Return to Transcripts main page
On the Story
Who is in Charge of Iraq Rumsfeld or Rice? Story of Schwarzenegger's Victory in California;
Aired October 11, 2003 - 10:00 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.
KELLY WALLACE, CNN NATIONAL CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we've covered this week. I'm Kelly Wallace, on the story of the recall, the Schwarzenegger victory and the fallout for California and national politics.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: I'm Barbara Starr, on the story of new tensions inside the Bush administration over who is in charge of Iraq, Don Rumsfeld or Condoleezza Rice.
JOSIE BURKE, CNN SPORTS CORRESPONDENT: I'm Josie Burke in Boston, where for baseball it is fantasy time. The Red Sox and the Cubs just might meet in the World Series. And for basketball, it's reality time. Kobe Bryant is back in uniform and back in court.
ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: I'm Andrea Koppel in Atlanta, on the story of new fears of widening war in the Mideast.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: I'm Suzanne Malveaux, on the story of a White House wrestling with a leak probe and trying to polish up perceptions of what's going on in Iraq.
KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, on the story of the latest signs of economic recovery. We'll be talking about all these stories.
Also coming up, the admission by radio talk show host Rush Limbaugh that he's addicted to painkillers and seeking help. New concerns about solid gold retirement deals at the Stock Exchange. And we'll listen to the president's weekly radio address at the end of the hour.
Email us at onthestory@cnn.com. Now, straight to Kelly Wallace and the recall.
(BEGIN VIDEO CLIP)
GOVERNOR-ELECT ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I will do everything I can to live up to that trust. I will not fail you, I will not disappoint you, and I will not let you down.
(END VIDEO CLIP)
WALLACE: The governor-elect in the ending of his latest extravaganza called recall. Now we are now watching the evolving sequel called transition and governing.
There was one clear sign that this campaign had come to an end and we were now focused on governing. At his first news conference, the governor-elect taking questions. It was all policy, not politics. Reporters even asking about his position on the importing of Russian oil.
But one aide put it this way. He said, "Now comes the hard part. Now comes the task of governing." He must work with a Democratically- controlled legislature. He has to deal with big problems and his popularity is on the line.
BURKE: Kelly, during the campaign Schwarzenegger also said that afterward he'd address those allegations of sexual harassment. Any sign that he's going to follow through on that?
WALLACE: Well, Josie, it's interesting. Schwarzenegger was asked about this on Thursday, his second news conference as governor- elect. And he said at the end, that is "old news."
Well, his aides are looking into these allegations, and they say that they want to get the facts to the public, that they are looking into all of these allegations and they want to make sure that the public knows what's true and what's not true.
HAYS: You know, what about the economy? That's what I always have to come back to, because that's really what got them in trouble.
You had Silicon Valley, the whole tech bubble crashing. You had the economy slowing down. They've got a huge budget deficit they have to stop. And the first thing he says he is going to do is repeal the car tax that brings out about $4 billion a year. It just doesn't sound like it adds up.
WALLACE: Well, first, his advisers want to look into this. He says he can do it on his first day in office. Well, the Democratically-controlled legislature disagrees. That's number one.
Number two, what do you do to make up for $4 billion a year when you have an estimated deficit that could be about $8 billion? He doesn't have the answers right now. He says he's looking at the books to see about where the spending cut should come from.
STARR: But that seems to really get to the question, is Arnold Schwarzenegger going to be able to get his administration running quickly, really live up to some of his promises, or is this going to be traditional politics by the time he gets to Sacramento?
WALLACE: Well, it's interesting. First off, in his transition, he's reaching out to the right and the left. Susan Estrich, a campaign manager for Democrat Michael Dukakis of Boston, of Massachusetts, so she is part of this transition team, as well as right-leaning Bill Simon, a former gubernatorial candidate.
So he's trying to bring in both sides, trying to govern from the center. But he faces challenges, and quickly. Normally a transition lasts a couple of months. He could be in office as early as next month. And then he has to present a balanced budget by January. So he has to make decisions and make them very quickly.
KOPPEL: Kelly, you mentioned the Democratically-controlled legislature. Any idea how Governor Schwarzenegger is going to be received?
WALLACE: Well, Andrea, it's very interesting. Right now, everyone is very warm and kind and a lot of smiles. "We're going to work with him." He talked on the phone with the Democratic leaders of the legislature. He also called up Senator Dianne Feinstein and Barbara Boxer, California's two Democratic senators.
So he's saying we're going to work together. He's also sending out a message. He says that the people have spoken, that the landslide victory for Arnold Schwarzenegger shows that people are against the status quo.
Arnold Schwarzenegger thinks that's a message for law makers up in Sacramento. The Democrats say, OK, we'll work with you, but we want to see what plan you're going to put forward.
MALVEAUX: Another person he got a call from was President Bush, of course. And it is rumored, and we think it is true, that he is going to be paying a visit to Schwarzenegger, as well, through his fund-raisers. But what does this mean for President Bush?
I mean, there's a lot of voter discontent. The economy. Does this translate in any way to national politics? Are we going to see a president that's vulnerable?
WALLACE: No surprise, Suzanne, it depends on who you talk to. Democrats say oh, yes, oh yes. This means where California goes, there goes the nation. And the voter discontent in California will lead to voter discontent nationwide, and that spells trouble for George W. Bush.
Republicans disagree. Many think this was an isolated circumstance. Gray Davis, the governor of California, his popularity was at an all-time low rally for a Democratic leader. People disliked him. Arnold Schwarzenegger, a celebrity, incredible name recognition.
Again, we don't know, but most voters said they were voting against the status quo. They were angry and frustrated. And it really does remain to be seen if this could translate into a national trend next year.
BURKE: Kelly, what role did Maria Shriver, the governor-elect's wife, play in getting him elected, and what's her role now?
WALLACE: Well, she played a very strong role, Josie. And Schwarzenegger even alluded to that when he was making his victory speech. He right away introduced Maria and he sort of held up her hand and said, "I know a received a lot of votes because of you."
She was out there towards the end quite a bit talking a lot on behalf of her husband. And it was especially important after these allegations of sexual misconduct against Schwarzenegger. And there she was at the podium saying, I know this man, he's an A+ human being, he respects women, he is a proponent for women's rights. Many believe that appealed to Democrats and appealed women voters to say, I'm going to trust this guy and give him my vote.
KOPPEL: You know, Kelly, one of the things that surprised me wasn't obviously Maria Shriver, being the wife, was there, but that Maria's mother, a staunch Democrat, was there campaigning along as well. Any idea why she came on?
WALLACE: Well, certainly some analysts say in the Kennedy family, you know, blood might be stronger than politics. This, of course, is her son-in-law, even though she is a strong Kennedy family Democrat.
You had the entire Shriver family there, Andrea, up on the stage the night of Schwarzenegger's victory. She was also out there, though, the day Schwarzenegger had an education summit. And she's going to be one of his top education advisers.
HAYS: I just have to sneak in a quick question about the Hispanic vote, because I think the (UNINTELLIGIBLE) this election is, it's clear that Hispanic voters do not vote on mass Democrat -- many voted for Schwarzenegger.
WALLACE: They do. I don't have the exact numbers. I think he got something like 40-plus percent. Bustamante, the Democratic lieutenant governor, Hispanic, received a little more than 50 percent. But clearly it is not a block vote, it's a swing vote. And that should send a message also to Democratic and Republican candidates next year.
STARR: Well, from the aftershocks of recall to how the Iraq story continues to put pressure on the Bush administration, especially Defense Secretary Donald Rumsfeld. I'm back on that story in a moment.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, SECRETARY OF DEFENSE: I guess it's because bad news is news. With 24-hour news in our country, it isn't like it's one problem. It's like that it's 24 problems. One every hour, even though it's the same one.
(END VIDEO CLIP)
STARR: Well, Donald Rumsfeld living up to the fine tradition of defense secretaries, doing double duty as a media critic. Welcome back. We're ON THE STORY.
And that's really one of Don Rumsfeld's themes nowadays. Every speech he makes he makes sure that he gives his opinion of news coverage of the war in Iraq, and he is resolutely unhappy with the news media. He says that the news media is simply covering too much of the bad news, not enough of the good news, and that Americans are getting a misperception of what's going on in Iraq, that Americans are hearing only about the problems.
Of course, some people in the news media do have a different opinion, feel that a broad range of stories are being covered out of the many journalists that are risking their lives working in Iraq and Baghdad, and in other cities. But clearly, the administration this week felt a lot of political pressure on the Iraq question as they tried to get a handle on the story, as they tried to control the message. Whether they're going to be able to do that over the long run is really open to question at this point, I think.
KOPPEL: Barbara, another sign of Secretary Rumsfeld's displeasure, his interview that he gave to "The Financial Times," in which he expressed displeasure with Condoleezza Rice for seeming -- at least he says -- to go behind his back, or at least pass memos around, brief "The New York Times" on the changes in the chain of command on Iraq and Afghanistan. How surprising was it to hear the secretary mouth off like that?
STARR: Well, what was surprising, indeed -- you're quite right, Andrea -- is how much of this did spill over into the news media coverage? The memo that now Condoleezza Rice is in charge of Iraq planning policy on the big picture, Rumsfeld becoming very publicly unhappy about that. Scott McLellan, the White House spokesman, coming out and saying, OK, Rumsfeld's in charge.
Rumsfeld getting so annoyed with the news media that he canceled a planned news conference at the NATO ministerial in Colorado Springs this week because he said he had better things to do than answer questions about this again. So a lot of pressure.
MALVEAUX: Well, one thing that happened, too, is that White House aides say, yes, Rumsfeld was notified about this. But we definitely saw Scott McLellan backtracking. I mean, at one point saying, well, he was as involved as we said he was, as an integral part of the process. And clearly, the White House was just furious, the fact that this thing just blew up as it had.
I mean, yes, there's always been kind of that push-pull between Powell and Rumsfeld. But for this to just come out in the open as it had...
(CROSSTALK)
STARR: (UNINTELLIGIBLE). It (UNINTELLIGIBLE) out into public open warfare. That Don Rumsfeld had to come out and even talk about it or wanted to talk about it is not something that the political operatives want to see happen.
WALLACE: So what's going on behind the scenes? Are we looking now to see the Defense Department really going up against the White House? And is going to be that Defense Secretary Donald Rumsfeld is going to be unhappy that he has to now potentially somewhat report to Condoleezza Rice, the president's... STARR: Well, Don Rumsfeld doesn't like to report to anybody. Don Rumsfeld likes to do his own thing. There's no question about that.
What we will probably see now is a test of the system. We will see Don Rumsfeld, Condoleezza Rice, I think Secretary of State Colin Powell all push, test the system, see where the decision-making really is, continue to go their own way, and see where the NSE pushes back. Where will Condoleezza Rice make her stand and push back against the things that the Pentagon or State Department wants to do in Iraq remains to be seen.
BURKE: Just talking about Condoleezza Rice's career, is this really, Barbara, a defining moment for her, expanding into a role that maybe she hasn't been used to before?
STARR: Well, she is one of -- I think Kelly and Suzanne, from their experience at the White House, know that this woman is one of the most brilliant operatives in the Bush administration. They would know that better than me. But I don't know.
I mean, Suzanne, do you hear a lot of talk at the White House now, people maneuvering for what their next job in a second Bush administration might be?
MALVEAUX: Well, there's big rumors that President Bush would ask Dr. Rice to be his secretary of state. That's something that's been floating around for some time. But this is not an unusual position for Dr. Rice to be in, the fact that she's got to deal with two big elephants in the room, Powell and Rumsfeld, and try to make peace here.
One of the things, however, is that -- what I thought was interesting is that Congress made it very clear, yes, she has power, but it's limited authority. They said that anybody who is going to report to them has to have confirmation by the Senate essentially if it's accountability. If you're at the White House, we don't have to call you to testify.
STARR: That's the real thing. Don Rumsfeld can't run Iraq any more like it's just a military problem. That actually is the crux of the matter, I think.
WALLACE: It's become a political issue.
STARR: It's money and politics; how much it's costing and the political price to the president.
HAYS: So where does that take us? We talk about the personalities and who is going to do this and -- I think the American people are sitting back and saying fine, just move ahead.
Now, you had the admission that in Iraq now we're probably not going to get any troops to help. That is another thing on the plate. So now what happens? I think a lot of people say Rumsfeld, Condoleezza Rice, I don't care, but just get us out of this mess. STARR: That, I think, is going to be the key issue, because it's American public opinion. The polls, the political price to the president, where the Pentagon starts to feel the pressure, the State Department and the NSC. And it's not clear that there's any way separate other than the way ahead that the military and the Pentagon have laid out just to continue ahead.
They have no option. Nobody's about to turn around and leave. So they press on.
KOPPEL: But I mean the fact of the matter is, Barbara, is we know that Turkey this week, that their parliament did OK up to 10,000 troops. So there's a question as to whether or not the Iraqi Governing Council, the nominal authority there under the U.S. and Great Britain, would OK it.
I mean, just getting back to the whole is it that big of a deal that Condoleezza Rice would be put in charge, as Rumsfeld said himself, she's the national security adviser. That's the way it's supposed to be.
STARR: Well, it is. And I think that the question that the White House is still going to have to struggle with, that the Pentagon is certainly struggling with, is how many more weeks, how many more months of seeing U.S. soldiers attacked, U.S. soldiers killed and the American public's response to that. If the American public continues to not have a positive response to the operation in Iraq, the White House could feel pressure to change.
MALVEAUX: And also, the big deal, too, is the fact that the White House has acknowledged they want more voices. They want more of a direct role in authority in dealing with the reconstruction of Iraq. That they're just not going to leave it in Rumsfeld's hands.
HAYS: And they're worryried about 2004, the election.
WALLACE: And you have all these soldiers who are home for two weeks going back, and what trouble that is for their families as they watch their loved ones going back again.
BURKE: Kelly, earlier in the week, when there was a lot of heat on Rumsfeld, he suggested to the news media that they focus on something important, not the memo. The Chicago Cubs in the playoffs. Well, we're going to take him up on that when ON THE STORY comes right back.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I'm speechless, man. The heart, the heart. I'm just speechless. It's awesome.
Go Red Sox!
(END VIDEO CLIP) BURKE: They're still screaming in October in Boston for their team. And remarkably, they're also still screaming for the Cubs in Chicago. A lot of people crossing their fingers, hoping for an historic World Series between the Red Sox and the Cubs.
And one disclaimer: I did grow up here in Boston, so I know a lot about the fan base here. Two quick observations coming home. One, there's a lot of optimism, and that's something we're definitely not used to here. And the other is there really seems to be a connection between the players on this team and the fans of this team, and you can't really put a barrier between the two because there's so much history there. But it's a little different that there's such affection between the two groups.
WALLACE: Josie, I'm going to get myself in trouble. I'm a New Yorker. But I think that...
BURKE: That's OK.
WALLACE: ... a Cub-Red Sox series would be amazing. The question is, could the curse affecting both teams actually be broken this year?
BURKE: That's a lot of -- that's something that a lot of people are wondering. And there's even the question, would it really be good for these two franchises if there was a guarantee that one of them would actually win?
You look at the fact that they are so identified by the fact that they're always losing. For the Cubs, they're the loveable losers because they've never come close, really, if you go back for the past 95 years. Whereas for the Red Sox, it's the heartbreak over and over and over again. Some people, if it does actually come to fruition, might end up in therapy trying to overcome it.
HAYS: Josie, I just want to ask you kind of a semi-serious question about the series. In terms of vetting the two teams, you know I think what's interesting about the Marlins, apparently a younger team, they're not the highest players in baseball, which I kind of like, because the Yankees, it's money, money, money. That's why the people who aren't Yankees fans kind of resent them.
Red Sox are known for kind of choking towards the end of the series. The Yankees always seem to pull it out. What are the pros saying about the match-up at this point?
BURKE: Well, there are a lot of people who think that the most logical match-up, if you look at it on paper, is the fact that it will end up being the Yankees and the Marlins. And what would be interesting about that series is the fact that there would be a low budget team against the highest budget team.
The Marlins are a really interesting case because they've only been in existence a decade. Now, they've already won a World Series title, and after that, that team was just decimated. They had what they call a fire sale, got rid of everybody. And here they are back again.
So I think the historians and people who have a sense of history are looking and pointing to a Red Sox-Cubs series. But there are also people who know baseball who would not be surprised in the least to see in the end it comes down to the Marlins and the Yankees.
KOPPEL: Josie, we know you've been wracking up the frequent flier miles this week next to Kelly Wallace. You were in Hawaii earlier, and you heard the Kobe Bryant press conference at the L.A. Lakers' training camp there. What did you hear Kobe say, if anything, that surprised you?
BURKE: The one thing that just stuck out -- and I think for everyone who was there, it had to be -- he was asked point black, "Are you scared?" And he answered point blank, "I'm terrified."
I think a lot of people were wondering how he was holding up, how he was handling this, if he understood the consequences and what was really at stake. And just from those words "I'm terrified," you got the sense that he does realize he's in for the fight of his life and for his life.
(CROSSTALK)
STARR: The fight of his life. It was interesting this week. At the preliminary hearing there was every indication that the defense is going to play hardball on this one. Take no prisoners, if you will.
BURKE: It's interesting. There are a lot of people who said that both the prosecution and the defense scored points. But the fact that the defense scored any in a preliminary hearing is really something.
The damaging thing, if there's anything for Kobe Bryant, that came out of this, is that there are words and images, because there was a detective who was telling the side of the accuser that are going to stick with people when they are watching him on the basketball court. Hands around her neck over a chair, turned her around, things like that. Those are words that are going to stick with you no matter what the outcome is.
WALLACE: Josie, one question. You've been talking with the management staff at the L.A. Lakers. Do they have any sense that if this hearing continues that is might be better for the team, for morale, for everything if Kobe Bryant doesn't go ahead and play a full season with the L.A. Lakers?
BURKE: Well, publicly, no one is coming out and saying that, that they don't think it would be good for the team or for Kobe for him to be out there. But you get the sense that privately there are feelings among management and among some of the players that maybe this is a distraction that neither the team nor Kobe needs right now.
You also get the sense from listening to Bryant, from listening to Phil Jackson, the coach, that this isn't set in stone. That nobody believes he will definitely play the entire season. They understand that this is a situation where everyone is going to be very flexible. They're going to have to be.
MALVEAUX: And Josie, last week we were talking about Rush Limbaugh as the commentator. And this week, clearly, a very bad week. And now this admission on drug use?
BURKE: Really a bombshell, because at the same time that he was resigning his post last week at ESPN because of his controversial comments, there were these allegations. There was a big story in the "National Eninquirer" about the alleged prescription painkiller abuse of Rush Limbaugh. And then he comes out this week -- and it was really a bombshell -- talking to his listeners on the radio, saying, I am addicted, and that he's going into rehab.
A lot of interesting things here. One, Barbara, you were talking about it earlier, the fact that Rush Limbaugh had an ear problem a couple of years ago. He had surgery for it. Could this have been linked to the abuse of the painkillers? There's been a medical study perhaps linking those two things. And did it have any affect on anything that he said over the past couple of weeks or years?
WALLACE: Well, it is interesting. We're in Washington, and one thing that happens when someone is in trouble or in a controversy, people start digging up what people have said in the past. And you are seeing comments that Rush Limbaugh made in the past when it comes to addiction and not showing tolerance for people who are addicts, saying, "Just say no. Just say no."
The question is, how does this present a problem for him now as he's admitting an addiction of his own?
HAYS: In a broad way, this is one more way that he pendulum has swung away from -- remember a few years ago, when the arch conservatives kind of seemed to rule the world for a while, so much frustration on the liberal side. They're still trying to put together a national radio talk show with a liberal host. It just seems -- it's interesting how the pendulum swings due to things that people can't even anticipate.
KOPPEL: Well, we want to thank Josie for joining us. I know you've got a busy day ahead of you. What are you going to be looking for ON THE STORY today?
BURKE: Well, like everyone else, I'm looking for possibly history to be made here. It's an incredible pitching match-up, Pedro Martinez of the Red Sox, Roger Clemens of the Yankees, game three of the (UNINTELLIGIBLE). And this could be a game, Andrea, that people talk about for years and years and years to come.
KOPPEL: And that's get under way at what time?
BURKE: Four o'clock Eastern.
KOPPEL: Had to think about that. All right. Well, I'm sure a lot of folks will be tuning into that.
But right now, we're moving from sports to the hard front game of diplomacy, where the U.S. seems ready to back down in the United Nations and regarding that Iraq resolution. We are back in a moment ON THE STORY, and with a check on what's making headlines at this hour.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: What would help Syria would be to take firm action against terrorists that operate terrorist activities in Syria.
(END VIDEO CLIP)
KOPPEL: State Department spokesman Richard Boucher talking about what Syria can do to persuade the U.S. It favors a negotiated end to Mideast violence. Welcome back. We are ON THE STORY.
You know, what you guys might find surprising is that usually we're talking about a lack of consensus within the Bush administration at large. Well, I found this week a lack of consensus within the State Department as to exactly what these camps were. You had some State Department officials saying that there was U.S. intelligence that showed that there had been construction in recent weeks and days outside this one (UNINTELLIGIBLE) camp, and that they were widening roads.
But another State Department official I spoke with, who has a lot of experience living in Syria, said "Oh, come on." He said, "This is not Afghanistan. We're talking about maybe a couple dozen Palestinian Islamic Jihad militants or Palestinian fronts for the liberation of Palestine who might have lived there. This is not, you know, (UNINTELLIGIBLE), the Philippines, with Abu Sayyaf. We're talking about a very minute group of people."
So even though you heard President Bush sending out a strong signal, there's still a question as to just whether or not this was really terrorist activity that they were trying to thwart.
MALVEAUX: What kind of support is Syria getting with the international community? I know they came up with this U.N. Security Council resolution. Are other countries signing on to it? I know the United States threatened to veto it. Where does that stand?
KOPPEL: Well, it is definitely worrisome factor out there for the Bush administration. They don't want to have to veto this resolution because they believe it's already poisoning the atmosphere at the U.N. for that other resolution we've been talking so much about, the Iraq resolution.
But as things stand right now, we know that there is a lot of support within the Arab world. There is still a question; most believe it will come to a vote. But just when it comes to a vote, that is an outstanding question.
But it is really worrisome for the U.S. They say -- one State Department official said the atmosphere is so bitter right now at the U.N., that is really the backdrop, the sort of behind the scenes story as to why the U.S. may, in fact, not call for a vote on that Iraq resolution. We heard Secretary Powell and others beating the drum on not that long ago, saying it was important to get this broader mandate at the U.N., to get more troops and get more money for Iraq.
WALLACE: Andrea, go back to the Israeli attack on Syria. What are your sources at the State Department and elsewhere saying about the overall implications? Some believe this was an operation by Israel, trying send a message to Syria, especially with massive U.S. military presence in the region, to say, hey, don't mess with us.
Others say it could just sort of lead to a wider and bigger Middle East conflict. What are your sources saying?
KOPPEL: Well, again, there are any number of opinions out there. Some people saying that they don't believe that Iraq -- excuse me, that Israel has a strategy, per se, that this was an expression of frustration, lashing out because they couldn't believe that their steps are so limited now dealing with the Palestinians that they have been for the last three years since the intifada began.
But others say, look, look at Syria's position. The reason that they haven't completely expelled these Palestinian militant groups, Hamas and Palestinian Islamic Jihad, and others, is that this is really about Arab nationalism, about Syria having a card to play over the Golan Heights if negotiations ever get started on that front.
And so as far as what Israel is looking for, most people believe that this was really lashing out at Syria, trying to fire a warning shot across the bough. They make note of the fact that was a Palestinian Islamic Jihad site and not something like the Syrian Ministry of Defense, which really would have been a strike directly at the Syrian government.
MALVEAUX: Andrea, one thing that was significant was what the administration did this week, the fact that they're cutting back on trade with Syria. I mean, that was very important.
KOPPEL: Right. This is the Syrian accountability act. This is something -- we're not really talking about a whole lot of money. It's a couple of hundred million dollars, whereas the U.S. does billions of dollars with trade within the Arab world at large.
But this is significant, as you point out, Suzanne. The White House signaling to Capitol Hill that they will not oppose the Syrian accountability out if it comes to a vote, which could happen in the House side, at least, as soon as next week.
MALVEAUX: From changing minds on the world stage to changing them back home, how does President Bush's team hold on to support spore for its Iraq policy? I'm back ON THE STORY in a moment.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I've constantly expressed my displeasure with leaks, particularly leaks of classified information. And I want to know the truth.
(END VIDEO CLIP)
MALVEAUX: Remember the leak, the disclosure of a CIA operative's identity in what some White House critics claim was a slap at the woman's husband, who had criticized information released by the administration to justify the Iraq war? Welcome back. We are ON THE STORY.
Two things that happened this week that was really of concern to the White House. First of all, the fact that they were gathering all of these documents that the Justice Department asked for, turned it over to White House counsel Alberto Gonzales for the White House to take a look before they sent it over to the Justice Department. Some critics say what is going on here? This isn't necessary.
The other thing of course is the fact that the White House says that is may call executive privilege for some of these documents, saying this is classified, it's too sensitive, we're not going to send it over to the Justice Department. To things that some critics and some Democrats pointing at, saying, look, this only feeds the fire here that there's something that's amiss, something that's going on here.
HAYS: And even so, it seems like we're still in limbo, because this is an investigation. We're sort of in the midst of it. We don't know where it goes yet.
How big of a worry is it for the White House, though, at this point, things that undermine potentially the White House's credibility? Support for the war in Iraq has waned. This is just one more thing, that no matter how it turns out, some people remain convinced that there was guilt at the highest level in the White House.
And again, if you had to have a scale where you're weighing things right now, you don't want anything on the negative side for the White House. This is in no way a positive.
MALVEAUX: There are a lot of negatives at this point, because you've got I think probably about 100 U.S. soldiers killed in action since Bush declared the end of major combat. You've got nearly half of Americans are saying they don't think that it was worth it to go to war. You don't have a U.N. Security Council resolution here.
I mean, obviously, this White House is engaged in a very aggressive public relations campaign, a strategy here to put the president out there, put the vice president out there, Dr. Rice, get them all on message. Essentially, you almost heard the same recycled speech over and over and over this week that, look, we are still trying to convince the American people it was worth it, it was the right thing to do. But, I mean, it's a side that this White House is very worried that it is losing the public relations battle on this. WALLACE: Take us behind the scenes. How long were they planning this public relations offensive? Why now, and how much longer? Are we going to every day hear another administration official giving what you say is almost the same speech?
MALVEAUX: Well, you're going to hear it over and over and over again. I mean, granted, even on Monday, President Bush is giogn to come out, talk to regional media outlets, which is pretty rare, again making this case.
This is something that's been building. And the polls are showing that his popularity is dipping. It is something that they are trying to get a hold of here. And the find that the Democrats have become more embolden.
And then we heard just this past week they're going on this PR offensive. Democratic leader Nancy Pelosi says, yes, it's offensive all right. I mean, you hear Kennedy and others, who are coming out and saying, you know, this is a problem with your policy. No public relations is really going to correct that.
HAYS: Well, you know there really is some good news for the White House lately from an unlikely source, and that's the economy. I'm back ON THE STORY in just a moment.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
BUSH: We're following a clear and consistent economic strategy. And I'm confident about our future.
(END VIDEO CLIP)
HAYS: President Bush giving his own vote of consumer confidence this week. Welcome back. We're ON THE STORY.
An important milestone for the stock market this week. And I'm surprised that the president didn't make a little more of this. I'm sure he will in the weeks ahead.
One-year anniversary since the low point in the stock market. You know, the S&P 500 very broad measure, up nearly 20 percent this year, up more than 30 percent over the past year.
You know, we've been worry and worrying and worrying about the economy, worrying about the stock market. Meanwhile, it's been making all of these really tremendous gains. And of course, the question now is, what happens next?
I had a conversation with a long-time money manager this week, who said he thinks the problem is that, after sustaining losses for like two or three years, a lot of people, a lot of professionals who manage money, are up 10 or 15 percent, and it's only October. And they really wish it were December, they could take their profits, close the books, and move ahead and actually be sure they're going to make some money.
STARR: You know, Kathleen, it seems like we sit here almost every week and one week there's good news, one week there's bad news, this indicator, that indicator, and yet there's still nervousness in the economy. So the question is, where is the sustainability of the good news? Is it going to last?
HAYS: That's what everybody wants to know. And if we could answer that, everybody says, I would be a millionaire. I wouldn't be sitting here talking to you this morning. Of course I would.
But in terms of -- I think, though, the things that people are really watching now is -- (UNINTELLIGIBLE) earnings. You know, basically, just the company's report card. You know, you add up profits, revenue, your cost. And how much did you actually earn? That really drives stock prices.
We're going to get tons of them in the coming week. And here's one of those good news-bad news things. Good news is the companies are supposed to do well. The estimate is for earnings to be up 15 percent, 18 percent in the third quarter.
Tremendous, but the professionals are saying, but have we already priced that in? Have we already gotten our sense of the good news that's here, the good news that's coming? Does the stock market already reflect that?
If it already does, then it's hard for the market to keep going forward from here. Beyond that, we have to look at some of the key indicators of the economy. We've got a couple of those this week, certainly on the jobless claims and then on the chain store sales.
STARR: And the question is, those earnings based on other good news? Are companies doing that because of increased sales, increased productivity?
HAYS: Well, that's the key question. What people want to see in the earnings now is that people are making money not because they're cutting costs, not because they're laying off workers, but because they're actually growing their sales. A lot of the gains so far has come from cost cutting, and that is the issue. Because you can only make your money so long that way.
WALLACE: I hate to be the bearer of bad news, but bad things always happen in October in the stock market. How much worry is there that we could see something bad happen this October as well?
HAYS: Well, you know, I think everybody -- it's not just superstition, but it also a little bit of that, because the great crash of 1929 was in October. In 1987, the crash was in October. And 1989, there was a meltdown in October.
And, in fact -- but the thing that's interesting, September and October have traditionally been the toughest months. But this past September, the one we just finished, wasn't so bad. You know, the stock market was gaining at the beginning of the month, I think it finished the month with some small losses. But still a relatively good performance compared to other ones.
So I think the hopes are running high that this October could break that pattern. But we already saw GE, General Electric, (UNINTELLIGIBLE) kind of a proxy for the stock market in the economy, kind of coming in with earnings OK for the third quarter, but warning for the year that it's gradually ratcheting down its expectations for its year.
And people feel if GE, a big company with so many different kinds of businesses, finance, industrial, entertainment, if it is having very slow growth, what does that mean for other big companies in the aggregate? Can they really do much better than GE?
KOPPEL: Kathleen, I wanted to ask you about one of the big execs, Dennis Kozlowski, who is the poster boy for corporate excess. He was back in court again this week. What can you tell us about that?
HAYS: Well, he's on trial. They start -- of course, the prosecution trying to build their case that Kozlowski and Mark Swartz, his chief financial officer at Tyco, another big conglomerate that was a very high flyer, that they basically paid themselves money, gave themselves loans that were not authored by the board of directors. And the prosecution called three key witnesses, basically lower level people from the legal department, going through some of the documents that would have suggested in fact these were not authorized, that there were aspects of the laws within the company that they should have, for example, gone through the board of directors and didn't.
WALLACE: What's the sense of consumer confidence, though? We always ask you about this, conflicting signals here and there. Any movement o of consumer confidence?
HAYS: Well, let's look at the reading on chain store sales for the month of September. Wal-Mart up six percent. They've been doing like, you know, three percent, two percent. In great times, booming times, they do about 10 percent on a year-over-year basis.
The problem is we don't know if it's because everybody spent their tax credit checks, the weather turned cold so everybody went and got their sweaters, and it's going to kind of taper off now. Or if it's the beginning of a real wave of stronger confidence so that maybe things are really turning the corner. I could talk about that all morning, but we've got to move on.
Coming up, more ON THE STORY, and the president's weekly radio address, where he talks of how Iraq is making progress in its own reconstruction.
(COMMERCIAL BREAK)
HAYS: Thanks to my colleagues, and thank you for watching ON THE STORY. We'll be back next week.
Still ahead, "PEOPLE IN THE NEWS," focusing this week on Kevin Bacon and movie star and Governor-Elect Arnold Schwarzenegger. At 12:00 noon Eastern, 9:00 a.m. Pacific, CNN LIVE SATURDAY. And at 1:00 p.m. Eastern, 10:00 a.m. Pacific, CNN's "IN THE MONEY" with Jack Cafferty, about efforts to improve the U.S. image in the Arab world.
Coming up at the top of the hour a check of the top stories, but first, the president's weekly radio address.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Schwarzenegger's Victory in California; >
Aired October 11, 2003 - 10:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KELLY WALLACE, CNN NATIONAL CORRESPONDENT: Welcome to CNN's ON THE STORY, where our journalists have the inside word on the stories we've covered this week. I'm Kelly Wallace, on the story of the recall, the Schwarzenegger victory and the fallout for California and national politics.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: I'm Barbara Starr, on the story of new tensions inside the Bush administration over who is in charge of Iraq, Don Rumsfeld or Condoleezza Rice.
JOSIE BURKE, CNN SPORTS CORRESPONDENT: I'm Josie Burke in Boston, where for baseball it is fantasy time. The Red Sox and the Cubs just might meet in the World Series. And for basketball, it's reality time. Kobe Bryant is back in uniform and back in court.
ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: I'm Andrea Koppel in Atlanta, on the story of new fears of widening war in the Mideast.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: I'm Suzanne Malveaux, on the story of a White House wrestling with a leak probe and trying to polish up perceptions of what's going on in Iraq.
KATHLEEN HAYS, CNN CORRESPONDENT: And I'm Kathleen Hays, on the story of the latest signs of economic recovery. We'll be talking about all these stories.
Also coming up, the admission by radio talk show host Rush Limbaugh that he's addicted to painkillers and seeking help. New concerns about solid gold retirement deals at the Stock Exchange. And we'll listen to the president's weekly radio address at the end of the hour.
Email us at onthestory@cnn.com. Now, straight to Kelly Wallace and the recall.
(BEGIN VIDEO CLIP)
GOVERNOR-ELECT ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I will do everything I can to live up to that trust. I will not fail you, I will not disappoint you, and I will not let you down.
(END VIDEO CLIP)
WALLACE: The governor-elect in the ending of his latest extravaganza called recall. Now we are now watching the evolving sequel called transition and governing.
There was one clear sign that this campaign had come to an end and we were now focused on governing. At his first news conference, the governor-elect taking questions. It was all policy, not politics. Reporters even asking about his position on the importing of Russian oil.
But one aide put it this way. He said, "Now comes the hard part. Now comes the task of governing." He must work with a Democratically- controlled legislature. He has to deal with big problems and his popularity is on the line.
BURKE: Kelly, during the campaign Schwarzenegger also said that afterward he'd address those allegations of sexual harassment. Any sign that he's going to follow through on that?
WALLACE: Well, Josie, it's interesting. Schwarzenegger was asked about this on Thursday, his second news conference as governor- elect. And he said at the end, that is "old news."
Well, his aides are looking into these allegations, and they say that they want to get the facts to the public, that they are looking into all of these allegations and they want to make sure that the public knows what's true and what's not true.
HAYS: You know, what about the economy? That's what I always have to come back to, because that's really what got them in trouble.
You had Silicon Valley, the whole tech bubble crashing. You had the economy slowing down. They've got a huge budget deficit they have to stop. And the first thing he says he is going to do is repeal the car tax that brings out about $4 billion a year. It just doesn't sound like it adds up.
WALLACE: Well, first, his advisers want to look into this. He says he can do it on his first day in office. Well, the Democratically-controlled legislature disagrees. That's number one.
Number two, what do you do to make up for $4 billion a year when you have an estimated deficit that could be about $8 billion? He doesn't have the answers right now. He says he's looking at the books to see about where the spending cut should come from.
STARR: But that seems to really get to the question, is Arnold Schwarzenegger going to be able to get his administration running quickly, really live up to some of his promises, or is this going to be traditional politics by the time he gets to Sacramento?
WALLACE: Well, it's interesting. First off, in his transition, he's reaching out to the right and the left. Susan Estrich, a campaign manager for Democrat Michael Dukakis of Boston, of Massachusetts, so she is part of this transition team, as well as right-leaning Bill Simon, a former gubernatorial candidate.
So he's trying to bring in both sides, trying to govern from the center. But he faces challenges, and quickly. Normally a transition lasts a couple of months. He could be in office as early as next month. And then he has to present a balanced budget by January. So he has to make decisions and make them very quickly.
KOPPEL: Kelly, you mentioned the Democratically-controlled legislature. Any idea how Governor Schwarzenegger is going to be received?
WALLACE: Well, Andrea, it's very interesting. Right now, everyone is very warm and kind and a lot of smiles. "We're going to work with him." He talked on the phone with the Democratic leaders of the legislature. He also called up Senator Dianne Feinstein and Barbara Boxer, California's two Democratic senators.
So he's saying we're going to work together. He's also sending out a message. He says that the people have spoken, that the landslide victory for Arnold Schwarzenegger shows that people are against the status quo.
Arnold Schwarzenegger thinks that's a message for law makers up in Sacramento. The Democrats say, OK, we'll work with you, but we want to see what plan you're going to put forward.
MALVEAUX: Another person he got a call from was President Bush, of course. And it is rumored, and we think it is true, that he is going to be paying a visit to Schwarzenegger, as well, through his fund-raisers. But what does this mean for President Bush?
I mean, there's a lot of voter discontent. The economy. Does this translate in any way to national politics? Are we going to see a president that's vulnerable?
WALLACE: No surprise, Suzanne, it depends on who you talk to. Democrats say oh, yes, oh yes. This means where California goes, there goes the nation. And the voter discontent in California will lead to voter discontent nationwide, and that spells trouble for George W. Bush.
Republicans disagree. Many think this was an isolated circumstance. Gray Davis, the governor of California, his popularity was at an all-time low rally for a Democratic leader. People disliked him. Arnold Schwarzenegger, a celebrity, incredible name recognition.
Again, we don't know, but most voters said they were voting against the status quo. They were angry and frustrated. And it really does remain to be seen if this could translate into a national trend next year.
BURKE: Kelly, what role did Maria Shriver, the governor-elect's wife, play in getting him elected, and what's her role now?
WALLACE: Well, she played a very strong role, Josie. And Schwarzenegger even alluded to that when he was making his victory speech. He right away introduced Maria and he sort of held up her hand and said, "I know a received a lot of votes because of you."
She was out there towards the end quite a bit talking a lot on behalf of her husband. And it was especially important after these allegations of sexual misconduct against Schwarzenegger. And there she was at the podium saying, I know this man, he's an A+ human being, he respects women, he is a proponent for women's rights. Many believe that appealed to Democrats and appealed women voters to say, I'm going to trust this guy and give him my vote.
KOPPEL: You know, Kelly, one of the things that surprised me wasn't obviously Maria Shriver, being the wife, was there, but that Maria's mother, a staunch Democrat, was there campaigning along as well. Any idea why she came on?
WALLACE: Well, certainly some analysts say in the Kennedy family, you know, blood might be stronger than politics. This, of course, is her son-in-law, even though she is a strong Kennedy family Democrat.
You had the entire Shriver family there, Andrea, up on the stage the night of Schwarzenegger's victory. She was also out there, though, the day Schwarzenegger had an education summit. And she's going to be one of his top education advisers.
HAYS: I just have to sneak in a quick question about the Hispanic vote, because I think the (UNINTELLIGIBLE) this election is, it's clear that Hispanic voters do not vote on mass Democrat -- many voted for Schwarzenegger.
WALLACE: They do. I don't have the exact numbers. I think he got something like 40-plus percent. Bustamante, the Democratic lieutenant governor, Hispanic, received a little more than 50 percent. But clearly it is not a block vote, it's a swing vote. And that should send a message also to Democratic and Republican candidates next year.
STARR: Well, from the aftershocks of recall to how the Iraq story continues to put pressure on the Bush administration, especially Defense Secretary Donald Rumsfeld. I'm back on that story in a moment.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
DONALD RUMSFELD, SECRETARY OF DEFENSE: I guess it's because bad news is news. With 24-hour news in our country, it isn't like it's one problem. It's like that it's 24 problems. One every hour, even though it's the same one.
(END VIDEO CLIP)
STARR: Well, Donald Rumsfeld living up to the fine tradition of defense secretaries, doing double duty as a media critic. Welcome back. We're ON THE STORY.
And that's really one of Don Rumsfeld's themes nowadays. Every speech he makes he makes sure that he gives his opinion of news coverage of the war in Iraq, and he is resolutely unhappy with the news media. He says that the news media is simply covering too much of the bad news, not enough of the good news, and that Americans are getting a misperception of what's going on in Iraq, that Americans are hearing only about the problems.
Of course, some people in the news media do have a different opinion, feel that a broad range of stories are being covered out of the many journalists that are risking their lives working in Iraq and Baghdad, and in other cities. But clearly, the administration this week felt a lot of political pressure on the Iraq question as they tried to get a handle on the story, as they tried to control the message. Whether they're going to be able to do that over the long run is really open to question at this point, I think.
KOPPEL: Barbara, another sign of Secretary Rumsfeld's displeasure, his interview that he gave to "The Financial Times," in which he expressed displeasure with Condoleezza Rice for seeming -- at least he says -- to go behind his back, or at least pass memos around, brief "The New York Times" on the changes in the chain of command on Iraq and Afghanistan. How surprising was it to hear the secretary mouth off like that?
STARR: Well, what was surprising, indeed -- you're quite right, Andrea -- is how much of this did spill over into the news media coverage? The memo that now Condoleezza Rice is in charge of Iraq planning policy on the big picture, Rumsfeld becoming very publicly unhappy about that. Scott McLellan, the White House spokesman, coming out and saying, OK, Rumsfeld's in charge.
Rumsfeld getting so annoyed with the news media that he canceled a planned news conference at the NATO ministerial in Colorado Springs this week because he said he had better things to do than answer questions about this again. So a lot of pressure.
MALVEAUX: Well, one thing that happened, too, is that White House aides say, yes, Rumsfeld was notified about this. But we definitely saw Scott McLellan backtracking. I mean, at one point saying, well, he was as involved as we said he was, as an integral part of the process. And clearly, the White House was just furious, the fact that this thing just blew up as it had.
I mean, yes, there's always been kind of that push-pull between Powell and Rumsfeld. But for this to just come out in the open as it had...
(CROSSTALK)
STARR: (UNINTELLIGIBLE). It (UNINTELLIGIBLE) out into public open warfare. That Don Rumsfeld had to come out and even talk about it or wanted to talk about it is not something that the political operatives want to see happen.
WALLACE: So what's going on behind the scenes? Are we looking now to see the Defense Department really going up against the White House? And is going to be that Defense Secretary Donald Rumsfeld is going to be unhappy that he has to now potentially somewhat report to Condoleezza Rice, the president's... STARR: Well, Don Rumsfeld doesn't like to report to anybody. Don Rumsfeld likes to do his own thing. There's no question about that.
What we will probably see now is a test of the system. We will see Don Rumsfeld, Condoleezza Rice, I think Secretary of State Colin Powell all push, test the system, see where the decision-making really is, continue to go their own way, and see where the NSE pushes back. Where will Condoleezza Rice make her stand and push back against the things that the Pentagon or State Department wants to do in Iraq remains to be seen.
BURKE: Just talking about Condoleezza Rice's career, is this really, Barbara, a defining moment for her, expanding into a role that maybe she hasn't been used to before?
STARR: Well, she is one of -- I think Kelly and Suzanne, from their experience at the White House, know that this woman is one of the most brilliant operatives in the Bush administration. They would know that better than me. But I don't know.
I mean, Suzanne, do you hear a lot of talk at the White House now, people maneuvering for what their next job in a second Bush administration might be?
MALVEAUX: Well, there's big rumors that President Bush would ask Dr. Rice to be his secretary of state. That's something that's been floating around for some time. But this is not an unusual position for Dr. Rice to be in, the fact that she's got to deal with two big elephants in the room, Powell and Rumsfeld, and try to make peace here.
One of the things, however, is that -- what I thought was interesting is that Congress made it very clear, yes, she has power, but it's limited authority. They said that anybody who is going to report to them has to have confirmation by the Senate essentially if it's accountability. If you're at the White House, we don't have to call you to testify.
STARR: That's the real thing. Don Rumsfeld can't run Iraq any more like it's just a military problem. That actually is the crux of the matter, I think.
WALLACE: It's become a political issue.
STARR: It's money and politics; how much it's costing and the political price to the president.
HAYS: So where does that take us? We talk about the personalities and who is going to do this and -- I think the American people are sitting back and saying fine, just move ahead.
Now, you had the admission that in Iraq now we're probably not going to get any troops to help. That is another thing on the plate. So now what happens? I think a lot of people say Rumsfeld, Condoleezza Rice, I don't care, but just get us out of this mess. STARR: That, I think, is going to be the key issue, because it's American public opinion. The polls, the political price to the president, where the Pentagon starts to feel the pressure, the State Department and the NSC. And it's not clear that there's any way separate other than the way ahead that the military and the Pentagon have laid out just to continue ahead.
They have no option. Nobody's about to turn around and leave. So they press on.
KOPPEL: But I mean the fact of the matter is, Barbara, is we know that Turkey this week, that their parliament did OK up to 10,000 troops. So there's a question as to whether or not the Iraqi Governing Council, the nominal authority there under the U.S. and Great Britain, would OK it.
I mean, just getting back to the whole is it that big of a deal that Condoleezza Rice would be put in charge, as Rumsfeld said himself, she's the national security adviser. That's the way it's supposed to be.
STARR: Well, it is. And I think that the question that the White House is still going to have to struggle with, that the Pentagon is certainly struggling with, is how many more weeks, how many more months of seeing U.S. soldiers attacked, U.S. soldiers killed and the American public's response to that. If the American public continues to not have a positive response to the operation in Iraq, the White House could feel pressure to change.
MALVEAUX: And also, the big deal, too, is the fact that the White House has acknowledged they want more voices. They want more of a direct role in authority in dealing with the reconstruction of Iraq. That they're just not going to leave it in Rumsfeld's hands.
HAYS: And they're worryried about 2004, the election.
WALLACE: And you have all these soldiers who are home for two weeks going back, and what trouble that is for their families as they watch their loved ones going back again.
BURKE: Kelly, earlier in the week, when there was a lot of heat on Rumsfeld, he suggested to the news media that they focus on something important, not the memo. The Chicago Cubs in the playoffs. Well, we're going to take him up on that when ON THE STORY comes right back.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I'm speechless, man. The heart, the heart. I'm just speechless. It's awesome.
Go Red Sox!
(END VIDEO CLIP) BURKE: They're still screaming in October in Boston for their team. And remarkably, they're also still screaming for the Cubs in Chicago. A lot of people crossing their fingers, hoping for an historic World Series between the Red Sox and the Cubs.
And one disclaimer: I did grow up here in Boston, so I know a lot about the fan base here. Two quick observations coming home. One, there's a lot of optimism, and that's something we're definitely not used to here. And the other is there really seems to be a connection between the players on this team and the fans of this team, and you can't really put a barrier between the two because there's so much history there. But it's a little different that there's such affection between the two groups.
WALLACE: Josie, I'm going to get myself in trouble. I'm a New Yorker. But I think that...
BURKE: That's OK.
WALLACE: ... a Cub-Red Sox series would be amazing. The question is, could the curse affecting both teams actually be broken this year?
BURKE: That's a lot of -- that's something that a lot of people are wondering. And there's even the question, would it really be good for these two franchises if there was a guarantee that one of them would actually win?
You look at the fact that they are so identified by the fact that they're always losing. For the Cubs, they're the loveable losers because they've never come close, really, if you go back for the past 95 years. Whereas for the Red Sox, it's the heartbreak over and over and over again. Some people, if it does actually come to fruition, might end up in therapy trying to overcome it.
HAYS: Josie, I just want to ask you kind of a semi-serious question about the series. In terms of vetting the two teams, you know I think what's interesting about the Marlins, apparently a younger team, they're not the highest players in baseball, which I kind of like, because the Yankees, it's money, money, money. That's why the people who aren't Yankees fans kind of resent them.
Red Sox are known for kind of choking towards the end of the series. The Yankees always seem to pull it out. What are the pros saying about the match-up at this point?
BURKE: Well, there are a lot of people who think that the most logical match-up, if you look at it on paper, is the fact that it will end up being the Yankees and the Marlins. And what would be interesting about that series is the fact that there would be a low budget team against the highest budget team.
The Marlins are a really interesting case because they've only been in existence a decade. Now, they've already won a World Series title, and after that, that team was just decimated. They had what they call a fire sale, got rid of everybody. And here they are back again.
So I think the historians and people who have a sense of history are looking and pointing to a Red Sox-Cubs series. But there are also people who know baseball who would not be surprised in the least to see in the end it comes down to the Marlins and the Yankees.
KOPPEL: Josie, we know you've been wracking up the frequent flier miles this week next to Kelly Wallace. You were in Hawaii earlier, and you heard the Kobe Bryant press conference at the L.A. Lakers' training camp there. What did you hear Kobe say, if anything, that surprised you?
BURKE: The one thing that just stuck out -- and I think for everyone who was there, it had to be -- he was asked point black, "Are you scared?" And he answered point blank, "I'm terrified."
I think a lot of people were wondering how he was holding up, how he was handling this, if he understood the consequences and what was really at stake. And just from those words "I'm terrified," you got the sense that he does realize he's in for the fight of his life and for his life.
(CROSSTALK)
STARR: The fight of his life. It was interesting this week. At the preliminary hearing there was every indication that the defense is going to play hardball on this one. Take no prisoners, if you will.
BURKE: It's interesting. There are a lot of people who said that both the prosecution and the defense scored points. But the fact that the defense scored any in a preliminary hearing is really something.
The damaging thing, if there's anything for Kobe Bryant, that came out of this, is that there are words and images, because there was a detective who was telling the side of the accuser that are going to stick with people when they are watching him on the basketball court. Hands around her neck over a chair, turned her around, things like that. Those are words that are going to stick with you no matter what the outcome is.
WALLACE: Josie, one question. You've been talking with the management staff at the L.A. Lakers. Do they have any sense that if this hearing continues that is might be better for the team, for morale, for everything if Kobe Bryant doesn't go ahead and play a full season with the L.A. Lakers?
BURKE: Well, publicly, no one is coming out and saying that, that they don't think it would be good for the team or for Kobe for him to be out there. But you get the sense that privately there are feelings among management and among some of the players that maybe this is a distraction that neither the team nor Kobe needs right now.
You also get the sense from listening to Bryant, from listening to Phil Jackson, the coach, that this isn't set in stone. That nobody believes he will definitely play the entire season. They understand that this is a situation where everyone is going to be very flexible. They're going to have to be.
MALVEAUX: And Josie, last week we were talking about Rush Limbaugh as the commentator. And this week, clearly, a very bad week. And now this admission on drug use?
BURKE: Really a bombshell, because at the same time that he was resigning his post last week at ESPN because of his controversial comments, there were these allegations. There was a big story in the "National Eninquirer" about the alleged prescription painkiller abuse of Rush Limbaugh. And then he comes out this week -- and it was really a bombshell -- talking to his listeners on the radio, saying, I am addicted, and that he's going into rehab.
A lot of interesting things here. One, Barbara, you were talking about it earlier, the fact that Rush Limbaugh had an ear problem a couple of years ago. He had surgery for it. Could this have been linked to the abuse of the painkillers? There's been a medical study perhaps linking those two things. And did it have any affect on anything that he said over the past couple of weeks or years?
WALLACE: Well, it is interesting. We're in Washington, and one thing that happens when someone is in trouble or in a controversy, people start digging up what people have said in the past. And you are seeing comments that Rush Limbaugh made in the past when it comes to addiction and not showing tolerance for people who are addicts, saying, "Just say no. Just say no."
The question is, how does this present a problem for him now as he's admitting an addiction of his own?
HAYS: In a broad way, this is one more way that he pendulum has swung away from -- remember a few years ago, when the arch conservatives kind of seemed to rule the world for a while, so much frustration on the liberal side. They're still trying to put together a national radio talk show with a liberal host. It just seems -- it's interesting how the pendulum swings due to things that people can't even anticipate.
KOPPEL: Well, we want to thank Josie for joining us. I know you've got a busy day ahead of you. What are you going to be looking for ON THE STORY today?
BURKE: Well, like everyone else, I'm looking for possibly history to be made here. It's an incredible pitching match-up, Pedro Martinez of the Red Sox, Roger Clemens of the Yankees, game three of the (UNINTELLIGIBLE). And this could be a game, Andrea, that people talk about for years and years and years to come.
KOPPEL: And that's get under way at what time?
BURKE: Four o'clock Eastern.
KOPPEL: Had to think about that. All right. Well, I'm sure a lot of folks will be tuning into that.
But right now, we're moving from sports to the hard front game of diplomacy, where the U.S. seems ready to back down in the United Nations and regarding that Iraq resolution. We are back in a moment ON THE STORY, and with a check on what's making headlines at this hour.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: What would help Syria would be to take firm action against terrorists that operate terrorist activities in Syria.
(END VIDEO CLIP)
KOPPEL: State Department spokesman Richard Boucher talking about what Syria can do to persuade the U.S. It favors a negotiated end to Mideast violence. Welcome back. We are ON THE STORY.
You know, what you guys might find surprising is that usually we're talking about a lack of consensus within the Bush administration at large. Well, I found this week a lack of consensus within the State Department as to exactly what these camps were. You had some State Department officials saying that there was U.S. intelligence that showed that there had been construction in recent weeks and days outside this one (UNINTELLIGIBLE) camp, and that they were widening roads.
But another State Department official I spoke with, who has a lot of experience living in Syria, said "Oh, come on." He said, "This is not Afghanistan. We're talking about maybe a couple dozen Palestinian Islamic Jihad militants or Palestinian fronts for the liberation of Palestine who might have lived there. This is not, you know, (UNINTELLIGIBLE), the Philippines, with Abu Sayyaf. We're talking about a very minute group of people."
So even though you heard President Bush sending out a strong signal, there's still a question as to just whether or not this was really terrorist activity that they were trying to thwart.
MALVEAUX: What kind of support is Syria getting with the international community? I know they came up with this U.N. Security Council resolution. Are other countries signing on to it? I know the United States threatened to veto it. Where does that stand?
KOPPEL: Well, it is definitely worrisome factor out there for the Bush administration. They don't want to have to veto this resolution because they believe it's already poisoning the atmosphere at the U.N. for that other resolution we've been talking so much about, the Iraq resolution.
But as things stand right now, we know that there is a lot of support within the Arab world. There is still a question; most believe it will come to a vote. But just when it comes to a vote, that is an outstanding question.
But it is really worrisome for the U.S. They say -- one State Department official said the atmosphere is so bitter right now at the U.N., that is really the backdrop, the sort of behind the scenes story as to why the U.S. may, in fact, not call for a vote on that Iraq resolution. We heard Secretary Powell and others beating the drum on not that long ago, saying it was important to get this broader mandate at the U.N., to get more troops and get more money for Iraq.
WALLACE: Andrea, go back to the Israeli attack on Syria. What are your sources at the State Department and elsewhere saying about the overall implications? Some believe this was an operation by Israel, trying send a message to Syria, especially with massive U.S. military presence in the region, to say, hey, don't mess with us.
Others say it could just sort of lead to a wider and bigger Middle East conflict. What are your sources saying?
KOPPEL: Well, again, there are any number of opinions out there. Some people saying that they don't believe that Iraq -- excuse me, that Israel has a strategy, per se, that this was an expression of frustration, lashing out because they couldn't believe that their steps are so limited now dealing with the Palestinians that they have been for the last three years since the intifada began.
But others say, look, look at Syria's position. The reason that they haven't completely expelled these Palestinian militant groups, Hamas and Palestinian Islamic Jihad, and others, is that this is really about Arab nationalism, about Syria having a card to play over the Golan Heights if negotiations ever get started on that front.
And so as far as what Israel is looking for, most people believe that this was really lashing out at Syria, trying to fire a warning shot across the bough. They make note of the fact that was a Palestinian Islamic Jihad site and not something like the Syrian Ministry of Defense, which really would have been a strike directly at the Syrian government.
MALVEAUX: Andrea, one thing that was significant was what the administration did this week, the fact that they're cutting back on trade with Syria. I mean, that was very important.
KOPPEL: Right. This is the Syrian accountability act. This is something -- we're not really talking about a whole lot of money. It's a couple of hundred million dollars, whereas the U.S. does billions of dollars with trade within the Arab world at large.
But this is significant, as you point out, Suzanne. The White House signaling to Capitol Hill that they will not oppose the Syrian accountability out if it comes to a vote, which could happen in the House side, at least, as soon as next week.
MALVEAUX: From changing minds on the world stage to changing them back home, how does President Bush's team hold on to support spore for its Iraq policy? I'm back ON THE STORY in a moment.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I've constantly expressed my displeasure with leaks, particularly leaks of classified information. And I want to know the truth.
(END VIDEO CLIP)
MALVEAUX: Remember the leak, the disclosure of a CIA operative's identity in what some White House critics claim was a slap at the woman's husband, who had criticized information released by the administration to justify the Iraq war? Welcome back. We are ON THE STORY.
Two things that happened this week that was really of concern to the White House. First of all, the fact that they were gathering all of these documents that the Justice Department asked for, turned it over to White House counsel Alberto Gonzales for the White House to take a look before they sent it over to the Justice Department. Some critics say what is going on here? This isn't necessary.
The other thing of course is the fact that the White House says that is may call executive privilege for some of these documents, saying this is classified, it's too sensitive, we're not going to send it over to the Justice Department. To things that some critics and some Democrats pointing at, saying, look, this only feeds the fire here that there's something that's amiss, something that's going on here.
HAYS: And even so, it seems like we're still in limbo, because this is an investigation. We're sort of in the midst of it. We don't know where it goes yet.
How big of a worry is it for the White House, though, at this point, things that undermine potentially the White House's credibility? Support for the war in Iraq has waned. This is just one more thing, that no matter how it turns out, some people remain convinced that there was guilt at the highest level in the White House.
And again, if you had to have a scale where you're weighing things right now, you don't want anything on the negative side for the White House. This is in no way a positive.
MALVEAUX: There are a lot of negatives at this point, because you've got I think probably about 100 U.S. soldiers killed in action since Bush declared the end of major combat. You've got nearly half of Americans are saying they don't think that it was worth it to go to war. You don't have a U.N. Security Council resolution here.
I mean, obviously, this White House is engaged in a very aggressive public relations campaign, a strategy here to put the president out there, put the vice president out there, Dr. Rice, get them all on message. Essentially, you almost heard the same recycled speech over and over and over this week that, look, we are still trying to convince the American people it was worth it, it was the right thing to do. But, I mean, it's a side that this White House is very worried that it is losing the public relations battle on this. WALLACE: Take us behind the scenes. How long were they planning this public relations offensive? Why now, and how much longer? Are we going to every day hear another administration official giving what you say is almost the same speech?
MALVEAUX: Well, you're going to hear it over and over and over again. I mean, granted, even on Monday, President Bush is giogn to come out, talk to regional media outlets, which is pretty rare, again making this case.
This is something that's been building. And the polls are showing that his popularity is dipping. It is something that they are trying to get a hold of here. And the find that the Democrats have become more embolden.
And then we heard just this past week they're going on this PR offensive. Democratic leader Nancy Pelosi says, yes, it's offensive all right. I mean, you hear Kennedy and others, who are coming out and saying, you know, this is a problem with your policy. No public relations is really going to correct that.
HAYS: Well, you know there really is some good news for the White House lately from an unlikely source, and that's the economy. I'm back ON THE STORY in just a moment.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
BUSH: We're following a clear and consistent economic strategy. And I'm confident about our future.
(END VIDEO CLIP)
HAYS: President Bush giving his own vote of consumer confidence this week. Welcome back. We're ON THE STORY.
An important milestone for the stock market this week. And I'm surprised that the president didn't make a little more of this. I'm sure he will in the weeks ahead.
One-year anniversary since the low point in the stock market. You know, the S&P 500 very broad measure, up nearly 20 percent this year, up more than 30 percent over the past year.
You know, we've been worry and worrying and worrying about the economy, worrying about the stock market. Meanwhile, it's been making all of these really tremendous gains. And of course, the question now is, what happens next?
I had a conversation with a long-time money manager this week, who said he thinks the problem is that, after sustaining losses for like two or three years, a lot of people, a lot of professionals who manage money, are up 10 or 15 percent, and it's only October. And they really wish it were December, they could take their profits, close the books, and move ahead and actually be sure they're going to make some money.
STARR: You know, Kathleen, it seems like we sit here almost every week and one week there's good news, one week there's bad news, this indicator, that indicator, and yet there's still nervousness in the economy. So the question is, where is the sustainability of the good news? Is it going to last?
HAYS: That's what everybody wants to know. And if we could answer that, everybody says, I would be a millionaire. I wouldn't be sitting here talking to you this morning. Of course I would.
But in terms of -- I think, though, the things that people are really watching now is -- (UNINTELLIGIBLE) earnings. You know, basically, just the company's report card. You know, you add up profits, revenue, your cost. And how much did you actually earn? That really drives stock prices.
We're going to get tons of them in the coming week. And here's one of those good news-bad news things. Good news is the companies are supposed to do well. The estimate is for earnings to be up 15 percent, 18 percent in the third quarter.
Tremendous, but the professionals are saying, but have we already priced that in? Have we already gotten our sense of the good news that's here, the good news that's coming? Does the stock market already reflect that?
If it already does, then it's hard for the market to keep going forward from here. Beyond that, we have to look at some of the key indicators of the economy. We've got a couple of those this week, certainly on the jobless claims and then on the chain store sales.
STARR: And the question is, those earnings based on other good news? Are companies doing that because of increased sales, increased productivity?
HAYS: Well, that's the key question. What people want to see in the earnings now is that people are making money not because they're cutting costs, not because they're laying off workers, but because they're actually growing their sales. A lot of the gains so far has come from cost cutting, and that is the issue. Because you can only make your money so long that way.
WALLACE: I hate to be the bearer of bad news, but bad things always happen in October in the stock market. How much worry is there that we could see something bad happen this October as well?
HAYS: Well, you know, I think everybody -- it's not just superstition, but it also a little bit of that, because the great crash of 1929 was in October. In 1987, the crash was in October. And 1989, there was a meltdown in October.
And, in fact -- but the thing that's interesting, September and October have traditionally been the toughest months. But this past September, the one we just finished, wasn't so bad. You know, the stock market was gaining at the beginning of the month, I think it finished the month with some small losses. But still a relatively good performance compared to other ones.
So I think the hopes are running high that this October could break that pattern. But we already saw GE, General Electric, (UNINTELLIGIBLE) kind of a proxy for the stock market in the economy, kind of coming in with earnings OK for the third quarter, but warning for the year that it's gradually ratcheting down its expectations for its year.
And people feel if GE, a big company with so many different kinds of businesses, finance, industrial, entertainment, if it is having very slow growth, what does that mean for other big companies in the aggregate? Can they really do much better than GE?
KOPPEL: Kathleen, I wanted to ask you about one of the big execs, Dennis Kozlowski, who is the poster boy for corporate excess. He was back in court again this week. What can you tell us about that?
HAYS: Well, he's on trial. They start -- of course, the prosecution trying to build their case that Kozlowski and Mark Swartz, his chief financial officer at Tyco, another big conglomerate that was a very high flyer, that they basically paid themselves money, gave themselves loans that were not authored by the board of directors. And the prosecution called three key witnesses, basically lower level people from the legal department, going through some of the documents that would have suggested in fact these were not authorized, that there were aspects of the laws within the company that they should have, for example, gone through the board of directors and didn't.
WALLACE: What's the sense of consumer confidence, though? We always ask you about this, conflicting signals here and there. Any movement o of consumer confidence?
HAYS: Well, let's look at the reading on chain store sales for the month of September. Wal-Mart up six percent. They've been doing like, you know, three percent, two percent. In great times, booming times, they do about 10 percent on a year-over-year basis.
The problem is we don't know if it's because everybody spent their tax credit checks, the weather turned cold so everybody went and got their sweaters, and it's going to kind of taper off now. Or if it's the beginning of a real wave of stronger confidence so that maybe things are really turning the corner. I could talk about that all morning, but we've got to move on.
Coming up, more ON THE STORY, and the president's weekly radio address, where he talks of how Iraq is making progress in its own reconstruction.
(COMMERCIAL BREAK)
HAYS: Thanks to my colleagues, and thank you for watching ON THE STORY. We'll be back next week.
Still ahead, "PEOPLE IN THE NEWS," focusing this week on Kevin Bacon and movie star and Governor-Elect Arnold Schwarzenegger. At 12:00 noon Eastern, 9:00 a.m. Pacific, CNN LIVE SATURDAY. And at 1:00 p.m. Eastern, 10:00 a.m. Pacific, CNN's "IN THE MONEY" with Jack Cafferty, about efforts to improve the U.S. image in the Arab world.
Coming up at the top of the hour a check of the top stories, but first, the president's weekly radio address.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Schwarzenegger's Victory in California; >
