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Capital Gang

Bush Tax Cut Plan; Hearings on the Marc Rich Pardon; A Tribute to Ronald Reagan and the Israeli Elections

Aired February 10, 2001 - 7:30 p.m. ET


ANNOUNCER: Live from Washington, THE CAPITAL GANG.

MARK SHIELDS, HOST: Welcome to a one-hour CAPITAL GANG. I'm Mark Shields with the full CAPITAL GANG. That is Al Hunt, Robert Novak, Kate O'Beirne and Margaret Carlson.

President Bush formally unveiled his across-the-board tax cut.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We need tax relief now. In fact, we need tax relief yesterday. And I will work with Congress to provide it.



SEN. TRENT LOTT (R-MS), MAJORITY LEADER: We don't have much in here for small businesses. We don't have the very popular IRA and 401(k) pension reforms that we had last year. And, of course, the one that I have talked the most about is the capital gains rate cut.


SHIELDS: Democratic leaders attacked the tax plan as tilted to the rich.


SEN. TOM DASCHLE (D-SD), MINORITY LEADER: If you make over $300,000 a year, this tax cut means you get to buy a new Lexus. If you make $50,000 a year, you get to buy a muffler on your used car.



PAUL O'NEILL, TREASURY SECRETARY: What you saw with the Lexus analogy is so false. To me it demonstrates a detachment of some of our political spokesmen from what people do in their real life. Higher income people are going to reinvest the money in the economy, they don't need another car. (END VIDEO CLIP)

SHIELDS: A CNN-"Time" poll of adult Americans this week showed support for the Bush tax plan, 49% to 36%. Kate O'Beirne, who is winning the political war on taxes?

KATE O'BEIRNE, "THE NATIONAL REVIEW": I guess it's a safe bet that there are no Lexus dealerships in South Dakota. But you know was used to be in South Dakota. In South Dakota there used to be Congressman Tom Daschle who voted to lower the top rate from 70 to 28 percent, apparently agreeing with Ronald Reagan that 28 percent was a fair top rate.

Now that George Bush is saying no one should pay more than a third, he's become a class warrior. That was my preface, now is my answer to the question.

SHIELDS: I was going to say.


O'BEIRNE: Thank you, Al. George Bush is winning. so far this tax cut war. He's won over Alan Greenspan. His case has become stronger because the economy is weaker and the surplus is bigger than when he first started talking about it on the campaign trail, and Democrats are clearly moving in his direction.

They're now up, endorsing an $800 billion tax cut. I've talked to House conservatives who are pleasantly surprised that the more liberal members of the House Republicans are rather pleasantly -- they're pleasantly surprised -- rather, they're comfortable with the cut in the top rates, and some liberal Republicans in the Senate are sort of afraid or getting nervous that they might lose some leverage if enough Democrats in the Senate begin supporting this tax cut plan, like Senator Tim Johnson, Senator Daschle's colleague from South Dakota, who unlike Senator Daschle is up for reelection in 2002 in a state that went for George Bush overwhelmingly.

SHIELDS: Al Hunt, do you think that all the momentum is behind George Bush and should it be?

AL HUNT, "THE WALL STREET JOURNAL": Well, the answer to the first is yes; the answer to the second is no. It is because they have succeeded so far in this patently false claim that this a tax cut that's tilted to the middle and working class. It's not, Mark.

The top 1 percent of income earners in the U.S. today pay about 20 percent of all federal taxes. They get 36 percent of the benefits in this bill. Conversely, the working poor. The working poor, now, I'm talking about, get virtually nothing from this bill.

They're people who pay payroll taxes but they get nothing because first of all, it does nothing about payroll taxes, even though 74 percent of Americans pay more payroll taxes than income taxes. It does nothing about the earned income tax credit for working Americans, and on the refundable -- or on the tax credit, the child tax credit, it gives it to people making $150- to $200,000 a year for the first time. But because it doesn't make it refundable, if you make 15 to 20 grand you get nothing.

This is a reverse Robin Hood, Mark.

SHIELDS: Reverse Robin Hood, Bob Novak?

ROBERT NOVAK, "THE CHICAGO SUN-TIMES": You know, I'm glad I got that lesson in Marxist dialectics. You know, I get it every Saturday night.

HUNT: It took two seconds, Mark.

NOVAK: As a matter of fact, this thing is over, kids, and you better realize it. There's going to be a tax cut. All that stuff during the campaign that the American people didn't want tax cuts. The Democrat politicians didn't believe. Maybe some members of THE CAPITAL GANG believed that nonsense, but the American people want this. There's going to be a tax cut.

The question is what kind and I would say that this tax cut is really quite modest and I think it, as Trent Lott said, I think it has to be improved. And I would agree with Al on one thing. Al's figures are all skewed, but I would agree on one thing with you, Al. I would say I would like to see a cut in the payroll tax, and stop this lock box nonsense about the Social Security fund.

I think it's going to be very difficult because both parties have talked themselves into it, but the payroll tax, I've always said this, and I've been consistent, is too large, and there should be a cut in that as well as the income tax.

SHIELDS: Who's right: Daddy Warbucks Novak or the Marxist Manifesto Hunt?

HUNT: "The Wall Streeet Journal" Marxist.


MARGARET CARLSON, "TIME" MAGAZINE: You're both right. You had one point which I'm surprised to hear which is there should be a cut in the payroll tax and...

NOVAK: If you had been listening to me you wouldn't be surprised.

CARLSON: I try not to listen too much. That would help the people who aren't going to be helped by this tax cut. And all week long there was kabuki theater in the White House and other places by George Bush to try to make it seem like the soccer moms and waitress mom were going to benefit from this when they're really not.

NOVAK: They are, though.

CARLSON: But very modestly...

NOVAK: Sixteen-hundred dollars.


CARLSON: .. compared to say $16,000, for instance for someone like you.

HUNT: Oh, no. Far more than that.


CARLSON: See, I don't even have the numbers right, but...

O'BEIRNE: Millions of working families will be taken completely off the tax rolls.

CARLSON: But I thought the Publisher's Clearing House, Ed McMahon was going come out because I think the working class has about as much chance as getting help under this bill without the payroll tax cut as we do winning the sweepstakes.

NOVAK: If I could introduce something new into this argument, which is needed, the silliest thing that I have heard is the thing that some of the liberal Republicans are putting forth that Dr. Greenspan, the chairman of the Federal Reserve Board, agrees that if the surplus diminished, you should have an automatic trigger that would increase taxes.

Have we not learned anything in 70 years? Even the liberal Keynesians (ph) know if the surplus is getting down that means the economy is declining. The worst thing you want to do is increase taxes at a time of declining economy.

CARLSON: You want to slow the tax cut. One of the things that wasn't heard in Alan Greenspan's testimony was that surpluses should be real and there should be triggers that reduce this in the out years if the surplus doesn't materialize.

SHIELDS: Let's just get one thing straight, the top 1 percent are the focus of this. I mean, very blunt about it, 40 percent of the cut goes to the people who pay 20 percent of the federal taxes. Now, we can make a big argument about the 1 percent...

NOVAK: More than 40 percent.

SHIELDS: ... more than 40 percent of the cut goes to them?

NOVAK: More than 40 -- they pay more than 20 percent. They pay more than 20 percent.


SHIELDS: No, because when you say federal taxes. Bob, you have to include payroll taxes, and they don't pay them. I mean, they pay them up to $76,000.

NOVAK: You can't include the payroll tax in that category. SHIELDS: Can I just make this point?

NOVAK: Yes, sorry.

SHIELDS: And the question is, and the Democrats have to make their argument, on what is the common good? That $22,000 single mom with the two kids, I'm dying for Mr. Bush or Mr. Cheney to explain to her why her kids can't go to a safe, clean, superior school with good teachers. We can't afford that? We afford that?

No, because we make a decision to take all this money and instead of building better schools, instead of providing 45 million Americans with health care, we're going to give it back to these people whose income has gone up 10 times as fast as the lower 90 percent.


O'BEIRNE: You ask that mother with two children who gets a child tax credit doubled, she's probably off the tax rolls. You want Washington to spend this money on her behalf? Ask her. Or would you rather the money in her own pocket. I'll tell you right now, if you want, most people know it's not the rich against the rest of this, like the Dems are trying to set this up. It's the government against all of us.


HUNT: Let me tell Kate why she's wrong about that woman, and Bob said my figures were false. Twenty-six thousand dollars a year, you know what you get is -- a couple with two kids, they get a grand total of tax cut a year of $20. That's what they get, Kate. They don't get a $1,000.

O'BEIRNE: Child tax credit...

HUNT: I'm sorry, they don't get -- they get in $20 and they continue to pay $2,689 of payroll taxes, so therefore their tax cut is less than one percent. That's people.

The other point is if you want to fund that, if you want to fund the payroll taxes, it's very easy. Don't eliminate the estate tax, which goes to the only 2 percent wealthiest Americans and would have terrible consequences. I would point out that John DiIulio, who runs President Bush's faith-based initiative, said yesterday that ending the estate, tax this is President Bush's appointee, would be terrible for charitable contributions, churches, homeless shelter and universities would get in less.

NOVAK: I think he's absolutely wrong, because I think people give contributions because they feel -- I know a liberal can't understand that.

HUNT: But John DiIulio has worked in this area.

(CROSSTALK) NOVAK: Can I please? I let you talk. Liberals and John DiIulio doesn't understand that people give out of the goodness of their heart and their intentions and their will and not because they're going to get tax deductions. That's hard for a liberal to understand. But let me frame what this debate is about. This is about redistribution of income, attempted redistribution of income, of putting in more tax cuts for people who don't pay taxes and not giving any relief to the people who are overtaxed and also it is about having enough money for big government programs. That's what it's about.

HUNT: It redistributes to the rich. No doubt about.

SHIELDS: Bob, let's just get on thing. There's a great concept in Judeo-Christian culture and ethics. It's called the common good. The common good. It doesn't come down to whether the rich ought to have more, it comes down to whether in fact in our society has a decent living and can live in dignity with health care and shelter and food...

NOVAK: You're talking a -- that's what the socialists have been talking about for years.

SHIELDS: Thank you very much. That's the end of the argument. The Gang of five will be back with the Marc Rich case on Capitol Hill.


SHIELDS: Welcome back. Bill Clinton's eleventh hour pardon of fugitive financier Marc Rich was the subject of a hearing by Congressman Dan Burton's House Oversight Committee. The ex-White House counsel who arranged the pardon and a former federal prosecutor both testified.


JACK QUINN, ATTORNEY FOR MARC RICH: I remain to this day absolutely and unshakably convinced that the prosecutors constructed a legal house of cards in this indictment.



MARTIN AUERBACH, FRM. MARC RICH PROSECUTOR: If we did, it was all aces. We had extraordinary testimony, extraordinary cooperation from people within Marc Rich's organization which demonstrated the guilt to which his companies pleaded guilty.


SHIELDS: The acting attorney general at the time of the pardon asked why he did not oppose the pardon.

(BEGIN VIDEO CLIP) ERIC HOLDER, FRM. DEPUTY ATTORNEY GENERAL: I wish that I had ensured that the Department of Justice was more fully informed and involved in this pardon process. Knowing all that I know now, would I have made a recommendation against the pardon, and the answer to that is yes.


SHIELDS: Al Hunt, is this another Dan Burton production or is there more this time to be learned about this pardon?

HUNT: This pardon is so atrocious that even Danny Burton doesn't look as goofy as usual, Mark. If Jack Quinn was right, then there was a simple solution. Marc Rich should have come back to the country that he renounced and beaten the rap, and Eric Holder was just positively pathetic.

Not because he was part of any corrupt deal. He wasn't. It was just he simply didn't do his job. There was no diligence. He didn't notify the people who prosecuted Rich the way he should.

Mark, there's more legs to this story, too. Denise Rich is going testify. She took immunity this week or she took the Fifth this week, but she is going to testify when she gets immunity, and I think there will be more stories about Marc Rich's current dealings, including his dealings in Russia and questions of violations of the Corrupt Practices Act. It's just going getting to get worse and worse and worse. One good it's all so messy that this guy Marc Rich will never be able to come home.

SHIELDS: Never come home, Bob Novak?

NOVAK: I don't think so. I would like to say something nice about Dan Burton because I don't think anybody else would have held these hearings but him. Everyone else would have said, well, it's something you can't turn it around. It's a pardon.

Of course you can't turn it around, but you can investigate it and this just shows you a lot of ways that the Clinton White House operated for the last eight years and got away with it. I think the most interesting thing was that Jack Quinn has contact with the president on a trip to Ireland and he does not even submit, does not even submit the application for a pardon to the Justice Department.

In the letter, which he supposedly gave to the deputy attorney general Mr. Holder never reached Mr. Holder. So, it's a very smelly thing that needs a lot of investigation.

SHIELDS: Kate O'Beirne.

O'BEIRNE: I didn't understand why Eric Holder -- his testimony was completely incomprehensible to me. he initially said when I heard about the request, I didn't pay that much attention because I didn't think -- I thought it was unremarkable.

Then later he explained that he sort of just missed it because it totally lacked merit. He assumed it would just never happen, and then he ultimately told the White House counsel's office that he was neutral on it, leaning in favor.

SHIELDS: After Mr. Barak.

O'BEIRNE: Well, which is it, though, Eric Holder?


NOVAK: He said if it had foreign policy consequences? I didn't know he was running foreign policy.

O'BEIRNE: Just incomprehensible, and I think, too, what is going make this hearing different for Dan Burton, who I think has tried over the years to have some accountability, is it's a post-Reno Justice Department.

In the past, when he learned something and referred to it the Justice Department for follow-up, the Justice Department under Reno stonewalled and there were no consequences. Well, now we'll see what an Ashcroft Justice Department does. Maybe we'll see what the Democrats claim they want, somebody enforcing the law.

SHIELDS: Before I turn to Margaret, and have the canonization of Dan Burton, here, this is the same Dan Burton who put a watermelon in his...

NOVAK: Oh, I was waiting for the watermelon.

SHIELDS: ... put a watermelon in his back yard and conducted ballistics tests out there and then went to the House floor, the House of Representatives -- it's in the record, if anyone wants to read it, and talked about shooting a bullet through a watermelon.

NOVAK: Have you ever mentioned Burton without mentioning that story?

SHIELDS: About the Vince Foster, four independent investigations said Vince Foster was a suicide. He's refused to accept that. I mean, Dan Burton has been kept by the Reno Justice Department? He's been kept by himself.

CARLSON: I mean, thanks to Dan Burton we had six years of who killed Vince Foster when we all knew that he committed suicide. But let us not praise Dan Burton.

NOVAK: I would praise him because I think he's a great American.

CARLSON: Eric Holder did not clothe himself in glory, but what the hearing did was to try to find somebody to pin this on, as if Clinton had been told by the Justice Department not to do it or that he wouldn't have done it.

Clinton, the buck has to stop at Clinton. You could have told Clinton anything about this pardon. He was one that had Denise Rich's money going his library. He's the one that wanted to a grant the pardon for his own reason and he did.

SHIELDS: Margaret Carlson, the last word. Next up on CAPITAL GANG, a gunman at the White House.


SHIELDS: Welcome back. A distraught former IRS clerk with a grudge against his old employer brandished a pistol on the sidewalk outside the White House and was shot in the knee by a police officer. Pennsylvania Avenue was closed by President Clinton after previous shooting incidents. The 2000 Republican national platform pledged to reopen Pennsylvania Avenue, and candidate George W. Bush said he would study it. After Tuesday's shooting, the White House said President Bush was still studying it.

Margaret Carlson, will the president open the avenue of the people?

CARLSON: Still studying? He was actually working out, it turns out, at 11:30 when the shots were fired. The avenue of the people, a certain member of this panel named Mr. Novak lives on the avenue of the people, and I'm sure you wouldn't mind, perhaps having those bunkers moved down there and block all that off in front of your apartment.

Listen, this is a park now. I mean, unless you think cars are kings, there is absolutely nothing wrong with this area closed off in front of the White House. The traffic has adjusted to it. It doesn't cause traffic jams. And why not build a protection around the White House because there are a lot of crazy people in the world.

SHIELDS: Bob, you've got a point of personal privilege, as a resident of Pennsylvania Avenue.

NOVAK: Number one, the traffic has not adjusted to it. Ask Mayor Williams. Ask any of the governing members of the city council of D.C,, it has choked up the city. Number two, it is ugly there. I don't know if you go near the White House but it's got these bunkers that look like a war zone.

Well, you don't go there anymore anyway.

CARLSON: They're skating...

NOVAK: It's a war zone. Number three, any time there's a guest coming into Blair House on Pennsylvania Avenue, they close it off to pedestrians as well as vehicular traffic and finally the idea that this has any relevance on the president's intention, his promise to open the avenue is ridiculous because it just shows that a guy can go walking there and pull out a gun. He doesn't need to have a...

SHIELDS: Al, is Bob right?

HUNT: I don't know what Bob said. I got lost in all that.

NOVAK: Do you want me to repeat it? HUNT: No thank you.

CARLSON: Vehicular.

HUNT: Mark, I used to love to drive by Pennsylvania Avenue. I thought it was really one of the most inspiring drives that you could take in this town. I used to love to -- I covered the Capitol for 12 years without going through a single checkpoint.

You can't do either of those today. I regret that, but that's because terrorism is a greater threat than ever before. We're unwilling to do anything about all the guns we have in society and I'm afraid it's just the modern reality. I don't like it, but I think it's what it is.

SHIELDS: Kate, you interviewed George W. Bush during the campaign on this subject.

O'BEIRNE: Well, late 1999, one of the things we asked him was how would about reopening Pennsylvania Avenue and he said, you know, I was just in Washington a couple weeks ago and driving past, it occurred to him that it was unseemly, that the symbolism was wrong. We look we're under siege.

I'm elaborating, but he seemed very open to the idea of reopening Pennsylvania Avenue. It's in the Republican platform. The incidents that prompted its closing, a plane landing and gunman walking up to the fence wouldn't -- aren't prevent by closing it. Permit no trucks, cars have to keep moving. It ought to be opened.

SHIELDS: Last word. Kate O'Beirne. We'll be back too look at how THE CAPITAL GANG reacted to President Bill Clinton's tax plan eight years ago.


SHIELDS: Welcome back. Newly-elected President Bill Clinton waited until April to send to Congress his tax program, a tax increase which was concentrated in the very top income brackets. Federal Reserve Chairman Alan Greenspan approved the Clinton proposal, and was seated next to the first lady as the president delivered his economic message.

On February 20, 1993, your CAPITAL GANG commented. White House communications director-then George Stephanopoulos, still George Stephanopoulos was our guest.


HUNT: Bob, in your income bracket, you're a front-line soldier in this war on the shared sacrifice.

NOVAK: Exactly.

HUNT: But if it's good enough for Dr. Greenspan, is it good enough for you? NOVAK: I believe this has the capacity and the capability of contracting the economy, but you know, Al, a lot of liberals who are very unhappy with President Clinton are delighted because this is -- they're surprised. This is a classic liberal program, high taxes on the rich, defense spending and new liberal spending programs.

HUNT: Bill Clinton stepped up to it, and he deserves our credit, and the most important thing he did, and the best for politics and everybody who cares about America ought to applaud him for, is he said, I seek responsibility, and I welcome it. And that's what he did.

GEORGE STEPHANOPOULOS, FRM. WHITE HOUSE COMMUNICATIONS DIR.: What Bob won't tell you is that there's going to be a targeted investment tax credit, that there's going to be a small business tax credit for entrepreneurs who want to invest over the long haul in new business. He's looking, the president's looking to create growth in this economy, to create jobs, and he's serious about spending cuts.


NELSON: Bob Novak, will you admit, eight years later, that the Clinton tax increases did not contract the economy as you, the prophet of gloom and doom, predicted eight years ago?

NOVAK: I was wrong, Mark, because I underestimated the ability of the American economy to withstand that toxic poison of tax increases. The funniest think about that little segment, though, is George Stephanopoulos talking about these tax incentives, whatever happened to them and for spending cuts, whatever happened to that.

HUNT: I want to come to Bob's defense, because Bob, you were wrong, but there were people where were a lot more wrong. Dick Armey said of the 1993 Clinton tax, he said it would be a job killer. The U.S. economy created 22 1/2 million jobs since Dick Armey said that.

Phil Gramm said it would make the deficit worse. He was only off by a about a half a trillion dollars, that great Texas economist. Since that bill, since that tax increase was enacted, unemployment has gone from 7.6 to 4.2. The stock market has tripled and we've had the best economy of Bob Novak's lifetime and he's gotten richer than he ever dreamed.

O'BEIRNE: Despite the tax increases, I see you took it on the chin from those tax increases, and you still supported them.

NOVAK: I did.

O'BEIRNE: Very patriotic.

SHIELDS: Incredibly patriotic -- Margaret.

CARLSON: I'm in favor of tax increases on people like Bob. Listen, not one Republican voted for Clinton's budget or the tax increase, and people like Bob have benefited more than anyone else over the last eight years, and Republicans often damn Alan Greenspan and he should be thanked, applauded and celebrated for what happened these last eight years.

SHIELDS: Senator Phil Gramm, he used to teach economics at Texas, said it was a one-way ticket to recession, and the gloom and doom. I disagree. Remember, the next half-hour, we're going to discuss Ronald Reagan, who was always such optimistic to government, but you, Bob, and your conservative ilk sounded like you were five minutes to midnight.


NOVAK: I said we underestimate the economy, but if anybody is really stupid enough to think that that tax increase had anything to do with the prosperous economy you deserve to be an liberal.


HUNT: I'll give you two people who think that about, Bob Rubin and Alan Greenspan, and I'll tell you, I'll take their views on the economy, their expertise over anybody's.

NOVAK: Over mine?

HUNT: Even over yours.

NOVAK: I can't believe it.

CARLSON: Let's hope you're not as wrong about this tax cut as you were about that tax increase.

SHIELDS: Wow, last word, Margaret Carlson. The gang will be back for the second half-hour of CAPITAL GANG with Ronald Reagan's 90th birthday, a hawk's victory in Israel and our "Outrages of the Week," all after a check of this hour's top news.



SHIELDS: Welcome back to the second half of CAPITAL GANG. I'm Mark Shields with Al Hunt, Robert Novak, Kate O'Beirne and Margaret Carlson. Tuesday was the 90th birthday of Ronald Wilson Reagan. Al Hunt talked about the 40th president of the United States with Mr. Reagan's longtime aide, Mike Deaver.


HUNT: Mike Deaver, the Ronald Reagan legacy is larger and more favorable today than when he left office. Why?

MICHAEL DEAVER, FRM. WHITE HOUSE DEPUTY CHIEF OF STAFF: Well, I think there was a character, there was a values, there were something that we yearned for and would love to see again in leadership in America.

HUNT: What did President Reagan consider his greatest achievement? DEAVER: Oh, I don't think there's any question. He believed getting the Soviets to the table and ending the nuclear war was his greatest achievement. That is why he ran.

HUNT: When you take about a longing for the Reagan style, the Reagan substance, if you will, it's clear the new president, George W. Bush, is trying to model his presidency after the Reagan presidency. Yet George Bush, for all his virtues, is a man who grew up in privilege with connections, family ties were helpful. Ronald Reagan was very much a self-made man. Aren't the differences between these two men really more striking than the similarities?

DEAVER: Well they may be. I think that, you know, the jury is still out on that. I see in young George Bush some of the firmness and conviction of ideas that Reagan had. And I also see some of that undervalue, that underestimation that was a great Reagan virtue. Everybody didn't think that he was up to it.

HUNT: He always benefited from that, didn't he?

DEAVER: Always.

HUNT: That sense of being underestimated, particularly by his critics, here in Washington and the political world.

DEAVER: And you know, he sort of loved it because he always treated it with humor and it always went away.

HUNT: He also was criticized by some experts, however, ranging from his former budget director, David Stockman, in his book 15 years ago, to Francis Fitzgerald's award-winning book last year on Star Wars and Reagan, and the rest of the criticisms were that Ronald Reagan was really unformed about central elements of his major initiatives. Is that valid, Mike?

DEAVER: I don't think so. You know, I think the proof is in the pudding, and I think Reagan knew a lot more than any of those people ever knew. Certainly this woman who wrote the book on Star Wars didn't know. But people have always said, you know, was Reagan a smart man? Was he intellectual? I don't know, but I know he was the wisest man I ever knew.

HUNT: If he were aware of all these accolades today, what would his reaction be?

DEAVER: I just don't think it made any difference to him. I used to ask him, what do you want people to say about you? What do you think your legacy would be? and of course, talking about Reagan was the last thing he ever wanted to do, and he would just say, well, I guess they'd just say I did the best he could.

HUNT: Final question, Mike Deaver. What is your most vivid memory of Ronald Reagan? Nobody knew him better other than Nancy Reagan than you did. What's your most vivid memory?

DEAVER: Oh, I think my most vivid memory is day one, walking into the Oval Office and having him sit down at the desk. We'd just come off from reviewing stand, still in our cutaways, and he put his hands on the desk and looked up at me and he said, you have goosebumps.


SHIELDS: Kate O'Beirne, do you agree that Ronald Reagan's place history will be as the winner of the Cold War?

O'BEIRNE: I think his most important legacy would be ending the Cold War and liberating millions. The important thing about Ronald Reagan, though, in that context of that achievement is not because he was looking for a legacy, but owing to his principals. He loved freedom. Despised tyranny, and was utterly convinced the Soviet Union would end up on the ash heap of history, when elite opinion didn't think it would, which he dismissed.

And his central attribute was not the ability, as a former actor, to deliver somebody else's lines. Despite the fact that many still like to think Ronald Reagan was uninformed, this recent book of radio scripts he wrote himself from the mid-70s when he was delivering them five days a week, shows a real command of foreign and domestic issues, a real command of the facts and a real ability to write.

SHIELDS: Al Hunt, your own reaction, I mean, based upon Mike Deaver but also covering -- your piece with Mike Deaver, but also covering Ronald Reagan for as long as you did?

HUNT: Well, I would disagree, I'm sure, with Kate and with Bob on some of the substantive claims. I think he does deserve some credit for ending the Cold War, but so does Harry Truman and George Marshall and Dean Atcheson, the architects that contained them back 50-some years ago. And I would certainly disagree with them on the economic claims. We spent 12 years trying to undo the effects of the '81 Tax Act and then the asterisks and other tax.

O'BEIRNE: Is there something nice in this?


HUNT: But Kate, hear me out for a second. But I also think there is extraordinary legacy. I really do. I'll tell you what I think it is. I think Ronald Reagan came in office at time when people were saying our system doesn't work. You can't govern in America. There's no confidence. We were really -- it was with the hostages. It was a feeling -- there was malaise or whatever.

And Ronald Reagan, with his courage of his convictions, his steadfastness, his incredible optimism, proved they were wrong, proved the system worked and I think that was an extraordinary legacy.

SHIELDS: Bob Novak.

NOVAK: I think it's a credit to Ronald Reagan that liberals like Al are not trying find reasons to say nice things to him, but, in fact, he did win the Cold War. The, what Joe McCarthy called the Cowardly College of Containment, the people you mentioned. They wanted to contain the Soviet Union and Truman is much overrated as a cold warrior.

Reagan wanted to win the Cold War. He did. And far from being a curse on economy, the '81 tax cut was really the cause of the prosperity that we've been enjoying today. But what he really did was he changed the tone of the Republican Party and of America and he made it OK to a right winger.

SHIELDS: Ronald Reagan aside, Harry Truman stopped the Soviets. Harry Truman stood up in Berlin, He saved Berlin. He saved the West. He organized NATO.

HUNT: He saved Europe.

SHIELDS: He saved Europe.

NOVAK: I thought this was about Reagan. Why do you always get off the subject?


SHIELDS: You made the crudest attack upon Harry Truman.

NOVAK: Well, he brought Truman up.

CARLSON: I love this new legacy which is Ronald Reagan made it cool to be a right-winger. Bob, you will never be cool.

NOVAK: OK, I didn't use the word cool.

CARLSON: Reagan does show what a sunny, optimistic nature can do for you and what communicating does for a president. It's more important than almost anything else when you think about it. On the economy, he was failure and didn't do what he said he would do. I mean, government spending didn't go down. The government work force didn't go down. And deficits went way, way up. And the tax cuts were only on marginal rates. Not on the rich.

But, he did wonderful things, nonetheless, and we remember him on his 90th birthday very fondly.

SHIELDS: Thank you, Margaret. He sailed by a fixed star. I agree with Al, a man of conviction at a time when intellectuals were saying the presidency, we have one six-year term because the presidency was too big for one man. He totally disabuses that.

The test he failed, was the one that Lou Cannon described on the eve of his inaugural, and that was that a man so blessed himself by good fortune and good luck and a providence, would he become the tribune for those that had not been similarly blessed, and he never did.

NOVAK: He was not a socialist, Mark, and that's what you can't forgive him for.

SHIELDS: He never reached out the warm, comforting hand.


NOVAK: He was not a redistributionist.

HUNT: Mike Deaver did know him better than anyone other than Nancy Reagan, and he's going to publish a book in another month or two which I think will probably have some fascinating anecdotes in it because it was really a very, very close relationship.

SHIELDS: Good piece, Al. Next on CAPITAL GANG, a hawk wins in Israel.


SHIELDS: Welcome back. Israel's Prime Minister Ehud Barak lost his bid for reelection in a landslide to hard-liner Ariel Sharon. The winner immediately visited the Wailing Wall.


ARIEL SHARON, ISRAELI PRIME MINISTER-ELECT (through translator): I am visiting Jerusalem, the capital of the Jewish people for the last 3,000 years; the undivided capital of Israel with the Temple Mount in its center forever and ever.


SHIELDS: Bob Novak talked to CNN chief international correspondent Christiane Amanpour and asked what the Israeli people were saying in their vote?


CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Bob, I think they were saying, we have had enough of violence. This was a vote against violence. It was a vote not only against Prime Minister Barak's attempts to make peace, but the fact that they didn't succeed and all they brought was more violence.

And the Israeli people really were motivated by a sense of security, or insecurity when they went to the polls. Most of them voted against Barak, they say, rather than necessarily for Sharon.

NOVAK: Is there a sense there with the election of General Sharon, that war may be imminent; that there may be, instead of just violence, an actual outbreak of another Mid-East War?

AMANPOUR: Well, nobody that I've spoken to really thinks that it's that dire. What they do say though, is given Ariel Sharon's election platform where he clearly stated that he was nowhere near the kind of concessions that Barak had offered, which were the demands of the Palestinians, most people think that there will be a period of heightened tension.

Most people on the Sharon team say that we believe that there are simply unbridgeable gaps between the Israelis and the Palestinians. We're not going for a final peace. At best, we're going for a non- belligerency pact, a truce, and sort of a maintenance, if you like, a sort of a status quo, trying to tamp down the violence and make a series of interim agreements.

If you talk to analysts about the potential of something worse, like war, they say they think the only likely scenario for that, and that's in, you know, in the outside case, if for instance, Hezbollah in Southern Lebanon infiltrates or infringes or takes Israeli soldiers from Northern Lebanon, then Sharon may be tempted to hit Hezbollah and Syrian bases inside Lebanon.

That's the only scenario that we've heard for a possibility of war. But most people think that it will be mostly just increased violence within Israel and the territories.

NOVAK: On the other side of coin, there are some imaginative people here in Washington, Christiane, who see in General Sharon another Nixon going to China; that this hawk may surprise us all with a very forward and very aggressive peacemaking initiative. Do you think that is in the realm of the possible?

AMANPOUR: Well look, most people say to judge his future actions, look at his past actions. Many observers, the pundits, and all the others have said that Ariel Sharon was, you know, dragged kicking and screaming into some of the recent peace deals with the Palestinians, certainly.

He doesn't believe that there's a possibility of a final peace accord. On the other hand, he has said that -- I mean, his election campaign was "only Sharon can bring peace." and there are people, particularly, for instance, former Secretary of State James Baker, who's likened Sharon to the possibility of Nixon going to China.

But most people think that the best he will do is perhaps the only thing he can do, and that is a series of interim measures, keep the situation calm, make a few concessions based on a motus vivandum, but not necessarily come to a full and final peace agreement. They think there are unbridgeable gaps for the moment.


SHIELDS: Bob Novak, what does Prime Minister Ariel Sharon mean for the United States and the new Bush administration?

NOVAK: I would think that would mean it's a hand-off Israel for the type being. Obviously, you're not going to find George W. Bush trying to get a Nobel Peace Price by getting a peace -- brokering a peace settlement as President Clinton attempted.

I think that General Sharon is a very scary guy. I think that going to the Wailing Wall as soon as he's elected and saying, no compromise on this real estate means we're not going to follow in the courageous steps taken by Prime Minister Barak. So obviously, nothing is going to happen. I hope there's not a war, but I think there's not going to be much progress with Sharon. SHIELDS: Kate O'Beirne, a very scary guy?

O'BEIRNE: What Barak did really showed Arafat for what he is. Huge concessions, the unilateral concession, willing to divide Jerusalem and there was never even a counteroffer from Arafat. He made, or I think those negotiations made it clear that Arafat and his supporters don't want peace. And that's why I think what the Israeli voters were responding to.

SHIELDS: But what about Sharon? Is he a scary guy?

O'BEIRNE: There's no peace through appeasement, as we learned from Barak. Maybe there'll be peace through deterrence because they clearly read Barak's concession an appeasement as a weakness.

SHIELDS: Margaret Carlson, what's your sense?

CARLSON: I agree with Kate. The -- there will never be more offered. And so, now we know who Arafat is. We know exactly who he is. And this was a vote for security because the Israelis have done what they can. They want to be safe now. I mean Nixon going China, we could dream, but I doubt it and for the Bush administration, it will be a period -- a cooling-off period, no great activity, a period of benign neglect. Let's hope the neglect is benign.

SHIELDS: Al Hunt, I don't think that Bob Novak was suggesting that a peace prize was a bad objective or an accomplishment for an American president.

HUNT: Oh, I'm not really sure of that, Mark. No, I agree.

NOVAK: Do you think it accomplished much?

HUNT: No, I think Clinton did a wonderful job and came close, and I do think that -- I agree with you that the Bush administration is not going to do anything at first. They're going to be very cautious. Most new administrations are. Eventually, the peace process in the Middle East is only going to advance with the active involvement the U.S.

I don't buy the Nixon goes to China syndrome, at least not with Sharon. I do agree that Arafat is the big loser. He showed himself to be a coward. He got half of Jerusalem, over 90 percent of the West Bank. He'll never get a deal like that again.

I think in the short-term over there, what's going to happen, though, is that there's going to be a coalition government put together because Sharon needs it in order to keep Netanyahu off his back and Labor needs it in order to try to figure out where they're going.

SHIELDS: It just strikes, though, that there is a consensus in Washington, liberal, conservative, I think Democrat of respect for Dennis Ross, who has been a tireless negotiator and done, you know, gone great lengths and great lengths. Who will be as the negotiator for the United States over there under really the last two administrations.

NOVAK: I don't think there's going to be a negotiator, right away.

SHIELDS: There won't be.

NOVAK: And I think the idea of the United States being able to negotiate a settlement has just been disproved. I think, unintentionally. I really think President Clinton's motives were good in this case, but I think that created much of the violence. I think he pressed too hard and that...

O'BEIRNE: He only pressed one side. He only pressed the Israelis.

CARLSON: But the peace effort has peaked with him, and we now where we stand.

SHIELDS: Last word, Margaret Carlson. The gang will be back with "The Outrage of the Week."


SHIELDS: Now for the "Outrage of the Week." I like the Speaker of the House, Dennis Hastert, but his case for the Bush tax cut, 40 percent of which goes to the richest 1 percent of Americans, is seriously defective.

On CBS's "News Hour" this week, the speaker echoed President Bush and Vice President Cheney when he argued that we need to take the money off table because people in Washington will spend it. Hey, fellows, the Republicans now control the U.S. Senate, the U.S. House and the White House. Those people in Washington who must approve any spending are Republican. It's time to accept responsibilities -- Bob Novak.

NOVAK: That's why he wants to take the money off the table. The sitting issue for Virginia's Governor Jim Gilmore is repeal of the hated car tax. It enabled him to come from behind to be elected in 1997 and for Republicans to win the legislature in 1999. It is the reason he is now Republican National Chairman. Now Republicans in legislature have put on their green eyeshades and say they just can't keep Gilmore's promise. Stupid Republicans, they deserve the retribution of Virginia's voters.

SHIELDS: Margaret Carlson.

CARLSON: Mark, as we enter the ninth year of the Clinton administration, the good news is that Elvis has left the building. The bad news is that he took everything but the door knobs. Criticism of the Clinton's last-minute gift grab has given way to criticism of carting off furniture that did not belong to them to Chappaqua a year ago, and despite a warning from the chief usher not to do it. Now, do they have enough money, enough furniture and enough spoons to take on a few good works?

SHIELDS: Kate O'Beirne?

O'BEIRNE: Seven members of Congress who need immediate remedial health from President Bush's campaign for civility, disgraced themselves this week when the House voted to wish former President Reagan a happy 90th birthday. These Democrats, including Loretta Sanchez, Maxine Waters and Peter DeFazio abstained rather than simply express their good wishes for the ailing Mr. Reagan. The shameful seven no doubt think Republicans are hateful.


HUNT: Mark, our old friend Tom Feeney, the right-wing zealot who is speaker of the Florida House, is threatening to impose term limits and other sanctions on the Florida Supreme Court because he didn't like their decisions during the presidential election recount fiasco. A lot of us didn't like the U.S. Supreme Court's political machinations in this dispute, but any proposal by a Democratic or liberal to strip the court of its independence would be unconscionable. So is Speaker Feeney.

SHIELDS: This is Mark Shields, saying good night for THE CAPITAL GANG. "CNN TONIGHT" is coming up next.



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