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CNN Late Edition

Is Bush's Proposed Tax Cut Too Large?; How Have Pardon Scandals Hurt the Federal Government?

Aired February 25, 2001 - 12:00 p.m. ET


WOLF BLITZER, HOST: It is noon in Washington, 9:00 a.m. in Los Angeles, 5:00 p.m. in London and 8:00 p.m. in Kuwait. Wherever you are you watching from around the world, thanks for joining us for this two-hour LATE EDITION.

We'll get to our guests shortly. But first, the hour's top stories.


BLITZER: Joining us now to talk about the president's new budget priorities and how he plans to get them through Congress, is the director of the Office of Management Budget, Mitch Daniels.

Mr. Daniels, welcome to Washington. Welcome to LATE EDITION. Thanks for joining us.


BLITZER: You know that not only Democrats, but even some Republicans -- Jim Jeffords of Vermont, Lincoln Chafee of Rhode Island -- say the $1.6 trillion tax cut is simply too much, too ambitious. It's got to be a lot less.

DANIELS: Well, they're going to be very reassured, I think, after they look at the facts as we have looked at them. There is more than enough room, far more than enough room, to provide tax-paying Americans with the amount of tax relief that the president has suggested.

But their concern is well motivated. They want to make sure, as we do, that we can meet the needs of the country, and we can. That we can we can pay down debt, and we can and will at a historic record rate to levels not seen in a century. And we can also leave room for the unknowns of the future, which we will.

BLITZER: But, you know that you have a hard sell. Even Senator Domenici, who is one of your allies, says you don't have the votes right now to pass this tax cut.

DANIELS: I was there. Senator Domenici said "not yet," which is fair, because people are reserving judgment. But we think the votes will be there. And there will be more votes there after people, as they are entitled to do, have seen our overall plan.

BLITZER: The major complaint of the Democrats and some moderate Republicans, a complaint echoed in today's New York Times, is this. Let me read to you from the New York Times editorial this morning: "It is twisting the entire budget out of shape in a very unhealthy way. It is too big, too weighted towards the rich and too unlikely to be of immediate help to the economy."

Let's go through a couple of those points. The rich do well with these tax cuts, especially the very, very rich, who of course of pay the most in taxes to begin with. But they are going to get the biggest breaks.

DANIELS: The people who do the best are the people actually at the lower end of the scale. By far, the highest percentage tax reduction will go to those working Americans in the lower brackets.

BLITZER: Well, you've heard Senator Daschle and others say the very wealthy are going to be able to afford a new $40,000 or $50,000 or $60,000 Lexus. Those people you are talking about are going to be able to afford a muffler for a used car.

DANIELS: We have the devices like the alternative minimum tax already in the code, that take care of the people that Senator Daschle is so desperate to deny any tax relief to.

Another thing he overlooks and shouldn't, is that 21 million American small businesses are proprietorships, or "S" corporations -- they're paying on the individual tax rates. And therefore, an enormous amount of this relief will go to the small businesses that create most of the jobs in this country.

BLITZER: You're basing the tax cuts on a 10-year surplus projection. Ten years ago when these projections were made, no one could have foreseen where the economy is today. What if these projections turn out to be wrong, even by a little bit? Won't it disrupt the entire calculation that you've come up with?

DANIELS: Odds are, these projections will not be accurate. Precision is tough 10 years out. The last five years, the government has been grossly underestimating its revenue, steadily. In fact, this year, even with a wobbly economy, revenues are running ahead of projections.

We have built a tax code that is the Electrolux of tax systems for sucking money out of taxpayers' pockets. And I'm just telling you that, based on very cautious assumptions, this $5.6 trillion figure, which is just like the one CBO independently arrived at, is just as likely to prove low over those 10 years as high.

BLITZER: But if they're wrong, and it's possible they could be wrong -- these projections have been wrong many times over the past -- some senators, not only Democrats, like Senator Bayh of your home state of Indiana, some Republicans, like Senator Specter, Senator Chafee of Rhode Island are saying, let's build in a trigger mechanism. Alan Greenspan, the chairman of the Federal Reserve, says that's probably a pretty good idea, that, if the surpluses are not as significant as you say they will be, that the tax cuts won't necessarily be implemented to the full extent.

DANIELS: Well, first of all, I think a trigger mechanism that provides an invitation to greater spending, rewards Washington for greater spending and penalized taxpayers, is probably a bad idea. Much better, I should think, if you're going to have triggers, to have one which says if Washington spends too much, they should take the haircut and taxpayers should be protected.

But listen, we have a better idea.

BLITZER: Is that trigger proposal a non-starter, as far as the Bush White House is concerned?

DANIELS: I think it's flawed conceptually and mechanically impossible. We have a better idea, because it is certainly fair for people to wonder about the uncertainties, and there are several.

There is certainly the chance that the surplus number could be off. As I point out, it could just as easily be larger than we now think. But we don't know for sure.

It is certainly possible that defense spending, for instance, could need to be more than the natural growth that we project in the budget. And therefore, we will suggest a significant reserve, an enormous reserve, roughly $1 trillion as cushion against those uncertainties.

BLITZER: Well, where will that $1 trillion come from?

DANIELS: That's part of the $5.6 trillion surplus projection that we have.

BLITZER: And so what you're saying is, after you have a lock -- you lock away the money for Social Security, and for Medicare, correct?


BLITZER: Are you going to include the Medicare in the lockbox, too?

DANIELS: Think of it this way, Wolf. We will pay down all the debt that is available to be paid down. We will pay down debt to levels that we have not seen since the early part of the last century, essentially will eliminate this as a factor in our national fiscal affairs.

In the most recent years, we've been using 14 or 15 cents of the federal dollar just to pay the interest. It will drop to two, closer to one, over these 10 years.

Having done that, having protected every penny of Social Security for Social Security, having spent every penny of Medicare receipts on Medicare, having set aside $1 trillion for new needs or contingencies, there is still $1.6 trillion overcharge that the American taxpayers are entitled to.

BLITZER: How much are you setting aside for the projected defense, the missile defense shield that you want the Pentagon to go forward with?

DANIELS: No specific amount at this time. As you know, Secretary Rumsfeld has begun the first genuine comprehensive look at our defense needs and strategy since the Eisenhower years, and no one knows what that will show. It could show that we need more defense spending. It could show the same, conceivably even less. But it's because we don't know that answer that we've tried to budget very cautiously and to provide for all reasonable contingencies.

BLITZER: The L.A. Times in an editorial also said this, and I want to get your response: "Republicans deny it, but Bush's tax cut is clearly driving the government's budget policy. It was his tax package, not a big spend-thrift government, that dominated his presidential campaign."

Did you start off with the tax cut and say, let's see if everything else adds up as a result of the $1.6 trillion tax cut?

DANIELS: No. We started forming this budget with the president's priorities, and he had been very clear about them. Some people in Washington seem startled that he meant what he said in his campaign, but he did.

And everyone of those new priorities -- education, quality of life for people in the military, medical research, support for our nations veterans and so forth -- is incorporated in this budget. That was the first step.

BLITZER: You know, the comptroller general, David Walker, of the Government Accounting Office says that, unless you deal with some of the major entitlement programs like Medicare and Social Security -- which you're not apparently dealing at this early stage in the administration -- the whole thing could come back to haunt you. Listen to what David Walker had to say before Congress earlier this month.


DAVID WALKER, COMPTROLLER GENERAL OF THE GOVERNMENT ACCOUNTING OFFICE: Without a change in entitlement programs, demographics will overwhelm the surplus and drive us back into a period of escalating deficits and debt.


BLITZER: So when are you going to begin the Social Security reform, the Medicare reform, that President Bush promised?

DANIELS: Tuesday night. David Walker is a great American, and he's right. He is one of the first people I visited after I accepted this role.

And President Bush will say Tuesday night, as he has forthrightly in campaigning for president, that these problems won't wait, that we ought to have a Social Security system, that provides tomorrow's retirees with as fair a deal as today's. And right now we don't have that system.

BLITZER: When does he submit the legislation to make those changes?

DANIELS: I think I better leave certain specifics for the president, if it's all right. But it will come as no surprise and make no news that he thinks we need to move on these two fronts now. You know, some of the...

BLITZER: The first year of his administration?

DANIELS: Commencing right away.

And some of our adversaries like to pretend, for instance, that Medicare's running a surplus. It's not. Medicare will cost $700 billion more in this decade than it takes in. We need to move now to make a system that serves patients well and is financially practical for the future.

BLITZER: In addition to a big tax cut, increases in spending for education, for defense, National Institutes of Health, there will be some reductions. President Bush earlier this week on Thursday spoke about those, what some people call cuts. He prefers not to call them cuts. Listen to what he said.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This is a town where if you don't increase the budget by an expected number, it's considered a cut. We're going to slow the rate of growth of the budget down.


BLITZER: All right, tell us, who will suffer as a result of slowing down the rate of growth in the budget?

DANIELS: I prefer to think about those who will benefit, and that starts with the American taxpayer.

But, listen, by the media's own definition, Washington's been on spending spree -- that term is frequently used; I've seen binge. Spending has been growing at a 6 percent rate over the last three years, 8 percent last year. And that's just faster than we can really sustain for the future. If we don't slow that down it will eat this surplus.

Therefore, we're going to propose continued growth. They'll be over $25 billion of new spending beyond the record level of last year.

BLITZER: Which programs are going to be reduced, though?

DANIELS: Well, let me say that every program of government, every department anyway, viewed in the context of the last four years, will show an increase. Some will grow at a slower rate this year, and a couple will actually be reduced slightly.

BLITZER: Which ones?

DANIELS: We will start with programs which are either duplicative. We have 50 programs for the homeless sprawling across eight departments of government. Those are not particularly the ones I'm looking at here, but we have to be careful with duplication of that kind. There are programs which have outlived their usefulness or even completed their mission. Washington has a tough time declaring victory in stopping anything, and there are programs which benefit principally corporations or...

BLITZER: What Robert Reich used to call corporate subsidies.

DANIELS: Corporate subsidies is a common and I suppose fair term for those.

BLITZER: So which of those subsidies are going to be eliminated?

DANIELS: Well, we are looking at, in most cases, trimming as opposed to outright elimination. In some cases, the cut involved, what you would call a cut, is simply asking the beneficiary, the corporation who is getting its research subsidized or its loan subsidized, to step up and share a little bit more of the cost.

BLITZER: You'll be reducing or eliminating some of the tax credits for export-import bank, for example?

DANIELS: We might be reducing the amount of subsidy, the extent of the subsidy that the benefiting corporation enjoys.

BLITZER: How much of a problem has the controversy over the presidential pardons been in your being able to get your message out?

DANIELS: None at all. It's not our fight and not our focus. It's, you know, simply the last, I guess, extension of an eight-year period that most Americans want to forget, and we do too.

BLITZER: Mitch Daniels, you've been away from Washington for, what, 15 years, since the Reagan White House. But you're back now, and I assume we'll be seeing a lot more of you in the next weeks and months and years ahead.

DANIELS: I'm available.

BLITZER: Thanks for joining us.

DANIELS: Thank you.

BLITZER: And when we return, how will the president's agenda be received on Capitol Hill? And is the widening investigation into former President Clinton's pardons overshadowing other key legislative business? We'll talk politics, pardons and a lot more with Nebraska Republican Senator Chuck Hagel and Massachusetts Democratic Senator John Kerry.

LATE EDITION continues right after this.



BUSH: This White House is moving forward. We've got a lot to do. We've got a lot of people of to convince on our agenda. I think we're making pretty good progress, but there is a lot of work to be done.


BLITZER: President Bush speaking Thursday at his first press conference since taking office.

Welcome back to LATE EDITION.

The president declined to talk about the expanding congressional investigations into his predecessor's controversial pardons, but that issue has been taking center stage in Congress, as well as in the news media.

Joining us now to talk about that, as well as other issues, are Republican Senator Chuck Hagel of Nebraska and Democratic Senator John Kerry of Massachusetts.

Senators, always good to have both of you on our program.

Senator Kerry, I want to begin with you, because so many Democrats -- I haven't heard any Democrats say they support President Clinton's pardons. So many of them are using words like "disgusted" and "repulsive" and sharp language like that. I assume you don't support the Marc Rich pardon?

SEN. JOHN KERRY (D), MASSACHUSSETTS: No, I don't. And I've used tough language about it, too, as I think most of my colleagues have, because that's the way they feel. I mean, this is not a contrived situation. I think a lot of people have a sense that that pardon was outside of any rational explanation that they can find.

I mean, you know, I'm a former prosecutor. I was with cops last night in Massachusetts. They look at it and wonder about how it undermines what they do. People who have a son or daughter in jail for some small amount of possession or something wonder why they can't get that break. I mean there is undermining impact of it, I think, Wolf, that has raised very legitimate questions.

Now, how do we go about this? I don't think it should be hysterical, I don't think it should be a whole lot of, you know, sort of pointed accusations that simply fly about without rational analysis. The president has this extraordinary power. It's been exercised previously. You know, Cap Weinberger got a pardon that was subject to people saying, wasn't that a conflict? George Bush was going to go testify. People didn't go through this kind of process.

So there are fair questions to be asked, but let's do it fairly and go through the process.

BLITZER: Well, President Bush says, Senator Hagel, that it's time move on, and that's that, history, now it's time for other issues. What do you say?

SEN. CHUCK HAGEL (R), NEBRASKA: Well, I think what the president was talking about is his agenda, his leadership and his vision for America. He has a responsibility to lead this country for the next four years.

Aside from that, I think it is appropriate for the Congress to look at what happened here. We now know some very disturbing things as a consequence of some of that activity that took place on January 20.

BLITZER: What's the most disturbing thing as far as you are concerned?

HAGEL: Well, the most disturbing thing for me is reports that 40 of these pardons were done without the concurrence or even the knowledge of the Justice Department. Now, America needs to know something about this.

And also there is another dynamic in this. There are a lot of good people who have been around President Clinton, and his wife now is a United States senator. There's a heavy cloud, a dark cloud that hovers over these people. They need to be cleared, as well.

I think of Eric Holder. He was left holding a bag of rotten fish here.

BLITZER: The deputy attorney general.

HAGEL: Deputy attorney general, and did he have anything to do with this? These people need to be cleared of this.

But we need to find out really what went on, and I think we will do that. And I think it's appropriate, and it's a responsible thing to do.

BLITZER: Well, does that mean the next logical step is that President Clinton should be forced to come before Congress and testify why he ordered these pardons?

HAGEL: Well, I'm not prepared to say that. I'm not close enough to those investigations.

I think both the Democrats and the Republicans, in looking through this, will come to some kind of conclusion. But whether that will be an appropriate thing to ask a former president to do, I don't know.

BLITZER: Do you think President Clinton owes it to the American people to go beyond his op-ed piece in the New York Times last Sunday and offer a more detailed explanation of all of these pardons?

KERRY: Well, whether he owes it or not, Wolf, it is going to happen, because clearly the investigative process is under way, not just with the Congress but with our criminal justice system.

So, there will be answers. And I think people need to guarantee that this is a fair process. How it unfolds is really up to those in directly in the investigation, and neither Chuck nor I are in that.

BLITZER: Well, you're a former prosecutor, so you know a little bit about these kinds of issues. Mary Jo White, the U.S. attorney for the Southern District of New York, is now engaged in a preliminary criminal investigation. Speculation there could be others in California dealing with some of the other controversial pardons, perhaps in Florida.

BLITZER: Would it be wise for the new attorney general, John Ashcroft, to call for a special counsel to coordinate all of these investigations -- not an independent counsel because that has lapsed, that law, but a special counsel that he would name to look into all of these pardons?

KERRY: No, I don't think so at this point in time, Wolf. I think, you know, there is no showing that these jurisdictions aren't capable of doing their job. They each have different jurisdictional issues based on where something happened.

And until there is some showing that we can't understand this -- remember, the president has this unique power. It may or may not have been abused. And I mean, certainly Chuck and I and others would agree that there are serious issues about some of these pardons.

But I think we are going to get at those issues. And I don't think we need to heighten this or elevate it or even, frankly, you know, you and I and others, with the other issues we have in front of us -- enormous questions about a tax cut, about education, about prescription drugs, health care for citizens, children in distress and otherwise -- I mean those are the things most Americans really want us to put most of our energy into.

BLITZER: Do you think it's time for the House and Senate to consolidate their separate investigations -- the Dan Burton investigation in the House, the Arlen Specter investigation in Senate -- come together with some sort of House-Senate committee that would look into this jointly?

KERRY: Well, again, I'm not party to that, so I'm a bit on the outside to be giving too much advice. But both the House and the Senate are individual bodies and have, in some cases, individual responsibilities. It may work its way into a joint effort, but right now, I think they should continue along separate tracks. BLITZER: Hillary Rodham Clinton, of course, has now been, I guess some would say, dragged into all of this. She spoke out after word was released this week that her younger brother, Hugh Rodham, got $400,000 for helping two of those controversial pardons. Listen to what Senator Clinton had to say earlier this week, once she says she learned about all of this.


SEN. HILLARY RODHAM CLINTON (D), NEW YORK: I was heartbroken and shocked by it and, you know, immediately said this was a terrible misjudgment and the money had to be returned. And that is what we worked on. You know, this is a very sad matter to me personally. It was a surprise, but more than being surprising, it was extremely disappointing.


BLITZER: You know, some of her critics, Senator Kerry, are not accepting her words at face value.

KERRY: Well, I understand that. You know, as James Carville said, you can pick your friends but you can't pick your relations. And I mean, that is tough situation for her.

I think Chuck and most of our colleagues would agree, she has worked diligently to come into the Senate, to do her homework, to build relationships, to try to stay out of limelight, to do the hard, nitty-gritty of being a good United States senator, and I think she is well on her way to doing that.

This, obviously, is an enormous interference with that. But, you know, let's wait and see. Let's give people some benefit of the doubt in this process. And let's investigate it. That's appropriate. But let's also do that in an appropriate, fair-minded way, without some of the hysteria that so often just clouds everything we do around here.

BLITZER: All right, Senators, we have to take a quick break, a lot more to talk about. We will continue this conversation. We'll also talk about the Bush budget blueprint: Will it withstand congressional scrutiny? We'll talk with Senators Hagel and Kerry when LATE EDITION resumes.



BUSH: I'm going to resist the Christmas tree effect of tax policy. I don't want people putting ornaments on my plan.


BLITZER: President Bush talking about suggestions by some Republicans in Congress that he increase his tax cut proposals.

Welcome back to LATE EDITION. We're talking with two members of the United States Senate, Republican Chuck Hagel of Nebraska and Democrat John Kerry of Massachusetts.

Let me begin with you, Senator Hagel. Are you one of those Republicans who thinks $1.6 trillion is not enough, it should be $2.2 or $2.5 trillion?

HAGEL: Well, I'd like a lot more in tax cuts if we could do it, but I suspect we're not going to be able to do it.

Obviously, the budget is going to have to be reconciled, and what that means in plain English is that we're going to have to be able to come up with a budget that accommodates all the needs of our government: paying down the debt, increasing education, defense spending, all the other priorities that I think most of us want to see, as well as a tax cut. I think we can do all of it.

That will be the process that begins actually early April in the Senate. That process has actually begun in the Budget Committee over the last two months.

So $1.6 trillion, I don't know, that's probably about right. I don't think it's going to go higher than that.

BLITZER: You know, a lot of Democrats are suggesting that once the budget is submitted by the president Tuesday and Wednesday -- he addresses a joint session of Congress Tuesday night -- the honeymoon with the Democrats is over.

KERRY: Well, you know, there's no automatic signal about that, but the president just said he doesn't want ornaments hung on his tree. I want a tree that stands up, that doesn't fall down under its own weight. And the tree that he is offering us without any ornaments is a tree that can't stand.


KERRY: Because the numbers don't add up. I mean, this is a case of "here we go again," back to 1981 with Ronald Reagan. The American people have a clear choice. We can go back to Reaganomics, where you cut much more than you can, give a big tax cut mostly to the wealthy at the expense of a lot of people at the lower end.

I heard Mitch Daniels a moment ago saying this is for everybody. It's not for everybody, because not everybody pays an income tax. You got a lot of poor people who pay most of their taxes through the payroll tax. They don't get a break from George Bush.

We Democrats believe every American ought to get something back here, and the way to do that is to be fair.

Secondly, we don't want to go back to the days of '81 where you grew the debt of this country. When Ronald Reagan came to power, the debt was $909 billion. When he left, it was about $2.9 trillion, and when Bush left, it was $4 trillion in those span of years.

We want to make sure we pay down debt. We want to make sure we can invest in the future of this country, prescription drugs, education for our children, our transportation needs, a host of other issues. And we want to make sure we have a tax cut for every American that is fair.

BLITZER: What about that, Senator Hagel?

HAGEL: Well, I subscribe to the logic of you give tax cuts to people who pay taxes. I think there is some logic that holds up.

KERRY: Well, payroll tax is a tax.

HAGEL: ... well, John, I didn't interrupt you.

Let's look at what he's trying to do here: He is trying to, across the board, the president, deal with an over-taxed society. Now, my friend John may not agree with that, but I think any measurement you take of that, how much tax burden is on the American taxpayer over the last 50 to 60 years, we are about at the peak here when you include all taxes.

Second, Ronald Reagan did something that was very important to address what John is talking about, and John has a good point. And that is putting into the tax code what we refer to as income tax credits to help those people at the bottom, so that they wouldn't have to pay that income tax after a certain amount of money and level of wages kicks in.

BLITZER: The earned-income tax credit.

HAGEL: Yes, the earned-income tax credit, which helps them.

Payroll taxes, if we're going to do that, if we're going to really get into taking a burden off of everybody on payroll taxes, then we're going to have to assess in a very real way here how we're going to continue to finance the out years on these huge entitlements that are growing in everybody's analysis into the stratosphere.

The other thing I want to comment on is what John said about the Reagan years. The problem with the Reagan years is the second half of that bargain wasn't fulfilled, and that was to control spending. The spending during the Reagan years went out of sight, and that's as much to blame as anything else.

BLITZER: And Democrats...

KERRY: Can I make two quick comments?

BLITZER: Go ahead.

KERRY: The spending during the Reagan years should have been controlled by the Reagan presidency, but he never vetoed those, and the Senate was managed by the Republicans. Bob Dole was the majority leader when I came to the Senate. And one of the first things I did was join in the Graham-Rudman-Hollings (ph) deficit reduction act because they weren't serious about it.

But the problem today, Wolf, is, to come back to what Chuck just said, that you don't have to put anything at risk here. We Democrats are the ones who had the idea of setting Social Security aside, and we fought for that. We also want to set Medicare aside and protect it so none of our seniors are at risk.

But you can protect the people who pay the payroll tax by creating a credit. If you make it a credit and it's refundable, it doesn't wind up counting against the Social Security per se.

BLITZER: Specifically on the spending, are you prepared to go along with President Bush on the cuts or the "reductions in the increase in spending," as he calls it?

KERRY: Well, nobody has a clue what he's going to cut or where.

BLITZER: But if he wants to get rid of some of those corporate subsidies and...

KERRY: Well, John McCain and I introduced legislation a number of years ago with Fred Thompson and Russ Feingold to get rid of $60 billion worth of unnecessary corporate subsidy, what was called corporate welfare. Now, I'm going to wait and see if President Bush includes any of those in his proposals.

But the fact is that right now we're hearing that even his education increase apparently is artificial. He's claiming an 11 percent increase for education, but he's claiming some $2 billion-plus that we put in a year ago. So his real increase is only going to be about 5 percent. If games are going to be played here, that takes us right back to where we were in 1980s.

BLITZER: Let me let Senator Hagel respond to that.

HAGEL: Well, first of all, we don't know because we haven't received the budget yet. So, I think we should just hold our fire until we get the facts. That's number one.

BLITZER: That will be Wednesday.

HAGEL: That will be Wednesday.

Number two, even the chairman of the Federal Reserve, Alan Greenspan, said that when we when you look at numbers, these five- year, 10-year outside projections based on assumptions, which is the best we can do, he has said that these are very conservative assumptions. We don't know how it is going to turn out, but we need some kind of a basis to make some calculations and projections into the future.

Now, I think the real debate here is: How do you continue to sustain the economic growth in this country in order to sustain the spending in the commitments and entitlements? I think we are far better off to give tax cuts to people who will reinvest that, who will develop more of a pool of savings, where the private economy is what makes the economy work, produces jobs -- productivity hinges on that -- not the government. That is as much of a debate as any part of it. KERRY: Wolf, we want to give a tax cut, and we have fought hard to create the kind of economy. Look at what we have had the last eight years. We've had the most extraordinary creation of jobs in the history of this country.

But we've been responsible. We've paid down $363 billion of debt in the last few years. We do not want to go back to the Reaganomics where you try to spend more money on the military, which Bush is going to do, on a number of other things, and give a tax cut that locks you in.

And what's more, on Alan Greenspan -- and this important. They want to put together a tax cut that locks you into a 10-year projection. Now, Alan Greenspan, seven months ago, raised interest rates because the economy was growing too fast. Seven months later Alan Greenspan had to lower them and say it is not growing at all. Now if Alan Greenspan can't see more than seven months ahead, how do they dare give a tax cut that's 10 years out?

BLITZER: We have to take a quick break, but I want you to respond to...

HAGEL: I will respond.

BLITZER: ... the whole issue of triggers that Senator Specter, a Republican, Senator Chafee, a Republican -- they wrote with some Democrats, Evan Bayh and a few others, to say, well, maybe these projections aren't going to be accurate. Let's build in some triggers to make sure that we can afford, they say, these kinds of tax cuts. Is that a good idea?

HAGEL: No, it's not a good idea. Triggers, first of all, should start with spending, not tax cuts.

The economy works on confidence, Wolf. When there is confidence in the economy, the global economy, then there is growth. The confidence is based on many, many things. And when small businesses, big businesses, are talking about investing in the future -- more productivity, more machinery, more plants, better jobs, more jobs -- they do that based on what amount of confidence they have in the future.

Now, projected tax cuts are a very big part of that. But if you do it on a basis of "well, maybe and if," and if you complicate it with different trigger mechanisms, that is going to have a tremendous impact on our future economic growth.

BLITZER: Let's take a caller from Alabama.

Please go ahead with your question.

CALLER: Yes, I was wondering why we can't get the minimum wage law up, where people can make a living at the low end. They are talking about all this tax break and all this bull, and it won't help the poor people one iota. Why don't they raise the wage law? They'd be paying in taxes, they'd pay an income tax, and looks to me like that would help the economy more than this tax break deal.

BLITZER: Senator Kerry, you support an increase in the minimum wage.

KERRY: I do, indeed, and I think it is a shame that our Republican friends blocked us last year from raising the minimum wage. We are trying to get it up. We're years behind the index of where it ought to be relative to what people need to live on. I will fight together with others this year to raise the minimum wage.

But we can address this gentlemen's call by also making sure that we are helping people at the lower end.

Upper-income earners, the top 1 percent of Americans, $319,000 a year or more in income, Wolf. They pay 21 percent of the tax burden of America. But they are going to get, under the Bush plan, 43 percent of the money back, while 25 million Americans get nothing. That is wrong, simply wrong.

BLITZER: All right, I want to move on because there is a lot of other stuff I want to talk to you about, especially the espionage issue that came up this week, the arrest of Robert Hanssen, a long- time FBI counterintelligence agent. How serious is the potential damage here? I know both of you are very interested in this issue.

HAGEL: Well, it is very serious.

HAGEL: And I think one of the things that it forces us to do is step back for a moment to get a sense of the world as it is today. The world is still very dangerous today. It is still very unpredictable today.

And to see that our intelligence apparatus has been violated, there has been a mole at the top of that very, very critical dynamic of security for our country, has been breached, that is not good news. And I think we are going to have to sober up here and understand that we live in the kind of world where intelligence may be even more important as the sophistication of the world becomes more and more dynamic.

BLITZER: Senator Kerry, were you were surprised that there were no polygraphs routinely given to these individuals, these agents at the FBI like Robert Hanssen?

KERRY: Yes, very, very much so, Wolf. In fact, I served the last six years on the Intelligence Committee; I'm not on it anymore.

But I would like to see a very thorough investigation of this. I don't understand, I really don't understand how, in the most sensitive areas of your counterespionage, et cetera, you don't have better procedures in place to be making certain that people are living up to the highest standards. And that this has gone on as long as it has, I am shocked. I mean, I'm really surprised by it, and I think most Americans are.

BLITZER: Should heads roll? KERRY: Well, I think somebody has to be held accountable.

We have this new ethic in America, it is in business particularly. You know, you do badly, you get a terrific parachute, and you go upstairs. We don't seem to hold people accountable the way one used to. People would resign over something like this in the past.

BLITZER: Senator Hagel, we only have a few seconds, but a lot of people are scratching their heads saying, after Aldrich Ames, after all the spies, after all the promises of tightening up counterintelligence, that Robert Hanssen was allegedly spying for more than 15 years in one of the most sensitive positions in the FBI.

HAGEL: Well, I think we're going to have to open up all the windows and the doors and take a new look at our entire intelligence apparatus, the people, the process, the procedures. We've become way too complacent and sanguine here over the last few years. I think, especially, it was brought on with the implosion of the Soviet Union.

That cannot stand. And we must understand how dangerous the world is, as we go on. And that's going to force us to take a very acute look at our intelligence apparatus.

BLITZER: OK, Senator Hagel, Senator Kerry, we unfortunately have to leave it right there. I want to thank both you of for joining us.

Up next: It's now been more than a month since he's been out of office, but Bill Clinton continues to be under scrutiny. We'll get some legal insight into his pardon problems from former Bush attorney general Dick Thornburgh and former Democratic counsel Abbe Lowell.

LATE EDITION will be right back.



CLINTON: There were many, many people, who had an interest, a friend, a relative, but it was all passed on to the White House counsels office. And they, along with the president, made the decisions.


BLITZER: Senator Hillary Clinton responding to revelations that her younger brother, Hugh Rodham, as well as the treasurer of her Senate campaign were involved in winning those controversial presidential pardons.

Welcome back to LATE EDITION.

With us now to help sort out what has become a growing pardon controversy from a legal perspective, are two of the best in the business: Abbe Lowell, the former Democratic counsel for the House Judiciary Committee during the impeachment inquiry, and Dick Thornburgh, who served as attorney general in the first Bush administration.

Gentlemen, thanks for joining us.

And, Abbe, I just want to begin with you. On this whole issue, President Clinton is getting hammered, not only from Republicans but from Democrats as well, a lot of them. I don't think, you know -- your position -- you tell me what your position is on this whole thing.

ABBE LOWELL, FORMER DEMOCRATIC COUNSEL: I'll tell you one position I have is this is a Washington phenomenon where we can exult a decision that we could perhaps all agree was in bad judgment and make it the subject of Senate hearings, congressional hearings, 24- hour talk shows, two or three investigations by prosecutors.

I mean, you know, if bad judgment, in the case of the president's decisions, or bad taste, in the way of the first former first lady's brother, were a violation of law, there wouldn't be enough courtrooms and there wouldn't be enough jails.

I mean, I think people can say they don't like what happened. It doesn't mean that we should turn Washington on its head and conduct an inquisition as if it was the days of the independent counsel.

BLITZER: Is the process going too far right now on that front?

DICK THORNBURGH, FORMER ATTORNEY GENERAL: Well, I think we have to wait and see. This is a little bit different from the past when there have been criticisms of pardons that may have been unwise and the judgment was called into question.

Here you have a suspicion out there that, in particular in the case of Marc Rich, that the pardon was bought and paid for. Why is that? Because of these enormous contributions made by people close to him; Mrs. Rich and Beth Dozoretz and the millions of dollars to the campaign and to the library. And then you have Mrs. Rich taking the Fifth Amendment. You have a refusal to turn over a list of the donors to the library. And I think the fact that President Clinton's appointee as United States attorney in the Southern District of New York has used that as appropriate predicate for an investigation is very much in order.

But again, we'll have to wait and see. Proving these kinds of things is very difficult, as Mr. Lowell knows. You're not going to get a signed contract, it's all -- if anything was done, it was always with a wink and a nod.

BLITZER: And on that front, Abbe Lowell, Marc Rich yesterday did issue a statement. Among other things, he said this, echoing what President Clinton suggested in that article he wrote in the op-ed page of the New York Times last week: "The indictment against me in the United States was wrong and was meant to hurt me personally. The pardon granted by President Clinton remedied this injustice 18 years later."

THORNBURGH: Well look, I think it is important that people frame what is the law, that it now is going to apply to these investigations. And there's really only two possibilities, Wolf.

One is, in the case of the Rich's for example, there's an issue of the money. That is, if money was paid, was it really the money of Denise Rich or was it somebody else's? That's a classic sort of, what's called in the lingo, a conduit-contribution-type event.

BLITZER: Which is illegal?

LOWELL: Which would be illegal if that were a contribution made in the name of another person.

In terms of the motive, though -- it's money and motive. In terms of the motive, why did the president do this? I mean, the notion that we think that he did something for money for example, whether it be to the library or for campaigns. I mean, if he were going to be selling pardons for money, I think Mike Millken (ph) might have been top on the list.

I do want to set out the law. But having said that, remember: It is incredibly difficult to make this case. And I think what has now been exposed, Wolf, and I think it's important, is there's a certain level of Washington hypocrisy.

And here's what it is: Finally, Americans are waking up to the idea that if you make lots of contributions, people pay more attention to you than if you're average American who doesn't. Finally, people are waking up to the idea if you have a lot of money, you can hire a lawyer, you get better justice in America. These are inequities that occur in this system, and when they erupt this way we get outraged, and maybe we should. But it's not an issue of the pardons, it's a bigger issue than that.

BLITZER: People shouldn't be shocked by that, right, Dick Thornburgh?

THORNBURGH: No, I think that's a good point to make. But I think we also are learning another lesson, and that is what happens when you bend the rules and cut corners on recognized government procedures.

Here, this pardon was granted in a process that completely bypassed the Department of Justice, bypassed the Department of State and the CIA if there were national security considerations, gave access to well-connected people, wealthy people, family members, former friends and colleagues.

THORNBURGH: It was kind of like a Middle East bazaar at the end of the administration.

And I think people are justifiably concerned about that, and certainly want to see investigations pursued that might show criminality but also might suggest ways in which the process can be improved.

BLITZER: And Dan Burton -- I want to elaborate on that -- Dan Burton, the chairman of the House Government Reform Committee who's having an investigation, his own hearings on this, he was on ABC earlier today. And he made a similar point.

I want you to listen, Abbe Lowell, to what he said.


REP. DAN BURTON (R), INDIANA: It doesn't pass the smell test, if you will. The president may not have been involved with any illegal activity. But the fact of the matter is, the appearance of impropriety is there. And what we need to find out is what actually transpired, so that the Congress and the American people can rest assured that there was no illegal activity.


BLITZER: Is that the legitimate oversight responsibility of the Congress?

LOWELL: It is. Let's be clear that what the president did should be subject to review. It should be reviewed by the appropriate congressional committees, for sure. Because as Attorney General Thornburgh just said, it is one thing to decide that somebody didn't do it right, cut corners, didn't use the Justice Department -- that exposes the process for in the future being done better, so that presidents can learn that maybe they should use the pardon attorney in all cases and not just in some. That's a policy dispute, and we should have scrutiny. Oversight is the appropriate remedy.

But if it gets too far and people are going to suggest that there was criminality when there is no issue of criminality, or make this the next cause celebre or the scandal du jour in Washington, then they have taken what should be done responsibly and turned it into yet the next media circus.

THORNBURGH: Well, you may see come out of this, for example, a sense of the Congress resolution that hereafter presidents should follow the procedures using the pardon attorney and the Department of Justice. I wouldn't think that'd be a bad idea. I think it's also...

BLITZER: But you wouldn't necessarily want to see an amendment to the Constitution?

THORNBURGH: Absolutely not, no. I think that would be foolish and the kind of overkill that Abbe Lowell is talking about.

BLITZER: Then you agree on that?

LOWELL: Definitely. I mean, that's the kind of, as I said, overreaction, you know, let's impeach the president again, let's change the Constitution. I mean, that's just partisan nonsense.

But what is important is, let's not go too far on the policy oversight either. This pardon power of the president is very important. It was important for former President Bush to be able to do it for Caspar Weinberger without having the pardon attorney involved. There are cases, right or wrong, we disagree or agree, that we have to give the constitutional power where it belongs. BLITZER: We'll pick this up. Unfortunately, we have to take another quick break.

For our international viewers, World News is next.

For our North American audience, stay tuned for the second hour of LATE EDITION. We'll check the hour's top stories and take your phone calls for Dick Thornburgh and Abbe Lowell.

Then, some perspective on this week's other big story, the FBI spy case.

Plus, our LATE EDITION roundtable and Bruce Morton's last word.

It's all ahead in the second hour of LATE EDITION.


BLITZER: This is the second hour of LATE EDITION.


CLINTON: With respect to any of these decisions, you will have to talk with people who were involved in making them, and that leaves me out.


BLITZER: Senator Hillary Rodham Clinton attempts to distance herself from her husband and her brother on the latest pardon controversies. We'll get legal perspective from former Attorney General Dick Thornburgh and former Democratic counsel Abbe Lowell.


UNIDENTIFIED MALE: The criminal conduct alleged represents the most traitorous actions imaginable.


BLITZER: And espionage inside the FBI. How could this continue for more than 15 years? Former FBI counterintelligence agent David Major and former CIA Director James Woolsey provide insight into top secret institutions.

Plus, our LATE EDITION roundtable: Steve Roberts, Susan Page and David Brooks. And Bruce Morton has the last word on a final request from Oklahoma City bomber McVeigh.

Welcome back to LATE EDITION. We'll get to your phone calls for attorneys Dick Thornburgh and Abbe Lowell in a moment, but first, here is Brian Nelson in Atlanta with the hour's top stories.


BLITZER: Now back to our conversation about the Clinton pardons with former Democratic counsel Abbe Lowell and former Bush Attorney General Dick Thornburgh.

Let's take a caller from Beloit, Kansas.

Please go ahead with your question.

CALLER: Thank you. My question regarding the presidential pardons: If President Clinton received money, gifts, compensation or any other compensation -- and I think most Americans believe that -- wouldn't that make the pardons illegal and, therefore, null and void? Thank you.

BLITZER: Let's ask Abbe Lowell first.

LOWELL: Quick, two questions. You know, the presidential pardon power is absolute. That means once he did it, it is done. And whether or not he did something wrong or whether he did something that would be questioned, the pardons remain no matter what happens.

And if he got what you said, you have to be very careful. Under the law, you know, somebody who gives money to a political party because that party person likes the policies of the individual, that is considered OK in our system. You just can't put the money in the pocket of the individual. And that is one of the dichotomies that this is exposing.

BLITZER: So there would be no legal recourse if, in fact, that were proven to be the case?

THORNBURGH: The pardon, once given, is secure.

But I think what the caller may be missing is an old Latin phrase, quid pro quo. And that is what would have to be proved in the event that money found its way into the coffers of any of the Clinton interests in connection with a pardon that was given.

BLITZER: You know, a lot of Americans, Abbe Lowell, seem to believe that money was a factor. Look at this Gallup poll that just came out: Why Clinton pardoned Marc Rich, the fugitive billionaire in Switzerland. Fifty-eight percent say money was a factor; only 22 percent say justice was a factor.

LOWELL: Well, I think sometimes people are mistaking the money to the access and the familiarity. I mean, everybody must realize now that if Marc Rich had not been represented by Jack Quinn, who was somebody who the president could believe in the word of, and had not had all the people put together the nice glossy books, and had not been able to sort of get it all done, then that person may not have gotten the pardon, Marc Rich might not have.

And therefore, you could easily say, "Oh, it's money," but it's more complex than money, Wolf. And I think, again, one of the nice parts, one of the silver linings in this pardon controversy is that it does bring to light the influential of contributions, whether they be in campaigns or whether they be for libraries, and that ought to be scrutinized, because it does get you access and it gets you more access than the average American. BLITZER: Money talks.

THORNBURGH: One of the ways to move this forward, it seems to me, is for the president to heed the suggestions that he come forward with a full, detailed explanation of why these pardons were given -- President Ford did that with regard to the Nixon pardon -- and also, to tell the people at the library to cease resisting the disclosure of the people who actually gave them money.

I know the president made an attempt a couple weeks ago to explain this in an essay in the New York Times, but it was flawed and raised more questions than it answered. And I think that both of the Clintons ought to recognize that this is not going to go away until there's some satisfactory review in which they fully participate.

BLITZER: Lawyers, as you know, Abbe Lowell, better than I, are always reluctant to have their clients talk too much about any kind of subject that has potential criminal investigations surrounding it. But if you were working for the president right now, which you're not, but if you were, would you advise him to go testify or give an interview or speak out and explain his thinking?

LOWELL: Testify, depending on where, perhaps not, because some of these hearings that take place are really more a set-up than trying to get at the real truth.

But I would say that the president probably would do himself a lot of good if he would explain the circumstances, and he has a good explanation to give.

At the end of the day, Wolf, we may disagree. We may still find that he was in bad judgment, but at least people will say, hey, look, if I were doing this for money, why wouldn't I take money from Michael Milken or the Hollywood community that were pushing money for so many other people. It wasn't about the money.

Now, it may be that at the end of the day I was misled, or I trusted people too much, or I didn't get all the information, or I was distracted because I was leaving the White House, but it wasn't about money. I think he'll do himself a service in some forum to explain more than the op-ed piece.

BLITZER: All right, lest's take another caller from Philadelphia.

Please go ahead with your question.

QUESTION: Yes, I would like to know, we always mention Caspar Weinberger when they mention Republican pardons. We never mention the fact that George Bush, Sr., pardoned six drug dealers from Texas. And if we took all that time and I asked my congressman to start investigating everything, then we'll be in this investigation mode forever.

BLILTZER: What about that? THORNBURGH: Well, I think if you want to go back over the history of pardons, you're going to find any number of people who are probably unattractive who received presidential pardons.

BLITZER: By definition, someone who's going to be pardoned is a criminal.

THORNBURGH: You got it. Now the additional factor here is that there are allegations that have caused the United States attorney, a Clinton appointee I have to remind you, in Manhattan to open a grand jury investigation into possible criminal conduct in connection with the grant of the pardons. That's quite a bit different thing, as we've agreed today, than poor judgment or a mistake.

LOWELL: Look, if you looked at every pardon of every president in last 50 years, you could find the grounds to ask some question. And if that era was an era such as we live in now, then you go from a question being asked to an investigation being opened. We could have investigations of former presidents too. There are always questions.

THORNBURGH: That's an unjustified shot at Mary Jo White, Abbe, who is the U.S. attorney in New York and is a thorough professional and, as I indicated, was a Clinton appointee. She's not out to follow this for... LOWELL: Now, the one thing that she should investigate that merits the review that she's doing is the issue of whether or not money was improperly labeled and improperly spent. And that should be the subject of a criminal investigation.

BLITZER: What about the issue of...

THORNBURGH: If you can establish a quid pro quo for any of these contributions, these millions of dollars that tumbled into the library's coffers, that's where the advantage...

BLITZER: But what about the...

LOWELL: Yes, but if she could establish that somebody was also involved in a crime elsewhere, she could open an investigation about that.

But you know as well I do that the idea of a quid pro quo, given the political circumstances -- that is, the political circumstances that you are allowed to make contributions to parties...

BLITZER: But what about the other investigations supposedly about the Hasidic Jewish community in upstate New York that voted almost unanimously for Mrs. Clinton and four members of that community received pardons?

LOWELL: By definition, that if people are saying, "Why did any particular of those pardons occur?" and they raise the question, "Well, was it because of some quid pro quo?", then I guess could you say it raises the -- reaches the threshold to open an investigation, Wolf. But I mean, as the allegation there that this community pledged their votes for Mrs. Clinton in exchange for a pardon being granted without there being... BLITZER: Would that be illegal?

LOWELL: Yes, it could very well be illegal.

THORNBURGH: Surely, absolutely.

BLITZER: Then that would be the focus of the investigation?

LOWELL: Sure, and then you could just say they did it because they also given her $100,000. But the idea is that there is no evidence of any of this. And what is the threshold that you open an investigation in this era, where even having an investigation is deemed to be "Oh my God, what's going on?"

BLITZER: All right. Dick Thornburgh, you get the last word.

THORNBURGH: My view is there is an appropriate predicate for this investigation, and it is premature to pass judgment on it. I think the U.S. attorney is doing exactly what she ought to do.

BLITZER: OK. Dick Thornburgh, Abbe Lowell, thanks for helping us understand the law and pardons a little bit better. Appreciate it very much.

When we return, a betrayal by one of its own leaves the FBI engaged in massive damage control. We'll get some insight into the spy controversy from former CIA Director James Woolsey and former FBI counterintelligence agent David Major.

LATE EDITION will be right back.



LOUIS FREEH, FBI DIRECTOR: The FBI agent who raised his hand and spoke those words over 25 years ago has been charged today with violating that oath in the most egregious and reprehensible manner possible.


BLITZER: FBI director Louis Freeh announcing the arrest this past week of veteran FBI Agent Robert Hanssen on charges of spying for Russia.

Welcome back to LATE EDITION.

Joining us now to talk about the case are two guests: James Woolsey served as the director of the Central Intelligence Agency under former President Clinton, and David Major served as a top FBI counterintelligence agent. At one point, he was Hanssen's boss.

Gentlemen, thank you very much for joining us.

Let's begin in a little bit, David Major, and talk about Robert Hanssen. You know him. You worked with him, you supervised him. What do you think made him turn, allegedly, like this?

DAVID MAJOR, FORMER REAGAN COUNTERINTELLIGENCE ADVISER: I met him in 1981 when he and I were both GS-14s in FBI headquarters, and then later I became the supervisor of his supervisor.

And I've really looked at this case a lot. Our center has studied it extensively in the last week, and we are trying to come up with that same answer. We always ask that question in espionage, why? And sometimes we never have a clear answer.

But I don't think this was a case purely about money. I don't think was he was in it for the gain. I do think he was in it possibly for the game, because Bob was a very bright man, and the opportunity to beat the system would appeal to him. And it is a very complicated answer, but I think that is part of what was behind Bob Hanssen.

BLITZER: In it for game, not the gain. Does that make sense to you?

JAMES WOOLSEY, FORMER CIA DIRECTOR: Well, it doesn't make sense to me, but I think it may be right. If I read the affidavit, it looks as if living on the edge and having this complete dual identity that he had -- the very devout religious man, family man, living simply in the light, on one hand, strongly anti-communist; on the other hand, working for the KGB -- it appeared to be something that intrigued him.

And one of these notes in the affidavit he talks admiringly about Kim Philby, the British spy who spied for Russians, and being interested in doing something like this since he was 14 years old.

BLITZER: You know, one of the shocking things that has come out, David Major, since the arrest is that there were no polygraphs routinely given to people like you or Robert Hanssen over the years.

MAJOR: That is not really true. I was polygraphed many times by the FBI.

BLITZER: Well, supposedly, Robert Hanssen was not polygraphed.

MAJOR: That was sort of aberration. If I could take you through the polygraph controversy, I think it is very important to understand this case. In the wake of the John Walker espionage case in 1985 -- that's when I went to White House as the director of counterintelligence programs.

We came up with a series of recommendations to enhance American security. And one of them was, it was signed by the president, Ronald Reagan, in November of 1985, is that everyone who had access to SCI material or Comsat (ph) material would have to take a polygraph.

BLITZER: Secure compartmented information.

MAJOR: Correct, the highest, the kind of information that Bob Hanssen compromised along with other things. And that we had to do that on a regular basis and random basis. However, that policy was not implemented. When the secretary of state went on national television in December and says I will take it and then I'll resign. And unfortunately, the administration never went forward and implemented that national program.

BLITZER: At the CIA, there were polygraphs routinely given.

WOOLSEY: Oh, yes, every five years.

BLITZER: But Ames passed the polygraph.

WOOLSEY: Right, that is part of the problem with polygraphs, which is that they work for most people, but they have both false positives and false negatives. And even with an experienced operator, you can sometimes have someone beat them when he's lying. You can also sometimes pick up indications that someone is lying when they are really not.

BLITZER: But don't they serve -- and I want to show our viewers an editorial in Saturday's New York Times on this issue of whole issue of polygraph. Let me put it up on the screen: "Law enforcement agencies have a tendency to place too much reliance on lie detector tests. They are unreliable as the Ames case showed."

But don't they serve as a deterrent? If, and it's a hypothetical, if Robert Hanssen had known that every year or two years he would have to go through a polygraph, might not he have thought a little bit harder about whether he was supposedly going to be doing this?

WOOLSEY: The CIA has always a has been a model on how to do this, and one of the advantages of a polygraph is it's a tremendous deterrent effect. I mean there are a number of classic examples in which people like David Barnett of the CIA wouldn't go back in once he became a spy because he was afraid of the polygraph.

But it is important to understand in the Hanssen case that he really came out of access to Soviet programs in '92. And this was the time that the FBI was ratcheting up its use of polygraphs.

In fact, in the post-Walker period, and clearly in the post-Ames period, there's been an ever-increasing use of polygraph. But by that time, Bob had manipulated his career so he wasn't in a position to have access to the best material. We don't even know if he was a spy or active between '92 and '99, because the indictment stands moot during that period.

MAJOR: And that is when the CIA stood up to the plate and really has enhanced its program.

BLITZER: At that time, yes.

You've read the more-than-100-page affidavit outlining the government's case against Mr. Hanssen, a lot of it does read like a spy novel. I read the whole thing. I'm sure both of you have read it, as well. If you take a look, though, at the damage allegedly done by Mr. Hanssen, give us a sense: Is it worse, on par, or a lot less than what Aldrich Ames was convicted of doing?

WOOLSEY: Well, Ames got 10 and perhaps more people killed, and so from a sort of moral point of view, what he did was hideous. He compromised our human intelligence operations against the Soviet Union and Russia very badly. But as nearly as we can tell, he didn't have access to much in the way of technical programs and the like.

One of the damaging things about Hanssen is, assuming the allegations are correct from the affidavit, is that he had a wide access to a range of programs in different agencies, including the CIA, and technical collection programs. And so, in a way, some aspects of that could be more damaging than Ames, even though apparently he only got two people killed along with Ames, rather than a dozen.

BLITZER: David Major, based on what you know right now, and you had -- I'm going to put you to the test. Who caused more damage to the U.S. intelligence community, Aldrich Ames or Robert Hanssen?

MAJOR: During the period of 1988 to 1990 where Bob appears to have committed his most damage, he probably committed more damage to NSA and the CIA and the FBI during that period, and he took away opportunities for the future.

I think it's premature to make a judgment who's the worst between the two, and it serves no purpose. Clearly, Bob, however, was in a position and, according to the indictment, compromised a lot of very sensitive programs. And when the damage assessment is done, we'll be able to make that, I think, intelligence judgment.

BLITZER: OK, we have to take a quick break. We have a lot more to talk about.

When we return, your phone calls for James Woolsey and David Major. LATE EDITION will be right back.


BLITZER: Welcome back. We're continuing our conversation about espionage within the FBI's ranks with former CIA director James Woolsey, and former FBI counterintelligence officer David Major.

I want you to listen to what Oleg Kalugin, a former KGB -- was he in the KGB?

MAJOR: Yes, he was.

BLITZER: He was in the KGB, now living in the United States, living here in Washington -- what he said this week, what this suggests about U.S.-Russian relations now, with a former KGB agent, namely, Vladimir Putin, the president of Russia, in charge over there. Listen to this.


OLEG KALUGIN, FORMER KGB GENERAL: With Mr. Putin back -- I mean, the old KGB guys back in power, you would not expect anything else but the intensification, the redoubling of the efforts against the United States and United States allies.


BLITZER: Mr. Woolsey, I thought you there was a new relationship between United States and Russia after the Cold War, where this kind of classical espionage was not supposedly necessary.

WOOLSEY: Well, I think there would be from the United States' point of view. I don't think most people in the United States government, Clinton administration or this administration, who work on Russia matters, wish Russia anything other than well. We'd like for Russia to be prosperous and a democracy, and we don't have any strategic interests at odds really with Russia, fundamental ones.

It's from the Russian side. I think what Mr. Kalugin said is right. I think, although things were rather warm and friendly there for a couple or three years early in the Yeltsin era, today, I think I would have to say Mr. Putin is headed back toward, you know, suppressing freedom of speech and freedom of the press in Russia, cracking down on religions. He's headed back maybe not at 60 miles an hour, but maybe around at 30 miles an hour, towards some of the very old think.

BLITZER: I know, David Major, you worked with Oleg Kalugin, and he still works for you right now, for your center. But is that true, that the level of espionage, Russian against the United States, and presumably U.S. against Russia, has intensified recently?

MAJOR: Some of the public indicators show that. I mean, in September of 1999 it was revealed that there are as many intelligence officers from Russia in the United States as there were before Ronald Reagan kicked out 100 in 1986. And the numbers had gotten back.

When we looked at the Gusev (ph) case, which was in 1999, when they were putting -- planting this device (inaudible) State Department. It's a very, very dangerous kind of operation, and there's a lot of risk with it. The fact that they would take a chance to do that indicated it was in their national interest to conduct intelligence, but we should never be surprised. Nations conduct intelligence because it's in their national interest to do so.

BLITZER: Been going on a long time and presumably will be going on for a lot longer.

Let's take a caller from Connecticut.

Go ahead, please, with your question.

CALLER: Hello, I'm concerned about the lack of security issues at this high level. How do we make sure that it doesn't happen in the future? BLITZER: All right. You want to handle that?

WOOLSEY: Well, it's hard to be certain, really impossible to be certain it's not going to happen in the future, especially with somebody as clever as Hanssen apparently was, leading this entirely proper life, in a sense. He didn't spend money wildly the way Ames did, for example, he didn't show many of the indicia that spies often do.

There may be some things that can be improved. Perhaps the Bureau's use of polygraphs should be shifted some, perhaps there is some types of financial investigations of people's finances that would have uncovered something. But it's important to remember that this fellow was very clever and knew what he was doing in order to essentially meld into the woodwork and not stand out at all.

BLITZER: William Webster, a former FBI director, a former CIA director, has been asked by Louis Freeh to head this blue ribbon panel looking into all of this. He says in the new issue of Time magazine out today, he says this: "If you've lived in the real world, you know there is no absolutely failsafe set-up that will quickly and immediately identify a good man or woman who goes sour."

So, basically, what he is saying, it almost seems like he's throwing it up his hands and saying, "It's going to happen, and there's nothing much we can do about it."

MAJOR: You cannot prevent espionage, and that's a very important thing. What you want to do is deter it for as short a period of time as you can, but you cannot say that it won't happen.

WOOLSEY: You can deter it, you can limit the effectiveness of it by compartmentalizing information, but if you overdo that, then you can't really run your organization very effectively. And you can take precautions and make it less likely.

But it's been going on since at least the time of Joshua. I think the second chapter of the Book of Joshua is an espionage story. And it'll be going on forever.

BLITZER: And the rivalry between the CIA and the FBI -- you worked at the CIA, you worked at the FBI -- it was almost legendary, although we hear that in recent years there has been much better cooperation.

WOOLSEY: It was quite bitter in the early days between Hoover and the CIA when it was formed, and it's gone through various cycles since.

I think a major step was taken at the end of 1991, when Paul Redmond out at the CIA took over the mole hunt that eventually found Ames and began to work closely with the Bureau.

WOOLSEY: And then we took some steps after Ames was arrested in '94 to improve some of the security procedures at the CIA and also to work more closely with the Bureau. I don't know how it went during the Deutch years, but since George Tenet's been at the CIA, I know he and Louis Freeh have been cooperating closely on a lot of things.

BLITZER: What about that point?

MAJOR: I'd really like to comment on that because I joined the Bureau in 1970 when Hoover was there and saw the transition of a period of time.

Starting in the early 1980s, the relationship between the CIA and the FBI was excellent. There were some controversies and conflicts over the period of time, but it became increasingly better during the period of time.

And what I found is that if you look back at now the last 10 years, when you were at the DCI, we look at what has improved. The agency has made a tremendous improvement in its counterintelligence program and both organizations share personnel. When we look for simple answers to very complex problems in here -- and it's not just a problem between an agency rivalry. I think there is a much closer relationship between the two organizations.

BLITZER: We only have a second left, very quick answer to both of you. A lot of people out there are asking themselves, are there other spies, double agents, moles in the CIA, the FBI, elsewhere in sensitive positions in the U.S. government right now that the U.S. government should be trying to find?

WOOLSEY: We can hope not, but you always have to act as if there were. You have to presume everyday when you go to work that there may be a mole there that could seriously damage you. Anything else will leave you open.

MAJOR: There always has been, there always will be.

BLITZER: All right, short answer to the point. David Major, Jim Woolsey, thanks again for joining us.

WOOLSEY: Good to be with you.

BLITZER: Thank you.

Just ahead, after bypassing it for a month, President Bush finally faces the Washington press corp. How did he do? We'll go around the table with Roberts, Page and Brooks when LATE EDITION returns.


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

All right, Steve, the story of the Clinton and the pardons, it's a story that simply won't go away. Will it ever go away?

STEVE ROBERTS, CNN COMMENTATOR: I think it'll eventually go away, but one of the things that's really clear this week is how few Democrats are willing to defend Bill Clinton.

You know, for a long time, Clinton benefited from several factors. He benefited from his enemies. You know, the Democrats could rally around because they hated Newt Gingrich and they hated the impeachment managers. There's no way any Democrat can say that this is being done to Bill Clinton by his enemies. This is a totally self- inflicted problem.

And the other thing is, Clinton benefited from the fact that Democrats drew strength from Clinton's strength. If he was strong, if he could sustain his vetoes, if he could dominate the debate, then Democrats had power. They don't need him anymore. And so, a lot of the forces, the dynamism that supported Clinton in the past have dissipated.

BLITZER: Well, let me ask David. Would it be different if President Clinton were still in the White House right now? Let's say he granted these pardons six months ago and he still was president. Would it be different right now?

DAVID BROOKS, CNN COMMENTATOR: There'd be more supporters, that's for sure. Jack Quinn, if Al Gore had won, he'd have to resign if he had represented Marc Rich.

But I think this is going on for a couple of weeks for a number of reasons. The essence of this scandal was articulated by Carlos Vignali, the drug dealer from Los Angeles who was pardoned.

BLITZER: With the help of Hugh Rodham.

BROOKS: Exactly, and he said word went around the prison that it was time to go to the White House to get some pardons. So word was going around the prisons, and what that meant was the White House had said don't go to the Justice Department, go to us. And that meant every lawyer with good White House connections could get or at least try to get somebody a pardon.

And where the story is going to go from here is those connections. How did a drug trafficker from Southern California get connected with Hugh Rodham? How did a tax evader in Little Rock get connected with the guy who was Hillary Clinton's finance chair?

BLITZER: William Cunningham.

BROOKS: So it's all that whole network that we still have to investigate.

BLITZER: You know, Susan, if you look at the Tindel (ph) report this week, the amount of minutes on the three broadcast networks evening newscasts -- take a look at this, we'll put it up on our screen. Former President Clinton got 30.3 minutes, pretty precise. President Bush, he's in the White House right now, he got a total of five minutes on the evening newscasts this week.

SUSAN PAGE, CNN COMMENTATOR: You know, this may be doing Clinton a lot of harm and it's doing Democrats some harm, but I don't think it's doing Republicans or the White House any good, you know, even if this scandal continues for weeks or months. I think it's doing...

BLITZER: But what the argument that his approval ratings go up as Clinton's approval ratings go down?

PAGE: George Bush has a task to do right now and that is to make his case for his initiatives. You know, this is the big year and next year, not even as much. This is a year where he needs to deliver on some of his campaign promises; he needs to make a connection with the American people; needs to convince them that he's legitimately the president with a mandate that he can exercise.

And this is getting -- initially, maybe the comparison was helpful to George Bush, but I think he's now at the point where he needs to have some attention, he needs to make his case. This is getting in the way.

ROBERTS: And there's another problem too, because the next person in Washington who appoints a big contributor to a big job is going to be named George W. Bush and the whole -- he's going to name big people, contributors to him, to ambassadorial posts, to administration jobs, to commissions. This whole notion that somehow, oh my goodness, we're so horrified at the notion we're rewarding big contributors.

Now, in no way defending any of the pardons, but this larger notion that somehow this would be inappropriate, Republicans could be creating a problem for George Bush.

PAGE: Bush is not making that argument. Bush's argument is, this has nothing to do with the future, I want to talk about the future. So it's going to be hard to hang him on that particular hypocrisy because he is not arguing that this is an outrageous case. He's arguing, let's not talk about this, let's talk about my agenda.

BROOKS: But a lot of Republicans are making that case.

BLITZER: If you look, David, at the Gallop poll, they came out with favorable ratings for George W. Bush. Let's take a look. Right now, 67 percent have favorable views of George W. Bush. Hillary Clinton had 49 percent, Bill Clinton is down at 42 percent.

BROOKS: Yes, I would say there's one Democratic message that gets out and one Republican message. And the Bush Republican message is going to get out Tuesday night, which is tax cuts. I would say if Clinton is drowning out anything, it's the Democratic counter-message, because if there's one Democratic story, it's going to be Bill Clinton.

But to me the big thing is the mood in Washington.

BROOKS: Democrats were furious about Florida, many are furious about this.

But one other thing, it dampens down morale, and we're going to start on Tuesday with this tax fight and this budget fight, which is going to be a good, old-fashioned Republican-Democratic fight: Republicans cutting taxes, Democrats not so much.

This is a pure fight, and so what matters is morale in the troops, and I would say Democratic morale has been hurt by Clinton, and it's going to spill over into this tax fight.

BLITZER: Mrs. Clinton, the new senator from New York, her brother was out yesterday. I don't know if you saw the the video of him in front of his house down in South Florida, but I want to show a little snippet of that, because he was once again, I guess, defending himself. I am not so sure how effective he was, but look at this.


HUGH RODHAM, SENATOR CLINTON'S BROTHER: And it doesn't matter how long you guys sit out here, it's not going to make a difference.

Why aren't I talking about it? Because it's not in anybody's best interest to do so. That's why, and you know that to be true. So that's all I have to say.

Any more flower deliveries or phone calls about deaths in the family, I'm going to have to ignore them even though they might be true.


BLITZER: You're familiar with the stakeout outside someone's house.

PAGE: Yes, I guess we've all done stakeouts at one point or another.

I actually think the American people have some tolerance for embarrassing relatives.


PAGE: Many Americans in their own families may have embarrassing relatives. I don't know about you, Wolf. But in my family...

ROBERTS: A lot of relatives are embarrassed by us, all the time.


PAGE: But I actually think this is quite damaging to Hillary Clinton in the same way it's damaging to George Bush, because this is the point she wants to make her own independent stature as a political leader.

It's getting in the way of her doing that, and more serious, it seems to me, than the Hugh Rodham case is the New Square pardons that were -- and where there is an allegation, or some people suggest, that votes were delivered in exchange for a pardon, votes in her Senate race. This is going to be the subject of a criminal inquiry. That seems to me to be more damaging than the fact that she has a brother who's exercised poor judgment. BLITZER: Unfortunately, we have to take a quick break. We're going to pick this up when we come back.

Stay with us. Right after the break, we'll also talk about some other stuff. Forget about "The Washington Post" and "The New York Times," is this paper becoming the new paper of record, all the news that's fit to print? The roundtable weighs in when LATE EDITION continues.


BLITZER: Welcome back to our roundtable.

David, President Bush finally had his first news conference one month into his administration. "Finally," there were some complaints from those of us in the press corp. How did he do?

BROOKS: Well, "her and he" didn't do too great. It was not like William F. Buckley using a lot of long words up there.

BLITZER: You mentioned that, you talk about the grammar. We have a little clip about some of his syntax, some of his grammatical errors. This is someone who got a masters degree from Harvard University...

BROOKS: There's your explanation right there.

BLITZER: But listen to this...


BUSH: You teach a child to read, and he or her will be able to pass a literacy test.

I am thankful that he's coming across, actually he'll be coming down from Canada, but coming across the sea to visit us. Laura and I are looking forward to having a private dinner with he and Mrs. Blair Friday night.


BLITZER: Is that what they teach people at Harvard?

BROOKS: No, I think that was Yale, actually.

Listen, there's this publication that comes out called The Hotline where they report on shows like this one. And if you ever read your own comments, you sounds like a moron. So, I don't rest a lot on that, but he's not the most articulate guy. But neither was George Washington, neither was Dwight Eisenhower. You can be a good leader and not be good at this particular facility.

ROBERTS: I think one of the questions is sort of how the reputation grows. You know, when we covered Ronald Reagan, you and I covered the Reagan White House, people would sit there holding their breath thinking he might make some mistake. But even when he made mistakes, people thought, oh, well, that's just Ronald Reagan. Dan Quayle, every single time he made a mistake, everybody made something of it.

These are exaggerated poles. But does George Bush become Reagan where people excuse all of these foibles, or does he become a Quayle figure where they become objects of ridicule? And I don't think we know the direction.

BLITZER: Well, so far, Susan, it looks like he's becoming Reagan.

PAGE: I think it depends on what happens. If the economy is good and there's peace abroad, he's going to be Ronald Reagan. No one is going to care whether his grammar is right. If the economy tanks and there is serious crisis and he doesn't seem up to handing it, that's when it will worry people, whether he's up to the job, not specifically whether his grammar is good or not.

BROOKS: I personally have underestimating him for two years. When I looked at him during the primary season, I thought no way this guy could win. A lot of people want to become president, he did it. That's no small achievement.

ROBERTS: Except once you're in the White House, you are measured by a different standard. And there's a sense of dignity, an aura that comes with the job, but you have a role to fulfill. The head of state job is a big job, and it involves being able to inspire confidence, inspire support. And that press conference does not suggest that he is at least yet ready to do that job as head of state.

BLITZER: He was very successful at staying on message. He didn't deviate from any of the messages that he, obviously, had been well prepared for going into the news conference.

But let's change the subject and talk a little bit about the press, one of our favorite subjects, the "National Inquirer." Look at this, look at some of the front pages of the "National Enquirer" in recent weeks: They broke the story about Jesse Jackson and his love child. They broke the story about the Clinton pardon and Hugh Rodham, the $400,000, which it eventually turned out to be the case. Newsweek magazine gives him an up (ph) periscope this week saying, Pulitzer prize, get ready.

PAGE: These are legitimate stories that the mainstream press has been forced to follow, and I think you have to give the National Inquirer a lot of credit for landing them and landing them in solid ways, demonstrated they were true. In the Hugh Rodham case, they had a copy of the bank transfer to show that there was actually money that changed hands.

BLITZER: David, does this mean we have to start reading the National Inquirer?

BROOKS: You don't?

(LAUGHTER) BLITZER: I don't. But if you tell me to, I will.

BROOKS: I'm a Globe man myself.


In some ways, Bill Clinton started this. You know, when he ran for president in 1992, he went on MTV talking about boxers or briefs. He went around the traditional media. The idea we were more relaxed, post-Cold War era. And now we have this atmosphere, which is, like I said last week, like a royal family. Less like politics and policy, more like a scandalous royal family that Bill Clinton fed into. I suspect George W. Bush will not feed into it.

BLITZER: You have 10 seconds.

ROBERTS: I give the Inquirer a lot of credit. But they diminish their own credibility with a lot of stories you cannot believe. And so the reader is left, "Which ones do you believe?" And they have to build up a track record before they are an authoritative...

BLITZER: And the "National Enquirer" does have an advantage over the rest of us mainstream media: They pay their sources for information, which obviously helps sometimes.

David, Susan, Steve, thanks for joining us.

Just ahead, Bruce Morton's last word.


BRUCE MORTON: Timothy McVeigh, the Oklahoma City bomber, is to be executed May 16. He wants his execution to be televised. Should it be?


BLITZER: Is it time for Americans to witness government- sanctioned death?


BLITZER: Time now for Bruce Morton's last word on executions. Do we have to watch?


BRUCE MORTON, CNN CORRESPONDENT (voice-over): Timothy McVeigh, the Oklahoma City bomber, is to be executed May 16. He wants his execution to be televised. Should it be?

McVeigh's wishes, of course, count for nothing. His lawyer says McVeigh is in favor of public scrutiny of government action, and he may think his killing will show the government behaving brutally.

But his truck-bomb killed 168 men, women and children, and watching him die is more likely to spark tailgate parties than outrage.

The debate over the death penalty these days isn't pro or con. Polls show Americans favor it, as did both major presidential candidates in last year's election.


BUSH: I was asked, "Do you support the death penalty?" I said I did, if administered fairly and justly, because I believe it saves lives.



AL GORE, FORMER PRESIDENTIAL CANDIDATE: I support the death penalty. I think that it has to be administered not only fairly, with attention to things like DNA evidence, which I think should be used in all capital cases, but also with very careful attention.


MORTON: The new debate involves new technology, like DNA evidence. And do we sometimes kill the wrong man? There is no question of that here.

Executions used to be public, of course. The British hanged felons at Tyburn, where London's Oxford Street runs now, and huge crowds came. They were often violent, apparently, and pickpockets usually had a good day at a hanging. But that was back when a night on the town was described as "Drunk for a penny, dead drunk for two pence." Times have changed. Britain abandoned public executions back in 1868.

Hangings must have been dramatic. So must other public executions in olden times, a Catholic queen burning Protestant bishops and so on.

Gary Gilmore, the first American executed after the courts repealed a temporary ban on capital punishment back in the 1970s, died by firing squad, dramatic but private.

Electrocution can be dramatic.

Lethal injection, the method to be used on McVeigh, is, they say, like watching someone fall asleep.

But it's really a moral question. If we the people condemn someone to death, shouldn't we watch our will being done? Albert Camus, the French philosopher, wrote, "One must kill publicly or confess that one does not feel authorized to kill."

Governments do kill by executions or by, from time to time, sending their young people to fight wars. Vietnam was the first war Americans saw every day in their homes, thanks to television. Did it change how they felt about war? Probably. So is Camus right? Should we kill only if we are willing to watch the act? Something to think about as Timothy McVeigh's time runs out.

I'm Bruce Morton.


BLITZER: Thanks, Bruce, and now it's your turn to have a last word.

Paul from California, a self-proclaimed "Goldwater Republican," writes this: "Mr. Clinton has performed a truly great service to the republic. Never before has the corrupt power that exists on this globe been so exposed. This may be his legacy."

Mary from Asheville, North Carolina says this about last week's show: "You spent valuable time today discussing the Clinton pardon when you should have been talking about other matters that are important to the American people. If you must discuss the Clintons, then let's go back and investigate the Bushes, Reagans and so forth. You are applying a double standard just as the Republicans are."

Another viewer writes this: "Why mess with Clinton anymore? He is above the law. He can lie under oath and get away with it. What makes anyone believe he will tell the truth now? He does not know how." Jack from Virginia asks this: "Since Congress is investigating Clinton's absolute pardon power of Mr. Rich, why don't they do for democracy a real favor and investigate the outrageous decision by the U.S. Supreme Court to stop the Florida presidential recount and select Mr. Bush as president?"

And finally, Mary from California has this to say about presidential press conferences: "The president of the United States has a slew of duties -- see oath of office -- none of which includes feeding the media machine as you all best see fit. I would rather the leader of the free world spend his valuable time governing rather than preparing for a 30-minute pop quiz by journalists."

Remember, I always welcome your comments. You can write to me at "," and you can sign up to receive my free e-mail previewing LATE EDITION every weekend, at ""

When we return, we'll reveal what's on the cover of this week's major news magazines. Stay with us.


BLITZER: Let's take a look and see what's on the cover of this week's major news magazines.

Time magazine has "Death In The Fast Lane: How a racing legend embodied the passions and perils of NASCAR," with the late Dale Earnhardt on the cover.

Newsweek examines the mind of a spy: "Why would a trusted FBI agent betray us to the Russians?" with alleged mole Robert Hanssen on the cover.

And on the cover of U.S. News and World Report: "A Spy Story: How an American double agent beat the FBI at its own game and finally got caught."

That's your LATE EDITION for Sunday, February 25. Be sure to join us again next Sunday and every Sunday at noon Eastern for the last word in Sunday talk.

And if you missed any of our program today, you can tune in tonight, 7:00 p.m. Eastern, for a one-hour replay of LATE EDITION.

I'll see you tomorrow night on "WOLF BLITZER REPORTS." I'll be talking with former New York Governor Mario Cuomo. That's at 8 p.m. Eastern.

Until then, thanks very much for watching. Enjoy the rest of your weekend. I'm Wolf Blitzer in Washington.



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