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White House Using Controversial New Math to Help the President Keep a Campaign Promise

Aired August 16, 2001 - 17:00   ET


JOHN KING, CNN ANCHOR: This is INSIDE POLITICS. I'm John King in Washington. The White House is using controversial new math trying to help the president keep a campaign promise.

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: I'm Major Garrett with the president in Texas. I will tell you how Social Security fits into the Bush administration's calculations.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: I'm Bill Schneider in Washington with a timely look at the Elvis-Clinton connection.

KING: Also ahead, after winning Olympic gold, find out what gymnast Kerri Strug is doing for an encore on Capitol Hill.

ANNOUNCER: Now, Judy Woodruff takes you INSIDE POLITICS.

KING: Thank you for joining us. Judy is off this week.

The political debate over Social Security is heating up today. The Bush administration says it is adopting, quote, "more accurate accounting practices" that will help protect the Social Security surplus. But some Democrats are accusing the White House of cooking the books to hide the impact of the president's tax cut.

For the bottom line, let's go to Major Garrett covering the western White House in Crawford, Texas -- Major.

GARRETT: Hello, John. The White House is using some new math, and it's conveniently timed math, math that some skeptics say is timed exactly to present and preserve a presidential promise.


GARRETT (voice-over): Soon after arriving in Washington, President Bush made this promise on Social Security.

GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: My budget protects all $2.6 trillion of the Social Security surplus for Social Security and for Social Security alone.

GARRETT: But Democrats have said that promise will be broken in Mr. Bush's first year, and the congressional budget office will soon say that declining revenue from the weak economy and the Bush tax cut will force the White House to dip into the Social Security surplus. But the White House denies that, and its budget office will soon report that Social Security is safe and actually stronger in part because the White House suddenly found billions in new revenue.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: We found that there should be more money attributed to Social Security than was previously thought. In other words, Social Security had been short changed in 1998, 1999 and 2000. More money came in for Social Security than the government accountants thought, and that'll be fully and fairly reflected.

GARRETT: How much? $5.6 billion. But the White House also found that the postal service is going to lose $1.3 billion this year, so it subtracted that amount, leaving $4.3 billion added to Social Security. Democrats say the new math looks like fuzzy math that was very conveniently timed.

JACK LEW, FORMER CLINTON BUDGET DIRECTOR: Now they're short in 2001, so they're creating a new gimmick. They're going back and changing the books for '98, '99 and 2000. I think it really is indicative of the problem of having an enormous multi-year tax cut that doesn't leave any cushion if things go wrong.


GARRETT: The White House says the only danger posed to Social Security now is Democrats who want to spend too much, but Democrats say the damage has already been done, and the only thing standing between Mr. Bush and a broken promise on Social Security is an accounting gimmick -- John.

KING: Well, Major, this debate obviously will dominate the appropriations process to come when both the president and the Congress return to Washington. Any regrets on the White House part at all about the size of that tax cut?

GARRETT: No regrets at all, John. As a matter of fact, the White House says, "Look, if it wasn't for the tax cut, we wouldn't be able to find our way out of this temporary budget squeeze." The White House says that tax cut will generate new economic growth. As a matter of fact, the president's chief economic adviser now says that next year, the economy will grow at 3.2 percent. That's almost double the projected rate of this year: 1.7 percent. The White House says it will be that growth that will make the surplus larger next year and in years to come, which will make President Bush and many congressional Republicans all the healthier -- John.

KING: All right, Major Garrett with the president in Crawford, Texas. Thank you very much.

Now back here in Washington, White House economic adviser Larry Lindsey also is defending the administration's new accounting practice. A short while ago, I asked Mr. Lindsey to explain just how the White House found the new money and why it happened just now.


LAWRENCE LINDSEY, WHITE HOUSE ECONOMIC ADVISER: The money was always there. It was scored as money actually that came in in 1998, 1999 and 2000. The government often doesn't know where the money is coming from when it comes in the door. We don't file our tax returns until April of the next year or sometimes August. So the government does not know what is Social Security money and what is not Social Security money until after the fact.

What we're doing is crediting Social Security money that should have been credited in '98, '99 and 2000 to the place it rightfully belongs: Social Security.

KING: And when did the administration discover this? Democrats, of course, will raise questions about the timing saying, you're doing this. They're already calling it a gimmick in response to their concerns about the budget?

Well, I think we're the ones who are concerned about making sure that money that belongs in Social Security is credited to Social Security. I think that's the most important thing that we do. Again, the Treasury always does this update. It happens routinely as we get more and more information. And we're just -- it's being announced as part of this mid-session review that we're doing, which is a natural time to announcement any budget numbers.

KING: Obviously, as you know, the Democrats were quite skeptical. I want you to listen to something the Senate majority leader, Tom Daschle, said yesterday on this program clearly signaling that as the Congress comes back next month and engages in the appropriations process trying to pay the government's bills and has to negotiate with the administration, the Democrats are going to take issue, that they are going to specifically blame the president's tax cut for what they believe to be a shortage of money here in Washington. Let's listen for a minute to Senator Daschle.


SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: Because the tax cut was so large, we virtually have no room to do all of the other things that we need to do to run the government. We are going to be dipping into Medicare and most likely Social Security trust funds for the first time in years. That to me is wrong. The Bush economy is souring, and we've got to find a way to resolve these issues prior to the time they get any worse.


KING: Now we were talking just a moment ago about budget accounting. Respond to that in terms of budget politics.

LINDSEY: Well, the first observation I'd make is that the bill that Senator Daschle sponsored in the Senate, they had their tax cut alternative. For this fiscal year, that tax cut alternative happened to be larger than the one that was actually passed. So if you're saying that there's a problem, he would have created a bigger problem had has alternative passed.

In addition, there's two other facts I think your viewers should know: One, the previous administration, the previous Congress last year to get out of town spent $30 billion more than what they had agreed they were going to spend. Second, we've learned that the level of the economy last year, last December, was lower than what the previous administration said it was by about $120 billion. That was something that came out two week ago when the Commerce Department did its revisions. So, yes, we are learning a lot of new things, things that no one knew at the time. But I don't think Mr. Daschle really is in a position to point the blame down here.

KING: With the administration's mid-year report due out next week, can you tell us now what you expect the surplus figure to be? Obviously, it is smaller than anticipated at the beginning of the year. The Democrats are blaming the tax cut; the administration says, no, it's because the slower economy means less tax revenue for the government.

LINDSEY: The surplus is going to be about $160 billion. That's the second largest surplus in American history, even as a percent of GDP. You know, it's a major triumph both for our economy and for the government that we can run such a large surplus even when the economy is slowing.

Now the slowing economy, remember, we're now in the 12th month in which industrial production has declined, and so we've been seeing a slowing for quite a while. Fortunately, that tax cut is putting a floor under the economy so that we don't get into any real economic trouble. That should be our first concern: making sure that the slowdown in growth that started more than a year ago is stopped, that Americans have jobs, and that the economy can start growing again.

KING: Well, what will your prediction be on that front? The economy grew at a very anemic 0.7 percent in the second quarter. We understand from some of your colleagues in the White House the mid- year report though will suggest in the year ahead that growth will be much greater than that, perhaps even in excess of three percent. Is that right?

LINDSEY: The blue chip consensus is saying that growth will be around three percent. And that seems like quite a reasonable number to go at. We don't know exactly when growth will start picking up, but fiscal policy is now kicking in. Remember, last quarter, the number you cited, there was no tax cut. It wasn't signed till June. The checks are just going out now. We think that that will have an effect for the lag in 2002. The fed's interest rate cuts should also help. Energy prices have come down; that should also help. So I think there's a lot of very good reasons to expect much more rapid growth in '02 than what we've seen, oh, in the last six quarters.

KING: All right, we need to leave it there because of the time. Lawrence Lindsey, top economic adviser to the president, thank you very much for joining us on INSIDE POLITICS today.

LINDSEY: My pleasure. KING: And for more on this now very spirited debate over the federal budget surplus and the budget process still ahead, I'm joined now by CNN congressional correspondent Jonathan Karl.

Jonathan, what are the experts on Capitol Hill saying? Is the government dipping into the Social Security surplus or not?

Well, the budget director on the Republican side of the Senate Budget Committee, the staff director, is saying that he believes that based on their analysis -- this is not an official analysis, this is not the office of Management and Budget, this is not the CBO -- based on his preliminary analysis, he believes there will be about $35 billion to $40 billion less in revenues coming in because of the economic slowdown, less in tax revenues coming in. He believes that means that we could be dipping into the Social Security surplus by as much as $3 billion or $4 billion this year. And if not, we will come perilously close to doing so.

KING: Well, Republicans pushed the president's tax cut through the Congress. Do they see a potential political problem here?

JONATHAN KARL, CNN CORRESPONDENT: Well, certainly. I mean, there's no shortage of Republicans on Capitol Hill that got elected by promising, you remember, to put Social Security in a lock box. Now the possibility that they may be dipping into the Social Security surplus is a major political problem for them that they acknowledge. They can already see the ads, John, you know, the ads against these Republicans saying, you know, "Your grandmother's Social Security is jeopardized because Republicans gave a tax cut to the wealthy."

But there is a silver lining that Republicans see up there. They think that this will keep the lid on spending. Remember, the president wants to keep spending, the growth in spending in the government down to four percent a year. Well, now with this, you know, pending dipping into the Social Security surplus, they believe it'll be easier to keep a lid on spending.

KING: And the Democrats, are they taking steps? You mentioned potential ads, campaign 2000 a bit away. What about in the immediate term? What are the Democrats doing? I assume they think they can exploit this.

KARL: Oh, they've been ready for this. Democrats have been anticipating that something like this was going to be happening. They've been laying the groundwork. Today, Senator Conrad, the Democratic chairman of that Senate Budget Committee, came and this is what he had to say in a statement, written statement. "It is quite remarkable that after only seven months in office, the Bush administration is poised to raid both the Social Security and Medicare trust funds. Now it is resorting to cooking the books to hide what it has done, but no accounting gimmick can conceal it."

So, clearly, Democrats are ready to jump on this. But again, they face that problem. Democrats want to spend more coming up. They want to see more education spending. They want to go back, get more agricultural spending on any number of issues, prescription drug benefits for Medicare. Democrats want to do some more spending in this round. It's going to be hard with this slowing economy bringing less in terms of tax receipts into the government.

KING: And the debate sure to grow more spirited once the president and the Congress actually return to Washington.

KARL: Absolutely.

KING: Jonathan Karl, thank you very, very much for joining us today.

Now tax cuts may be complicating the budget process, but right now, they appear to be working for the president's political advantage. A new CNN-"USA Today"-Gallup poll released just this hour shows 44 percent of Americans give Mr. Bush a lot of credit for the tax cut checks being sent out by the federal government. Twenty-five percent say they give a lot of credit to Republicans in Congress. Only 11 percent give a lot of credit to congressional Democrats. Of those surveyed, only one-fourth say they already have received their tax cut. Now maybe you could check the mail very quickly, but please stay with us. This is INSIDE POLITICS.


UNIDENTIFIED ACTRESS: Take it from the king, this Russ Feingold record has got me all shook up.


ANNOUNCER: Elvis as a political influence, particularly when it comes to a certain ex-president. Also ahead, the candidates for Virginia governor talk to us about their contest and their clashes over taxes, guns, and tobacco. And she was a heroine of the '96 summer Olympics. But is Kerri Strug recognized now that she's working in the political arena?

KERRI STRUG, FORMER OLYMPIC GYMNAST: I think the height and the voice give it away.


ANNOUNCER: Live from Washington, there's more of INSIDE POLITICS with Judy Woodruff straight ahead.


KING: The tight race for Virginia governor is one of the nation's key off-year elections, and the race is receiving a lot of interest and money from both national parties. We will speak with Democratic candidate Mark Warner in just a moment. Earlier, I spoke with the Republican nominee, Mark Earley, and I asked him if he can keep his tax cut promises in a time of shrinking state budget revenues.


MARK EARLEY (R), VIRGINIA GUBERNATORIAL CANDIDATE: Well, I think the real difference, John, is our position on cutting taxes in general. My opponent did not oppose cutting the car tax. In fact when we began it four years ago, he called it cuckoo and voodoo economics. I strongly support it.

We're in a five-year phase out. We're in the fourth year. And my goal is going to be to finish the elimination of the car tax here in Virginia on time and on target. We've been able to manage our finances here in Virginia so that we're in so much better shape than the other states around the nation. So many of the other states around the nation are considering raising taxes. North Carolina has declared a budget emergency and laid off state workers. Here in Virginia, we've had to lay off no state workers. Our revenues are continuing to grow at three percent, and we believe we can continue to fund our priorities for our children such as education and public safety and transportation, and also allow our people in Virginia to have lower taxes and keep more of the money they earn.

KING: I know you're worried most of all about your raise. But do you see a parallel to the debate going on here in Washington where the Democrats, when they come back from the August recess, will argue the Bush tax cut was too big, left the government with too little money to fund things like education, health care, defense spending and other priorities? Is there a parallel to this debate going on in your race?

EARLEY: Well, I think, you know, there's an old saying: There's nothing new under the sun. And I don't think there's anything new here. And the Democrats across the nation and here in Virginia always want to raise taxes, always want to make the case for bigger government. As Republicans, we believe government ought to be leaner. We believe that people ought to have more power than the government, and that people ought to be able to keep more of what they earn. I mean, across America today, you know, people are working months into every year to pay the combined burden of state, federal and local taxes. And I agree with President Bush that we ought to allow more of the American taxpayers to keep more of their money. That's going to ultimately help the economy. And at the end of the day, you know, families, I think, can make a better decision about how they spend their money for their future and their children than the government can. So I think anyway we can allow Americans, and in this case, Virginians, to keep more of the money they earn, we're going to be a lot better off.

KING: Let's talk about another intriguing sub plot to your race being closely watched at the national level. It's the fight for the support of the National Rifle Association. Your current governor, Jim Gilmore, a Republican, has appeared in national NRA advertising. The organization has its headquarters in your state, Virginia. But your opponent, the Democrat, Mr. Warner, aggressively courting the organization trying to win the endorsement or at least to convince the NRA to stay neutral. What do you make of his effort, and how important is that endorsement to you?

EARLEY: Well, I think his effort is really part of a national Democratic strategy that you can read about just a couple of weeks ago in "U.S. News & World Report" in which the Democrats nationally are trying to now mask their support for gun control. They've been strong gun control advocates. They have really eroded Second Amendment rights in many cases. And now I think they're trying to sing a different tune. But in my particular race, you know, my opponent has a long history of supporting gun control. In fact, in 1993 when George Allen was running for governor, he said George Allen was a frightening candidate and you shouldn't vote for him because he's going to block gun control.

But what we've done here in Virginia I think has been a model for the rest of the nation. We've really shown America that the way you fight gun crime is by going after criminals who carry guns not by going after the rights of law-abiding citizens.

KING: This gun debate factors into what could be a critical fight in your race. Fight for support in Virginia's rural communities. Not long ago in Virginia and across much of the country, indeed that was Democratic territory or at least viewed as Democratic territory. But support for Democrats in rural area, both in Virginia and across the country, dropping dramatically of late, especially in the past several races for governor in your state. Mr. Warner making a determined effort. You are as well. What issues matter most? We see the city of Richmond behind you right now, but when you go down into farm country, tobacco country, what issues matter most?

EARLEY: We're finding also in the rural communities a great deal of resentment against the national Democrats for basically their attempt to destroy the tobacco-farming communities in rural America, particularly in the rural South. And, you know, we had to work very hard in Virginia to fight the Clinton-Gore administration. We were all interested in protecting children from tobacco, but at the end of the day, we also had to make sure we protected the children who lived in the tobacco farming communities of many states in the South. And the Clinton-Gore campaign, which was supported by my opponent, which would have really destroyed these tobacco farming communities, would have left these children with very little hope, very little money for education in their schools, and very little opportunity to continue to have a strong economic base in rural Virginia.


KING: That was the Republican nominee, candidate Mark Earley. For the other side of the debate in Virginia in the race for governor, we're joined now by the Democratic candidate, Mark Warner. He joins us live from our Washington studios.

Mr. Warner, I asked your opponent whether he saw a parallel: the budget battle in Virginia playing out in your campaign, the budget battle here in Washington. You obviously do see a parallel. Let's listen first before a little bit of questioning to a snippet from one of your latest campaign ads.


AMY WILLIAMS, TEACHER: As someone who teaches math, I cannot understand how the politicians in Richmond can't get the budget numbers to add up. And our kids are paying the price. (END VIDEO CLIP)

KING: So you're trying to take advantage of this climate. Obviously, a very difficult budget battle in Virginia last year. Why do you think that's an issue in your campaign? Your opponent's not the governor.

MARK WARNER (D), VIRGINIA GUBERNATORIAL CANDIDATE: Well, John, my opponent stood by the governor's positions throughout this campaign. And what was remarkable about this year's budget battle was the fact that in the first time in Virginia history, we didn't even come up with a budget. And it wasn't the Democrats versus the Republicans; it was the Republican Senate who said, no, said, "We've got to put fiscal conservatism first, not simply a pledge or a promise." And the end result was no budget, no teacher salary increases, zeroing out arts and cultural funding, no funding for college construction. And Virginians across the commonwealth said, "We can and must do better. We want to return to true fiscal conservatism." A governor that knows how to get both sides together so we never, ever have this kind of situation again where we don't even come out of a legislative session with a budget.

It's one of the reasons why I've been so proud of our campaign that has tremendous support from Republicans and independents. Literally, almost half our money we've raised had come from Republicans and independents. We even have a separate organization called Virginians for Warner, which has been made up of leading business leaders, Republican business leaders, a number of Republican and independent elected officials. So we're trying to change the dialogue in Virginia. We can either continue as politics as usual, or we can elect someone who understands the changing nature of our information-age economy , someone who will bring all parts of Virginia forward, not just those parts like northern Virginia, which are doing pretty well right now.

KING: You mentioned your fund-raising there. Your opponent is trying to make an issue of the fact that in your last race in Virginia statewide, you ran against Republican senator John Warner, you lost that race. You spent about $10 million of your own money. You haven't spent that much of your own money in this campaign, but when I spoke to Mr. Earley, he said someone is trying to buy this race in Virginia. He obviously meant you. What do you make of that?

WARNER: Well, I think that's the kind of attacks when you don't have a message to lay out. We've been extraordinarily successful in fund-raising. I'm very proud of that. We have over 11,000 donors. That's twice as many as anybody in Virginia political history, because people all over the state, regardless of party and region, are investing in our campaign.

I mean, the other thing that's been kind of funny about this campaign so far is the governor, my opponent, the others are attacking me for being a successful business person. I'm proud of my business success. Nobody gave me anything. I'm the only member of my family ever to graduate college. Started in business. My first two businesses failed. I got into the wireless communications industry and then into the venture capital field and have been very blessed with some business success. So if I'm asking others across the state to invest, I don't mind investing as well. But this campaign is not going to be about the money, because my opponent will have plenty of money, too, because the governor is chairman of the Republican National Committee. It's going to be about who's got a message of hope that is going to resonate all across the commonwealth. That's why we're ahead in fund-raising. That's why we're ahead in the polls. That's why we have tremendous support from across the aisle. And I think come November 6th, we're going to start a new day in Virginia.

KING: Well, you are a Democrat running in an increasingly Republican state, a Republican governor now, two Republican United States senators. Yet in a speech yesterday, you said it was time for voters to make a clean break. Obviously, you think you can take advantage of that budget impasse in Richmond. But aren't you taking a risk there urging voters in a Republican state to make a clean break?

WARNER: Well, what I've said throughout this campaign, John, my reason for getting in this race is I don't think most policy-makers, regardless of party, understand the full implications of the information age. It's going to change not only our economy but it's going to change education, health care, government, the very nature of our communities. And while I'm proud to be a Democrat, I frankly think the politics of the 21st century are going to be less defined by kind of the Rs and the Ds, and more defined by those policy-makers who understand most of the changes and the opportunities and those who don't.

That's particularly why we're doing so well in rural Virginia. I put a lot of time and energy into trying to make sure the kids in south side, in southwest Virginia have the same opportunities as the kids in northern Virginia, at least the choice to stay in the community they grew up in.

That's why we started regional venture capital funds in those areas, why I've helped start the Virginia Health Care Foundation that's helped 400,000 under served Virginians get health care, why I've been very active across the aisle actually with my friend, George Allen, co-chairing the communities and schools project to help at-risk schools. So our opportunity right now is to make sure that everybody across the commonwealth has the opportunities in the information age. That's why we're doing well. That's what we're going to run this campaign on, as well as cleaning up the budget mess in Richmond. And 83 more days. But I feel very good about the campaign at this point.

KING: Very quickly, sir, we're short on time. Your opponent called you a Clinton-Gore Democrat on tobacco, a Clinton-Gore Democrat on gun control. He thinks he's onto something there, obviously.

WARNER: Well, I think that's kind of the old politics, the labeling. He can call me any kind of labels. Let's talk about the issues. The support I've gotten with tobacco farmers across south side Virginia is tremendous. The support I've got all across rural Virginia is tremendous. The support that I've got from Republicans and independents is unparalleled in terms of Republican and independent-elected officials. He can keep calling names. I'm going to keep laying out an agenda on education, transportation, economic growth, rural economic development. And come November 6th, I think the voters will have a clear choice.

KING: All right, Mark Warner, Democratic nominee for governor of Virginia, thank you for joining us today on INSIDE POLITICS. I'm sure we'll have you back before that election in November and your Republican opponent Mr. Earley as well. Thank you again.

Now later on INSIDE POLITICS, Elvis may have left the building, but our Bill Schneider says he may never leave American politics. Plus, a check of some the day's other top stories, including an update on those out-of-control wildfires out West.


KING: Now the story you have all been waiting for: The Elvis Presley-Bill Clinton connection. Today is the 24th anniversary of the death of the king of rock 'n' roll, and three days from now, the former president of the United States celebrates his 55th birthday. That mid-August convergence was enough to get our Bill Schneider all shook up -- Bill.

SCHNEIDER: John, Bill Clinton, Elvis Presley -- brothers under the skin. Elvis: The first rock star. Clinton: The first rock star president.


SCHNEIDER (voice-over): It's no secret that Bill Clinton drew on Elvis for inspiration. You might say Elvis won the 1992 election for Clinton.

AL GORE, VICE PRESIDENT OF THE UNITED STATES: I have to tell you, I have been dreaming of this moment since I was a kid growing up in Tennessee; that one day, I'd have the chance to come here to Madison Square Garden and be the warm-up act for Elvis.

SCHNEIDER: Elvis was everywhere in the '92 campaign.

WILLIAM J. CLINTON, PRESIDENTIAL CANDIDATE (singing): You know I can be found.

(normal voice): That's all that I can do.

(singing): Sit home all alone.

SCHNEIDER: President George Bush made fun of Clinton's Elvis fixation.

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: I guess you'd say his plan really is Elvis economics. America will be checking in to the "Heartbreak Hotel."

SCHNEIDER: But Clinton knew what to do with that. He used Elvis to demonstrate that he had the common touch, and Bush didn't. CLINTON: You know, Bush is always comparing me to Elvis in sort of unflattering ways. I don't think Bush would have liked Elvis very much.

SCHNEIDER: How much did Clinton and Elvis have in common? Rock critic Greil Marcus wrote, quote: "As white male Southerners without family money, hillbillies, no-counts, white trash -- Presley and Clinton always had to prove themselves."

And they did, by connecting with people. As Marcus says: "Clinton had a talent for convincing anyone listening to him that he was speaking only to them, just as Elvis convinced someone in the 100th row that he was singing only to them."

Presley drew on black culture for inspiration. Clinton draws on black culture for solace. They were both culturally polarizing figures. Censors tried to shield Elvis' gyrating hips from public view to protect the country's morals. Elvis brought in the culture of the '60s. Clinton came out of it. Conservatives believe the '60s corrupted American culture with an ethic of self-indulgence. Well, these are two self-indulgent men, both famous for their appetites.

CLINTON: In his later years, he did a lot of good work, but his life was a lot sadder and it is not the memory I think he would want us to have.

SCHNEIDER: When told of Elvis' death in 1977, a Hollywood cynic remarked, "good career move." And it was. In death, Elvis became bigger than life, a cultural martyr. Graceland is his shrine. His memorabilia are cherished. He is imitated. He is loved.

America loves bad boys who try to do good. Elvis once asked President Nixon to make him a narcotics agent.


SCHNEIDER: Clinton, too, has found life after political death. And he's trying to do good: Fight AIDS and racism. Clinton is now a free man, a pure celebrity, being paid record amounts of money to tell his story. At long last, Clinton can be Elvis. Thank you, thank you very much.

And you know, John, just like Elvis, you are the King.

KING: Not quite.

Another postscript to the Clinton era today: Paula Jones is suing real estate tycoon Abe Hirschfeld, charging he never paid the $1 million he promised her to drop a sexual harassment suit against then- President Clinton. Hirschfeld offered Jones the money during a 1998 news conference. She reached a settlement with Mr. Clinton soon after. Jones filed suit yesterday to get Hirschfeld to fork over the money. Hirschfeld calls Jones' lawsuit "frivolous," and he says she doesn't deserve one penny.

More insight on the federal budget and the shrinking surplus. Plus, which candidates are in and out of some of next year's key races? Bob Novak and Margaret Carlson will join us next.


KING: Joining us now: Margaret Carlson of "TIME" magazine and Bob Novak of the "Chicago Sun-Times."

Bob, I want to start with you on the topic of the shrinking federal surplus, the debate we're having here in Washington. August posturing by the Democrats, or does the White House have a problem here?

ROBERT NOVAK, "CHICAGO SUN-TIMES": I think they have a political problem. What they're really waiting for, John, is the mid-year review coming out next week on how much the deficit has shrunk, and the Democrats will go around ringing their hands about it, and it's a question of whether the Republicans will say, my goodness, this is still the biggest surplus, second-biggest budget surplus in history, in the middle of a recession.

But a lot of the Republicans have put themselves on the box with the silly lockbox, because then they talk about all of that baloney about dipping into the Social Security surplus, when there isn't any. The bottom line is: They are worried sick about these numbers coming up next week -- maybe Wednesday or Thursday of next week.

KING: Looking down the road a bit, though, Margaret, could the Democrat be in a perilous position if the economy picks up, as the White House insists it is already doing and will more so in the future -- if they spend this fall arguing the president's tax cut is too big, what might happen next year, in an election year?

MARGARET CARLSON, "TIME" MAGAZINE: Well, it doesn't sound like that there's going to be so much money that they're going to be in a perilous position.

I mean, the Democrats have often been in a position of kind of wishing for bad news so that they look good, but I -- unfortunately this time, I think the news is going to be bad, and the movements of Republicans to try to find an accounting trick to make this Social Security surplus look bigger, tells you that they are very, very worried.

KING: Now Margaret, let's look ahead to that campaign 2000. I was told by someone last week, Senator Jesse Helms of North Carolina had told his old friend Bob Dole, "tell Elizabeth to get her track shoes out." This is Dole obviously thinking about running for that seat if Senator Helms retires. What do you hear about the timing of that decision?

CARLSON: She's not getting her track shoes ready, she's getting her black pumps and nice hose ready, that's Liddy Dole for you, very well-planned, down to the pastel suit.

He may announce sooner than we thought. It was going to be in September, it could be this month. She wants to get a leg up on (UNINTELLIGIBLE), who would like to have another crack at it. The timing is the only question with Helms, I think it's almost 99 percent certain that he will not run.

KING: Do you agree with that, Bob?

NOVAK: Yeah, I'm sure he will not run, and I think he will announce pretty soon. Now, Mrs. Dole, if she runs, she has got the nomination in the bag. I was talking to a political consultant down there, a Republican political consultant today, and she said -- he said that Mrs. Dole's numbers are like Mother Theresa's. I mean, he has never in his whole life seen numbers in the state of North Carolina like that.

Of course, they will go down, but the other question is that Liddy Dole has gone up to the line on many races before and jumped away. She quit early on her presidential race, and the question is: Will she really run? I can tell you this, the Democrats are scared to death of her. They don't think they can beat her.

KING: And Bob, another big race, we saw the reemergence of Al Gore this week in Tennessee. Bill Daley was the chairman of the Gore campaign, a very outspoken Gore supporter during the recount. He has now moved back to Chicago. What about his political future?

NOVAK: No, he's actually in New York. He was going to become a multimillionaire, but now he sees the chance of a lifetime to be governor of Illinois, a very weak Democratic field. His brother, the mayor's great friend, George Ryan, the Republican, dropping out, so that's not a problem.

I am going to tell you something, John, that I didn't think I would ever say. I would say it's 95 percent certain that Bill Daley, maybe within the next week, will announce for governor of Illinois. Now, it used to be in the old days that south of Highway 80 in Illinois, Daley was dead, but I think things have changed. Richard Daley is a very popular mayor, and I think Bill would be a strong mayor.

Richard Daley, by the way, no matter what you may read, is all for this race. He would love to see an all-Daley state, Richie as mayor and Bill as governor. It's the question of how it goes over with the voters.

KING: An all-Daley state. Now, Margaret, the former vice president down in Nashville, behind closed doors, but he did accept an invitation to go out to Iowa next month to speak to the Jefferson Jackson Day fund-raising dinner. Is that a sign Al Gore is back and that Al Gore is seeking a rematch?

CARLSON: Well, that makes me look more like a candidate than teaching a course with the other presidential loser, Lamar Alexander. But the first big event will be, he shaves off the beard, and the next big event would be the dinner.

You know, he looks like a candidate, and given the race that's sure to come with all the Democrats in, he probably needs to get in early to try to keep the field small. Although the more there are, perhaps the better chance there is that Gore can -- can consolidate all of these people.

I wanted to say one thing about Bill Daley, which is I think the Chicago curse is partly removed by Richard Daley, and he's an immensely popular figure with none of the flaws of Gore, the candidate who lost. He's a -- he's an authentic person. He's very likable, and although Bob might like him more if he were a multimillionaire, I think even Bob Novak likes him.

NOVAK: He's pretty conservative for a Democrat, too.

KING: And Bob, very briefly, we had Tom Daschle on this program yesterday from South Dakota -- the junior senator there, Democrat Tim Johnson, on the ballot next year. Who's going to be his opponent?

NOVAK: It looks like John Thune, the very popular Republican congressman, is going to run against Democrat Tim Johnson. Thune will be favorite. But in each happiness, there has to be a little bit of a sorrow. Thune's seat may not be -- the Republicans may lose their seat to a woman named Stephanie Herseth whose grandfather, Ralph Herseth, was governor of South Dakota, and I covered him, John.

KING: All right. Bob Novak, Margaret Carlson, thank you very much for joining us here on INSIDE POLITICS. And you can catch Bob a little big later, more Bob later here on CNN. Tonight in the "CROSSFIRE": what are Janet Reno's chances of becoming the governor of Florida, and Elizabeth dole's of wining that Senate seat in North Carolina? Strategists Mark Mellman and Scott Reed will weigh the odds, that's in the "CROSSFIRE," at 7:30 p.m. Eastern.

We head to Capitol Hill when INSIDE POLITICS returns: A visit with a Washington intern you may recognize, already beginning her second career.


KING: The life of a congressional intern is not known for its glamour: Answering the phones, sorting the mail, that's the norm. Meeting a few famous lawmakers, one of the very few perks. But one intern in this summer's class brings her own star power to the job.


KING (voice-over): Summer, 1996: Kerri Strug, Olympic hero. During the vault competition, Strug ripped two ligaments in her left ankle. She gritted her teeth and vaulted again. The U.S. team won the Gold.

STRUG: At the time what I thought was just my job, as part of the team, and to represent my country and my sport has become, you know, so famous.

KING: Five years later, at age 23, over the hill, she says, by women's gymnastics standards, Strug is building her adult life, a student at Stanford University, and a summer intern on Capitol Hill.

STRUG: Sometimes they recognize the voice. I think the height and the voice give it away.

KING: Her boss, one of the best-known and more controversial men in the Senate: John McCain.

KING (on camera): And you like Senator McCain?

STRUG: Yeah, I definitely like Senator McCain.

KING: Because some people do think he's a little loose in the head sometimes.

STRUG: Well, I think it's neat that he stands up for what he believes in on a continual basis, regardless of what -- how others view him.

KING: Regardless of how other view him, OK, that's diplomatic, that's very good.

(voice-over): Then it was the uneven parallel bars, the vault, the balance beam, floor exercises. And now...

STRUG: Sometimes the interns sort mail, so, you now, they will just give us a big sack, and we put it in its respective categories. Other times, you'll print stuff out, so here's the printer. Occasionally, it gets jammed, you got to fix it.

KING (on camera): For this you went to college?

(voice-over): Where critics see Senator McCain as hotheaded, a maverick, Strug sees a familiar resolve and determination.

STRUG: I was really honored and excited to come here, because you know, obviously he's a big figure, gets a lot of notoriety, and I just think he's a great guy for sticking behind what he really believes in.

And it's kind of, you know, I feel a lot of parallels between myself in gymnastics, in terms of, like, what he's doing, so I realize you can do in whatever, you know, venue you chose, whether it's in the entertainment industry, politics, sports, or raising a family -- you just have to follow the path that you chose and not let anyone get in your way. You have to stay persistent.

KING (on camera): Your parents back in Tucson, Republicans, McCain supporters. What about Kerri, what does Kerri want to do? A, are you a Republican?

STRUG: Well, I think that's why I'm here this summer, is my parents are definitely strong supporters of Senator McCain, they are very Republican, but being in California and having a liberal boyfriend who interned for Senator Lieberman, there is a lot of things that I wasn't sure about, living in my gymnastics world. I didn't really think about issues and politics, or really anything other than gymnastics.

So that's why I decided to come here, to kind of open my mind and my views and really see what I think, because for so long I think would just rather listen to what other people tell me. When you're a young gymnast, it's what your coach says, and that's that.

KING: You're 23 now?


KING: How old were you when you won the Gold Medal?

STRUG: I was 18 then.

KING: Eighteen then. Do you miss the competition?

STRUG: I do miss the competition a little bit. I think I miss the self-satisfaction of achieving, you know, that next skill, or that next competition when you set something, a certain score for yourself, but at the same time, I don't miss the everyday waking up at 6:00, and being on a special diet, and training eight hours a day, and not having a normal or a typical life that everyone would say a college student has.

So, I'm very fortunate in the sense that I had that life, I accomplished my dream, and now I can pursue other things.

KING (voice-over): And what's next for Kerri Strug? Maybe teaching, a family. And politics? Probably not, but she has learned at least one thing in Washington: never say never.


KING: Kerri Strug's time on Capitol Hill is almost over. Her seven-week internship ends tomorrow.

We will be right back.


KING: 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. Our e-mail address is:

I'm John King in Washington. "FIRST EVENING NEWS" is next.



4:30pm ET, 4/16

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