar positions. That's what you do, and they should be pointing out and making sure the reporters have a little dossier on the voting records of each of the candidates.

LOCKHART: Yes, but it's not done by chance. You clearly put your energy and time into those that kind of worry you more. And I think if you look at the efforts that come out of the RNC, they're worried about John Edwards, they're worried about Tom Daschle. And, you know, as others emerge, they're going to get worried about them. WOODRUFF: 108th Congress about to get under way this week. Ed Gillespie, Republicans in control of the House and Senate as well as the White House. As we've pointed out, first time in decades.

Is the president going to get everything or almost everything he wants from this friendly Congress?

GILLESPIE: Well, I think he's going to get a lot. The president has set the agenda. This is the first time ever that a Republican president has gained seats in a midterm election. And I think that the representatives and senators on Capitol Hill recognize the influence that the president has, the esteem with which he's held by the American public.

But they also understand that they're elected in their own right as senators and members the House. They're going to work out the legislation and the details, but the president is clearly setting the agenda.

WOODRUFF: Can the Democrats stop what they want to stop from this president?

LOCKHART: I think they can. And I think really what this is going to come down to is how much the White House wants to work with the Democrats. Because if you look at the accomplishments in the first two years, the vast majority, from my point of view, are where the president said, "OK. That's a Democratic idea, but it's a good idea, and now I'm for it."

If you look at the Transportation Security Agency federalizing the workers, having a Homeland Security Department. If you look at the education bill, a lot of the work came from Ted Kennedy. Campaign finance reform. These were all important accomplishments, and they were all originally Democratic ideas.

If he follows that model that he did in the first two years, then I think we can get a lot done. If we start getting caught up in presidential politics and ideology, which this stimulus package looks like it was built, then I think we're going to have gridlock.

WOODRUFF: Ed Gillespie, what about the new Republican leader in the Senate? New Majority Leader Bill Frist about to be formerly elected. Very little experience in that leadership role. Clearly a distinguished career as a surgeon. But how tough a time is he going to have, do you think?

GILLESPIE: Well, he's a very smart guy, as we all know, and he's very talented, and he has a very good leadership team around him, as well. He has a history of legislating. He is a legislator in his brief time on Capitol Hill.

GILLESPIE: But he will be learning the ropes as he goes forward in scheduling the floor of the Senate, which is a very complicated place to be. But I think he's going to have the staff, the leadership team around him and his own smarts and natural ability, as well as a president strongly pushing forward the agenda, to get things done. WOODRUFF: Joe Lockhart, but at the same time he presents a more moderate face for the Republican Party. Doesn't that make it more difficult for Democrats to paint Republicans as out of touch, too conservative?

LOCKHART: Well, we're going to have to look at what they do. I don't think this is about appearance and perception. You know, I think, for instance, he has been brought in the context of racial insensitivity.

WOODRUFF: With Trent Lott's departure.

LOCKHART: With Trent Lott, not his own obviously.

Now, having meetings and photo-ops are nice to sort of create a picture, but you've got to actually have the policies. And I think it would be smart for Frist and the president to set a goal, to say, you know, "In the '90s, we got African-American poverty down to the lowest level in history, and now it's gone back up; that we're going to take 12 months and we're going to pursue policies -- uninsured, which disproportionately hurts minorities. We're going to reverse that trend of the uninsured going up on health care coverage."

And find something specific and say, "Here's what we're going to do. This is what our promise -- this is what our outreach will be." Because otherwise it's all just words and I don't think all that meaningful.

WOODRUFF: We're going to have to leave it there. It's great to see both of you. Ed Gillespie, Joe Lockhart, thank you very much for being with us on LATE EDITION.

LOCKHART: Thanks for having us.

WOODRUFF: Take care. We'll see you.

And up next, LATE EDITION's "Final Round." Our panel squares off on the week's big stories. That's the "Final Round," right after a new alert.

(COMMERCIAL BREAK)

(NEWSBREAK)

(COMMERCIAL BREAK)

WOODRUFF: Time now for the "Final Round." With me, Democratic strategist Donna Brazile, Michele Cottle of the "New Republic," Jonah Goldberg of the "National Review Online," and Robert George of the "New York Post."

Thanks to you all for being here.

It is a new year, and the White House is trying to hit the ground running on the economy. On Tuesday, as we've been discussing, President Bush will unveil a new proposal that includes eliminating taxes on stock dividends.

Earlier today, the Senate's second-ranking Republican and Democrat sparred over who benefits from the president's plan.

(BEGIN VIDEO CLIPS)

SEN. DON NICKLES (R), OKLAHOMA: People just want to play class warfare, and they say, "Oh, well, wait a minute, if you have tax cuts, it's going to benefit the wealthy." Well, the wealthy are paying most of the tax cuts. You ought to have tax cuts for taxpayers.

SEN. HARRY REID (D), NEVADA: When they direct their tax programs to benefit the very, very, very few, and eliminate the majority from any benefit of these tax cuts, it is class warfare. That's their job.

(END VIDEO CLIPS)

WOODRUFF: Senators Nickles and Reid appearing on NBC.

Robert George, is this the right plan the president is about to unveil, as much as we know about it?

ROBERT GEORGE, NEW YORK POST: As much as we know about it. Yes, it's kind of funny when Democrats say that a tax-cutting proposal that is aimed at stock dividends only benefits the very few, when well over 50 percent of American families have some kind of stock now.

I think it's a good idea, especially last year, when there was so much corporate mistrust and malfeasance, we need to send a signal that it's basically a good idea to start reinvesting again. And I think it's the right tax cut at the right time.

WOODRUFF: Donna Brazile, the right tax cut at the right time?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: No, it's more of the same.

And unfortunately, Robert, it's not going to stimulate the economy. It's misleading, because it's supposed to be a growth package, and the only thing that's growing is the deficit.

And it's unfair, because, again, it continues to put money in the hands of the top 1 percent, and not in the hands of the people who will go out there and spend it, go to Walmart, go wherever they may shop, as well as help, you know, grow the economy again.

WOODRUFF: Jonah Goldberg?

JONAH GOLDBERG, NATIONAL REVIEW ONLINE: Well, look, first of all, I agree with both Donna and Robert a little bit. The issue with dividends isn't some -- I think Donna's right, it's not a stimulus. But what it is is to move toward better corporate governance, and that's one of the things we're supposed to be in favor of after Enron and all of that.

And by encouraging people to buy stocks that give dividends, and by encouraging corporations to give dividends, you're going to make the corporations more receptible and more responsible to stockholders, which is something everyone here was screaming about just six months ago.

And in that sense, it's a very good idea, but it is not a great stimulus. But there are other things in the package that are stimulative.

WOODRUFF: Michelle?

MICHELLE COTTLE, NEW REPUBLIC: And it's interesting that the Republicans are very careful when they talk about how the top-end taxpayers are the ones paying most of the taxes. But we're talking about income taxes. I mean, if you wanted to stimulate really growth in the economy, then what you do is, you work on the Social Security payroll tax, which affects lower-income taxpayers, who are more likely to spend extra dollars when they get them back.

WOODRUFF: Robert George, why shouldn't the administration -- why wouldn't the administration take that approach?

GEORGE: Well, as we know, I don't think -- they haven't announced everything yet. I mean -- and that's actually something to look at.

However, I think a Republican administration is especially sensitive that anything that looks like it's going to damage the Social Security trust fund, they don't want to touch it. If they want -- if Democrats want to step forward and say, keep cutting payroll taxes, then maybe they'll take a look at it.

WOODRUFF: All right. Well, even as the president grapples with the economy, he's now facing dual international flashpoints in Iraq and North Korea.

Today, Republican Senator John McCain on CBS said both situations are equally critical.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: The North Koreans are more limited in their military capability, even though Iraq's is quite weak. It's hard for me to compare the two. But I don't think that you can -- that you have to abandon our efforts to restrain Iraq from acquiring a position that North Korea has attained.

(END VIDEO CLIP)

WOODRUFF: Jonah, which is the bigger threat, Iraq or North Korea?

GOLDBERG: Frankly, I don't know. It might be North Korea.

But my problem with the question, not coming from you, Judy, but in general, the way the question is posed out there, is that people are saying North Korea is a bigger threat, therefore we should do more about North Korea than Iraq. But the whole point of going after Iraq is to prevent it from becoming a nuclear power like North Korea, which could cause vastly more havoc.

And there is this notion out there, which I find very disingenuous, by people saying that, because North Korea might be a bigger threat, therefore we should put Iraq on the back burner. They are not saying this because they really think we should be doing something about Iraq. They're basically -- it's basically an anti-war argument made to sound like good statesmanship.

WOODRUFF: Is that...

BRAZILE: Well, I think the problem is that the administration seem not to have a policy now on how to re-engage the North Koreans. They've isolated the country. They pointed their finger in their face. And now the North Koreans are coming back and saying, "OK, you called us out, now we're ready."

So I think it's important for the South Koreans, who are coming here this week to talk to our government, will find a peaceful solution and hopefully someone who is willing to talk and listen to them downtown (ph).

WOODRUFF: Robert?

GEORGE: Yes, well, we basically found out that your options become a lot more limited when a given country becomes a nuclear power. If Saddam is allowed to become a nuclear power and has influence over the entire Middle East region, the United States' options would be limited. So that's why they want to prevent that from happening now.

WOODRUFF: Michelle?

COTTLE: Sure, but you're looking at the axis of evil, and we now know North Korea has been working on its nuclear program. It looks like Iran may be more ahead of Iraq in this situation.

So what the administration has to be able to do is explain itself a little bit better in terms of why Saddam is so different. I mean, we're looking at a situation where anti-American sentiment is likely to go up and we're going to have more terrorist attacks because people think that a lot of this is just about going after the Middle East and the oil in the Arab nations.

WOODRUFF: So you're saying it's just a matter of how the U.S. explains itself?

COTTLE: No, I'm saying that's one of the things they have to be able to do. I mean, they have to explain why -- you know, they say, "Saddam's irrational. Containment didn't work. You know, we tried diplomatic pressure." All these things are true with North Korea as well, and still they continue on this course. So obviously...

GEORGE: And North Korea got to the nuclear weapons goalpost before Iraq did, and we're trying to stop Saddam from getting it too (ph).

(CROSSTALK)

COTTLE: And when we approached South Korea about stopping the oil experts, they said don't do that or they're going to restart their nuclear power program.

I mean, we're not -- we say that we need to have one voice with all of our allies, but right now Russia, China and South Korea completely disagree with us on these things.

WOODRUFF: All right.

GOLDBERG: We can have one voice, but that doesn't mean we have to say the same exact things to everybody around the globe. I mean, the Soviet Union was a much bigger threat than a few communists in Grenada. But we could stop the communists in Granada, and we did so, even though we couldn't kick them out of Moscow.

COTTLE: No, no, they're saying we have to have one voice with our allies on North Korea, but we can't even get South Korea and Russia and China to stop being upset publicly with us. I mean, they made it very clear they disagree.

GOLDBERG: But that's the problem with their foreign policy, not ours.

BRAZILE: Not to mention Japan, who's also concerned about the North Koreans and the threat that they pose. And again, they don't want to nuke up the neighborhood, so to speak...

(LAUGHTER)

... but I think it's important that we sit around and start talking to the North Koreans and engage.

GEORGE: There goes the neighborhood.

(LAUGHTER)

WOODRUFF: Moving back to the Persian Gulf, meanwhile some Arab leaders are floating the idea of Saddam Hussein going into exile in order to avoid another U.S.-Iraq war.

While no government has weighed in officially on that prospect, countries being mentioned are Sudan and Somalia. Some others being considered include Libya, Egypt, North Korea...

(LAUGHTER)

What would happen if North Korea harbored Saddam Hussein? And Cuba.

All right, Michele, is Saddam Hussein going into exile, is that an option that makes sense?

COTTLE: No, and certainly not in a lot of these countries. I mean, do you really want him running amok in the Sudan? This is a man whose entire reason for living is to hold onto the power he has accumulated. I think the AP story that was talking about this had this great line about back in '82 when they were suggesting that to prevent war with Iran he considered stepping down, the Ayatollah was saying that would be a good condition. The minister of health suggested, you know, just strategically maybe he should consider that. They took him in the next room and shot him.

I mean, this man is not going without -- you know, he's got that last bullet. He's going to use it himself before he steps down.

GEORGE: I think we're looking for the "Saturday Night Live" skit on Saddam in exile.

(LAUGHTER)

But no, the thing is, if he left it would really depend on -- I mean, if he leaves just for his sons to take power, that would not be acceptable.

WOODRUFF: Donna?

BRAZILE: I think that you will see a lot of bipartisan support for this regime change of getting him to move on and find someplace to throw all his palaces and his Viagra...

(LAUGHTER)

... and his girlfriends and all...

(CROSSTALK)

BRAZILE: But I think the Arab leaders are right to try to get Saddam to focus on, you know, the eventual reality that he's about to lose his job.

GOLDBERG: Yes, I think that's right. I mean, look, conceivably, it could be a worthwhile solution if he could get the entire Ba'ath regime, all his cronies, all his thugs and murderers to all get up and leave, but then he basically becomes like a James Bond villain, Osama bin Laden type, creating havoc from North Korea or wherever else.

But I do think that this is part of a sign that the region realizes that the guy's got to go. And it may be more of a trial balloon for forcing a coup than anything else, which would be good.

WOODRUFF: We're still trying to get this idea of Saddam Hussein in exile in our heads.

(LAUGHTER)

But meanwhile, we have to take a quick. But just ahead, the Democrats lining up to take on President Bush in '04. Who's the best bet to emerge from the pack? That and more, when the Final Round comes back.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to the "Final Round."

North Carolina Senator John Edwards is vying for President Bush's job in 2004. The freshman Democrat announced his plans this week, and today he pressen his theme of working for the needs of, in his words, "regular people."

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D), NORTH CAROLINA: These are the people that I fought for for 20 years as a lawyer, they're the reason I ran for the Senate, they are the essence of the reason of why I want to be president.

My entire life I have seen things through their eyes, and I think I understand what their concerns, what their hopes, what their fears are.

(END VIDEO CLIP)

WOODRUFF: John Edwards on ABC.

Donna, does a multimillionaire lawyer talking about the needs of "regular people" pass muster?

BRAZILE: Absolutely. Especially one that, I believe, understands the crisis that's going on in this country today as well as the international crisis.

John Edwards, although he's relatively new to the United States Senate, he is perhaps a good politician. He understands and would focus on the needs of what he calls "regular people," people like John and Robert, of course, and perhaps Michelle.

But also, you know, John will also help the Democratic Party regain the South and focus on issues of concern to that region, the economy, education and job and health care.

So I think it's important that John Edwards get out there and make a real good head start by talking about these issues.

WOODRUFF: Is he going to be lucky enough to have Donna Brazile working on his case?

BRAZILE: No, I'm still using up all my frequent-flyer miles from the Gore campaign, so I'll wait a couple of months.

WOODRUFF: All right, but we're going to keep asking that question. All right, Robert George?

GEORGE: I'm not sure whether a multimillionaire trial lawyer is actually a perfect representative of regular folks. The thing is, though, that some of the recent polls I saw, he would be behind 17 to 19 percent against Bush in his home state of North Carolina. Actually what his running for the White House, along with Tom Daschle's apparent run for the White House, actually does, it really opens up the possibility that the Republicans could actually end up expanding their majority in the Senate because I think Edwards's seat would be vulnerable, Daschle's seat would certainly be vulnerable.

WOODRUFF: Michele?

COTTLE: He's certainly got that folksy charm quality that Al Gore lacked and American voters really like. I mean, George Bush is absolutely not a regular guy, but he would turn on that cowboy baloney on the trail and people would just melt.

So, obviously, Edwards at least has this going for him. Now, whether or not he's ready for prime time in terms of policy discussions remains to be seen.

GOLDBERG: In terms of policy discussions, I thought this regular people thing was a veiled reference to cloning.

(LAUGHTER)

But I think the -- you know, look, I mean, the cliche around town is that Edwards is basically taking the Clinton strategy from 1992, this unknown guy who's going to have the courage to challenge a popular president named Bush, during wartime, blah, blah, blah, blah, blah. And everyone says, you know, that Edwards is Clinton without the baggage -- attractive, Southern, all that stuff.

The problem is, is that the circumstances of 1992 aren't the same today. We have all of the heavyweights getting into the race right now, and you can't recreate 1992 unless you're going to recreate -- your opponents are going to be Paul Tsongas and Bruce Babbitt and these other second-rate guys. This time around, you know, I don't see how Edwards' thing will work.

WOODRUFF: Well, it doesn't end with John Edwards, because tomorrow Missouri Democratic Congressman and former House Democratic Leader Dick Gephardt will take the first formal step of the 2004 White House bid with the establishment of a presidential exploratory committee.

Now, Michele, should Dick Gephardt expect success given what happened in the mid-term elections where the Democrats didn't do so well?

COTTLE: Well, it doesn't look good, but I think Jonah's reference to the first Bush run is very much what's going on here. Everybody backed out of the race and none of the heavy hitters wanted to go up against Poppy, so they seeded the field to this complete yokel from Arkansas and suddenly, that was who their candidate was.

They're not going to let that happen again. They're going to jump -- everybody's going to be in here. We were trying to figure this out earlier. We came up with about 10 names from the Democratic side who are going to jump in this race. WOODRUFF: And that includes Gary Hart. I mean, you...

COTTLE: No, it did not include Gary Hart, but Gary Hart is 11. It was like, you know, everyone from Al Sharpton to Bob Graham...

(CROSSTALK)

COTTLE: Wesley Clark. I mean, there is a huge field.

WOODRUFF: Robert?

GEORGE: Yes. I mean, the big question is, can a man with no eyebrows ever be elected president. I mean, this is the question.

(LAUGHTER)

No, I mean...

WOODRUFF: Wait a minute, who has no eyebrows?

(CROSSTALK)

GEORGE: Dick Gephardt.

(CROSSTALK)

WOODRUFF: You really are getting detailed.

GEORGE: No, but I think the problem is, I mean, I think he looks at this as a good way to go out of the House. Gephardt, I mean Gephardt ran, what, in 1998. It'll be 16 years, and I don't really think -- yes, he's got union backing, but I don't necessarily think he really has a message that's going to resonate in 2004.

WOODRUFF: Donna, I know you're going to say nice things about Dick Gephardt.

BRAZILE: Absolutely. I worked for Dick Gephardt in 1998, and I welcome Dick Gephardt in the race. I think he will bring a lot of assets to the party.

First of all, let's go back to 1994, the Democrats got clobbered and Dick Gephardt, over the last six years, has helped to reposition the Democrats back in Houses. It's no -- people understand that it's very difficult to win back the House when you don't have a lot of competitive seats.

I think Dick Gephardt has a national network of donors, a national network of activists and just remember, I was a couple of miles away from St. Louis.

BRAZILE: So I think Dick Gephardt will be a very formidable candidate.

WOODRUFF: Jonah. GOLDBERG: Yes, I listened to you earlier asking Ed Gillespie about who the White House fears most, and I think the reality is at this point, is that every new Democrat who gets in, the White House is happy, because it diminishes the stature of everybody. I mean, it -- think about...

WOODRUFF: The Seven Dwarfs.

GOLDBERG: Right, Seven Dwarves in '88, and now it's up to 10 or...

(CROSSTALK)

GOLDBERG: Perfect Storm, whatever, and you got this situation now where, you know, the Democratic debates are going to look like the Sergeant Pepper's album cover.

(LAUGHTER)

GOLDBERG: I mean, this huge crowd of people over there, and you have Gephardt yelling with Sharpton. And I mean, I think it looks great for Republicans.

WOODRUFF: You guys have some great lines this afternoon.

All right. We have to move to take another break, but the Lightning Round is just ahead. So you must stay with us.

(COMMERCIAL BREAK)

WOODRUFF: Time now for our "Lightning Round."

On Tuesday, the new Congress convenes for the first time with Republicans now in control of the House and the Senate.

Should President Bush expect smooth sailing from his friends on Capitol Hill, Michele?

COTTLE: Oh, absolutely not. There are too many Democrats on the Hill who are going to run for president, and they need to stake out their ground.

WOODRUFF: Robert?

GEORGE: Exactly. And in fact you've also got a lot of moderate Republicans that aren't going to be completely on board with a tax cut. It's going to be dicy.

WOODRUFF: Donna?

BRAZILE: No question. Democrats, they found their voice, their soul, and they're going to be the loyal opposition, with -- and I'm underlining "opposition."

GOLDBERG: Yes, it's a democracy, you're supposed to have people not allowing presidents to have smooth sailing. So he shouldn't expect it.

GEORGE: The pollsters helped them find their voice, I understand.

(LAUGHTER)

WOODRUFF: Well, there's a new racial controversy involving the Republican Party. In California, the party vice chairman, a man named Bill Back (ph), who is running for the state party's top job, is in hot water. It was reported this weekend that Back (ph) sent out an e- mail in 1999 that contained an essay which said history may have turned out better had the South won the Civil War. Back (ph) says he strongly disagreed with the article, and he's apologized for sending it out.

But my question is to Jonah: Is the Republican Party shooting itself in the foot on racial issues, especially given what happened to Trent Lott?

GOLDBERG: Well, I mean, this thing happened three years before Trent Lott, and I -- it seems to me this is overkill. You can have interesting arguments about the Civil War. The problem is, the Civil War has become synonymous with ending slavery, and so this guy got himself in trouble, but I don't think this has a lot of legs.

WOODRUFF: Donna.

BRAZILE: The Republican Party continues to have to explain itself on racial issues. They have 40 years of explaining to do. And I think this is just part and parcel of what's going to happen over the next couple of months.

GEORGE: Yes...

WOODRUFF: Is this going to continue?

GEORGE: The party secretary in California, the Republican Party secretary, Shannon Reeves (ph), who is African-American, is rather outraged over this. And so it may have some legs in California, but I don't think it really has to reflect on the Republican Party in general.

WOODRUFF: It's not going to help him as he tries to get elected to the party top job.

GEORGE: No, it wouldn't.

(LAUGHTER)

WOODRUFF: Michele?

COTTLE: The problem now is that people are sensitized to this. So any small, you know, no matter how loony or how fringe or how long ago, people are going to jump on it.

WOODRUFF: All right, next item, in West Virginia, more than two dozen surgeons are on strike to protest what they say are the high costs of medical malpractice insurance. Is curbing malpractice lawsuits and damage awards, is that the solution to this problem, and should doctors be striking, Donna?

BRAZILE: No, absolutely not. Look, in some states they have a cap on these awards and the costs are still going up. We need a healthy debate over our health care prices in this country, and I hope that somehow or another Congress will put aside their affinity for one side or the other and really find a solution.

WOODRUFF: Robert?

GEORGE: Doctors shouldn't be striking, but I think the medical malpractice issue has been bubbling for a while, and I think we may really get an actual debate.

GEORGE: And it will actually be interesting to see how John Edwards, for example, argues some of those issues.

COTTLE: Yes, it's hard to go after the doctors on this. Somebody reported that in West Virginia some doctor was paying $100,000 a year. I mean, this is not California. That's a lot of money for these guys.

But I think the insurance companies have something to answer for.

GOLDBERG: I mean, there's a problem with the Hypocratic Oath, but at the same time you can't force people to go into livelihoods that are going to bankrupt them. And we shouldn't be turning the medical business into a lottery for people to get rich.

WOODRUFF: Last but not least, this week America West Airlines will begin selling meals, selling meals, on some of its flights that cost from $3 to $10. Other major airlines, we are told, are also considering doing this.

Would you pony-up money, Robert, when you get on an airplane? Remember when we worried about safety? Now we're talking about buying food.

GEORGE: Yes, it seems like it was just a few years ago when a meal was actually part of it. I think it's easier just to get a burger or a pizza before you get on board and then just go with that.

WOODRUFF: Which, Donna, you said somebody was -- you were sitting with somebody on a plane and they whipped out ...

BRAZILE: They had a shoe box, and it was fried chicken and ham and potato salad. It was on America West, and I'm like, "Oh my God, I need to do this next time."

(LAUGHTER)

GOLDBERG: You should have bought it from her.

(LAUGHTER)

BRAZILE: You know what, I was thinking about it. But I'm going to make my own jambalaya and gumbo and serve that on the plane.

(LAUGHTER)

WOODRUFF: And I know for a fact it's good, because she made it for Inside Politics.

(LAUGHTER)

GOLDBERG: This is a good sign. Airlines have become a commodity, travel's become a commodity. Anything that adds value to the inside of the planes is long overdue.

WOODRUFF: Very quick.

COTTLE: I think it should be an option. I get really hungry over Chicago.

GEORGE: TV on JetBlue is better than food, anyway, so....

WOODRUFF: We're going to watch you all the next time you climb on an airplane.

Thank you all. Jonah, Donna, Robert and Michele, great to see all of you.

That's it for LATE EDITION this first Sunday of 2003. Be sure to join Wolf next Sunday and every Sunday at noon Eastern for the last word in Sunday talk.

Until then, thank you for watching. I'm Judy Woodruff in Washington.

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