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Inside Politics

Bush Administration Seeking to Capitalize on Worries About the Economy; Environmentalists Upset Over About-Face on CO2 Emissions

Aired March 14, 2001 - 5:00 p.m. ET


ANNOUNCER: Live from Washington, this is INSIDE POLITICS with Judy Woodruff.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm sorry people are losing value in their portfolios, but with the right policies, I am confident our economy will recover.


ANNOUNCER: The political spin, after another wild ride for the stock market.


REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: This administration doesn't have an economic plan that really deals with the reality of America's economy today.


ANNOUNCER: Some environmentalists are blowing their stacks over a presidential about-face on regulating power plant emissions.

And a report on federal pork. Watchdogs say Congress is spending higher on the hog than ever.

Now, Judy Woodruff takes you INSIDE POLITICS.

FRANK SESNO, CNN ANCHOR: And thanks for joining us. I'm Frank Sesno, sitting in for Judy today.

We begin with the political and financial fall-out after yet another stomach-churning day on Wall Street. At the closing bell an hour ago, the Dow Jones Industrial Average was down more than 317 points, plunging below the 10000 mark for the first time in five months. The Nasdaq fell, too, more than 42 points, ending the day there above 1900.

In response to the sell-off, Democratic leaders in Congress took aim at the White House today, while President Bush put in yet another pitch for his tax cut. Here is our senior White House correspondent John King.


JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT (voice-over): Another down day on Wall Street, yet the president adopted a slightly more optimistic tone.

BUSH: Well, I'm concerned that a lot of Americans' portfolios have been affected. People that put aside money in the stock market are now seeing their asset base decline, but I've got great faith in our economy.

KING: The language Mr. Bush uses to describe the economy is being analyzed as closely as the details of his tax cut and budget proposals. The markets are nervous, consumer confidence at a more than four-year low, and Democrats say the president and his team should accept at least some of the blame.

GEPHARDT: Part of this, I guess, was started when Dick Cheney a few months back said we're in a recession. I mean, we've been talking ourselves into this. Now, it's happening. Now there are real facts out there.

KING: Democrats say Mr. Bush is deliberately painting a gloomy picture of the economy to help build political support for tax cuts. Not so, the White House says, but the president does sell his tax cuts as just the tonic for a struggling economy.

BUSH: With the right policies, I'm confident our economy will recover. The right policies, fiscal policies, and that means giving people money back in plain language.

KING: Mr. Bush proposes $1.6 trillion in tax cuts over 10 years, but even if Congress gave the president exactly what he has asked for, the immediate tax cuts for this year would total only $5.6 billion.

ROBERT REISCHAUER, URBAN INSTITUTE: Harry isn't going to lean across the table to Louise as they're drinking their morning coffee and say, wow, what an impact. Now, we can go on that Caribbean vacation or now we can go out and buy that new car.

KING: The Bush team acknowledges any immediate tax relief would be quite modest.


KING: But just as Democrats say the president is causing a negative impact on market and consumer psychology by saying bad things about the economy, the White House says the knowledge that even a small tax cut is on the way, with more to come in the years ahead, would have a quite a positive psychological impact, not only on consumers, but also on Wall Street -- Frank.

SESNO: John, you're really talking here a lot about the bully pulpit, which is something that the presidents have and they use and they use it to talk up the economy in bad times. FDR did it, of course. Ronald Reagan did it. What role for the bully pulpit and this president does the White House see?

KING: Well, the White House says the president's job is to tell the truth. They discount this criticism from the Democrats, saying that if the presidency sees a bad economy or a weak economy, he should say so.

The Democrats, of course, are very skeptical about this. They view this as a political tactic. It is quite a different approach from the Clinton years that this administration, while not commenting on just why it thinks the market is going up and down, is not afraid to come out and comment every day when the market does go up and down.

The Clinton administration took the approach that the president should the say nothing about the markets because he could then have an affect on it. This president today showing once again he is not afraid to speak out.

Although it was striking, he did use the word sputter once today. But his comment, this was the first time in weeks that the president has said anything positive about the long-term fundamentals of the economy. That a very noticeable shift.

SESNO: John King at the White House. So much for the political equation of this side of the formula. Now we take a look at the markets themselves, why they're in turmoil.

CNN Financial News correspondent Jan Hopkins joins us now from New York. Jan, why today's sell-off?

JAN HOPKINS, CNN CORRESPONDENT: Well, a lot of the reason for the sell-off today was that investors are starting to be worried about what's going on in Japan, and what impact it could have on our economy and, perhaps, is already having on our stock market.

The market tried to rally several times during the session and then the rallies failed. That also worries investors because there wasn't a recovery on top of yesterday's recovery in stock prices. So, now the concern is, when do you buy? Not yet. It's going lower.

SESNO: Jan, is this selling coming from institutional investors, you know, the giant mutual funds or is this ma and pa and young investors, individuals out in the land selling off?

HOPKINS: Well, it's interesting. Some of the buying was institutions and, of course, a lot of the selling was institutions. I was hearing from a trader that I talked with this afternoon that a lot of mutual funds, in fact, came into the market and sold because investors are selling their mutual funds. So you know, if you sell a mutual fund, it has an affect on the mutual fund company. That is an institution, and it becomes an institutional sale.

SESNO: All right, Jan Hopkins, thanks very much for the next wild ride. We'll be back to you.

We're joined now here by former Clinton Labor Secretary Robert Reich, and former Reagan budget director Jim Miller.

Mr. Miller, first to you, how do you read what's happening in the markets?

JIM MILLER, FORMER REAGAN BUDGET DIRECTOR: I think we just have a temporary reduction in Wall Street. The underlying fundamentals are very, very sound. The economy is in a bit of a sputter. But it will come back up. I wouldn't be -- I certainly wouldn't panic. I wouldn't go sell any stocks or bonds that I have held. I would just stay the course.

SESNO: Former Secretary Reich, a bit of a sputter?

ROBERT REICH, FORMER CLINTON LABOR SECRETARY: Well, it is a bit a sputter. I tend to agree with Jim Miller. I don't think that we are seeing any fundamental change in American industry, in the long- term structure of the economy. I think we are very healthy.

Remember, Frank, that unemployment is still near a 30-year low in the United States and as long as that holds, Americans will be relatively confident about the future. But I do worry about the psychology here because once you start talking down the market, that can have a cascading effect and become a self-fulfilling prophecy.

SESNO: Well, let me let you both go on that one a little bit. We were talking with John King a moment ago about the bully pulpit effect, and what a president should do and can do and what practical effect he can have at a time like this.

Secretary Reich, why don't you take off on this. That is to say, you know, what should we be hearing from Washington on that bully pulpit?

REICH: Well, I think it's highly irresponsible, Frank, for the president of the United States to be talking down the economy, to be projecting that we may be in for some very rough times, suggesting that we are heading towards a recession because again, it can be a self-fulfilling prophecy.

People get very nervous. They start selling off. Companies, therefore, can't quite sell as much as they wanted because consumers don't buy quite as much, and they have to lay off people, and you can see how you can create a recession simply by the bully pulpit talking about a recession.

This is very different from someone like Franklin D. Roosevelt, President Roosevelt talking up an economy, trying to get the consumers to be more optimistic. That's one thing, and that's perfectly understandable if consumers are irrationally pessimistic, but I do not think that it wise or prudent for the president of the United States to be suggesting that we are heading downward.

SESNO: Jim Miller, your old boss, Ronald Reagan, talked up the economy at a time it wasn't doing very well.

MILLER: Right, but he recognized when the economy was in trouble. I think that the president is getting a bum rap from Mr. Reich and others. Look, if he were not saying what the truth of the matter is, he would be blamed for being irresponsible.


MILLER: He is saying that the economy has some problems, we need to address them. And that's one reason that we need this tax cut and need it now.

REICH: But I think there's a difference Jim, if you'd pardon me, from telling the public exactly what is happening today. That is, for example, there was a sell-off. There was a little bit of slowdown with regard to certain indicators.

And on the other hand, saying to the public, we are heading into rough times, the economy may be in trouble; suggesting to the public that we are moving in a direction that is perhaps appropriate for a tax cut as a stimulus, but a direction that causes people to be fearful about the future.

That prognosis, that business of predicting the future and giving it a bad spin is, I think, very, very dangerous for the White House to get engaged in.

MILLER: But Bob, I don't think the president can anymore talk down the economy than President Roosevelt was able to talk up the economy. If the economy -- if the president talks down the economy, people will see that the economy is sound and they will buy stocks when it gets -- when they get low enough.

I don't think that presidents' talk, rhetoric, really has a lot to do with it. I think the policies that affect the long-term stream of income, the opportunities for investors, the reason for people to invest in their own human capital, those are the things that matter and that's the reason that we need a tax cut.

REICH: You know, over the long term, you're absolutely right. But over the short term, let's say the next six months, eight months, even a year, psychology is so important here because investors are making guesses about what other investors are likely do. And if most people think that other investors are bailing out, nobody wants to get left holding the bag.

SESNO: Gentlemen, let me...

REICH: And that's where -- that's where a bully pulpit comes in and can be very dangerous.

SESNO: Let's take a test in psychology for a moment. I was talking to somebody today who said, you know, take a look at the landscape. You've got tremendously volatile markets, you've got high energy prices. You've got energy shortages. Japan is facing deflation. There are uncertainties across the economic horizon internationally.

This president faces a very challenging landscape. Overstated, Mr. Miller?

MILLER: No, I don't think that's overstated, and that's one reason that he says, look, let's take one thing at a time. Let's reduce the record high tax rates that we have in this country, and let's lower them and provide incentives, or additional incentives, for people to go out and invest, and go out and create...

SESNO: But even that money -- even that money...


Even that money that gets thrown back into the economy by virtue of that tax cut pales by comparison with what investors have lost out of their portfolios in just a few days.

MILLER: You know, Frank, but I think people are focusing too much on the -- on this business of how much will you be able -- additional money will you be able to keep in your pocket and will that be enough. What you need to look at is the change in the tax code, and as Secretary Reich was indicating, over the long term, that's going to provide the incentives. And that's what's important.

REICH: But -- but -- but, Jim, wait a minute.

MILLER: Long term is not the short-term (UNINTELLIGIBLE) in stock prices.

REICH: Wait a minute. But over the long term, I think we both agree, Jim, the economy is in quite good condition. The stock market over the long term is going to continue to rise.

We're talking about the next year, the short-term forecast. This $5.6 billion next year tax cut is absolutely going to have no effect whatsoever. Most of its benefits go to people who are wealthy. They're not going to spend more because they already have all the money they need.

The real issue is what happens next Tuesday when Alan Greenspan and the Federal Reserve Board's Open Market Committee meet. And if they cut interest rates by maybe a point, maybe even more than a point, that will be so much more effective as a tonic to the economy than any conceivable tax cutting.

SESNO: That's what you think it will take. You think it'll take a point or more from the Fed to cut interest rates...


REICH: Well, I think -- I think -- I think, Frank -- I think, Frank, it's going it's going to take at least 75 basis points. That is 3/4 of a point.

SESNO: So anything less -- anything less than 3/4 of a point won't do it.

REICH: Yeah, I think no. I don't think anything less then 3/4. MILLER: I -- I...

SESNO: Mr. Miller?

MILLER: Could I -- could I -- I think, Bob, what you see here is that Bob is pretty much a Keynesian and I'm a supply-sider. On the question of the cutting of the federal funds rate, I don't think cutting the federal funds rate dramatically is going to make a big, big difference. You can cut the federal funds rate some and stimulate some.

SESNO: That's the interest rate that Alan Greenspan...

MILLER: That's the -- that's the interest rate that the Federal Open Market Committee has control over. But I think we -- we are in for a lot of perturbations in the next -- in the coming few weeks perhaps. But I think the long run -- and I think Bob agrees and he said -- I think no one really thinks that we're in a serious trouble. But there may be some psychological uncertainties out there, and I don't think they're necessarily fueled by the president. I think the presidents is being responsible when he says, we've got a problem, let's address it.


SESNO: Jim Miller, Robert Reich, I've got to make -- I've got to make that the last word.

REICH: I -- I...

SESNO: We hope you come back.

REICH: I have a lot to say!


SESNO: We'll have you back. I'm sure we'll have a lot of opportunities.


SESNO: Thanks to you both, good to see you. Thanks.

And we're just getting started here on INSIDE POLITICS. When we return, President Bush goes back on the road. You saw a little of him doing that a moment ago. What else was he doing? Promoting two key planks in that domestic agenda of his.

Meanwhile, back in Washington, energy politics taking center stage after the president made an about-face on a campaign promise regarding carbon dioxide.


SESNO: President Bush today visited his 10th state in the last two weeks to promote his tax cut plan and his faith-based initiatives. Mr. Bush lobbied the New Jersey Chamber of Commerce on the virtues of across-the-board tax cuts, and he earlier visited a church-based charity organization where he vowed to push ahead with plans to provide federal money to religious groups that provide social services.

Here's CNN White House correspondent Kelly Wallace.


KELLY WALLACE, CNN CORRESPONDENT (voice-over): At a New Jersey Episcopal church, the site of an after-school mentoring program for high-risk teens, President Bush tried to set the record straight about his plan to provide federal support to religious charities such as this one.

BUSH: ... reports about our charitable choice legislation not going full steam ahead are just simply not true. We're moving -- we're moving on a timetable that -- that we're comfortable with.

WALLACE: But a bipartisan bill will be introduced in the Senate leaving out for now the central part of the president's proposal that allows religious services, such as this day care center run by Catholic Charities, to compete with secular groups for tax dollars.

SEN. RICK SANTORUM (R), PENNSYLVANIA: The timetable is let's work on the statutes that have already been passed, and one was just passed a couple of months ago. Let's see how we can implement those in an effective way and then piggyback on that success.

WALLACE: Shortly after Mr. Bush unveiled his plan for faith- based social work his second week in the White House, liberal critics went on the attack.

BARRY LYNN, CHURCH STATE SEPARATIST: The Constitution makes it very clear that government can't promote religion, including paying for the religious ministries in a community.

WALLACE: That was expected, but the administration may have been surprised by criticism from religious conservatives, such as Pat Robertson, who spoke with CNN's Wolf Blitzer.

PAT ROBERTSON, CHRISTIAN COALITION: Wolf, I tell you the greatest danger, frankly, is intrusion into the faith-based groups by federal agencies and federal rules.

WALLACE: The White House says it is listening to concerns from the right and the left, while Mr. Bush keeps using the bully pulpit.

BUSH: We're looking for something other than just the standard old way of conducting after-school programs. We're looking for somebody to put their arm around them and say, "I love you and I care."


WALLACE (on camera): The director of the president's faith-based efforts said recently, "In Washington, when you are learning and listening, people think you are equivocating and retreating." And so the White House says it is learning, not retreating, remaining confident Mr. Bush will sign one of his top priorities into law this year.

Kelly Wallace, CNN, East Brunswick, New Jersey.


SESNO: And another story we're monitoring now unfolding in Ramstein, Germany. It's shortly after 11:00 p.m. there, and here you see a transport plane that's brought back two U.S.-injured servicemen from that practice bombing that went awry in Kuwait the other day. That practice bombing claimed the lives of five U.S. servicemen and one New Zealander officer in that -- in that bombing run. It was a practice bombing run, as you'll recall, where three 500-pound bombs dropped on Monday --referred to as gravity bombs, "dumb bombs," because they don't have the guidance systems other weaponry has -- hit an observation post claiming those lives and causing the injuries.

Two of the injured aboard this transport. They'll be taken to a hospital about five minutes or so away from Ramstein Air Base there in Germany where they will receive additional treatment. The inquiry into what went wrong over there continues and is under way. CNN reporting that the defense sources telling us today that the F/A-18 Hornet that was involved in that fatal training accident dropped its bomb load about -- about a mile-and-a-half -- just under a mile-and-a- half from the intended target.

One person on the ground noted that the -- an abort order was called out, but it was called out too late to turn the plane back or stop the bombs from being launched.

As you see there now, an ambulance going to -- under the wing, to the transport plane, to take these two wounded individuals to the hospital for additional treatment.

U.S. Defense officials, meanwhile, are saying that a tactical air controller, Air Force Staff Sergeant Timothy Crusing was directing that attack when those bombs destroyed his post. He was hospitalized in stabile condition after that incident, Reuters reports. And we don't have the identities for you of those who are on this plane who were being brought to Germany for additional treatment.

But there, again, you see the ambulance, the individuals to be taken from this plane having been flown in from Kuwait. Again, it's shortly after 11:00 in the evening in Germany. It's about an 8-hour plane ride from Kuwait to the air base there, Ramstein in Germany; and as I mentioned, they will be taken for additional treatment. We will update you on their status, their condition, and further developments in the inquiry as that information become available us to us.

And now we will take a turn and go back into politics and our political coverage. President Bush making his first comments today on the decision not to keep the campaign promise to regulate carbon dioxide emissions as a pollutant. Some scientists believe manmade carbon dioxide contributes to global warming. And Mr. Bush promised during the campaign, that he would require power plants to reduce their CO2 emissions.

The president now says new regulations would mean higher energy prices. But he said his decision does not mean he's backing away from a commitment to clean air.


BUSH: This administration will enforce the clean air laws of the country. We will work with our utilities to encourage better efficiency, so to clean up the air. We got an energy crisis in America, that we have to deal with in a common sense way.


SESNO: The leader of one environmental group said the president has "a political tin ear on environmental issues," and several Democratic senators also went public with their own criticisms.


SEN. HILLARY RODHAM CLINTON (D), NEW YORK: A promise made and a promise broken. In less than eight weeks in office, President Bush has gone from CO2 to see you later.


SESNO: Just a few days from now, a bipartisan group of senators plan to introduce a bill that would require limits on carbon dioxide emissions.

For more on the environmental issues at the heart of the president's decision, and the scientific evidence at the heart of the political debate, here's CNN environment correspondent Natalie Pawelski.


NATALIE PAWELSKI, CNN CORRESPONDENT (voice-over): Government numbers say about 36 percent of the United States' carbon dioxide emissions come from power plants, precisely the emissions the president has decided not to regulate. A lot of those plants burn relatively dirty coal and use relatively old technology. The industry wants to make changes on its own schedule.

GLEN KELLY, GLOBAL CLIMATE COALITION: It's important that we focus on the new technologies about the way we use energy emissions that result from energy, but let's do so in a cost effective way that won't harm our economy.

PAWELSKI: Environmentalists say the president's decision will make international cooperation on curbing global warming even more difficult.

DEB CALLAHAN, LEAGUE OF CONSERVATION VOTERS: Leadership by the United States is absolutely essential. It's essential that the president set that tone and we just saw a reversal yesterday that was stunning and breathtaking.

PAWELSKI: In a letter to senators, President Bush said, "his administration takes the issue of global climate change very seriously."

But he also refers to "the incomplete state of scientific knowledge of the causes of the solutions to global climate change."

Meanwhile, on the science front, a fresh development.

(on camera): A new study in the "Journal of Nature" offers direct evidence of the Greenhouse Effect. Satellite data shows that over a 27-year period, Earth's atmosphere absorbed increasing amounts of energy, in large part to growing concentrations of carbon dioxide.

But the debate over global warming will always be as much about politics and economics as it is about science. President Bush's announcement is just the latest skirmish in what promises to be a very long battle.

Natalie Pawelski, CNN.


SESNO: We want to the remind you, we're continuing to monitor the situation on the ground at Ramstein Air Base in Germany where, as we mentioned a few moments ago, two of those injured in that errant bombing in that practice mission on in Kuwait on Monday, they are being brought to Germany for additional medical attention and taken from this transport plane to the hospital five minute away. We'll keep you updated on this story.

There is much more to come on INSIDE POLITICS.

Straight ahead: your tax dollars at work. Why the government is paying for a shrimp study in Arizona. We will track one interest group's ratings of which lawmakers are best at bringing home the bacon.

Also ahead...


RONALD REAGAN, 40TH PRESIDENT OF THE UNITED STATES: The federal government is too big and it spends too much money.


SESNO: Ronald Reagan tried to control federal spending with little success. Will George W. Bush fare any better? We will ask our Bill Schneider.

And later...


UNIDENTIFIED MALE: We believe the bill that we voted on in the House before and passed is the right one. So that's why we are here today to endorse the McCain-Feingold, Shays-Meehan approach to campaign finance reform.


SESNO: The Blue Dog Democrats climb aboard the campaign finance bandwagon.


SESNO: We'll have more of today's political news coming up, but now a look at some other top stories starting at Ramstein Air Base in Germany. We are expecting, in a few moments, those who were injured in that errant bombing run on Monday to be taken by ambulance to the hospital about five minutes away, as we mentioned to you earlier, for additional treatment.

You will recall that five U.S. servicemen and one officer from New Zealand were killed in that attack and now U.S. defense sources are telling CNN today, as we mentioned, that the F-18 Hornet that was involved in that training accident, dropped the bomb -- bombs actually; several of them -- 1.4 miles from the intended target.

You'll recall that it's a bombing run. It was a training mission. And the bombs landed in the wrong place with tragic consequences -- fatal consequences. Some of those injured arriving now at Ramstein Air Base, about an eight-hour plane ride from Kuwait. There were three 500-pound bombs that were dropped in that bombing run, and the team of investigators continue to look into this matter. The team of investigators departed from the McDill Air Force Base in Florida for Kuwait just today. Pentagon officials saying that it's unclear exactly how such a mistake could have occurred; and once again, tragic consequences for those who lost their lives and those who were injured.

We're also monitoring a severe weather system that is closer to home; it's in Texas right now. Karen Maginnis standing by at the weather system -- Karen

KAREN MAGINNIS, CNN METEOROLOGIST: Thanks. And as we do take a look at what is happening, right across Houston in the last couple of hours right around 2:55 local time, we had a report of a tornado right along with Interstate 45 in the vicinity of the Woodlands.

Also near Patterson, that is right along Interstate 10 to the west of the metropolitan Houston area, we had reports of some damage there and also some mobile homes that were damaged as well. But as of yet, we don't have any reports of any injuries. So this is kind of a different view. We get a close-up view of what is happening in gulf coast. Let's go back to Frank right now.

SESNO: Karen thanks, and we do want to take you back to Ramstein and keep you up to date and have you see what we're seeing as it happens, which is the servicemen who are now being loaded onto that ambulance and will be taken to the hospital for treatment.

And again, the Pentagon and investigators looking very closely into how this military accident on Monday took place. Those bombs landing about a mile and a half from those intended targets. Several investigators departed, as I mentioned a few moments ago, from McDill Air Force Base for Kuwait. They'll be conducting an intensive investigation on the ground, talking to those who were involved in the training incident itself.

Now, as CNN reported on Tuesday, the forward-air controller radioed the pilot in the midst of that training exercise, "Cleared, hot." Now that's the term used to cue the pilot to go ahead and drop those bombs. The pilot dropped three bombs, 500-pound bombs, before the air controller recognized there was a problem. He called on the pilot to abort. Obviously, at that point it was too late.

It's a very unusual and very difficult turn of events in military training exercises for something like this to occur, and that's the reason for the intensive investigation at this time.

The three bombs that were dropped were not smart bombs. They were not laser-guided bombs. They were gravity bombs, and so they basically go where they are dropped. Once released from the bomb racks beneath the fighter attack plane, they basically go straight down. They are not powered to a target.

And so the precision that one comes to expect, or we've certainly been told to expect from many, many of the modern weapons out there, is not present in such a training exercise.

INSIDE POLITICS will return right after this.



SEN. JOHN MCCAIN (R), ARIZONA: Every single special interest group in America and on K street that through the use of money obtains access and influence in the legislative process is scared to death about this legislation, because it diminishes their influence and power. It's that simple.


SESNO: Senator John McCain and Senator Russ Feingold pick up support for their campaign finance reform bill today from the moderate Blue Dog Democrats, as they're known in the House of Representatives.

Yesterday Democratic Senator John Breaux said he would not support McCain-Feingold. Senator McCain said today he's confident he will have the Senate votes he needs when the final vote arrives.

One longtime opponent of the major planks in McCain-Feingold is Republican Senator Mitch McConnell of Kentucky. He's chairman of the Senate Rules Committee. He joins us now from Capitol Hill.

Senator, good to see you, as always.

SEN. MITCH MCCONNELL (R), KENTUCKY: Hi, Frank. Glad to be back.

SESNO: Let's start with that defection from Senator Breaux. I mean, John McCain, Russ Feingold for their campaign finance reform bill, the version of that bill, had been counting on a solid phalanx of Democratic support. What's happening?

MCCONNELL: Well, this year's version of McCain-Feingold destroys the parties, which is a terrible idea, and seeks to quiet the voices of outsiders who want to criticize us in proximity to an election.

It's always been a bad idea. What's different about it this year, Frank, is I think the Democrats have actually read the bill. And a number of them, having actually paid attention to what's in the bill this year, are disquieted not only by the impact that it has on the two great national parties by taking away about 40 percent of their budget, but also by these unconstitutional efforts to quiet the voices of outside groups. Among them, the AFL-CIO, which is an important ally of Democrats.

SESNO: And of course, you're referring to the so-called "soft money" ban that John McCain and Russ Feingold would like to have.

MCCONNELL: Right. What that does...

SESNO: And the contention that you and others have is that they have a First Amendment right to the speak, and if that costs money, so be it.

MCCONNELL: Well, that's the only way you can have effective speech. You know, Frank, nobody would be able to hear you if there was not a big corporation that owned CNN that spent the money to allow your voice to be projected.

SESNO: Well, I know some people might disagree with that, and say we make ourselves...

MCCONNELL: No, no, there's no disagreement with that. That is essential. You would not be heard by anyone but for the big company that provides the money that allows you to amplify your voice. The same thing applies to others who have a chance, who should have a chance to get their message out in our society.

SESNO: Our Capitol Hill producer, Ted Barrett, is reporting, senator, that John McCain is rejecting an overture from the White House that essentially puts its arms around another version of campaign finance sponsored by your colleague, Republican Chuck Hagel of Nebraska, that would cap rather than eliminate or ban so-called "soft money." What do you have to say to that?

MCCONNELL: Well, I'm not enthusiastic about the Hagel proposal, but it's got some good aspects, one of which is that it indexes the so-called "hard money," the contribution limits set back in the mid- '70s, when a Mustang cost $2,700 -- why candidates have to spend so much time raising money.

It would update those -- that contribution limit to 2001 dollars. That's a good part of the Hagel bill. I'm not so keen about what it does to the so-called "soft money," but it has a, there are some positive aspects to the Hagel bill.

SESNO: Senator McConnell, is it lost for John McCain in the United States Senate now, with John Breaux's defection, or is there still a great deal of support for curbing the kinds of money that's thrown at U.S. politics, and a lot of support for a fellow by the by name of John McCain, and Russ Feingold, for the matter.

MCCONNELL: Well, it's hard to say. This is going to be a free- wheeling, wide-open debate with lots of amendments. We haven't had that on this issue since 1993. So we'll have to see what the bill looks like, Frank, after two weeks of amendments.

SESNO: Now, you went to work today on another topic as well, which is election reform. We all remember Florida and what went wrong there. Your Rules Committee is overseeing some of the steps to try to get an arm around that. Talking about $500 million in a study?

MCCONNELL: Yes, it was a great hearing. This is an issue that we are not ready to legislate yet. The hearings are really important, because we learned a lot today, for example -- I mean, the commonly held perception that the punch-card voting is more common in minority districts and poor districts is simply not true. It's more common in affluent and Republican precincts.

So the hearings are really important to find out really what the nature of the problem is. And if we can agree on what the problem is, what the solution is.

Is it is a federal slug of money sent down to states and localities, or just what is it?

So we're looking at the issue but we're not ready to legislate on that yet, Frank, and I don't think it will be a part of the campaign finance debate, which starts next week.

SESNO: Now, Senator, several Democrats, labor union activists, civil rights activists today called for election reform to take place through an updating of the Voting Rights Act of 1965, with specific safeguards written into it to prevent the kind of thing that they say took place in Florida: some of the anomalies, in fact, that you just addressed.


SESNO: There are no Republicans who currently favor that. Could that be the way this thing turns out?

MCCONNELL: Well, I don't know. I mean, I don't know what took place in Florida. You know, the Democratic attorney general in Florida decided not -- that there was not enough evidence to go forward. The Democratic attorney general of the United States, Janet Reno, decided there wasn't enough evidence to go forward.

We know it was a botched election, but I don't there's any evidence at all, not a shred of evidence, that there was any kind of conspiracy to deny people the right to vote.

In fact, if you look at the African-American vote in Florida, African-Americans are about 14 percent of the people, eligible voters in Florida, but composed 16 percent, comprised 16 percent of the overall turnout. So they turned out in very large numbers, and I think that's something the NAACP was proud of.

There's no evidence that there was any conspiracy to deny anybody an opportunity to vote.

SESNO: Senator Mitch McConnell, with your take on election reform and campaign finance reform. Thanks, as always, for your time.

MCCONNELL: Thank you.

SESNO: Appreciate it.

I want to mention to you and our viewers as well that tomorrow Judy Woodruff, who will be back on this show, will be interviewing none other than John McCain, who is, in fact, spearheading this effort on the Republican side in the United States Senate for his version of sweeping campaign finance reform.

And when INSIDE POLITICS returns, counting up the pork on Capitol Hill. It's sizzling. Plus, lessons from the Reagan era, and the states. Bill Schneider on tax cuts and spending pitfalls.


SESNO: President Bush's economic plan includes an effort to limit spending increases in the federal budget. But on Capitol Hill, the current congressional appropriations bills are far from lean. An annual report on pork barrel projects finds this year's congressmen bringing home more of their share -- more than their share of legislative bacon.

Our Jonathan Karl adds up the numbers.


JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT (voice-over): The Ingalls Shipyard is in Majority Leader Trent Lott's backyard, which may explain why Congress set aside $450 million to build a Navy assault ship there the Pentagon didn't ask for. Critics call the ship the USS Trent Lott, and an example of wasteful, pork barrel spending.

SEN. TRENT LOTT (R-MS), MAJORITY LEADER: Pork is in the eye of the beholder, as you well know. Where I'm from, that's federal programs that go north of Memphis.

KARL: Then there's the $4 million set aside for shrimp aquaculture research in six states, including land-locked Arizona. Defenders of the program say it is necessary to help the U.S. overcome its shrimp trade deficit.

COLIN KALTENBACH, UNIVERSITY OF ARIZONA: We've heard that before. Our opinion is that it's not pork, but in fact, it's government support of research that's needed to feed this nation.

KARL: The home-state senator disagrees.

SEN. JOHN MCCAIN (R), ARIZONA: I've opposed it. I always am intrigued by the vision of little shrimp flopping around out in the desert. Yes, and I have been in opposition to it. Yes.

KARL: Citizens Against Government Waste has for years been tracking pork barrel spending, which it defines as special projects that bypass the usual budget process. This year, the group says it found $18.5 billion such spending, a record amount.

TOM SCHATZ, CITIZENS AGAINST GOVERNMENT WASTE: The surplus revenue flowing into Washington has turned into a feeding frenzy for pork barrel spending.

KARL: With this story, following the money means following the senior members of the appropriations committee. The number one state in per capita pork spending is Alaska, home of Chairman Ted Stevens, followed by Daniel Inouye's Hawaii, Thad Cochran's Mississippi and Robert Byrd's West Virginia, all senior members of the committee that cuts the checks on Capitol Hill.

Chairman Stevens has long been considered the champion of pork barrel spending, but this year, he nearly tripled the amount of money funneled to Alaska with projects big and small, including $20 million for railroad rehabilitation, $1 million to study the Bering sea crab, $645,000 for alternative salmon projects and $176,000 for the Reindeer Herders Association.

Senator Stevens says his projects are not only worthy, but a lifeline for survival to Alaska. Mississippi's Thad Cochran also defends the increased money he has helped funnel to his state.

SEN. THAD COCHRAN (R), MISSISSIPPI: So, a lot of funds from federal programs are allocated to a state like Mississippi because we have so many disadvantaged students in schools. In other ways, we qualify for education and agricultural benefits because of an economic downturn that we have seen that have caused farmers, particularly, not to be able to make a living on the farm.


KARL: The availability of money thanks to a budget surplus has fueled the growth in government spending far beyond of what Citizens Against Government Waste calls pork barrel spending. In fact, government spending on the overall budget, discretionary budget, increased by 8.6 percent this year. Now, that is double the rate of growth that George W. Bush hopes to see next year -- Frank.

SESNO: John Karl, shrimp for dinner tonight?

KARL: From Arizona, no less.

SESNO: All right, well, spending may be key to the success or failure of the Bush economic plan. Joining us now, senior political analyst Bill Schneider. Bill, the president is likely to find that controlling spending is tougher than cutting taxes. Yes or no?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: That is absolutely true. That's certainly what Ronald Reagan found back in the 1980s. You know, when he the president, there was a deficit and that should have made it pretty difficult to cut taxes.

But then someone came along with the supply side theory that said if you cut taxes, you're going to increase economic activity and that's going to bring in more revenue. It didn't happen. He also assumed if he cut taxes, it would force Congress to cut spending. That didn't happen either.

Well, now we have a surplus and that changes things in a very direct way. The surplus makes it easier to cut taxes but harder to cut spending because a lot of people say why should we cut spending? The money is there.

SESNO: You mentioned Ronald Reagan. I remember when Ronald Reagan did a deal, he thought, with Congress, a dollar in tax cuts for every $3 in spending cuts. Never happened.

SCHNEIDER: Never happened. The Democratic Congress wouldn't pass it, and the president accepted the congressional budget. So, there was no discipline there.

SESNO: I'm sorry, I misspoke. He actually agreed at one point to raise taxes. It was a dollar in tax increases to bring the deficit for every $3 in cuts. They never took place.


SESNO: What about the surplus and the social safety net, Bill, if in fact the volatility we're seeing on the markets and the slowdown in the economy continues or even gets worse?

SCHNEIDER: Surplus down, safety net up. That's what's going to happen and it's going to put a squeeze on the budget that President Bush has proposed. The surplus is likely to go down because capital gains tax revenues will go down. People are selling stocks, but making less profit, often at a loss.

And of course, fewer people working will mean that they're going to pay less taxes. The safety net expenditures are going to go up because more people are going to need unemployment insurance, welfare benefits, food stamps and job training.

SESNO: Now, that's something we also saw in Reagan. And back to Reagan for a moment, you and I were talking earlier about David Stockman's book called...

BATTISTA: "The Triumph of Politics," subtitled, "Why the Reagan Revolution Failed." And that'll be and interesting book because what President Bush is trying to do is a lot of what President Reagan did in the early 1980s.

Now in that book, it was interesting, he told a story about giving Ronald Reagan a multiple choice test. What he did was he gave -- he was the president's first budget director. He gave the president 50 programs and for each program offered him three spending cut choices and he explained the implications of each.

Well, when the president got through with the test, which Stockman said he enjoyed immensely, President Reagan ended up with an $800 billion deficit over five years. So, David Stockman went in and said, now, sir, we might want to start talking about a tax increase, and President Reagan was infuriated and he banged his fist on the table and said don't talk to me about taxes.

The problem is deficit spending. But that was the problem. The way that test went showed exactly where the problem was.

SESNO: Some people might take issue with David Stockman's title, now, looking back at this in retrospect. Very quickly, at the state level, we're already seeing some of this play out.

SCHNEIDER: We're seeing it in Virginia, where Governor Gilmore, the Republican governor of Virginia, got elected on a car tax repeal. He's standing by it, but it's because the bad budget of Virginia has to be balanced. It means they're going to have to make some very controversial cuts, including road spending in Northern Virginia, which is very congested.

Same thing in Texas. Governor Bush cut taxes in Texas. Now there's a revenue shortfall. They're going to have to make some very controversial spending cuts in Texas, and some people in Texas, my sources are saying, those spending cuts could, could get a Democrat elected governor of Texas next year, which would be a very serious embarrassment for President Bush.

SESNO: Bill Schneider, thanks very much. Always here with the good news.


SESNO: And up next, more on campaign finance reform, as well as the president's revision of his own environmental position and the latest changes in the economy. We'll have Margaret Carlson and Tucker Carlson. Still ahead.


SESNO: Joining us now to discuss a variety of political matters, Margaret Carlson of "Time," and Tucker Carlson of CNN's "SPIN ROOM." Good to see you, as always.


SESNO: John McCain was out today. He had Russ Feingold in tow, talking about campaign finance reform and getting the money out of American politics.

Tucker, I know that's an issue that cuts close to your heart.

M. CARLSON: He wants more money in politics.

TUCKER CARLSON, CNN'S "SPIN ROOM": Much, much more, because it informs American voters, it competes with toothpaste ads. There's lots of good things about money in politics, but John Hagel -- Chuck Hagel, senator from Nebraska, looks like he may be offering an alternative that will, in effect, sabotage John McCain's bill, the McCain-Feingold. Sort of an odd dynamic, because, of course, they're friends.

M. CARLSON: We haven't seen Bush's principles on this, which I think are coming out at the end of the week, but he might -- Bush might be able to wrap himself in Chuck Hagel's bill.

SESNO: They've been talking.


SESNO: They've been talking.

M. CARLSON: They've been talking, and it's a refuge for some people who will be see, you know, to be able to make themselves seem to be for campaign finance reform without really being for it because Hagel allows soft money in his bill.

SESNO: I met with Chuck Hagel today, and he's pretty optimistic, and he's got some Democrats, including John Breaux, and...

M. CARLSON: Who else?

SESNO: ... the junior senator from his own state, who is helping us out on this, Ben Nelson. Is this a breakthrough?

T. CARLSON: I think the Senator Breaux thing is definitely a breakthrough and look, I mean, clearly Bush feels pressure to sign some sort of campaign finance bill. I bet you that by the end of the week, probably by the end of the day, you will hear McCain-Feingold supporters saying, you know, look at the CO2 story. This is an example of why we need to control contributions because it affects policy.

SESNO: Let's talk about for just a moment, the change from George Bush's campaign, where he said, among other things, that carbon dioxide would be something that should be cut from the emissions list. Now he's saying, no, not so fast. We can't do it because the economy and specifically energy prices would be aggravated by that. Retreat?

T. CARLSON: A mistake.


T. CARLSON: That's the official line, that it was a mistake that it wound up on... M. CARLSON: That it was on that list.

T. CARLSON: Yes, exactly.

M. CARLSON: It was just a typo.

SESNO: But the environmental groups aren't giving him a free pass on that. It wasn't a typo. It represents a substantial change for that.

M. CARLSON: Nor should they, and in fact, the energy crisis was worse when he said it than it is right now. We have the California utility power crisis, but that's a very different thing.

So at the time that he said it, we didn't know that Dick Cheney, the former CEO of Halliburton, would be in charge of energy policy, and I think that must have a good deal to do with it because now those people have an ear in the White House on the subject.

SESNO: If you talked to people about this subject within the administration, Tucker, what you'll hear is: Technology is the way out of the greenhouse gases problem that this country faces. Not signing onto accords negotiated in Kyoto or any other place that commit this country to arbitrary reductions of greenhouse gases, potentially at the cost of jobs and economic well-being.

T. CARLSON: And of control of the country's energy problem.

SESNO: Well, is that spin or is that..

T. CARLSON: No, that's not...

SESNO: You know spin well. You recognize spin.

T. CARLSON: Well, thank you. I like to think so.

SESNO: You're welcome.

T. CARLSON: No, in fact, that's not spin at all, but clearly the way to sell this, I mean, you hear a lot of talk about clean coal, that new technology is going to solve the problem, but the way to sell this is to say, look, you know, you're paying 400 bucks a month for natural gas. There's an energy crisis now, and this is going to exacerbate it and we're saving you from higher energy prices. I think that's...

SESNO: Margaret.

M. CARLSON: Captain Spin, there's a global warming crisis, and you know, you have to do these things at the same time because you can't wait for technology to necessarily come in and solve the problem when there are things you can do right now that may inconvenience some of these people, but nonetheless, can be done without huge inconvenience while we're waiting for the technology to come in and solve the problem. SESNO: Seeing a lot of volatility on Wall Street. That is an understatement. How is that affecting the life of politics in Washington, Margaret?

M. CARLSON: I don't know, I saw John McCain with a pig today as he did the pork stuff and he was tying the economy, pork, the campaign finance reform, all into one big thing which is that, you know, everything that happens on Capitol Hill these days is tied to who is giving the money. Now, maybe there'll be less money to give as a result of the stock market plunge.

And while we were standing there waiting for the press conference, the market dropped another 40 points. It went from 300 to 342 in that space of time. I mean, people are standing around, watching it on Capitol Hill. It's now trickled down to where...

SESNO: We heard a Democrat and a Republican earlier, though, Tucker, say this is a little sputtering, but basically, the economy is very strong and people shouldn't lose sight of that.

T. CARLSON: I think that's a completely valid argument. Let me just say about campaign finance reform, that is the beauty of campaign finance reform. It's a theory of everything. You know, it just sort of ties it all in.

M. CARLSON: It's a unified...

T. CARLSON: It is a unified theory. It's a lot like Marxism, but the Democrats charge that somehow Bush is talking down the economy so he can sell his tax cut -- unfair.

M. CARLSON: No, well, he doesn't have to talk down anymore. It's actually happened.

SESNO: OK, folks. We'll leave it there with everybody's prophecy. We'll see you again soon.

Much more ahead on this edition of INSIDE POLITICS. In the next 30 minutes, debating the White House position on those emissions control. We'll hear from Senators Harry Reid and Larry Craig.

Plus, more White House news from the notebook of Bob Novak. INSIDE POLITICS will continue in just a moment.


SESNO: One singer's financial woes provide back up for congressional advocates of bankruptcy reform.

Also ahead: New figures from the Clinton legal defense fund. Do they point to any connection with the pardon flap?


(BEGIN VIDEO CLIP) SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: The president and his team have really made a 180-degree turn on their position here, suggesting now that CO2 is somehow a-OK.


SESNO: The political heat over carbon dioxide emissions.

ANNOUNCER: From Washington, this is INSIDE POLITICS, with Judy Woodruff.

SESNO: And welcome back to INSIDE POLITICS. I'm Frank Sesno, sitting in for Judy today.

More than halfway through his first 100 days in office, the political-going seems to be getting a bit rougher for President Bush today. On top of the turmoil in the stock market, Mr. Bush is somewhat on the defensive over what some Democrats call a broken promise.

CNN senior White House correspondent John King has more now on Mr. Bush's new stance on power-plant emissions and the flak he's getting for it.


KING (voice-over): The president says he saw no choice but to abandon a campaign promise to help fight global warming by regulating carbon dioxide emissions from power plants.

BUSH: I was responding to reality, and the reality is the nation has got a real problem when it comes to energy.

KING: But environmentalists are furious and blame the change of heart on an intense lobbying campaign by the coal and oil industries.

ALYS CAMPAIGNE, NATURAL RESOURCES DEFENSE COUNCIL: It's amazing how quickly he -- the president's willing to walk away from his most significant and explicit campaign pledge on the environment. In doing so, he's betraying not only his own campaign promise, but also members of his administration.

KING: Just last week, EPA administrator Christie Whitman said the president would keep his campaign pledge.

SEN. JOE LIEBERMAN (D), CONNECTICUT: The Bush administration, sadly, has flip-flopped, apparently under intense pressure from special interest groups aligned against what candidate Bush said he would do.

KING: But in a letter to several Republican senators Tuesday night, the president said regulating carbon dioxide emissions could lead to -- quote -- "significantly higher electricity prices." Mr. Bush went on to say: "At a time when California has already experienced energy shortages and other Western states are worried about price and availability of energy this summer, we must be very careful not to take actions that could harm consumers."

Top aides say Mr. Bush was not aware during the campaign that carbon dioxide was not considered to be a pollutant under the Clean Air Act.

SEN. RICK SANTORUM (R), PENNSYLVANIA: Every campaign makes mistakes on those kinds of things, and I think what he's done now is take a solid look. And I don't think you should hold a president to a campaign pledge that is not a good pledge, is not right.

KING: Coal-burning plants still account for half of the electricity generated in the United States, and an administration review led by Vice President Cheney concluded regulating carbon dioxide emissions would be bad energy policy and also could hurt the economy.

(on camera): The reversal is the latest example of the president siding with conservatives over Republican moderates in a major policy dispute and another example of the sway the vice president holds when there are disagreements among senior administration officials.

John King, CNN, the White House.


SESNO: More now about carbon dioxide emissions and global warming. We're joined by Senator Harry Reid of Nevada -- he's the ranking Democrat on the Environment and Public Works Committee -- and Senator Larry Craig, Republican of Idaho. He was one of the members who received a letter from the president about his revised policy on power-plant emissions.

Senator Craig, to you first, in September, George W. Bush said -- and I'm quoting here -- with the help of Congress we'll require all power plants to meet clean air standards in order to reduce emissions of sulfur dioxide, nitrogen oxide, mercury and carbon dioxide within a reasonable period of time. What changed?

SEN. LARRY CRAIG (R), IDAHO: Well, he made that speech once in Saginaw, Michigan, and of course, he did say it in a campaign brochure.

Immediately following that, a good number of us said to the candidate at that time that we did not regulate carbon dioxide, the Clean Air Act did not, that Congress had chosen not to do that, because in all fairness, Frank, it's the very breath that comes out of your mouth when you exhale. That's carbon dioxide. And I'm not quite sure that we know how to regulate that or that we should.

What I see the president doing is exactly what he ought to be doing. And that is clarifying the statement, clearly going in and giving the kind of direction that we've got to have as we shape a new energy policy for this country at a time of an energy crisis.

SESNO: Senator Reid, clarification or capitulation? SEN. HARRY REID (D), NEVADA: Well, I'm terribly disappointed in George W. Bush. He made this commitment. The environmental community was very enthused about his commitment. And he not only talked about it in Saginaw, Michigan; he's talked about it on a number of other occasions, including that in his campaign literature. And in fact, his EPA administrator was at an international conference in Italy last week, and she talked about what the United States was doing in this administration to get rid of carbon dioxide.

And I also say this: It's so important that we do something. The energy producers came to my office. They need certainty. This has nothing do with the energy crisis. In fact, it will only make it worse.

I think the American people are very, very disappointed. The...

SESNO: You say it has nothing to do with the energy crisis. What does it have to do with then?

CRAIG: It has a lot to do with the energy crisis, Frank.

REID: It -- I said it'll only make it worse. That's what I said, it will only make it worse.

We -- we have to recognize that the energy producers want certainty, and they have uncertainty now. The president made a commitment. The commitment was a good commitment until he and his people met with the coal producers and whoever else had him change his mind on something that was so important.

SESNO: Senator Craig...

REID: The belching of the pollutants out of these power plants has to stop.

CRAIG: What Harry is talking about doesn't fit. I know who he met with. He met with key senators, including myself and others, who are working to craft an energy policy for this country at a time when we truly are at an energy crisis. Harry knows that well. A neighboring state of his is in crisis at this moment, pulling all kinds of energy out of the state of Nevada and not even being able to pay for it.

The president did reassess his position, and he reassessed it in an honest and realistic way. Now what the president has gone on to say that I think Harry fails to mention, we are going to push for new technology, we're going to push for clean coal-bed technology. Clearly, we want to reduce of the overall level of pollutants that are coming out of our coal-fired generators.

But what we're not going to do and what the president can't do is legislate us into a permanent energy crisis by denying the use of carbon-based fuels.

It isn't just the coal-fired plants -- and Harry knows that. It's automobiles. It's all of the carbons that we burn are critical in this analysis. And I think the president did just exactly what he had to do for the American people and for the American economy.

SESNO: Senator Reid, isn't it true -- isn't it true that the burden of carbon dioxide emission reduction would have fallen especially hard on coal-burning plants, and isn't it true that those coal-burning plants provide about 50 percent or more of the electricity in this country?

REID: And they're the people that met with me and said we need certainty. That's why even Senator Smith, the conservative chairman of the Environment and Public Works Committee, recognizes that this bill is important. Now, we're going to show President Bush is that we in this Congress are going to be bipartisan. We're going to come up with a bipartisan bill that's going to include carbon dioxide, because it's one of the reasons we have global warming. There's climate change going on. And all that Larry said, with all due respect, is a copout.

The president has reneged on commitment that he made to the American people, and everyone understands that. But we are going to try be bipartisan in the Environment Committee and report out of that committee a bill that will take care of this problem, and let the president see if he's going to be as bipartisan as he said he would in his initial weeks in...

SESNO: And Senator Reid -- Senator Craig, rather, I'm not going to let you cop out. I'm going to have you respond specifically to that -- to that bill that that committee's going to report out with carbon dioxide in it.

CRAIG: Frank, I'm glad that you are, because the coal-generating energy sources of our country, coal-use sources, deserve certainty. What they got was a filed lawsuit by the Clinton administration, who promised them that they would adhere to the Clean Air Act, and then stepped in when they were trying to modernize their facilities and bring them into even greater compliance -- they were threatening to file a lawsuit. Now, that's the kind of uncertainty that the coal industry, or I should say the utility industry, came to us and said "build some stability."

We have not had an energy policy in this country for eight long years, and now we have a president that says it is a key priority for this country and for the American consumer to know that we have a strong stable energy supply. And now of course, Senator Reid is saying it's a copout.

Harry, it's no copout. It's good, clear articulation of a policy that we ought to adhere to.

SESNO: Senator Reid, I've got about 15 seconds here left for you to reply.

REID: They can't get away from beating up on Clinton. This is George W. Bush, who reneged on a commitment he made to the American people. Forgetting about Clinton -- the president today is George W. Bush. He should live up to his commitments. SESNO: The energy issue is one that's going to be getting increasing attention, gentlemen, and obviously the source of substantial debate.

Thank you very much, to both of you.

CRAIG: Good night.

SESNO: And President Bush has been watching his words today as he watched the stock market plunge again. The Dow Jones industrial average tumbled more than 317 points to close below the benchmark 10,000. The Nasdaq fell more than 42 points, ending the day above 1,900. Mr. Bush says the downturn is further evidence that his tax cut plan is needed to get the economy back on track.


BUSH: Instead of increasing discretionary spending, let's give people more of their own money back. And it makes sense to do so. It makes sense to do so. Our economy is beginning to sputter.

I believe I was asked about the markets today. I'm sorry people are losing value in their portfolios. That worries me. But with the right policies, I'm confident our economy will recover -- the right policies, fiscal policies. And that means giving people money back, in plain language.


SESNO: House Democratic leader Dick Gephardt charged today that the Bush administration does not have an adequate economic plan. Gephardt accused the administration of contributing to the nation's financial problems.


GEPHARDT: Unemployment is going up around the country, and you know, part of this, I guess, was started when Dick Cheney a few months back said we're in a recession. I mean, we've been talking ourselves into this. Now it's happening. Now there are real facts out there. And the economic...


SESNO: Amid this economic downturn, the Senate is moving today toward expected passage of legislation that would make its harder for people to wipe out their debts in bankruptcy court. CNN's Kate Snow has details on the bill and why some are singing praises of reform.


KATE SNOW, CNN CORRESPONDENT (voice-over): Supporters of bankruptcy reform like to talk about singer Toni Braxton and actress Kim Basinger, Hollywood stars who've filed for bankruptcy, despite making millions for their work. Republicans, and many Democrats, say too many Americans are taking advantage of the system. SEN. CHARLES GRASSLEY (R), IOWA: There's people that have the ability to repay. They go into bankruptcy. They go into Chapter 7. Everything would be wiped clean. Somebody else would pick up for they're not paying their bills.

SNOW: Over the last 10 years, the number of personal bankruptcies nearly doubled. In 1990, the number of filings was just over 700,000 per year. By 2000, the figure grew to 1.2 million. The bill in the Senate creates hurdles to file for bankruptcy. It sets up a means test: anyone making over a certain amount would no longer be able to "wipe the slate clean" by filing under Chapter 7.

SAMUEL GERDANO, AMERICAN BANKRUPTCY INSTITUTE: The idea here is that people are entitled to only the relief that they need but no more, so the bill sets up an elaborate screening mechanism with an arithmetic test to determine the debtor's income and their expenses. After which, if they can repay some part of their debts -- 25 percent roughly, then they will be shifted into mandatory repayment plans.

SNOW: But opponents of the bill say that new system is too creditor-friendly. They argue, too many people would be saddled with debt, required to pay off credit cards and car loans.

SEN. PAUL WELLSTONE (D), MINNESOTA: This is a class issue. These are poor people we're talking about. None of us ever are put in this situation. President Bush, whatever happened to compassionate conservatism?

SNOW: President Clinton vetoed a similar bankruptcy reform bill last year for the same reason. Democrats charge, passing the bill now is a form of payback to corporate America. Credit card companies, banks and the big auto makers have been lobbying for the reform and contributing to Republican candidates, according to an election watchdog group.

(on camera): President Bush says he'll sign the reform into law, and bankruptcy attorneys know it's coming. Ironically, a bill that's meant to decrease the number of bankruptcy filings may lead to an increase over the next six months, as filers rush to get their paperwork in before the law changes.

Kate Snow, CNN, Capitol Hill.


SESNO: And paperwork on another front now: the Clinton Legal Expense Trust opens its books for inspection. When we return: how much money has been donated? And how much the former president still owes his attorneys.


SESNO: Former President Bill Clinton racked up millions in legal bills during his eight years in office. And the fund that was created to help the Clintons pay their attorneys is still raising money. CNN national correspondent Eileen O'Connor has the latest numbers and an update on the investigation of the former president's last minute pardons.


EILEEN O'CONNOR, CNN CORRESPONDENT (voice-over): Former President Bill Clinton continues his European tour, bringing in some money from speeches, and staying largely out of the American media spotlight. In Washington, the guardians of his legal expense trust fund announced over 116,000 people, giving on average $75 each, have donated over $8.7 million. Still not enough to cover $11.3 million in legal bills the Clintons have submitted.

The trust's executive director denies a past contribution from Denise Rich, the ex-wife of fugitive financier Marc Rich, or any other contributions were linked to the granting of presidential clemency.

ANTHONY ESSAYE, CLINTON LEGAL EXPENSE TRUST: That was so long ago we felt no meaningful connection between that and any pardon effort.

O'CONNOR: Still, the U.S. Attorney from the Southern District of New York, Mary Jo White, has officially been given the go-ahead to head up any investigations of pardons or commutations granted by the president on his last day in office.

STEVEN COHEN, FORMER ASSISTANT U.S. ATTORNEY: It makes sense that one prosecutorial authority would be vested with responsibility for handling that investigation.

O'CONNOR: It also has the political upside of making it look like White, a Clinton appointee, and not Republicans, are keeping the issue alive. Legal sources say White will want to talk to Denise Rich about the pardon granted her ex-husband. She refused to testify to Congress, invoking her constitutional right against self- incrimination. Denise Rich's lawyer says she has done nothing illegal and has no knowledge of wrongdoing. Some experts say such statements mean it's likely she is or will be cooperating with White, who also has more power than Congress to force rich to testify.

COHEN: She could grant immunity to her and require that she testify.

O'CONNOR: White house aides John Podesta, Bruce Lindsey and Beth Nolan will also likely face subpoenas. All testified before Congress, saying while they opposed the pardon of Rich, it had nothing to do with political contributions.

JOHN PODESTA, FORMER CLINTON CHIEF OF STAFF: I believe that the president made the decision even in the Rich case, which I disagreed with, he made it on the merits.

O'CONNOR (on camera): White, sources say, is unlikely to subpoena the former president or now-Senator Clinton, unless some illegalities are discovered.

Eileen O'Connor, CNN, Washington.


SESNO: Still ahead on INSIDE POLITICS, Bob Novak on Clinton's fund-raising plans.

Plus, the latest buzz on the president's brother and his future in Florida politics. But first, a preview of what's ahead on MONEYLINE. Allan Chernoff joins us -- Allan.

ALLAN CHERNOFF, CNN ANCHOR: Thank you. Another brutal sell off in the markets. The Blue Chip Index skidding to its lowest close in a year and back below 10,000.

The latest meat scare, hoof-and-mouth disease, plaguing the European continent: will it come here? We'll take a look at the impact on the U.S. meat industry, as health officials try to keep it at bay.

And with Disney's new theme park up and running, is the company chief worried the slowing economy will stunt attendance. We'll ask Michael Eisner how his company is coping. All that and more next on MONEYLINE.


SESNO: Here in Washington, it's all about personalities and prospects. So, here is one for you: a prominent personality, Republican Senator Kay Bailey Hutchison, from Texas, decided not to run for governor of that state. Senator Hutchison issued a statement a short time ago calling recent speculation she might run a "serious distraction." The current governor, fellow Republican Rick Perry is up for reelection next year. Perry became governor when George W. Bush resigned to take another job at 1600 Pennsylvania Avenue.

And Robert Novak of the "Chicago Sun-Times" joins us now with his reporters notebook.

Bob, the president's revised position on power plant emissions today; we heard a fair bit about it; talked a bit about it. Flap, mistake, what is it?

ROBERT NOVAK, "CHICAGO SUN-TIMES": The mistake, Frank, was during the campaign, when it was slipped into the president's speech on September 29th, on energy, a statement -- just a one-sentence statement deep in the speech that he would be against -- he would try to stop CO2, carbon dioxide emissions, on carbon dioxide emissions from power plants. That was never properly vetted.

Now, the truth of the matter is the only person who picked that up was Christine Todd Whitman, the EPA administrator, on "CROSSFIRE" on CNN on February 26. She said that was established policy by the governor, and that started a tremendous week-long fight inside the administration, Frank, on what was going to happen. And the conservatives won out. The final decision was made by Governor Bush, but Lawrence Lindsey, the national economic adviser, and Secretary of Energy Spencer Abraham led the fight to change that position.

SESNO: Already, the Democrats are piling on, aren't they?

NOVAK: Yes, they are.

SESNO: As they say, Northwest Airlines strike, another sort of a challenge for the president.

NOVAK: Last night the senior aides -- five senior aides of the White House met secretly to plot strategy. It's almost certain there's going to be a strike call -- it is almost certain that the president will go to the Congress for legislation to stop the strike. Politically, that is seen by some Republicans as something like President Reagan's traffic controller strike, saving the American public from trouble.

Now, what is interesting is that is if you notice AFL-CIO President John Sweeney, who's usually vocal about these things, has been low-key. That is because the union involved -- the Mechanics Union involved with Northwest is not an AFL-CIO union. It's a breakaway union who wants to use this strike go into other airlines. So the AFL-CIO is a little conflicted in fighting Bush on this one.

SESNO: So perhaps a little less fallout for Bush than Reagan among the unions if this transpires, as you say.

NOVAK: Right.

SESNO: Let's go to campaign finance reform: a lot of talk about John McCain, and John McCain and campaign finance reform. But there is an echo out there?

NOVAK: This is lovely little story for me, Frank. Senator McCain has traveled all over the country, going into Republican states, to talk up campaign finance reform, made the Republicans really angry, like Senator Tim Hutchinson of Arkansas. Tomorrow, Congressman Bob Ney, Republican of Ohio, will begin a series of forums against campaign finance reform. Guess where he starts? Phoenix, Arizona, in the McCain heartland. Some speculation that Senator McCain is not pleased.

SESNO: Perhaps, another lovely little story -- this one from Florida.

NOVAK: Speculation down there in Republican circles -- in conservative circles that Governor Jeb Bush, the president's brother, will not seek re-election next year. He is having a lot of trouble right now, and people are looking for signs in the wind. The governor's Web page --I'm sorry -- the Republican Party Web site in Florida, has a big puff on President Bush, nothing on Governor Bush. The decision hasn't been made but that is the talk in Florida.

SESNO: Talk about tea leaves, Bob.


SESNO: All right, no discussion with Bob Novak is complete without uttering two words, "Bill Clinton." NOVAK: President Clinton has put out the word very widely he is not going to raise any money this year. I called up several Democratic politicians, asked them if they're distraught, their champion fund-raiser on the bench. They are delighted. First place, they don't think he can raise money now that he's out of the White House and so controversial.

Secondly, Democrats really want him to cut it out, to get behind -- to get out of the limelight, so they are just very happy. But they are going to have a little trouble raising money this year.

SESNO: Bob, what does that do to Terry McAuliffe, head of the Democratic National Committee -- very close to Bill Clinton, raised a lot of money for him? And he was counting on using Clinton's fund- raising prowess to fill up this callers.

NOVAK: And you know, they are depending on Terry McAuliffe -- without his patron, Bill Clinton, supporting him -- to raise money himself, so Mr. McAuliffe, who is kind of a controversial figure, is on the spot for the 2002 campaign. Now, "The New Republic" says that McAuliffe, because of some of his problems, ought to resign. I think he still has support of most of the party, but very, very controversial figure.

SESNO: Bob Novak, thanks. Informative as always.

That's all for this edition of INSIDE POLITICS. But, of course, you can go online all the time at CNN's -- AOL keyword, CNN.

This programming note: Lines are being drawn in the battle over campaign finance reform. The man leading the charge is Senator John McCain. And he's our guest on INSIDE POLITICS tomorrow. He'll be talking to Judy Woodruff at 5:00 p.m. Eastern time.

Also tomorrow, AFL-CIO President John Sweeney on Bush's clash with those unions.

I'm Frank Sesno. "MONEYLINE" is next.



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