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Are Americans Too Scared to Celebrate Holiday?; President Bush Faces Scrutiny on Business Dealings

Aired July 3, 2002 - 16:00   ET


JUDY WOODRUFF, CNN ANCHOR: I'm Judy Woodruff in Washington. With all the talk of heightened security, are Americans too scared to celebrate the 4th of July?

KELLI ARENA, CNN CORRESPONDENT: I'm Kelli Arena in Washington with latest warnings on the possibility of terror tomorrow.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: I'm John King at the White House. As the president prepares a big speech on corporate responsibility, he's facing fresh scrutiny of his own dealings in the business world.

WOODRUFF: Also ahead, who is up in arms over Wal-Mart's tough new policy on gun sales?

Thank you for joining us. On this eve of Independence Day, many Americans seem intent on celebrating the holiday in a public way, despite any concerns they may have about terrorism. Our new poll, released this hour, shows 63 percent of Americans say they plan to attend fireworks displays tomorrow. That's exactly the same response that pollsters got a year ago, before September 11th made almost everyone more afraid.

As many people across the country head off to enjoy the holiday, you're looking at a scene -- this is I-95 in Providence, Rhode Island, heading toward a popular holiday spot, Cape Cod.

Back here in Washington, preparations are continuing for the festivities on the national mall. Almost all 900 members of the Capitol police force will be among the many law enforcement officers on duty in the nation's capital tomorrow.

Our justice correspondent Kelli Arena is here in the studio. Kelli, what is the latest warnings on the terror threat? Now, I understand the FBI has issued their latest bulletin to state and local law enforcement folks.

ARENA: That's right, Judy. It includes a compilation of past warnings, telling law enforcement agencies to be on the lookout for suspicious activities at places like airports and bridges.

It also mentioned stadiums, one in particular, the St. Louis Rams stadium, saying that individuals with possible terror connections have visited Web sites concerning that stadium. It mentions one other, but we haven't at this point figured out which one it is.

Once again, warns also about July 4th. Now, the FBI says there are no credible threats about specific attacks on July 4th. But the Bureau does point out that there is heightened operational activity, what it calls operational activity, by terrorists around the world. It also mentions the political and cultural significance of the July 4th holiday, saying that it warrants increased vigilance.

Now, Judy, this is not a public warning. It is meant for law enforcement only.

WOODRUFF: Natalie, what other steps, what else is the government doing, to beef up security tomorrow?

ARENA: Well, the measures are very much dependent on state and local authorities. But we are seeing stepped-up security pretty much across the board.

The homeland security office staffers will be monitoring about 2,000 events across the nation. Air patrols will be randomly flying over several cities. Local police and FBI presence is being enhanced nationwide. The FBI is also beefing up its 24-hour emergency control center.

Now, the message from officials is, let us worry about security. Go out, have a good time, but be aware and be vigilant.

WOODRUFF: And, Kelli, finally, what's the FBI role in all of this?

ARENA: The FBI's role is basically what it has always been, gathering intelligence. They have gathered it before. They'll gather it during the holiday, after the holiday. As we've heard , this is all about preventing the next terrorist act, not prosecuting after the fact.

WOODRUFF: All right, Kelli Arena, our justice correspondent. Thank you, Kelli.

Well, beyond the 4th of July, FBI officials are warning America it keep their guard up for possible warning signs of terror. Our national security correspondent David Ensor takes a closer look at the threat, now and ahead.


DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): U.S. intelligence officials say something is up. And there are increasing indications terrorists may try to strike against the United States again this summer or fall. However, officials say they have no evidence an attack is planned during the week of the nation's birthday.

From the embassy bombings in Africa to the USS Cole in Yemen, to September 11th itself, Osama bin Laden's al Qaeda group has never before attack on a date significant only to the West. That does not rule it out, say experts, but they deem it unlikely.

PETER BERGEN, TERRORISM ANALYST: Al Qaeda hasn't ever struck on an American holiday so far. It has tended to strike either on days that were significant to the group itself, or on days that simply were sort of moments of opportunity.

UNIDENTIFIED MALE: They will conduct their operations when they feel they are ready to go. And that will dictate the timing more than our dates or something else.

ENSOR: And present and former intelligence professionals say, while al Qaeda was badly hurt by the overthrow of the Taliban in Afghanistan, and by arrests around the world, it still has much capability.

PAUL BREMER, TERRORISM EXPERT: I think it's weakened. But the conditions that feed that terrorism and particularly in a place like the Middle East, central Asia and south Asia are all still there.

UNIDENTIFIED MALE: So I think we have to assume al Qaeda has substantial capability. It may not need central direction anymore. That is to say, there may be some autonomy in some of these cells, including in the United States.

ENSOR (on camera): A year ago, intelligence officials say there was the same amount of what they call chatter by individuals suspected of association with al Qaeda, about a major attack coming against the U.S. And of course, September 11th followed.

This time, the warnings from U.S. intelligence are getting plenty of attention. But there's no specific information on when, where, or how the terrorists might be planning to attack. Nothing, Judy, specific, so far at least.

WOODRUFF: All right, David Ensor, thank you very much.

Well, fears about a repeat of September the 11th are taking a toll on the nation in many ways. As CNN's Jonathan Aiken reports, in some places the most colorful July 4th ritual is in jeopardy.


JONATHAN AIKEN, CNN CORRESPONDENT (voice-over): It's the busy season...


AIKEN: ... at Zambelli fireworks. There are displays to be made, fireworks to be packed, trucks on the move, heading to more than 1,800 fireworks shows Zambelli is doing across the country.

That's more than usual. And the colors this year, deeper, than ever.

GEORGE ZAMBELLI SR., ZAMBELLI FIREWORKS INTERNATIONALE: Patriotism is everything. I mean, they want a lot of red, white and blue.

AIKEN: Those colors don't come cheap. The average size towns spends between 10 and $20,000 for a fireworks show. But if memories of September 11th have Americans longing for a star-spangled 4th, they also have some municipalities stretching their budgets. It's not just fireworks that are expensive. In the wake of the terror attacks and a bad economy, so is insurance.

(on camera): Most cities and towns carry some kind of municipal liability insurance. That's the kind of coverage that protects against the unexpected or the catastrophic at a public event, like a fireworks display. On average, those premiums go up 2 to 4 percent a year. They have jumped 8 to 10 percent since last September.

FRANK COVELLI, PROFESSIONAL INSURANCE ASSOCIATES: What's happened in the marketplace has severely cut insurance companies' revenues. We have less reinsurers in the marketplace that are willing to take on the risks of municipal insurance. And, yes, there's some of the fear factor that went along with 9/11.

AIKEN (voice-over): And the fear isn't just about the 4th of July. You take in a ball game on the 4th, you're sitting in a stadium that costs more to insure now than last year. In some cases, 200 percent more.

Back at Zambelli's, the fireworks family has seen its municipal customers getting a late start in fireworks planning this year.

ZAMBELLI: I think only because they were hoping to be able to really blow the socks off and come off with a big, big budget.

AIKEN: But Zambelli says only one location has canceled its contract, and it's not because of terrorism fears or even insurance costs. There will be no fireworks at Mount Rushmore this year. The risk of fire is just too high.

Jonathan Aiken, CNN, Washington.


WOODRUFF: Well, question, how prepared are police to protect the nation's capital tomorrow? Up next, we will head to the national mall to talk security with the head of the United States park police.

Later it's on to California, where political trends are made. And where some are warning Democrats, be careful what you wish for.

Plus, ads that are driving some of the hottest races this election year, and prompting some laughs along the way.


UNIDENTIFIED FEMALE: Perry, one thing he's done as governor -- uhh...

UNIDENTIFIED FEMALE: I can't think of anything that... (END VIDEO CLIP)



WOODRUFF: We're here on the national mall, talking with the head of the United States park police chief, Teresa Chambers. Chief Chambers, thank you for talking with us.


WOODRUFF: First of all, as we look around here, what is different about the security on July 4, 2002, from security in previous years?

CHAMBERS: I'm sure one of the first things that you've already noticed is the snow fence that has began to be erected around the mall. In fact, most of it is in as of this point. When it's all done, we'll actually have a parallel row of snow fence.

What that allows us to do is to funnel folks through one of 24 checkpoints. At those checkpoints, officers will be staffed to look in coolers, backpacks, purses -- any item that's brought onto the property. We want to make certain that there's nothing illegal in there. That there's also no alcoholic beverage or glass containers that are in there.

This is a family area. And once folks come onto the park property, we want them to feel as though this is a safe and secure environment, and one in which they can play and have fun and celebrate America's independence.

WOODRUFF: How much extra time is this going to add, do you think, to people's celebrating of the 4th, and coming out to watch the fireworks?

CHAMBERS: Well, visitors certainly need to plan ahead and leave early, much like we do when we're going to airports now. This is part of what I believe Americans have grown to expect -- a minor inconvenience to ensure their safety overall.

And so if they leave early and think about bringing just those items that they need for themselves that day. We encourage them to bring lots of water for hydration and food for nutrition. But they can help expedite by getting here early and bringing just what they need.

WOODRUFF: And we're just talking about the mall. How many acres are we talking about?

CHAMBERS: Well, in the mall that we describe is from the Lincoln Memorial on the backside of that, down both Independence and Constitution Avenues, actually north of the White House, and then behind the Capitol -- over 300 acres. And that is all being enclosed in this snow fence with the 24 entry points. WOODRUFF: Why are you doing this?

CHAMBERS: We understand our obligation in the United States park police, to provide an environment where people want to come, where they're not afraid to come out and celebrate America's independence. That is our role, much like if, I mentioned an airport a moment ago. If you and I walked into an airport today and the security was gone, I know that I'd be one that would be a little offended by it. Maybe nobody cares about my safety.

Well, our role is to care about the safety of the visitors that come here on the 4th of July, as we do every day. The 4th is special because thousands, if not hundreds of thousands, of people will come out here. And so we've gone the extra mile. We spent months planning this.

The rest is now up to the community, to come out and celebrate one of the greatest days in our nation's calendar year.

WOODRUFF: But I know, I, for example, have talked to some young people, college interns who work with us this summer. They're saying that many of them are not going to come out. Their parents are calling them from wherever they're from around the country, saying don't go out on the 4th of July.

How do you know that you're not going to be -- you know, if not driving people away, at least saying, hey , this is a security issue here. Maybe you better stay home.

CHAMBERS: Actually, we think that just the opposite is happening. I know my family will be down here. The media has done us a great service this week by getting the message out early, that we have taken extra measures to ensure one's safety. And that folks should feel, not overly confident, because we need their help when they get here too, to look for what we may have missed. To make certain that there isn't something out of place.

But we have gotten the message out that we care, that we want people to come to their parklands, here in the nation's capital. There is no better place to celebrate patriotism and the 4th of July than here in Washington, D.C.

WOODRUFF: And what's the level of alert, would you say?

CHAMBERS: Well, of course, we're still on the same level of alert, the heightened alert that we've been on since September 11th. We evaluate it every day and make minor modifications as necessary to the plan.

We want this to be the people's park and to let folks come out, and enjoy as we always have. You know, as a child I sat up on that hill and I watched the fireworks and I listened to the patriotic music. And this issue of being an American became a part of me.

And now to be a part of the team that helps plan the event, so that others can experience the joy of being a United States citizen as I did as a child, that's an overwhelming privilege.

WOODRUFF: Chief Teresa Chambers, thank you very much, with the United States park police. We appreciate it. It's great to talk to you.

CHAMBERS: Likewise.


WOODRUFF: Chief Chambers, the first woman to hold that position.

Balloonist Steve Fossett is in the record books. But when will he come down to earth? His expected landing time and other top stories next in the "Newscycle."

Plus, who has the power to order airport evacuations? Why the government has revised the security chain of command, later in our "Taking Issue" segment.


WOODRUFF: Record-setting solo balloonist Steve Fossett could return to earth within the hour, according his mission control team in Missouri. If the gusty conditions in Australia subside a little, Fossett is expected to land in southwest Australia, shortly after sunrise Thursday, local time. Earlier today, Fossett had to climb out of his capsule to put out a small fire caused by a loose burner hose.

The two America West pilots accused of being drunk in the cockpit have been given their walking papers. The airline says the men have the right to appeal their firing under the terms of their union contract.

As Americans prepare to celebrate the 4th of July, the FBI has issued a new advisory urging law enforcement agencies to be on the lookout for suspicious activity. However, the government says there remains no credible information about a specific terror attack.

With us now, Rich Lowry of "The National Review" and syndicated radio talk show host, Joe Madison. Let's talk first about airport security. There are new directives that were handed down this week that says basically, every breech of security no longer requires that a concourse be cleared, that passengers be screened again.

And there was this reaction from the president of the Association of Flight Attendants. Her name is Pat Fran. She said just one more change for convenience over security. How do you stop the system when you're getting permission to secure it?

Joe Madison, is this a bow in the direction of convenience over security?

JOE MADISON, RADIO TALK SHOW HOST: I think so, there's no question. Anyone who has been caught in that situation knows how extremely inconvenient it is to have to go through security twice. But what concerns me about this, quite honestly, Judy, is that they're adding just another layer of management.

And some of these managers, or supervisors, as they say, are miles away from the airport. And what is the criteria? In other words, what are you looking for? What do you want this additional supervisor to do that isn't already being done? That's what's missing in this memo.


RICH LOWRY, "NATIONAL REVIEW": Well, I think it actually makes sense to kick an important decision like this upstairs to someone who's more senior, might be more responsible. And the fact is, we have to strike a balance between security and convenience.

And you know, the way we're going now, we have such a nightmarishly inconvenient system, that we're going to end up basically without an airline industry in the United States. So I think this is a fairly common-sense measure.

And I think eventually we're going to have to adopt a common- sense system of profiling at the airports to reduce these lines and reduce some of the inconvenience, where you no longer, you know, shake down business travelers who are at the airports every day the same way you would someone who might be more suspicious.

WOODRUFF: But what about -- go ahead.

MADISON: Well, I was just going to say, how do you determine that? I mean, you know, we -- who is more suspicious? I mean, I can look at you, are you more suspicious than I am?


LOWRY: What do you suspect me of, Joe?

MADISON: What do you suspect me of?

LOWRY: I don't suspect you of anything. But let me try to answer your question, very quickly.


MADISON: But you know, they've always profiled people. You know that. I mean, airlines -- my wife has worked for the airlines for 30 years. Profiling has been done for years.

LOWRY: Yes, but they've forbidden some categories that I think make sense, like national origin. Look, I think can you pick out people that you don't know much about, who don't fly frequently, who have recently been in Pakistan, and give them real, extra attention and interviews.

Instead, you know, we're engaging in this mass shakedown of old women and business travelers. It's a waste of time and effort and doesn't do anything to make us safer. WOODRUFF: Very quickly, I want to ask you both about a new policy by Wal-Mart having to do with gun sales. Essentially, they're saying they're tightening their policy. If they can't get a criminal background check back on someone who wants to buy a gun within three days, which is the federal guideline, then they're not going to go ahead and sell that person a gun, which federal law says that they can do. They're going to wait.

Joe, what does this say?

MADISON: Well, if I was a shareholder of Wal-Mart, I would be very pleased with this type of thing. All it takes is one person to do something wrong with the gun -- and don't get me wrong, I certainly believe in gun ownership.

But at the same time, I think what they're doing at the same time is protecting their interests as a corporation so that they don't get sued by somebody who might get injured by a gun.

WOODRUFF: Rich, is this a violation of people's right to bear arms?

LOWRY: No, I don't think it's a violation of anyone's rights. Wal-Mart is a private company. And if this is what they want to do, fine. I think ultimately the answer to this problem, though, is to have a real federal, automated system that provides an instant check, which is what the law is supposed to provide for, but Congress has not fully funded. I think we should be going more rapidly down that path.

WOODRUFF: All right, Rich Lowry, Joe Madison, we'll leave it there. Gentlemen, good to see you both. Thank you. Have a great 4th.

LOWRY: You, too.

MADISON: Have a good holiday.

WOODRUFF: All right, thanks.

One of the hardest working Democrats on the presidential campaign trail joins us next.


GOVERNOR HOWARD DEAN (D), VERMONT: The president is leading this country in a very bad direction.


WOODRUFF: Vermont Governor Howard Dean shares his opinions about President Bush and the way he's leading the nation.


WOODRUFF: We've been checking into the latest buzz in the early race for the White House. The "Chicago Sun-Times" is quoting a top Democrat as saying that Al Gore will run for president in 2004, but he will not choose Joe Lieberman as his running mate again. The "Times" says that Gore is eying Senators John Kerry and John Edwards as possible ticket mates.

But a Gore associate tells us it's premature to say whether Gore is running, let alone his choice for a running mate. And spokesmen for Kerry and Edwards say the senators are not interested in the No. 2 slot.

Well, Vermont's Governor Howard Dean, meantime, has been crisscrossing the country for months, testing his own waters for 2004. I spoke with him a couple of days ago and asked him if he agrees with Gore's claim that the Bush administration is using the war on terror as a political wedge.


GOV. HOWARD DEAN (D), VERMONT: I have not been terribly critical of the president's conduct of the war on terror.

My concern is that the president is leading this country in a very bad direction. We're back to the old borrow-and-spend Republican politics of the 1980s. And I think that is very, very dangerous. We can't run our states that way and we shouldn't run the country that way. And it's preventing us from doing things like a Medicare prescription benefit, health care for all Americans, and putting money into Social Security, which is where we should be putting it. So, my concern, frankly, is the president's domestic agenda more than his terror agenda.

WOODRUFF: Well, I want to ask you about the domestic agenda, but one more question about the war on terror.

You have no differences, no disagreement, no criticism of the way the president has handled the war on terror?

DEAN: I have an enormous amount of criticism for the president's foreign policy. I think the current situation in Israel is derived principally because we paid no attention, under the first year of the Bush administration, to the Middle East. And now we're forced to deal with people like Yasser Arafat, who clearly has no interest in peace.

So, I have a lot of concerns about the president's foreign policy. But in terms of pursuing the war in Afghanistan, no, I don't have a lot of criticism about that.

WOODRUFF: You are talking about -- you mentioned the economy, corporate responsibility. How strong is the U.S. economy right now? We're watching the stock market continue to slide.

DEAN: It's not very strong. And I gave a speech -- excuse me for my laryngitis.

I gave a speech to a couple of hundred people in New York last week. Most of them were Republicans. And I think there was a significant amount of support for the notion that the tax cut was a mistake. The tax cut really only affected about 2 percent of us. Most people who got a tax cut didn't notice it. And the people, the 2 percent of people who did get a tax cut, I think most of them would be happy if the market, the stock market looked like it did in 1996 instead of right now.

So, I think the tax cuts were the single biggest domestic mistake that the president has made. They should be pretty much rolled back. There's a few exceptions in there. But, pretty much, that money really ought to be put back towards paying off the debt, paying Social Security, and shoring up Medicare.

WOODRUFF: What about these corporate scandals, Governor Dean? We now have WorldCom. We're looking at billions of dollars in funny bookkeeping, on top of Enron earlier this year and other companies.

The Democrats are saying it was the Republicans who took control of the House of Representatives in the mid-1990s that created a climate -- by their support of deregulation created a climate that made all these scandals possible.

DEAN: I think that's true.

I certainly don't believe George Bush is corrupt at all. But I certainly think that he has empowered these corporate folks to behave like this, that his philosophy -- look at one of his chief appointments, Harvey Pitt, to the head of the SEC. Here's a guy whose job was to make sure that corporations didn't have to follow any rules and to reduce those rules as far as possible. Now he's supposed to be making the rules.

That's the kind of thing that undermines confidence in American corporations. Here's the guy who was supposed to be setting standards. There essentially are very few standards. And the Bush administration is actually pushing back and undermining the standards that the New York Stock Exchange and the Democrats are trying put in in the Senate. It is a very serious problem. I think it is going to be a very big issue for the president in 2004 and for the Congress in 2002.

WOODRUFF: And one quick last question back to Al Gore, because he has gotten so much attention: If he runs, is he automatically the front-runner?

DEAN: No. Well, he is certainly going to a front-runner because of name recognition. I think there will be a vigorously contested primary. I expect at least five of us to be in the primary. And I think it is going to be good for the Democratic Party.

WOODRUFF: All right, Governor Howard Dean on the campaign trail, we wish you well, certainly getting over the laryngitis.

DEAN: Thank you.

WOODRUFF: Good to see you, Governor. Thanks a lot.

(END VIDEOTAPE) WOODRUFF: And in Tennessee today: some possible movement toward ending a government shutdown now in its third day. The statehouse speaker has declared his proposed income tax plan dead for the year. Now lawmakers are likely to approve a sales tax increase and, they hope, end a stalemate that is threatening to cut off some state services and close the university of Tennessee. Tempers in the statehouse have been hot as the standoff has dragged on.


JOHN FORD (D), TENNESSEE STATE SENATE: We have sat here for nine days and have done nothing. Now, I'm not going to be here on the Fourth of July, even if we are in session. I'm want to make that clear.


WOODRUFF: Forty-six states in all, including Tennessee, have fiscal years that began on July 1. Of those states, six still do not have new budgets as of today. They are California, Kentucky, Massachusetts, North Carolina, Wisconsin and, as we mentioned, Tennessee.

Checking the headlines now in our "Campaign News Daily": South Dakota Democratic Senator Tim Johnson is hitting the airwaves with a new statewide television ad to promote his record on education.


ANNOUNCER: The Johnson record on education: increased aid to South Dakota schools better teacher training, more technology, higher academic standards, and a plan to put values back in the classroom.


WOODRUFF: Over the holiday recess, the senator plans to campaign with South Dakota's other senator, Majority Leader Tom Daschle. Tim Johnson faces Republican John Thune this fall.

In Oklahoma, former state Senator Tom Cole has entered the race for Oklahoma's 4th Congressional seat. Cole made his plans official today. The Republican hopes to succeed his friend J.C. Watts, who, of course, just announced his retirement. Watts has said that he would vote for Tom Cole if Cole decided to enter the race.

Former Senator and presidential candidate Bob Dole is wrapping up a campaign swing from an unfamiliar perspective. Dole has spent the past three days campaigning across North Carolina on behalf of his wife, GOP Senate candidate Elizabeth Dole. At one stop, Bob Dole told listeners -- quote -- "This is my first outing. If I don't flunk out, I get to come back" -- trademark Bob Dole humor.

Straight ahead: California's traditional role as political bellwether.

(BEGIN VIDEO CLIP) JEFF GREENFIELD, CNN SR. ANALYST: It's the state with more of us than any other state. It is where the dream of endless sunshine comes true and where our celluloid dreams are manufactured.


WOODRUFF: Our Jeff Greenfield considers the political future and what the Golden State has in store for the rest of us.


WOODRUFF: The state of California is once again on track to set the standard for the nation on environmental policy. A bill awaiting Governor Gray Davis' signature would cut tailpipe emissions of so- called greenhouse gases by cars and light trucks, a major defeat for the automobile industry.

Our Jeff Greenfield says the Golden State has always been a pacesetter. And today, he has abandoned the Big Apple to check out the sunshine, the surf and the signs of future political trends.


JEFF GREENFIELD, CNN SR. ANALYST (voice-over): It's the state with more of us than any other state. It is where the dream of endless sunshine comes true and where our celluloid dreams are manufactured.

It is also where the future always seems to happen first: the triumph of the automobile, the spawning of suburbia, surfing of every kind. And it is also where America's political future always seems to happen first. Nearly a century ago, Governor and then Senator Hiram Johnson helped birth the progressive movement: fighting corruption, busting monopolies, giving voters the power to enact laws on their own in the voting booths.


UNIDENTIFIED MALE: I'm not going to vote for Mr. Sinclair because he's a little too radical.


GREENFIELD: Two decades before television, Hollywood studios used moving images, staged images, to defeat radical Democrat Upton Sinclair in his 1934 race for governor. In 1946, years before Senator Joseph McCarthy demonstrated the political appeal in of anti- communism, a young Californian named Richard Nixon used the issue to propel himself into Congress and then onto the national stage.

The environmental movement? It was born in large measure with the Santa Barbara oil spill of 1969. The tax revolt?


UNIDENTIFIED MALE: Excessive taxation which have now... (END VIDEO CLIP)

GREENFIELD: California voters enacted Proposition 13 in 1978, an early sign of the anger that helped put Californian Ronald Reagan in the White House.


RONALD REAGAN, PRESIDENT OF THE UNITED STATES: ... president of the United States.



UNIDENTIFIED MALE: The voters of California have spoken.


GREENFIELD: In 1986, Californians went to the polls and removed three state Supreme Court justices for being soft on crime.

(on camera): So, if the future does show up here first, there is an obvious question to be asked. What is showing up now in California that will be reshaping the country's social and political terrain a few years from now?

(voice-over): One possibility: that Latino issues might increasingly dominate the political agenda. Over the next 20 years, Hispanics will come to outnumber non-Hispanic whites in California. And the numbers are growing in Texas, Florida, Arizona and elsewhere. So far at least, they favor Democrats just about everywhere outside Florida.

But is that a permanent national trend? Not according to longtime California Republican consultant Ken Khachigian.

KEN KHACHIGIAN, GOP CONSULTANT: I'd say to the Democrats be careful what you wish for, because the Latinos naturally are going to have an affinity for the Republican Party. They are family-oriented. They are hardworking. They like safe neighborhoods. And they'll start trending Republican.

GREENFIELD: Gregory Rodriguez has studied about Mexican- Americans. And he says assimilation is moving Latinos to the center and away from particular ethnic issues.

GREGORY RODRIGUEZ, NEW AMERICA FOUNDATION: Mexicans don't seem to fall -- much to the dismay of both parties -- on the extremes of either side. They find themselves very -- we're electing very pro- business, middle-of-the-road Democrats. And the Republican Latinos that are being elected are very similar.

GREENFIELD: So, what else might be on the horizon? Well, after 9/11, conventional wisdom had it that Americans would look to government to protect and care for them. BILL CARRICK, DEMOCRATIC CONSULTANT: I think that exactly the opposite has happened.

GREENFIELD: Bill Carrick is a longtime Democratic consultant based in Los Angeles.

CARRICK: What I am seeing here is, people are less interested in politics, less interested in big-picture issues, and retreating back closer to family, home, neighborhood, community, and worrying about the specifics of their individual lives and less worried about big universal problems.

GREENFIELD: Carrick says that translates into parallel forms of government: more homeowners groups, private security systems, and charter schools. In other words, Californians are increasingly looking inward to themselves and to their neighbors to do the things that government once did.

If he's right, and if once again California is a leading political indicator, that trend could affect everything from the way we teach our children, to the way we keep ourselves safe, to how much we are willing to pay in taxes, all fundamental political questions we may be facing a few years from now, questions they've already begun asking and answering out here.

Jeff Greenfield, for CNN, in Los Angeles.


WOODRUFF: We may let Jeff go to California more often.

Up next: We will take stock of the president's financial past. When we return: Could George W. Bush the businessman live up to the standards the president now is setting for corporate executives?


WOODRUFF: At the White House today, they were defending President Bush's handling of a stock sale 12 years ago. The matter has come under renewed scrutiny on the heels of the WorldCom scandal and Mr. Bush's call for corporate responsibility.

Here now: our senior White House correspondent, John King -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Judy, in a major speech next Monday, the president will flesh out his ideas on corporate responsibility. He will demand new disclosure rules and ethics when it comes to corporate leaders across the United States of America, including quicker disclosure when corporate leaders sell stocks -- some Democrats suggesting, perhaps, when he was in the private sector, Mr. Bush did not meet the very test he will lay out now.

At issue is his conduct back in the early 1990s. Remember, Mr. Bush bought an ownership interest in the Texas Rangers. To have the money for that purchase, he sold some stock in a company. He was a director of an energy company called Harkin Energy. And back on June 22, 1990, Mr. Bush did file a notice with the Securities and Exchange Commission notifying that he intended to sell a significant number of company stocks.

That very same day, he sold 212,000 shares, made almost $850,000 on that transaction. Now, the government requires a second form. It is called a Form 4, to be filed with the Securities and Exchange Commission to confirm that the sale actually took place. In this case, Mr. Bush's sale, that form was not filed until March, 1991. That is eight months after the deadline for which it was required.

This all came up back in 1994 when Mr. Bush was first running for governor of Texas. He said repeatedly back then that he had filed all the necessary forms and that the government must have misplaced them. But the White House says it has looked into the matter now that this has come up again and says, in fact, there was a delay filing the form -- the press secretary, Ari Fleischer, saying, though, that delay is to be blamed on the Harkin Energy attorneys.


ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president believed that all the forms were filled out properly by the attorneys and filed with the SEC, because he knew that he filed his form with the SEC. And then it turned out to be a mix-up with the attorneys where the Form 4's were not filed, and we were able to ascertain that this week.


KING: Now, the SEC, back in the 1990s, also investigated Mr. Bush for insider trading, potential insider trading, because he sold that stock at $4 a share. The company later reported some financial troubles and the stock fell dramatically. No action was taken against the president. He was not fully exonerated. The SEC does not use that word. But it did terminate the investigation and took no action.

Again, here at the White House, they say Democrats are trying to recycle all this to undermine the president's credibility as he prepares to deliver that big speech on corporate responsibility. Look for this debate to continue as Mr. Bush prepares that speech for Monday and as this issue increasingly takes center stage as the November elections approach -- Judy.

WOODRUFF: John, bottom line, just how worried are they about political damage to the president off this?

KING: Well, they say the facts are on their side, and that this all took place more than 10 years ago, that the president was investigated, that career investigators conducted that investigation and they took no action against the president.

What they are worried about here is clutter, if you will: that, as the president tries to make his case, that people will keep pointing to this conduct, keep trying to bring this up to clutter the president's message as he tries to look forward by having us in the news media and the Democrats, certainly, looking back and saying, this guy does not have the legs to stand on, if you will, in this debate. The White House says the facts are on its side, but this is politics.

WOODRUFF: All right, John King at the White House.

And for a little more on this story, we're going to bring in Wayne Slater with "The Dallas Morning News."

Wayne, back in 1994, when President, then Governor Bush -- or then Mr. George Bush was running for governor, what exactly were they saying about this stock sale and the notification papers that were required on it? Now they're saying it was an attorney mix-up. What were they saying then?

WAYNE SLATER, "DALLAS MORNING NEWS": In fact, I remember talking to George Bush at the time. And the episode had been raised in the media. It became a big campaign issue in the final month of the 1994 race. Ann Richards ran an ad that asked, raised questions about whether George Bush had engaged in insider trading and worse.

And so we talked to previous Governor George Bush before he was elected. And I remember him telling me, "It must have gotten lost in the mail," meaning the filing. He always insisted throughout then and then later in the presidential race that he filed all the necessary papers. What he acknowledged was that the final paper didn't get to the SEC for eight months, but that was because he refiled it. Again, his position back in 1994 was, he did everything that was necessary, that it had been filed, and, if it was lost, it was the SEC's fault.

WOODRUFF: Well, now they're saying, of course, that there was a misunderstanding, a miscommunication between the attorneys. When did this get straightened out by the Bush people?

SLATER: You know, the Bush people moved very quickly in 1994. And, in fact, it's interesting. They actually had an unusual thing, where they had the lawyers of the SEC file a letter to the lawyers for George Bush, saying that they had looked into this matter, that they had determined that they were going to take no action, that they had completed their investigation, and though they had not exonerated anyone, the intention at that point was to do nothing.

That letter was produced before the election against Ann Richards and was part of their effort. Frankly, none of this has been -- this business about someone else, the Harkin people, causing the problem is brand new.

WOODRUFF: Brand new, meaning you had not heard any of this before?

SLATER: I had not heard that.

Until the latest dust-up, it had been my understanding, both in the '94 race and the 2000 race, when the issue was raised again -- albeit it didn't get much attention -- that the problem was not George Bush or George Bush's lawyer or anyone else affiliated with him, that he had done everything he needed to do. The problem was on the other end of the SEC.

This most recent explanation that apparently there was a mix-up with the Harkin lawyers, the law firm, the lawyers for his oil company, is new and was new to me. And, of course, it comes at the worst possible time. Whereas the issue did not resonate in '94 or in 2000, now, and what's happened over the last several months with business scandals, this issue resonates anew. So, John is right. It's a lot clutter as the governor is attempting to step down on business.

WOODRUFF: All right, Wayne Slater, "Dallas Morning News," thank you so much for joining us. Good to see you again, Wayne. Thank you.

Bill Schneider's political ad reel is straight ahead, but first let's take a look at what's ahead on "WOLF BLITZER REPORTS" -- hello, Wolf.


The Fourth of July jitters have hit, with Americans wondering about security for the holiday. We will tell you what the U.S. military is doing to protect you. And we will take you around the country for a quick look at how our cities are preparing. Plus, officials in Salt Lake City raise the stakes in the search for the missing teenager Elizabeth Smart. We will talk live with the mayor.

All that, much more at the top of the hour, right after INSIDE POLITICS.


WOODRUFF: Well, we learned that campaign ads can serve as something of a Rorschach test for analyzing political races.

So, let's bring in our own Bill Schneider, who is still in Los Angeles -- Bill.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Judy, this year's marquee Senate race is in South Dakota between Democrat Tom Daschle and Republican George W. Bush. No, sorry, make that Democrat Tim Johnson and Republican John Thune. It only looks like a race between Daschle and Bush with all the outside money that is pouring into South Dakota.



ANNOUNCER: They came to South Dakota to make a life on the land.


SCHNEIDER (voice-over): Like this ad attacking Thune being run by the League of Conservation Voters.

(BEGIN VIDEO CLIP, LEAGUE OF CONSERVATION VOTERS AD) ANNOUNCER: But today, South Dakota's environment faces new threats, especially to our water. And John Thune isn't helping, voting twice to allow more arsenic in drinking water.


SCHNEIDER: Thune's response? East Coast outsiders are invading South Dakota.


ANNOUNCER: East Coast environmentalists who support Tim Johnson are running false negative attacks on John Thune, but here are the facts.


SCHNEIDER: Ever see a drive-through attack ad? This one is being run by Lamar Alexander in the Tennessee Senate race against his Republican primary opponent, Ed Bryant.


ANNOUNCER: Bryant has billed taxpayers $36,000 for cars. Bryant even billed us...

UNIDENTIFIED ACTOR: Another super deluxe for the congressman.

ANNOUNCER: ... for the car washes.


SCHNEIDER: In Texas, it's good to be for President Bush, even if you happen to be the Democrat running for governor, Tony Sanchez, against Republican incumbent Rick Perry.


ANNOUNCER: Sanchez supported George Bush for president. Bush wrote Tony Sanchez, praising him as a great Texan. Rick Perry? He took George Bush's surplus and turned it into a deficit.


SCHNEIDER: Perry's response? Sanchez isn't a Bush man. He's a Clinton man. Sanchez was there -- see, see, in the spotlight -- when President Clinton signed the tax hike back in 1993.


ANNOUNCER: Later saying he couldn't remember being there. Texans never trusted Bill Clinton. Can Texans trust Tony Sanchez?


SCHNEIDER: This week, Sanchez started running an ad giving Perry the silent treatment. Just what are these people thinking?


UNIDENTIFIED FEMALE: I can't think of anything that Rick Perry has done while he's been in office.



SCHNEIDER: Democrats salivate at the prospect of taking the governorship away from a Republican in President Bush's own state, even if the Democrats have to nominate a Bush supporter to do it -- Judy.

WOODRUFF: All right, Bill Schneider, thanks a lot. We'll see you tomorrow.

That's it for INSIDE POLITICS. "WOLF BLITZER REPORTS" is next. Thank you for joining us. I'm Judy Woodruff.


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