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CNN CAPITAL GANG

Has Enron Become a Political Scandal?; What is Reagan's Legacy?; How Has 9/11 Transformed the Winter Olympics?

Aired February 9, 2002 - 19:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Live from Washington, THE CAPITAL GANG.

MARK SHIELDS, HOST: Welcome to CAPITAL GANG. I'm Mark Shields with Al Hunt, Robert Novak and Kate O'Beirne. Our guest is Democratic Senator Kent Conrad of North Dakota, chairman of the Senate Budget Committee.

It's good to have you back, Kent.

SEN. KENT CONRAD (D), NORTH DAKOTA: Good to be with you.

SHIELDS: Thank you. Democratic Senator Fritz Hollings of South Carolina, chairman of the Senate Commerce Committee, announced that his hearings on the Enron scandal would not be limited to corporate corruption.

(BEGIN VIDEO CLIP)

SEN. ERNEST HOLLINGS (D), SOUTH CAROLINA: There's a culture of government corruption. I've never seen a better example of cash and carry government than this Bush administration and Enron. To say no help here is like "I did not have political relations with that man, Mr. Lay."

That's what happened to Kenny boy.

SEN. TRENT LOTT (R-MS), MINORITY LEADER: If this turns into just, you know, trying to spare the administration or it turns into a partisan battle, I don't think the people are going to react well to that.

(END VIDEO CLIP)

SHIELDS: Many Enron executives took the Fifth Amendment, but not the former CEO.

(BEGIN VIDEO CLIP)

JEFF SKILLING, FMR. ENRON CEO: I don't recall that any determination was made. I am not aware what Ken knew. I do not recall saying that. I don't recall that it would be possible. I don't know.

(END VIDEO CLIP)

SHIELDS: Bob Novak, after two weeks in congressional hearings, is Enron now become a political scandal?

BOB NOVAK, "CHICAGO SUN-TIMES": No, and it may never be, because I know the Democrats, particularly Henry Waxman and Fritz Hollings are hunting for something that they can't find. I thought that Fritz Hollings -- I'm going to say something I usually don't say. I think he looks like a fool and a liar. He lied because he said that Mitch Daniels, the budget director, was on the Enron payroll. Just a lie, he never was.

I think that's out of control. I think Henry Waxman, when he was on "CROSSFIRE," was asked by Tucker Carlson what's the basis for all these convictions? He said he read it in the paper.

Now I would say this. Mr. Skilling is a very unattractive fellow, but you know, the level of the questioning by the members of Congress, in that hearing, Republicans and Democrats, made Mr. Skilling a sympathetic figure. That's hard to imagine, but they did. And because these people were not after information, they were after to show how self-righteous they were. It was Congress at its worst. And I think it turns off, yes, as Trent Lott said, it turns off people.

SHIELDS: Kent Conrad? Is your sense of Congress at its worst?

CONRAD: No, I don't think that Congress at its worst. Look, I thought Skilling came off horribly. And here's a guy who was the CEO, and he didn't know anything. He didn't know about these deals. He didn't know about the financial condition of the company. I thought he came off as being totally unbelievable.

SHIELDS: Is it a political scandal?

CONRAD: I don't think we know yet. I think in fairness, what we know is this is corporate scandal of enormous dimension. It may become a full blown political scandal. Goodness knows there's tremendous amounts of money that Bush -- the administration got the greatest level of financial support from Enron people.

We see an involvement of Enron and the replacement of the FERC chairman. I think that's going to lead to a lot of serious questioning. But I'll tell you the real bottom line. The thing that I think is going to turn this into a scandal of even greater dimension is when the partners are revealed. Who was at the trough? Who had the advantage of these partnership agreements that enriched themselves at the expense, its shareholders and its creditors?

SHIELDS: Do we know any major figures you think were partners or?

CONRAD: Those names have not yet been revealed, but I've been told by those who are hot on the trail, that there's going to be some very, very embarrassed major figures in the days ahead.

SHIELDS: Not you, Bob.

NOVAK: Well, no, I tell you, Kent, you portray to me -- I get sick of all this. You were on here a couple weeks ago and you said you know there was contact. There haven't been any contact. Nothing's been revealed.

Now he says there's major figures. You know what we used to call that, Kent? McCarthyism.

CONRAD: No, it's not McCarthyism, Bob. You are going to find, when you get a chance to see who is in on these partnerships.

(CROSSTALK)

CONRAD: That people are -- that major people are going to be embarrassed. I don't think we know the full dimensions of this, but as you follow the trail of money, I think a lot of people will be embarrassed.

KATE O'BEIRNE, "NATIONAL REVIEW": I couldn't agree with Bob more. If there's anything designed to elicit sympathy, deserved or not with Enron executives, it's the spectacle of members of Congress so grandstanding. And the kangaroo court they're running. The lesson, of course, on campaign finance donations is forget whether or not you're looking for favors. If you even want a fair shakeout of Washington, you better not have given any money to politicians, because they're all tripping over themselves in a most unfair way, to make it look as though they haven't been affected.

And to them wringing their hands so about corporate fraud and waste, when I don't think there's a single agency of the federal government for which they have oversight responsibilities Congress, that can't pass even an Arthur Andersen audit.

And every time there's a scandal in the department, members of Congress say, "We had no idea." But I have some issue advice for the Democrats. They ought to diversify. And I'm not surprised the public doesn't trust them on the economy, given how they are now overinvesting in the stock of Enron.

A CNN poll this week was really interesting. Do you think people in Washington feel they owe special favors to Enron? The majority of the public said no, they do not believe George Bush felt he owed any favors. They're crediting George Bush with being honest and not for sale.

And the majority of the public did not feel that way about congressional Democrats. The majority of the public felt congressional Democrats felt they owed special favors. Mark, I think it's because they look like they're politicizing this and they're being opportunistic with the Enron scandal.

SHIELDS: I guess that's the reason we need hearings, Al.

AL HUNT, "WALL STREET JOURNAL": Yes.

O'BEIRNE: Why do we need hearings?

HUNT: I think there are very few Americans who agree with Bob and Kate that Mr. Skilling looked better than members of Congress. Mr. Skilling was a liar and a fool. He said he had not idea when he resigned in August that the company's going to go bankrupt.

If he had read the piece in "Fortune" magazine six months earlier that he tried to get killed, he would've known that his company was a deck of cards.

I also love the politicians who spend eight years wallowing in Whitewater, one of the great non-scandals of all times. Now they're shocked, they're just shocked by any kind of partisan shots here.

Mark, of course, this is a political scandal. Part of it has to do with lax regulation. It has to do with legislative and political favors given to this very corrupt company. Where it reaches, we don't know that. That's what investigations are all about, both legal investigations and congressional inquiries.

SHIELDS: Let me just make two quick points. One of the great mantras is, what did they get for it? What did Enron get for it? Well, I tell you what Enron got for it. Enron was the leader in the lobbying effort to repeal the corporate alternative minimum tax. They did it in the Republican House by a vote of 216 to 214. All right?

With the collaboration, the support and the endorsement of the Bush White House, and with a $254 million check directed right to Enron. Now this is Enron that hadn't paid tax in four to five years. I just...

O'BEIRNE: Mark, maybe there was...

(CROSSTALK)

SHIELDS: OK, that's one point you can correct me -- my second point, Bob. Because you're wrong, because that's the fact.

The second point is that they refuse, this Bush administration, to honor Bill Clinton, the Clinton administration's pledge to get tougher on the scrutiny and exposure of offshore shelters with the Organization of Economic Cooperation and Development. The deal that had already been made with the U.S. government. They said no. Who had 800 shelters offshore but Enron?

NOVAK: Let me tell you where you're wrong.

SHIELDS: OK, tell me.

NOVAK: As a matter of fact, the administration did not, clearly, did not endorse, did not -- just a minute, did not propose the retroactive payments to corporations on the alternative minimum tax. And there was -- this was an Enron bailout. Every corporation was at the trough, trying to get this. I was opposed to it. And I said that. So just a minute. Secondly, there are -- what about the things that Enron didn't get? They didn't get the stuff they wanted on carbon dioxide emissions so they could have trading on it. This is...

SHIELDS: They did. They got trade credits.

NOVAK: They didn't...

SHIELDS: They got the trade credits. It was in the energy bill.

NOVAK: They didn't get that through. They were...

(CROSSTALK)

SHIELDS: Now that you tell me I was wrong, let me tell you Bob. I covered that vote. The White House lobbied for the stimulus bill with that in it. And it was the official White House position. And when it passed, the White House we endorse it.

NOVAK: That's just wrong. They were not...

SHIELDS: Bob, Bob, you are wrong. Now I'm sorry, that's it, Bob. I am right and you are wrong.

HUNT: One of the things that we don't know is...

SHIELDS: You are wrong.

HUNT: ...and Kate and I think Bob have suggested that -- said the Cheney ought to release this information. And I think you've said that you guess that it will be benign when it comes out.

SHIELDS: Yes.

HUNT: I don't know any more than you do when it will be. My guess is, what it may well show is that there was a pay to play. That if you contributed, you got access to the Cheney energy task force putting together the energy bill.

NOVAK: Well, you're doing the guessing, too. You don't know that.

HUNT: You guess, I guess, we both guess.

NOVAK: Well, no, I don't know. I don't know.

HUNT: Nor do I.

O'BEIRNE: The administration is going to adopt free market, pro market energy policy. It's not going to look like Bill Clinton's. And might I add, Enron got a lot of favors out of the Clinton administration on the environmental regulation side.

CONRAD: Well, apparently, Enron did get the head of the Federal Energy Regulatory Commission removed, replaced.

NOVAK: That's not true either.

CONRAD: Because...

NOVAK: It's not true.

CONRAD: Because he would not tumble to Ken Lay's intimidation on agreeing with Enron's position on deregulation. So apparently got something there.

NOVAK: If you read my column, senator, you'd know that that decision had been made. I think it was a bum decision by the president, had been made long before that conversation with Ken Lay.

You -- putting all these things together is the worst kind of demagoguery.

CONRAD: You have one interpretation. Other people have others. Mr. Hebert says it happened. You say it didn't. We don't know. We'll get the fact...

NOVAK: It happened after the decision had been made.

CONRAD: Put people under oath, Bob. When you put them under oath, then you'll find...

(CROSSTALK)

SHIELDS: You are entitled to your tenure and entitled to your analysis. You are not entitled to your own facts. And the fact is the White House endorsed the House stimulus bill written by Bill Feinstein.

(CROSSTALK)

NOVAK: Wait a minute. You can't cut me off because you bring that up again. They endorsed the whole package. They never endorsed that proposal.

SHIELDS: Was that proposal the centerpiece of the package?

NOVAK: No.

SHIELDS: Yes, it was, too. Kent Conrad and the gang will be back with a new terrorist threat, other than the man on my left.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. The director of Central Intelligence briefed Congress on the condition of al Qaeda terrorists after their military defeat in Afghanistan.

(BEGIN VIDEO CLIP)

GEORGE TENET, CIA DIRECTOR: We assessed that al Qaeda and other terrorist groups will continue to plan to attack this country and its interests abroad. Their modus operandi is to continue to have multiple attack plans in the works simultaneously, and to have al Qaeda cells in place to conduct them.

(END VIDEO CLIP)

SHIELDS: The U.S. government changed the legal status of enemy fighters captured in Afghanistan and detained at Guantanamo.

(BEGIN VIDEO CLIP)

ARI FLEISCHER, WHITE HOUSE SPOKESMAN: President Bush today has decided that the Geneva Convention will apply to the Taliban detainees, but not to the al Qaeda international terrorists.

DONALD RUMSFELD, DEFENSE SECRETARY: What will be the impact of these decisions on the circumstances of the Taliban and al Qaeda detainees? And the answer in a word is none.

(END VIDEO CLIP)

SHIELDS: Al Hunt, if al Qaeda is alive and well, did U.S. military operations do any more than change the governments in Afghanistan?

HUNT: Yes, I think it did, Mark. Five months ago, there were extensive training camps in Afghanistan. There were money-laundering outposts. And bin Laden was able to communicate reasonably freely with his terrorist cells around the world. And none of that is true today.

You know, I think that terrorist network has been dealt a lethal blow. But George Tenet is right. I think some of these operations, some of these plans were in progress pre-September 11. I think they have people fanned out around the world. And I think that they're still a great threat. And I think there will be for some time to come, as both Don Rumsfeld and George Bush have told us.

By the way, I thought that Tenet was a tour de force at that committee hearing. It's hard to believe that only a few months ago people were saying that his tenure might not be secure. He's gotten very close to Bush. And his job is very safe right now.

SHIELDS: Kate O'Beirne?

O'BEIRNE: Yes, he bristled, of course, when he's asked by some members, you know? Can't we assume that there was a massive intelligence failure that permitted September 11 to happen?

And I'm still sort of inclined in that direction. You know, you look at John Walker Lindh, who infiltrated al Qaeda and Taliban, and how frustrating it is that we have no assets capable of doing that.

But in fairness to the director, he says that's not the case, that they knew something was happening. And they had not way of knowing exactly what. And of course, even a low level soldier like Walker Lindh wouldn't have known. And he claims that their intelligence has disrupted some planned attacks. And of course, he's right. They never get credit for the ones that don't happen that they've prevented.

SHIELDS: Senator Kent Conrad?

CONRAD: You know, I think he got it right. He's warning us that there are substantial risks still out there. Certainly there are. We also accomplished a great deal in Afghanistan.

The president and his administration deserves high marks. They took on a very tough undertaking. And they made a real difference. And I think al Qaeda, back on their heels at this point, but they remain a serious threat to this country.

SHIELDS: Bob?

NOVAK: You know, at that hearing, Mr. Tenet said that if they found any training camps anywhere in the world now, unlike before, they would hit them very hard. But the question is, what do they do about the coffee shops in Hamburg and maybe even in Detroit where there's al Qaeda? And that worries me. I wish they were arrested some people besides the people at Guantanamo.

Now what I'd like to know, and this is the kind of thing you'd probably understand, Mark, better than I would, is you tell the al Qaeda from the Taliban?

SHIELDS: Well, actually, the al Qaeda are...

(CROSSTALK)

O'BEIRNE: They tend to be (UNINTELLIGIBLE).

SHIELDS: That's right. That's true. But the news from Afghanistan, I'm sorry folks. I mean, there's a long road of holes there. I mean, it's better than it was, but I got to tell you, it's a long way from Iowa, as you like to say, but it's a long way from any semblance of order, democracy, or really national government, isn't it?

NOVAK: But there's no training camps there. See, that's the point. And we really don't care how rotten the country is. Afghanistan is always -- I always say Afghanistan for the Afghans. Or Afghans for Afghanistan, something like that.

SHIELDS: Do we care how rotten -- I mean, don't we have a responsibility once we're gone in?

CONRAD: Sure we care, because what allowed it to become a sanctuary for al Qaeda and bin Laden was because of the incredibly depressed conditions there and the influence of bin Laden's money. So we do care.

SHIELDS: Last word, Senator Kent Conrad. Next on CAPITAL GANG, a new budget and some hot words.

(COMMERCIAL BREAK) SHIELDS: Welcome back. President Bush's new budget sharply increases funds for defense and homeland security, while limiting spending for domestic programs.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: In the short run, we're focusing on a tax. The long run, the country will be better off for the doubling of the homeland security budget.

MITCH DANIELS, OMB DIRECTOR: We do propose the rest of government slow down to about two percent growth. And anybody made uncomfortable by that perhaps is wasting the taxpayer's dollar today.

(END VIDEO CLIP)

SHIELDS: Democratic Senator Byrd of West Virginia, the Senate president pro temp, complained to Treasury Secretary Paul O'Neill about a cartoon in the budget document, showing Gulliver, the administration, tied down by the Lilliputians, the Congress, with the Byrd rule governing appropriations.

(BEGIN VIDEO CLIP)

SEN. ROBERT BYRD (D), WEST VIRGINIA: You probably should have had a good study course in America history before you came here. And you've been in this town one year. I've been in this town 50 years. With all respect to you, you're not Alexander Hamilton.

PAUL O'NEILL, TREASURY SECRETARY: I've dedicated my life to doing what I can to get rid of rules that so limit human potential. And I'm not going to stop.

(END VIDEO CLIP)

SHIELDS: Kate O'Beirne, would you call this document a conservative Republican budget?

O'BEIRNE: Mitch Daniels reminded us this week that other wartime budgets historically have dramatically reduced, you know, by 20 and 30 percent non war spending. This one, of course, increases by two.

By Washington terms, though, it's not bad. I think the White House is right to not be so deficit obsessed. It is worth running. First of all, the deficit's not the most important thing. Besides the deficit, the size of government is the most important thing.

And even with a surplus, because all Washington's done is spend the money, reducing taxes in the interest of economic growth and increase in defense spending with the nation at war are far more important than a deficit.

And I think we're going to find -- the senator's going to find that the only thing that at least the president has a budget. And I don't think Senate Democrats are going to be able to come up with one. They'd rather just attack the administration's. Because it seems to me they're not willing to increases. They're not willing to short change defense or cut spending and they're railing against the deficit.

So I'll be surprised if you're even able to come up with a blueprint this year.

SHIELDS: Blueprint? Are you going to have one, Mr. Chairman?

CONRAD: Boy, is Kate going to be disappointed. Yes, we're going to have a budget. But the biggest problem with the Bush budget is its harm to the economy long term.

This is a return to deficits big time. The president said in his State of the Union that there were going to be small deficits, short- lived. "USA Today" got it exactly right in their lead editorial, when they said don't believe that.

These are going to be massive deficits for a very extended period. In fact, if you set aside the trust funds, which should be done, given the fact the baby boomers are about to start retiring, you set aside the trust funds of Social Security and Medicare, this president's budget is going to take $2 trillion of deficit. That's what we're going to see over the next decade. We're going to see an ocean of red ink, because the president has not made the tough choices.

Instead what he did was tell America last year you could have it all. It didn't add up then. It doesn't add up now. And we're not talking about the short-term situation. I think we could all understand recession and war for the short-term, a return to deficits perhaps. But his budget puts us in the ditch for the entire rest of the decade.

SHIELDS: Bob, $2 trillion of deficit, as Kent Conrad said, an ocean of red ink. Even for someone who doesn't worship before the shrine of the balanced budget, like yourself, that's got to be a little unnerving.

NOVAK: Nonsense. This has nothing to do with the deficit. We get up to growth rate of 3 percent, we're in surplus again because we're overtaxed in this country.

This is an ideological argument. Why don't we talk about deficits? It's a question of whether you want a lot of government spending, a lot more government spending than Bush wants and a lot higher taxes or you want less government spending and less taxes. That's what it's about.

But I want to say something else, if I could. I really believe that Senator...

(CROSSTALK)

NOVAK: No, no, no, no. Senator Byrd, I think, is a living argument for term limits because he abused Secretary O'Neill. I'm not a great fan of Secretary O'Neill, but he's a decent, hardworking man. And no cabinet officer should have to undergo 15 minutes of abuse.

And the senators let that old man carry on that way. It is disgusting. I think the Republicans are reprehensible. And they didn't say cut that out because -- and I think the chairman of the committee should have said, "This is out of order to treat a secretary of the treasury that way."

And nobody ever treated Bob Rubin that way.

SHIELDS: That's true. Isn't Senator Byrd the chairman of the committee?

NOVAK: No, this was at the Budget Committee.

SHIELDS: Oh, the Budget Committee. Go ahead, Kent Conrad.

CONRAD: Look, I think all of this is a distraction. The big question is the fiscal future of the country. I don't know if Bob Novak used to be a conservative. And now he doesn't care about paying our bills. That's the fundamental question before the country. We're not paying the bills.

Instead, we're putting it on the credit card. And the baby boomers are going to start to retire. And then the country is going to be faced with agonizing choices of big cuts in benefits, massive tax increases, or huge increases in debt.

NOVAK: I want somebody to defend Byrd.

HUNT: Amen, brother Conrad. I want to tell you, Mark, this budget is about as credible as an Enron accounting statement. Kate, unlike previous wartime budgets, this one proposes tax cuts for the wealthy, takes care of every corporate interest.

It is, as I said last week, a guns and caviar budget. It talks about Social Security reform, provides no money at all. You can't reform Social Security when you're raiding Social Security. It cuts funds for low income energy assistance. And it cuts funds for the CDC.

But my two favorites are, that first of all, they talk about in post-Enron about the SEC. Yes, we need an SEC. Congress passes legislation to let SEC regulators be paid the same as bank regulators. And this administration doesn't fund that.

And the president goes around and says, "I'm the education president." Runs around with George Miller, his friend from California. And then he proposes a budget. And George Miller says he's broken his word. He doesn't fund what talked about last week.

(CROSSTALK)

NOVAK: I'd like to have somebody defend Bob Byrd. That's what I want...

SHIELDS: I'd be happy to -- listen, you talk about Washington being all this contrived, phony, orchestrated, everybody with a set piece. That was a real exchange of great intensity and great passion.

(CROSSTALK)

SHIELDS: Between two individuals. They were both...

(CROSSTALK)

NOVAK: It was a disgusting performance.

SHIELDS: Wait a minute, wait a minute.

CONRAD: Wait a minute. I'm the chairman of the committee. That was not abusive. Look, there were very strong feelings there.

Senator Byrd had strong feelings about what he saw as the secretary demeaning something that had real relevance to holding down excess government spending. That's what the Byrd bill does.

NOVAK: He probably...

CONRAD: No, he did not brow beat him. He had strong feelings.

(CROSSTALK)

NOVAK: I watched the tape. I mean, we have a...

CONRAD: And the secretary was given the full right to respond. And we made clear that we respect him. We respect how this administration has performed in this war, but we do have profound differences of how they are conducting the physical future of this country. That matters.

SHIELDS: I will say this, any budget is first of all a moral statement, what the country cares about, and what it's willing to spend. George Bush on the expenditure side is committed to national defense. He's committed to homeland security.

On the revenue side, he doesn't want to touch any body who belongs to a country club or drives a corvette.

(CROSSTALK)

SHIELDS: You're absolutely right, Neil. Thanks. I needed that vote of confidence. Kate will be back with a CAPITAL CLASSIC of nine years ago, discussing President Bill Clinton's first budget.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. And now CAPITAL GANG CLASSIC goes back to April 10, 1993. That week, President Bill Clinton, in the third month of his presidency, submitted an anti-recession budget with a deficit of $250 billion.

(BEGIN VIDEOTAPE)

SHIELDS: The jobs part is the most popular public part of his entire economic program. The reality is that the political and journalistic establishment sees this economic recovery, but they're not talking about jobs. We're still -- Clinton's talking about is jobs. He wins that argument. He stays on it. And he (UNINTELLIGIBLE) the Republicans.

HUNT: Bob, you and your brethren talk about this as a pork builder. There's $2 billion in there for summer youth jobs. There is $2 billion in there for Pell Grants for low income college students. There's $4 billion for expired unemployment benefits.

Are you opposed to those specific provisions?

NOVAK: Probably, but you know...

HUNT: I don't think you're with America.

NOVAK: I expected more out of Mark Shields. And I definitely expected more out of you. I mean, this little bill, this $16 billion is irrelevant in a $7 trillion economy.

What's important is this terrible budget. And the American people, when they finally got a look at this budget that had been kind of talked about with blue smoke and mirrors all during the campaign, they realized it isn't deficit reduction.

HUNT: Yes, it cut $65 more to get the deficit just down to $200 -- you know, where would you cut?

SHIELDS: I'll tell you what you have to do. You are never going to get close to a deficit reduction, until you get some economic growth. I think the reality is, Al, that for those who have denied that there is a problem for 12 years, now to say that the people who are confronting it for the first time in 12 years are not doing enough.

(END VIDEOTAPE)

SHIELDS: Kate, in retrospect, didn't Bill Clinton's budget play a real part in ending that recession nearly a decade ago?

O'BEIRNE: Mark, I think it's pretty clear Bob Novak won that round. Happily, as Bob pointed out back then, $7 trillion economy is resilient can recover. And it doesn't much matter what kind of fiddling Washington's doing.

And do remember '93, Clinton was projecting deficits as far as the eye can see.

SHIELDS: Because he eliminated them, I guess we have to hold them accountable.

HUNT: You know, Mark, I remember that show very well. Unfortunately, we didn't see Bob's very next sentence, where he said you can't have economic growth if you increase taxes. We increased taxes. We had the greatest economic growth we've ever had in a lifetime. And the unemployment rate was cut in half. And a huge deficit turned into a surplus.

NOVAK: Well, this is a night of misstatements. I never said it during that thing. And I don't think I've ever really...

(CROSSTALK)

NOVAK: You check the transcript, because I didn't say it and you owe me an apology. I will say this, that I think well meaning people like Senator Conrad confuse cause and effect.

It -- the economic growth is what reduces the deficit. It isn't the reduced deficit that causes economic growth. What you have to have is economic growth. And that's why we need tax cuts.

SHIELDS: So Kent Conrad, Bill Clinton, whatever else. I mean, flawed human being that he was, steward of the economy, cut the deficit, economic growth, what millions of new jobs, lowest unemployment. What else?

CONRAD: Let's see. In 1993, plan that did raise taxes on the wealthiest one percent, that also cut spending in the midst of an economic downturn, turned out to be exactly the right medicine for economic growth. Because it took pressure off interest rates. And that was a key to getting America back on track.

The largest economic expansion in our entire history. The lowest unemployment in 30 years. The lowest inflation in 30 years. He hit a home run on economic policy.

SHIELDS: Kent Conrad, thank you very much for being with us. We'll be back with the second half of the CAPITAL GANG. Our "Newsmaker of the Week," former Ronald Reagan campaign manager John P. Sears. "Beyond the Beltway" looks at the Salt Lake City Olympics with its president and CEO Mitt Romney and our "Outrage of the Week." That's all after the latest news, following these messages.

(COMMERCIAL BREAK)

SHIELDS: Welcome back to the second half of CAPITAL GANG. I'm Mark Shields with Al Hunt, Robert Novak, and Kate O'Beirne.

To note Ronald Reagan's 91st birthday, our "Newsmaker of the Week" is the Gipper's former campaign manager, Washington lawyer John P. Sears.

John P. Sears, age 61. Residence, Washington, D.C. Religion, Roman Catholic. Undergraduate degree from the University of Notre Dame. Law degree from Georgetown University. Deputy counsel to President Richard Nixon. Manager of Ronald Reagan's 1976 and 1988 presidential campaigns until February 26, 1980.

Senior adviser to Jack Kemp's 1996 vice presidential campaign.

Al Hunt sat down with John Sears earlier this week.

(BEGIN VIDEOTAPE) HUNT: You ran Ronald Reagan's 1976 campaign, the critical early part of his 1980 campaign. What was it you saw that convinced you that you could get to the White House? I mean, would be a good president?

JOHN P. SEARS, ATTORNEY: Oh, I think for all the -- during all the time that I've been alive, Ronald Reagan was probably the best political candidate, who ever walked on the scene, either Democratic or Republican. Boy, there was no better horse than Reagan.

HUNT: Most presidents were -- most renowned presidents were very well versed in history and philosophy. You think of Jefferson and Lincoln and Teddy Roosevelt and maybe FDR. That really wasn't true, of Reagan, was it?

SEARS: No, I don't think it -- no it wasn't true of Reagan. It didn't really matter. What had enough smattering of knowledge of what went on before them and enough good, common sense about what conditions were and what needed to be done to respond to the real challenge of being president, which is to make decisions and to move the country along with you.

HUNT: In 1976, you told me that Reagan's great strength was that he would pick good people. And then he would delegate.

SEARS: Oh, absolutely. I think many people in politics, and I'm sure you've bumped into some of them, really fear good people around them. And it's a real drawback. People who understand the office and understand themselves well enough, really prosper from having good people around and don't have any insecurity about that. I think it helps if you've done something before you got to be president, that really, you thought may be was beyond you.

In Reagan's case, it was to become a well-known actor. In Eisenhower's case it was obvious that he thought of being a general as a much more important thing, really, than being president. The office didn't over awe him. And I think Reagan was in that same category.

HUNT: 1976, closest presidential nominating race in modern history. You came within a scintilla of toppling an incumbent president, Gerald Ford. If Ronald Reagan had won that nomination, would he have beaten Jimmy Carter that year?

SEARS: Oh, I think he would've. The much more difficult thing that year was to win the nomination. I think though that as often is the case, it turned out for the best. I think he would've been a good president, had he been elected in '76.

But the country actually needed him more in 1980, after we'd been through the terrible difficulty of having our people taken hostage in Iran. And we were really down on our luck. We needed a good dose of optimism, which Reagan provided.

HUNT: What was his greatest triumph in eight years as president?

SEARS: He got Americans to believe themselves again, after the Watergate and you know, many of the things that happened in the '70s. We need to think optimistically in order to bring out the best in ourselves. And Reagan was a great optimist.

But beyond that, I think that some his real contributions involved the fact that he grasped the opportunity to end the Cold War. And I think his activity in Prague was very important.

HUNT: No one was more central to Ronald Reagan's life than Nancy Reagan. Former Reagan aide, Mike Deaver, says she was his greatest asset. Former White House chief of staff Don Regan says he was a huge problem. Who's right?

SEARS: Well, I think there are more choices than that. She certainly was the closest person to him and the person that he trusted more than anybody else.

Jimmy Stewart told me once that you know, if Ronald Reagan had married Nancy instead of Jane Wyman to begin with, we'd all know him as a great actor because she would've found the right parts for him, and made sure that he got them and did them correctly. And he would've won the Academy Award. And there's some truth to that.

HUNT: Any final anecdote or story about Ronald Reagan that you particularly relish?

SEARS: Oh, you know, it was just fun -- I'd worked for Nixon, as you know, previously. And actually, the difference couldn't have been greater between the two men in all respects.

(END VIDEOTAPE)

SHIELDS: Al Hunt, you covered Ronald Reagan. Does Ronald Reagan look better to you and better to historians over the passage of time?

HUNT: Well, it's an awful short period of time to say for historians, but he certainly -- there's nostalgia for the Reagan years. I think one of the great leading indicators is if you listen to the spin from this current president's people, they will say that really George W. Bush is more like Ronald Reagan than he is like his own father.

SHIELDS: Bob Novak?

NOVAK: I think John Sears was very astute observer, really said something that very few people mention, that the great number of years she spent out of the government as an actor in the private sector, prepared him better for the presidency than a dreary career in Congress.

And I really do believe that the very good presidents we've had, Calvin Coolidge, Ronald Reagan, Glade Eisenhower, didn't spend much time in the Washington government.

SHIELDS: Calvin Coolidge. Kate O'Beirne, go ahead.

O'BEIRNE: Well, an awful lot of people always appreciated Ronald Reagan's unique strengths. And I think maybe some of the late learners are beginning to realize now things like the book publishing in his hand, to make it perfectly clear, Ronald Reagan was not just a great communicator reading somebody else's script. Ronald Reagan had a very well thought out core philosophy responsible for, I think, how successful he was as a politician.

And of course, his central legacy is liberating millions with the end of the Cold War.

SHIELDS: I think that he probably gets more credit for the Cold War than he deserves. But at the same time, I don't think there's any question. John Sears put his finger on it by Americans believe in themselves again was enormously important. He did fail the ultimate test, which was he was smiled upon by fortune. Would he be considerate of those who had not been smiled upon by fortune?

I think that was the one failure of the Reagan years. But next on CAPITAL GANG, "Beyond the Beltway" looks at the Salt Lake City Olympics with its president Nick Romney.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. "Beyond the Beltway" looks at the winter Olympics, opened in Salt Lake City last night by President George W. Bush, after he addressed U.S. athletes.

(BEGIN VIDEO CLIP)

BUSH: It's a chance for the world to see that in times of war, we can come together in friendly competition, to promote the peace. So not only do you represent the greatest nation on the face of the earth, you represent the spirit that is much bigger than evil and terror.

(END VIDEO CLIP)

SHIELDS: Protecting the athletes of the world, the United States military.

(BEGIN VIDEO CLIP)

RUMSFELD: We literally have more people in the area around Salt Lake City for the Olympics than we do in Afghanistan.

(END VIDEO CLIP)

SHIELDS: Joining us now from Salt Lake City is Mitt Romney, the president of the Organizing Committee for the Winter Olympics. Thanks for coming in, Mitt.

MITT ROMNEY, PRESIDENT, ORGANIZING COMMITTEE FOR WINTER OLYMPICS: Thank you.

SHIELDS: Mitt, how much of the events of September 11 transformed the Salt Lake City Olympics? ROMNEY: Well, there's no question, but as plans have been made for security, that they've had to be adjusted in the light of what we know about terror today. I don't think we ever thought about aircraft being used as missiles.

And so, air restrictions have changed entirely. And of course, the military plays a much bigger role in that kind of a responsibility than they were before.

But I think also that something's been brought to the games that hasn't been here in a long time. And that is, after all, the talk about the games representing peace, they really do affirm humanity and civilization today. And there's an emotion and a profound sense associated with the games that I think was intended when the games were originally designed.

SHIELDS: Al Hunt?

HUNT: Mr. Romney, you get a lot of credit, deservedly, for cleaning up the scandals of the Salt Lake Olympic Committee. And many of us love these games.

But it's a taxpayer financed extravaganza. It's going to cost the American taxpayers $1.5 billion, only about a quarter of that is for security. And "Sports Illustrated" reports a lot of it is lining the business interests of wealthy developers.

My question is why should the taxpayers pay for so much for these games?

ROMNEY: Well, actually what the taxpayer should pay for, I think, is exactly what they are paying for. We've got to get the facts right first. And the GAO actually was asked to do a study of what was paid for the Olympics. And they came up with a number of $385 million.

The other money you're talking about was used to rebuild the interstate highway system in Utah. It's got nothing to do with the Olympics. We didn't ask for it. Don't need it. Barely use it.

But the other money, $385 million is a lot of money. And there's no need to exaggerate that figure, to point out that the government's picking up a big portion of the tag for putting on the games.

And of that, about two-thirds is security. And about one-third is moving the public.

That is the cost of protection these days in this country. And the cost to move in the public. The other $1.3 billion paid for by these games is paid for out of private funds entirely. Ticket holders, sponsors and TV writes it's a big event, very expensive. And I think in the world today, it's probably more important than ever to show that we could have peace in this country, not just enforce it.

SHIELDS: Bob Novak. NOVAK: Mitt, I wonder if I could follow-up Al's question. Senator McCain has called the financing of the games by the American taxpayer is outrageous, disgraceful. And I've seen Senator McCain. Or course, always modulates his tone.

But I just wondered if you, as a conservative and a Republican, ever contemplated trying to do it the old-fashioned way. These games used to be financed entirely by the private sector, without -- apart from the security arrangements.

Was any consideration given to that?

ROMNEY: Well, I think Senator McCain has some important comments to make. And I agree with a number of them. I agree with a prospect that the security of the Games has to be paid for by the federal government. There's just no other way of doing that. And of course, state and local governments participate as well.

But I also believe that when it comes to moving people up into mountain venues and public transit. That's a roll the government can play.

The rest you're putting out, the games, the building of the venues, the operations, computers and so forth. That $1.3 billion is entirely private financed in our country. We're the only country in the world that does that.

But I think Senator McCain's point is perhaps most important to focus on where the decision is going to be made as to how the government's going to be involved.

Right now, there's no understanding of what the government's going to pay for, what they're not going to pay for. So a city this size, to bid for the games, they don't know. Is the government going to pay for security? Are they not? Are they going to pay for the highways needed to get to a venue. Are they not?

That kind of decision making really ought to be brought to one committee of Congress, so that we can get authorization before we run down the long road to the Olympics.

SHIELDS: Kate O'Beirne?

O'BEIRNE: Mitt, speaking of future bids, a delegation is out in Salt Lakes City from Washington Baltimore, looking towards 2012.

Now this local says no thanks. Given the inevitable disruptions, why should a local community welcome the destruction of the Olympics?

ROMNEY: Well, you know, I think if communities think that the games are about making money for the communicate and building economic value. But in this country, that logic doesn't hold.

Maybe there's an economist that's going to do some work down the road, and say that Salt Late City benefited economically or that the sky resorts for a benefit. But I don't think that justifies the huge investment that's made. In my view, the reason you bring the Olympics to the United States, is because you want to show that we can demonstrate peace here, that we welcome the nations here. And you provide to the people or the local community, an opportunity to serve the world. And to welcome the world.

You create memories that will not be forgotten in the hearts of our children and grandchildren. And of course, you give the American athletes the chance for a home field advantage every now and then.

Those are the reasons for bringing the games here. I think you're going to find in this community, that the great majority of people, who may have been very discouraged, and disheartened about the games only a year or so ago are going to be enthusiastic supports in the future. And we'll say do it again if we ever get the chance.

But it's not because of the money. It's because of the memories and the opportunity to serve.

SHIELDS: Following up on Al Hunt's point, Mitt. And that was that you get high marks and a lot of praise for taking what was a crisis, chaotic situation in many respects, the negative and turning it around.

Your own wife, Ann, has said that after this experience, I want Mitt to fulfill his own destiny. And with great support. So that means politics. What does it mean for politics post-Olympics now?

As soon as the torch is quenched this time, what about you?

ROMNEY: Well, you guys, I don't have to do any teaching to you about politics and how you get into it. I had my own little Run at politics running against Senator Kennedy. And in the world of politics, you have to find the right opportunity, the right window open at the right time, a position that you think you can win. And when were thinking you could make a real contribution.

When the games are over, I wasn't scared away by politics, but I actually thought they were pretty interesting. And I'd like participate if I found the right kind of opportunity, where I thought I could win, where I thought I could make a difference. And I'll evaluate that when this is all over, but I have no idea whether that window's going to open up between now and a reasonable future.

NOVAK: Mitt, Utah is an unusual place. It's dominated by the Mormon church. It's a -- a lot of Americans have never been there. Don't know much about it. And it's really culture change for a lot of these athletes from around the world.

Do think -- how do you think that's working out so far? Or are the athletes in the Olympic Village in a bubble? They might as well be in Gramercy Park as much as Salt Lake City.

ROMNEY: Actually, the athletes, they really get a sense of the local culture. In many respects, Utah and Salt Lake City are, you know, characterize the spirit of the American West.

It's a very open people, very hospitable friendly. You probably know. I've lived in Boston the last 30 years. Being out here, you find people that are very engaging, come up to you and say 'hello' on the streets.

We've got these name tags we around our necks to show our accreditation for the games. They look at your name. They say your first name to you. The athletes have to notice that even in their competitions today, and we had five events today, that the crowds cheered, not just for the American team, but they cheered just as enthusiastically for those of other nations.

There's a sense of welcome the world here that the athletes have to be touched by. And tonight, they gather for concerts. We had a big one last night. But we have on every single night of the games. They're going to touch with the people of Utah and come to know a people that are as warm and hospitable as they've ever encountered.

SHIELDS: Mitt Romney, thank you very much. Good luck with the rest of the games. The gang will be back with the outrage of the week.

(COMMERCIAL BREAK)

SHIELDS: And now for the "Outrage of the Week." Former California party chairman John Harrington announced today that he would not vote for former Los Angeles mayor Dick Riordan, if Riordan wins the Republican primary for governor.

Why? Mr. Harrington is upset that he'll be supported Democrats, including President Bill Clinton and California Senator Dianne Feinstein.

"I can't remember being urged to vote for Republican, who has actively worked the Democratic candidates," says Republican Harrington, who was Secretary of Energy under President Ronald Reagan.

In fact, Mr. Reagan partly voted for FDR four times, campaigned for Harry Truman and other liberal democrats. Does this mean, according to John Harrington, the Gipper was a good enough Republican? I'll turn to Bob Novak.

NOVAK: On Wednesday, the House of Representatives passed a routine birthday greetings from Ronald Reagan, 408 to four. To four? Not unanimous? Why did four Democratic members vote "present" instead of aye? They did not say. Nevertheless, the mean-spirited quartet should be identified. Eddie Bernice Johnson of Texas, Barbara Lee of California, Peter Stark of California, Diane Watson of California.

Three Californians refusing to approve birthday greetings from one of the great sons of the Golden State. Shame on them.

SHIELDS: Kate O'Beirne?

O'BEIRNE: Only to the Senate Democrats blockade of President Bush's judicial nominees, only two of 23 candidates for appeals courts have even had hearings.

One of the lucky two, Judge Charles Pickering, nominated for the Fifth Circuit Court, appeared this week. Committee Democrats, lauded and pointed by left wing interest groups, engaged in a an outrageous assassination, based on a litany of lies, about race, religion and abortion.

The truth? Judge Pickering was confirmed unanimously in 1990, has the ABA's highest rating and has been reversed in less than 1 percent of his cases.

SHIELDS: Al Hunt.

HUNT: Mark, with the Enron scandal, the House has been forced to vote on campaign finance reform this coming week. Suddenly, some members from both parties who voted for it in the past, realized it might really become law. They're looking for lame excuse, like the bill doesn't far enough, to sabotage it with killer amendments. It's going be interesting to see whether Republicans like Doug Ose, Rodney Frelinghuysen and Jim Saxton, and Democrats like Margin Sabo and Earl Hilliard vote their conscious next week or their political greed.

SHIELDS: This is Mark Shields saying good night for THE CAPITAL GANG. If you missed any part of this program, that's a shame. But you can catch the replay at 11:00 p.m. Eastern and again at 4:00 a.m. Eastern. Set your alarm for 3:55 a.m.

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