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Congress Passes Corporate Governance Bill; Gaza Missile Attack Ignites Furor; Bush Issues Veto Threat on Homeland Security Bill

Aired July 27, 2002 - 19:00   ET



MARK SHIELDS, HOST: Welcome to CAPITAL GANG. I'm Mark Shields with Al Hunt, Robert Novak, and Kate O'Beirne.

Our guest is Republican Congressman Rob Portman of Ohio, the chairman of the House Republican leadership. Thanks for coming in, Rob.


SHIELDS: Good to have you.

As the stock market kept plunging the first two days of the week, President Bush promised relief from passage of the corporate accounting reform bill.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm not a stockbroker or a stock picker. But I do believe that the fundamentals for economic growth are, are, are, are real. And I believe Congress is going to get a bill that will help take some of the uncertainty out of the market.


SHIELDS: With House Republicans accepting the tougher Senate Democratic bill, the legislation moved quickly toward final passage.


SEN. PATRICK LEAHY (D), VERMONT: What we're saying is, obey the law. Obey the law because it's the right thing to do. But if you don't, instead of being in a boardroom, you're going to be in a very small room with bars on the window.

SEN. PHIL GRAMM (R), BANKING COMMITTEE: I do not believe that the bill does as much good as it could do. I think it does more harm than it should do.

REP. JOHN LAFALCE (D), FINANCIAL SERVICES COMMITTEE: It is regrettable that we couldn't have passed a good, strong bill much earlier, which is something that we wanted to do.


SHIELDS: Al, do the administration and Congress really think this bill will truly revive the financial markets?

AL HUNT, CAPITAL GANG: No, but it's a good initial step, and it's absolutely essential, Mark. I love these people who say the markets will self-correct. That is reminiscent of Herbert Hoover in 1930, who said, "Everything will be fine in the long run," to which John Maynard Keynes replied, "In the long run, we'll all be dead."

Paul Sarbanes deserves great credit for being out front on this issue, and realizing that most Americans today, the overwhelming majority, don't think they're getting honest financial information about investment opportunities. And he made Republicans run up the white flag of surrender. They capitulated despite all their rhetoric about too much regulation

This is a good bill. It won't be a panacea, but it's a good start.

SHIELDS: Was it Republican capitulation, Bob Novak?

ROBERT NOVAK, CAPITAL GANG: You bet. And I haven't seen Al Hunt with such a smile on his face, his eyes twinkling, Republican capitulation. Of course they were scared. This bill is a dog. This bill is a clinker. I just hope that the economy is strong enough to withstand it.

But when the Congress gets involved in something, trying to deal with serious things, nobody is safe.

One financier told me he looked upon -- looked at the members of Congress in this House-Senate conference dealing with this bill, and it was like chimpanzees performing brain surgery. And the brain is the brain of the American economic system.

SHIELDS: Rob Portman, is it time -- I mean, Bob Novak, I mean, just really savaged Republicans in particular, Congress in general.

PORTMAN: I hate to be in a position of disagreeing with both Bob Novak and Al Hunt all at once here. You guys are ganging up. But it wasn't a capitulation, because the House Republicans actually passed a good corporate governance bill 100 days ago. It took the Senate a while to get on board. The Senate did increase some of the penalties, and they actually put in place some new accounting rules with regard to this difference between...

SHIELDS: Were they necessary?

PORTMAN: ... consulting and planning. I think they're helpful, and I think they'll help restore some confidence in the market.

But I got to say one thing. So it's a good bill, and I think it's balanced, and I think the House Republicans got the ball rolling and then actually helped in terms of the legislation we passed last week on increasing some of the sentencing.

But members of Congress do overestimate their importance in all this. I do think the fundamentals are more important. Earnings are more important. But really, the market is going to react based on what's going on in the economy. Inflation is low, interest rates are low, inventories are up. Things are going better than they have been, and I think that's going to make much more difference in what we do in the House or the Senate.

SHIELDS: Kate O'Beirne, Bob Novak says bad bill, Rob Portman says good bill, Al Hunt says could be better. What's the story?

KATE O'BEIRNE, CAPITAL GANG: Mark, it saddens me to leave our good friend Rob Portman all by himself here. But viewers of C-Span this week might have (UNINTELLIGIBLE) tuned to C-Span might have thought they were watching "The Fear Factor."

This was less a vote than a stampede. I'm with Bob Novak on this one. And I suppose corporate executives should be grateful no one offered a firing squad amendment, because in the current climate, that would have passed had it been on the floor.

And we don't know why the markets did so well this week. The sponsors of this bill would argue that because this bill passed, markets were reassured. But of course when it passed the Senate two weeks ago, markets weren't -- didn't go up. And of course the markets have known for some time, as we all have, this bill was going to pass.

Others, of course, are pointing to fundamentals for the markets' small recovery this week.

We do know something. We know that this bill's going to have unintended consequences. And those of us who are not at all sure the remedy is further regulation think instead what Congress might have risked doing here is criminalizing risk-taking, which is not good for corporate growth.


SHIELDS: We just -- we heard the president say he's not a stockbroker. But I...

NOVAK: He's not a stock picker.

SHIELDS: Or a stock picker either. But I, but I, I'm going to ask you this. The president obviously doesn't agree with you. Can we look forward to his signing this in the middle of the night like he did on campaign finance? Or will there be a major Rose Garden ceremony?

NOVAK: I see a Rose Garden in the future, don't you?


NOVAK: But what, but what, but what a lot of congressman I've talked to, Rob, all Republicans, probably, they want the president to do something, to do something dramatic. I don't know -- they don't know what. But between now and Labor Day, because there's a lot of problems in this economy, and if the -- this -- the continued vigor of the consumer ever begins to flag, then we're in big trouble.

HUNT: Well, I agree...


HUNT: ... we did -- we certainly needed more regulation in this case, because self-regulation didn't work, Mark, that's why we needed it. But I agree with Bob, there is going to be, if the markets don't rebound over a long -- longer period of time, and some people are skeptical about it, there will be tremendous pressure to do something. And I think the pressure is not going to come with tax -- more tax cuts for the wealthy. That's not going to fly.

But what I think there will be is an effort to replace an economic team that has no credibility in the investment community and even among many Republicans on Capitol Hill, at least find somebody. Paul Volcker, where are you?

O'BEIRNE: Al, the markets, of course, are severely punishing these companies, so the markets have kicked in.

But you raise a good parallel with campaign finance reform. I'm having flashbacks for the whole debate up at campaign finance reform. In that case, there was political corruption, there was a media stampede. You had to support McCain-Feingold. The public never much cared.

And this week, a "Wall Street Journal" poll found that 63 percent of the public don't think we need new laws to address what's wrong on Wall Street, they just have to enforce existing laws.

It's just like campaign finance reform.

HUNT: That same, that same poll said the biggest problem is government won't do enough rather than government will do too much...

O'BEIRNE: The public doesn't want new laws.

HUNT: ... and also said, Kate, that 70 percent of the people don't think they're getting honest information. That's a -- that's a stunning...

O'BEIRNE: But they say the remedy is not new laws, it's enforcement of the laws on the books, just like campaign finance reform.

PORTMAN: The public understands when you do both. We need some new parameters. That's what we put in place. It's good for long-term growth of the market as well.

But also, we need to enforce the laws. And that's what the president can do. And he started doing that this week. When you saw those executives handcuffed, being walked out, the Adelphia executives out of Philadelphia, that is the kind of vigorous prosecution of existing laws that the president needs to continue to do.

He's doing it. The SEC is doing it.

NOVAK: See, I don't, I don't like to see executives in handcuffs. It reminds me of Nazi Germany, it reminds me of the Soviet Union. And when I see...

PORTMAN: Only ones who have defrauded employees and defrauded investors.

NOVAK: But there's a certain joy, I find, by the politicians, by Pat Leahy. We had the sound bite said, We're going to put those people in a little room, we're going to really teach those businessmen something.

I don't think that's the right attitude.

HUNT: Do you mind seeing drug dealers in handcuffs?

NOVAK: Not a bit...


HUNT: ... we're tough on law and order unless they're rich CEOs.

NOVAK: No, no, no.

HUNT: Look at it.

HUNT: The drug dealers are richer than these guys, but they're -- but I -- If you don't see -- just -- if I could finish my sentence. If you don't see the difference between a drug dealer and somebody who made an accounting mistake, you got a problem.

HUNT: Some of these people...


HUNT: Some of these people...


PORTMAN: ... we're protecting our capitalist system, Bob, that's (UNINTELLIGIBLE).

HUNT: Rob, you're absolutely right. Franklin Roosevelt started to do it, and we're going to continue in that tradition. Thank goodness.

SHIELDS: Rob Portman, you were not opposed to seeing these guys pulled out in the...

PORTMAN: No. I mean, I think what we need to do, and Kate said it well, is, we need to enforce our laws. And we need to do so in ways that the president has been doing consistently. And he's -- look what happened with Arthur Andersen, you look what's happening now with regard to these prosecutions. It's the right thing to do. And that's what people really ultimately want to see, they want to see the laws enforced.


NOVAK: I think it's a huge mistake with Arthur Andersen.

SHIELDS: I agree, I agree with both Rob Portman and Al Hunt that we needed the legislation because, quite frankly, too many people, three out of four, they come up to you, they're angry, and they feel the system is rigged right now, and they're not getting honest advice. And they've got to get honest advice if you're going to have an investment system...

O'BEIRNE: The system depends on honest (UNINTELLIGIBLE).

SHIELDS: It sure does, and we haven't had it. Let's be very frank about it. Let's talk about it.

O'BEIRNE: And the market is punishing that.

SHIELDS: Well, I couldn't disagree with you more, Kate. But still, I respect your right be wrong.

Bob Portman and THE GANG will be back with the homeland security debate.


SHIELDS: Welcome back.

The House of Representatives working long hours before adjourning for the August recess to pass President Bush's homeland security bill, which gives the president authority to remove the new department's employees from their union contracts.

The Democratic-controlled Senate eliminated this provision, and the president issued a veto warning.


BUSH: I'm not going to accept legislation that limits or weakens the president's well-established authorities.


SHIELDS: While the Bush bill was passing the House, many Democrats were still unhappy.


REP. MARCY KAPTUR (D), OHIO: We fought World War II. We didn't need this department. We defeated the communists and the Soviet Union. We didn't need this department to do it. We fought the Persian Gulf War. Why do we need this now?


SHIELDS: Kate, is this homeland security bill getting bogged down in the usual partisanship?

O'BEIRNE: Well, there is an old fight that the president has picked in setting up his new department, which is enormously to his credit. He's said from the very beginning, if this new department is business as usual, completely inflexible with respect to personnel, when you cannot hire who you want to hire, when you want to hire them, you can't get rid of bad employees, you can't reward good employees, then it's not worth having.

He has now made that an even firmer demand, that this new department operate under different rules. That's an old fight, and the Democrats will fight it to the very end because government employees' unions are such an important part of their base, and they're going to care more about job security than domestic security.

Otherwise, though, he's got some bipartisan fights on his hands with Republicans in Congress opposing moving different pieces of his prospective new department.

SHIELDS: Rob Portman, a lot of Republicans have been urging President Bush to show strength by exercising the veto, which he hasn't done. And I can't believe, in spite of the threat, that this is the first piece of legislation, homeland security, biggest domestic change since national Department of Defense was created, that he's going to use the veto on this? You really think so?

PORTMAN: Mark, I would strongly encourage him to veto the bill if it doesn't have the kind of flexibilities you need to make it work. We're bringing 22 different agencies, 22 different personnel systems together under one new agency. And Kate's absolutely right, if we go with the antiquated 1950s-era civil service rules, which do not work, don't have the flexibility (UNINTELLIGIBLE) respond to this new agile threat of terrorism, it won't work.

So the president should fight for management flexibility, budget flexibility, which Congress is grudgingly giving him a little bit of, I wished that we would give him more. And finally personnel flexibility.

If we get those, it can work. If we don't get them, then the agency wont' be able to respond to the threat we face.

SHIELDS: Al Hunt, in our look at this in all the good will of September 11, I mean, when every guy elected in office was throwing his arm around a firefighter and a cop, all of whom showed up on the 11th of September, all of whom carried union cards, and none of whom said, There's job steward, no, I can't go in there because I'm working overtime, I'm not on the clock, or whatever else, all of a sudden now, the fact that they were dues-paying union members is forgotten in their heroism.

HUNT: Mark, didn't you know that it was unions and the lack of civil service -- or too much civil service protection that caused September 11? I mean, that's the -- seems to be the big issue now.

This is a bogus, phony political issue. That's all it's all about. if there's one thing in homeland security that, that, that we ought to focus on, it ought to be, Do we have a department that makes sense? Not these extraneous political issues.

And I will tell you this. I -- most reorganizations don't work. And there's no reason to think we'll have a better experience this time. And the critical question is not all thee frivolous fights, the critical question is, who are they going to get to head this agency? The only one in recent times that worked was EPA, and that's because Bill Ruckelshaus was so good under Republican administration, I would point out.

And they better find themselves a Bill Ruckelshaus. That'll matter a lot more than all this other silly stuff.

SHIELDS: Leadership matter more?

NOVAK: Oh, I don't know. But I do know that I'm glad to see a little (UNINTELLIGIBLE) union pandering at this table, because there was so much of it before when -- on Friday when Mr. Portman was the manager of the bill, and you had these Democrats who were in the bag for the labor unions, they got their contributions coming up.

They didn't care, they didn't talk security, they didn't talk terror. All they talked about was, My goodness, the union power might be a little bit diluted. That's what's wonderful about this country. Even in all-out war, World War II, it was petty politics, and you saw plenty of pretty politics on the House floor Friday.

SHIELDS: You sure did, because, I mean, when it comes right down to it, those people who were in the pocket of the Chamber of Commerce, the National Association of Manufacturers...


SHIELDS: ... National Right to Work Committee -- no, but all of a sudden they see the opening. Boy, what we can do is bust the union right here, bust workers' right to organize.

NOVAK: You love the unions, don't you?

SHIELDS: Rob Portman.

PORTMAN: Mark, two quick points.

SHIELDS: I believe in, I believe in workers' right to organize.



PORTMAN: First of all, the majority of the workers in this department will not be represented by labor unions as they come in. Seventy-five percent of the workers do not belong to a union. However, as they come into this new department, collective bargaining is retained, the unions are retained. What the president was talking about, in terms of his veto threat, was an effort on behalf of Democrats in the House to take away existing authority that he has for national security to be able to take people out of collective bargaining if there is a national security emergency for specific purposes.

Unbelievably, at a time when we're setting up this new department to defend our country, there are people saying we ought to take away existing national security authority. That's what the debate's been about on the floor.

O'BEIRNE: Mark, Mitch Daniels is not (UNINTELLIGIBLE).

PORTMAN: It's not taking away union rights. They'll be there.

O'BEIRNE: Mitch Daniels has made the point that we're up against an enemy that does not operate under a three-foot-tall code of federal regulations, and that's what this new department will be if the president doesn't win this fight. And it's too bad current collective bargaining agreements will come with the new department. They do things like prevent you from moving a border agent from where he is to where you might need him to protect the border.

That's the wonderful effect these collective bargaining agreements have on domestic security.

HUNT: Mark, this is surreal. I mean, for eight months, Joe Lieberman said, We need this agency, and George Bush said, No, we don't, we don't need any kind of agency. I'm sorry, we don't.

O'BEIRNE: That's a different (UNINTELLIGIBLE)...

HUNT: Eight months later, he finally...

O'BEIRNE: (UNINTELLIGIBLE) that's a different question.

HUNT: ... eight months later, he finally saw the light. Joe Lieberman is giving him 95 percent of what he asked for. And now they're looking to pick a fight because they figure we need some issue other than the economy.


HUNT: That's what this is all about.

NOVAK: I like picking a fight...


NOVAK: ... I think...


HUNT: ... Bob is, Bob's, Bob is up front about it. (CROSSTALK)

PORTMAN: ... I have to answer. It's the right fight to pick because it's necessary (UNINTELLIGIBLE). But when George Bush appointed Tom Ridge as his adviser and set up the National Security Council by executive order, he said, I'm going to look, I'm going to begin studying whether we need to have a statutory office, and whether we need to have a new agency.

HUNT: That's a long study, doesn't it?

PORTMAN: And he began that -- It was a long study, because it took a lot of study.


PORTMAN: ... largest reorganization of government in our history. I'm glad they took their time...


PORTMAN: ... because they came up with a good one.

NOVAK: Some of the Republican friends of labor like Jack McEwan (ph) and John Sweeney are probably better friends of labor than Al Hunt is...

SHIELDS: Jack Quinn.

NOVAK: Pardon?

SHIELDS: Jack Quinn, yes.

NOVAK: Jack Quinn. They were all for the president's proposal, because it isn't labor-busting. But what it is when you pose it, you just -- these people are just enthralled in the unions, they do whatever they tell them to do.

SHIELDS: Let's just get one thing, OK, Bob, because I know you hate hypocrisy as much as I do.


SHIELDS: Any Republican candidate who appears in a commercial this year with a firefighter or talks about the heroism...


SHIELDS: ... let's just say, Oh, now, they shouldn't have done that, because they were union members.


HUNT: And I'm sure they opposed taking away union members in handcuffs too.

SHIELDS: That's right.

Next on CAPITAL GANG, a deadly Israeli attack.


SHIELDS: Welcome back.

An American-made F-16 Israeli jet fired a 2,000-pound missile into a densely populated Palestinian neighborhood in Gaza. The target, Hamas leader Sheik Salah Shehadah, was killed along with 14 others, including nine children.


YASSER ARAFAT, PRESIDENT, PALESTINIAN AUTHORITY (voice of translator): I ask the whole world, how can you be sound (ph) and not stop such crime against our people, especially at a time when we had resumed that positive contact in all aspects, including the last meeting that took place between five of our ministers and Israelis officials, including Foreign Minister Shimon Peres?

ARIEL SHARON, ISRAELI PRIME MINISTER (voice of translator): We of course have no interest in harming civilians, and we are always sorry when civilians are hurt. But the point is that this operation was, in my view, one of the biggest successes.


SHIELDS: After a pause, the U.S. government reaction was critical.


ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president views this as a heavy-handed action that is not consistent with dedication to peace in the Middle East.

RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: We have concerns about this that are not just legal concerns. The issue of targeted killings, the issue of use of heavy weaponry in built-up areas, are issues that relate to, How are we going to achieve peace?


SHIELDS: Bob Novak, will this event have far-reaching consequences?

NOVAK: I think it will. I think it will have far-reaching consequences for the Israeli psyche. I think a lot of Israelis are heartsick that this kind of an operation with this loss of life, it wasn't a surgical strike at a killer -- whether you like assassination or not, this is not the way to perform it.

But it is, it really isolates Israel from the world. The only person who thought it was a great success was Sharon. And of course the fact that they were meeting, that Peres, the foreign minister, was sitting down with Erakat, the chief negotiator for the Palestinians, trying to make some progress, that this attack comes right at that point, is strictly Sharon.

And I think it is time for the United States to do something and to use words stronger than "heavy-handed."

SHIELDS: Rob Portman, when President Bush first ordered Israeli troops out of, after the first incursion, into the West Bank earlier and told them he wanted them out and Ariel Sharon ignored it, basically, the United States backed down. Did the -- was there a different tone this week in the president's remarks, to you?

PORTMAN: I think so. The president's remarks I have not heard. I've heard remarks from Ari Fleischer and from the State Department...

SHIELDS: Yes, I mean the president's statement, yes.

PORTMAN: But Ari's statement was very specific. You said it was after a pause, but it was that the United States does not support this action and condemns it.

And the tragedy here is the loss of life on both sides, and it's innocent lives. But if you look at the big picture here, Mark, the suicide bombers or homicide bombers, as the president calls them, who are going against Israeli civilians, and in many cases, the most recent one, immigrants, aren't even Israelis, are just as tragic, and more so in the sense of loss of innocent lives, because there's no military objective there.

What we need to do is get back to the Peres-Erakat talks. This is our only hope, and the United States needs to try to be a broker in this and try to keep these two sides talking.

If we don't do that, we're (UNINTELLIGIBLE) see the escalation of violence and more innocent lives lost.

SHIELDS: Kate O'Beirne, Ariel Sharon was the only person to call this a success. I mean, is he that out of touch?

O'BEIRNE: Well, the fellow who was the aim of this is a mass murderer. They have tried to be -- they have tried to get numerous occasions before, in fact, Shimon Peres says on eight previous occasions they thought they were able to get him, except concern for civilians in the area prevented it, which underscores that this was a miscalculation on their part, because they passed up those previous times.

And he clearly deserved what he got, so I think he was responding there.

They face the same challenge, the Israelis, that we do. They're fighting a war against terrorists who hide behind civilians. The root cause here, of course, is that under the Oslo accords, Arafat was obliged to arrest this mass murderer. But he won't do that, he won't meet his obligations. And so, unfortunately, the Israelis are expected to care about the safety of Palestinian citizens more than the Palestinian leadership does.

SHIELDS: Al, Israel has always held itself to a higher standard -- Jewish population has been noted for its commitment to morality and ethics. I mean, this is a devastating blow to their own self-image.

HUNT: Oh, yes, and I think Bob is right. That's why I think it will bother many, many Israelis. But this is not a miscalculation. When you take an F-16 and you drop a 2,000-ton -- or a 2,000-pound bomb in a, in a, in a urban congested area, and then you say, Geez, I'm surprised we killed a dozen, you know, kids and women, I mean, I'm sorry, that's not a miscalculation. That was Ariel Sharon.

I don't think there's a moral parity between what the Palestinians do with their intentional suicide bombings, their consistent, persistent efforts, and what the Israelis do. But I think this lessens the Israeli high ground, and I think they're going to pay a huge price for this.

And it -- and unless the United States keeps the same kind of pressure on Sharon that he -- we have rightfully, I think, applied to Arafat -- it's essential. Sharon thinks he can get away with this.

NOVAK: But do you think they're wrong?

HUNT: I'm doubtful, Bob.

NOVAK: I am too.

HUNT: And I think it would be a big mistake not to.

NOVAK: You know, the word "terror" is used very widely, but it's all -- it was used for the first time I've heard it not by Ted Turner speaking about the Israelis, but by members of the Knesset, who are using the word "terror" about their own government.

HUNT: And journalists over there too, Israeli journalists.

NOVAK: And -- yes, and the other, the other, the other question is, that this, that the -- everybody says they knew when this attack was made that the Erakat-Peres talks were in progress. They knew that.

O'BEIRNE: Given that all of this reaction was predictable, the Europeans, of course, predictably react because they don't think Israel occupies the high ground, and they seem to see moral equivalency when Israelis accidentally kill civilians and Palestinians target them, and given the fact that it's a democracy, people with a conscience who don't want to see these deaths, doesn't that underscore that it was a miscalculation?

Because this reaction is totally predictable. It's not in Sharon's self-interest to have done this intentionally. NOVAK: Sharon does not want an agreement. He has made that clear in closed-door meetings with senators. He does not want negotiation, he wants continued occupation.


O'BEIRNE: But he wants the support of the Israeli people, Bob.

HUNT: But his biggest concern, I think, comes from his right and Netanyahu, in fact, right now, short-term, at least.

SHIELDS: And Rob, I have to ask you one thing. You know, look at that, and you call it an accident, call it whatever you want, and it's hard to believe it was an accident when you drop a 2,000-pound bomb in a, in a, in a packed-in neighborhood, densely occupied.

But doesn't this just act as a recruiting poster for anti- Americanism and anti-Israeli feelings upon not simply Palestinian kids but, I mean, among Arab youth?

PORTMAN: I'm sure it doesn't help in the overall effort, which is to begin to change Arab public opinion so they understand the threat of terrorism that not just we face but everybody faces.

Let me just make another point, though. The United States has to support Israel if we are to see peace. And I say this because they are surrounded by hostile neighbors, because the Europeans, as you say, are not there for them.

And I disagree, I do think that Sharon would like to see peace. He wants to see peace through strength. And that's why the United States' role here is so critical, to be a broker with these talks, agree that talks ought to be going on, and we ought to be condemning these kind of acts.

But we also need to support Israel at this time if we want to see peace.

SHIELDS: Last word, Rob Portman. We'll be back with a CAPITAL GANG classic, Israeli-Palestinian negotiations 11 years ago.


SHIELDS: Welcome back.

Eleven years ago, Israeli Prime Minister Yitzhak Shamir was pressured by housing minister Ariel Sharon not to attend a proposed peace conference favored by President George Bush, first President George Bush.

Your CAPITAL GANG discussed this on July 27, 1991. Our guest was Republican Senator Richard Lugar of Indiana.

(BEGIN VIDEO CLIP, July 27, 1991)

PATRICK BUCHANAN: Will Israel politics kill off this chance for peace? Al Hunt.

HUNT: I think the answer is no. I think there will be conference. It is clearly a very long road. I think the minute the conference recesses and we go into bilateral talks, it's going to be very, very difficult. But it's a good start.

PAUL GIGOT, "THE WALL STREET JOURNAL": I think Shamir's playing it about right. He knows that most of his leverage in all of this comes before he sits down at a conference. Once he sits down, he's got to talk about land for peace, and that means giving up some land.

SHIELDS: He's got the popular will at home. They do want peace, they do want negotiations. And secondly, the problem he has is the $10 billion. He wants to -- the Israelis going to come up here in September on Capitol Hill looking for $10 billion.

If he, Shamir, sabotages a peace conference, then I think his chances for getting it are pretty damn remote.

BUCHANAN: Is it likely that Congress would go along with President Bush if he tries to hold up that $10 billion either for the conference or to get the Israelis to no more settlements on the West Bank?

SEN. RICHARD LUGAR (R), INDIANA: It'd be a very close call, and the president's going to have to consult with the Congress and say, This is American policy, I need your help. But it's not a foregone conclusion. The Israelis will be pushing to get the Congress to overrule the president.


SHIELDS: Bob Novak, didn't the situation in 1991 seem a lot more hopeful than it is today?

NOVAK: Partly because I wasn't on the panel that (UNINTELLIGIBLE) for that program. I think it's a wash. It was the beginning of something. That conference was held. It was the Madrid conference, which led to the Oslo conference, which led to a hope for peace.

It's kind of interesting, you know, it's a long story that the housing minister, Mr. Sharon, was throwing monkey wrenches in the peace process then. I'm telling you, he is a big part of the program -- of the problem. If we could look ahead 11 years then, we'd be very disappointed to see what we have now.


PORTMAN: I was working, I was working in the first Bush White House in 1991 when this discussion was going on. And for me, it seems very similar, it's deja vu. I mean, we still have some of the same issues. I don't think we're any further along than we were then.

SHIELDS: No closer. Kate O'Beirne, closer?

O'BEIRNE: Bob, you might not have been there, but you men were certainly well represented. Isn't that all-guy thing so retro?

The deal back then was land for peace. Israel gave up land, and we see the kind of peace they got for it here in 2002.

SHIELDS: Spoken like a true Likud.

Al Hunt.

HUNT: Well, we needed Kate O'Beirne's presence in 1991.

SHIELDS: That's right.

HUNT: It took us a while, it took us a while, but we finally got it.

SHIELDS: You know, you're right, what we needed was the softening, humanizing, compassionate women.

O'BEIRNE: Exactly, exactly.

SHIELDS: That's right. Thanks, Kate.

Bob Portman, thank you for being with us.


SHIELDS: We'll be back with the second half of CAPITAL GANG. Our Newsmaker of the Week is baseball legend Hank Aaron. Beyond the Beltway looks at the Tennessee Republican Senate primary with Tom Humphrey of "The Knoxville News-Sentinel." And our Outrages of the Week. That's all after the latest news, following these significant messages.



SHIELDS: Welcome back to the second half of THE CAPITAL GANG.

I'm Mark Shields with Al Hunt, Robert Novak, and Kate O'Beirne.

Our Newsmaker of the Week is Hank Aaron. Henry Louis Aaron, age 68, residence Atlanta, Georgia. Entered major league baseball with the Milwaukee Braves at age 20. During 23 years, broke 13 major league career records, including Babe Ruth's home run mark.

Baseball's Hall of Fame, elected 1982. Recipient of the Presidential Medal of Freedom, 2002. Senior vice president, Atlanta Braves.

Earlier this week, Al Hunt interviewed Hank Aaron from Atlanta.


HUNT: Henry Aaron, 20 years ago this week, you were inducted into the Baseball Hall of Fame. Earlier you broke Babe Ruth's home run record. Just this month you were awarded the Presidential Medal of Freedom.

How does induction into Cooperstown rank among your many accolades?

HANK AARON, BASEBALL HALL OF FAMER: Well, I think it's right up there. You know, you always like to be associated and -- with other great athletes. You walk up there on the podium and start making acceptance speeches, you get a little -- your knees start buckling a little bit.

HUNT: You hit more home runs than anyone in the history of baseball. You had more RBIs, you were third in hits. Yet there are those that say Henry Aaron doesn't really get the full recognition as one of the handful of the truly greatest men to ever play the game. Why?

AARON: I have no idea. I didn't play in New York City, nor did I play in Chicago, so I didn't really have the press behind me. So, you know, my mother always tell me, Don't worry about things you have no control over.

HUNT: When you joined the Cooperstown immortals, Tom Boswell of "The Wall Street Post" said that the spotlight and the unfair criticism that you came under as you chased Ruth's record, for you turned playing for those years into more of a chore than a joy. Has time healed those memories?

AARON: I think I was being unfairly judged, really, because I wasn't angry with anyone. A lot of people said, What about baseball? And I tried to tell them that at that moment, baseball was not fair to minorities, and I still say the same thing.

But -- and then people said I was angry, and that's not true. You know, I was merely stating the fact that was there.

HUNT: Who are the two or three toughest pitchers you ever faced?

AARON: Koufax, Gibson, Marechal (ph), and I would say Tom Siever.

HUNT: Boy, that's an awesome quartet. Who's the toughest player you ever played with or against?

AARON: Well, Willy -- I would say Willy Mays was probably the most complete ball player that I ever played with. But there were some great ball players. You take Billy Williams, for example. Billy was a terrific athlete. You know, he could hit, he could run. He hit with power.

So I would say I would have named Willy, Billy Williams, McCovey (ph).

HUNT: Of all the players you've played against, who's not in the Hall of Fame how should be?

AARON: I played with Lou Burdette (ph). He pitched in some very crucial, critical games, and I would to see him in Cooperstown, because he certainly deserved to be in there.

HUNT: Ozzie Smith his being inducted this time. You didn't play against him, but as an Atlanta Brave executive you saw a lot of him. He had a lifetime batting average of only .262. Yet why is he such an obvious choice for the Hall?

AARON: Well, he was such a great shortstop. I think he was probably one of the greatest that ever played the game in his position. Ozzie deserved to be in the Hall of Fame, regardless of whether his batting average was .260 or maybe .160. I think he certainly deserved to be in the play.

HUNT: Jackie Robinson paved the way for you and a generation of other African-Americans, but today, the number of young blacks in baseball's actually declining. Young African-American athletes seem more attracted to basketball. Why, and what can baseball do about it?

AARON: I think the one thing that they can do is to start building ball parks in the area in which African-American players can play in. We're losing a lot of ball parks. We're losing ball players to other sports such as basketball and football and et cetera.

HUNT: This season, as you know, there is the looming possibility of another strike. Would that be disastrous for baseball? And will it be avoided?

AARON: Well, it certainly will hurt baseball, no question about it. The only way that you're going to probably avoid another strike is by having both parties, the union and the player's representative -- I mean, and the owners, to get in the room, set down, and negotiate it and talk about these problems, and maybe try to avoid it.

But if you do have another strike, I think it's going to be hard for baseball to recover.


SHIELDS: Al Hunt, does Henry Aaron still sound like an angry man to you?

HUNT: No, Mark, and he's -- he says he never was angry, but he clearly was hurt back in 1974 by some of the insults, some racist, that he had the audacity to break a 40-year-old Babe Ruth record.

But I'll tell you, it plays into what Kate O'Beirne will think is a stereotype, but the idea of Henry Aaron, mano-a-mano, against Sandy Koufax and Bob Gibson, God, it doesn't get any better than that.

SHIELDS: Isn't that the truth, Kate?

O'BEIRNE: Absolutely...


O'BEIRNE: Before I yield to one of you who will no doubt want to recall some vivid memory of some crucial Hank Aaron home run, may I just point out that in the same ceremony that Hank Aaron was awarded a Presidential Medal of Freedom, so was Irving Kristol, remarkable intellectual.

NOVAK: Where'd he play?

O'BEIRNE: A remarkable -- But I might have something intelligent to say about Irving Kristol, a personal here of mine, so here I am talking about Hank Aaron instead. This is what I put up with, a panel of sports nuts.


NOVAK: Hank Aaron didn't get it any worse than Roger Maris did when he broke the single season record, and he was in -- Maris was a white boy from the Middle West. Love Hank Aaron, great, great player, but what he lacked, I think, and I think, I think he knew it, was the charisma that Willy Mays had, that Jackie Robinson had, that even Bob Gibson had. I mean, he was a kind of a workaday player. And all of a sudden, my God, look how many home runs he's got.

And I think he never was in that class of a, of a, of a, of a, of a, of an entertainer as those other players.

SHIELDS: Maybe not an entertainer, but those 13 lifetime records just -- I mean, I just stand in awe of them.

I would add what I found most interesting, I mean, the Juan Marechal and Sandy Koufax and Bob Gibson, who were logical choices, was this -- was the mention of Lou Burdette, his teammate with the, with the Braves, who was a great money pitcher in the playoffs...

HUNT: Great in the Series.

SHIELDS: Great in the Series. And it was interesting. It was, it was interesting. That was a great interview.

O'BEIRNE: I'm going to get a cup of coffee. I'll be right back. Talk among yourselves.

SHIELDS: OK, Kate, OK, Kate.

O'BEIRNE: Just talk amongst yourselves.

SHIELDS: Kate, take your time.

Next on CAPITAL GANG, Beyond the Beltway looks at Tennessee's battle for the Republican Senate nomination with Tom Humphrey of "The Knoxville News-Sentinel."


SHIELDS: Welcome back.

The decision by Republican Senator Fred Thompson not to seek reelection set up a contest to succeed him in the August 1 Tennessee Republican primary between former governor Lamar Alexander and Congressman Ed Bryant.

The latest publicly released poll by Alexander's pollster, Whit Ayers (ph), shows a 56 percent to 24 percent lead for Alexander.

But Bryant, painting himself as the more conservative of the candidates, is hoping for the bigger turnout.


ANNOUNCER: He's the governor who doubled state spending, raised the gas tax and sales tax, and advocated a state income tax. He's attacked President Bush's conservative philosophy, calling it "weasel words."

August 1, don't be plaid, be solid for Bryant. Solid conservative for Tennessee.



ANNOUNCER: Ed Bryant is trying to fool you about Lamar Alexander's strong conservative record. As governor, Alexander brought in new auto plants and good jobs. Ed Bryant voted to allow U.S. companies to lay off American workers and hire foreign workers to take their place.

Alexander rejected a state income tax. Bryant was prepared to support a new state payroll tax.


SHIELDS: Joining us now from Nashville is Tom Humphrey, the Nashville bureau chief of "The Knoxville News-Sentinel." Thank you for coming in, Tom.

TOM HUMPHREY, "THE KNOXVILLE NEWS SENTINEL": It's an honor and a privilege.

SHIELDS: Tom, is Lamar Alexander able to paint himself as a true conservative to Tennessee's Republican primary voters?

HUMPHREY: Well, there are a substantial number of Republican primary voters that that has not reached. The Tennessee Conservative Union, for example, is having a banquet this evening. Lamar is not invited. Ed Bryant and Democrat Bob Clement (ph), who will face the winner of the Republican primary, are both there.

But by and large, he's used a lot of paint, he's used it fairly well. He has saturated the conservative talk radio shows with 30- second commercials that use the word "conservative" 10 times in that 30 seconds.

And I suspect that he's applied enough paint along with his use of some negatives against Ed Bryant that probably Lamar is still the man to win that one. SHIELDS: Bob Novak.

NOVAK: Tom, doesn't Lamar Alexander, apart from all this ideology, have enormous advantage being from east Tennessee? Is, from what I, at least what I used to know about Tennessee, that's where the Republican primary votes really came from, and that's his home country in Knoxville. That's a huge edge for Lamar, isn't it?

HUMPHREY: That is a big edge, and the Republican primary, traditionally almost half of the votes do come from east Tennessee. The -- there is, however, growing Republican strength in the doughnut (ph) counties around Nashville, the suburbs. And in suburban Memphis, the suburbs over there, where there is strong Republican presence.

East Tennessee is historic Republican, dating back to Civil War days, and they're a bit different breed of Republicans than those in middle and east -- west Tennessee.

But that is a Lamar advantage, that geographic advantage is an edge for him in the primary.

SHIELDS: Kate O'Beirne?

O'BEIRNE: Tom, the governor -- the Republican governor of Tennessee, Don Sundquist, is extremely unpopular, in no small part because he tried to put in that state income tax. Are Republicans in November running statewide for either the Senate or the governorship likely to be hurt by the fact that the current Republican governor is so unpopular with voters?

HUMPHREY: That is certainly a widespread belief. That commercial you all added -- aired at the outset of this was modified today by Bryant, the Bryant commercial, to insert a line saying that Don Sundquist, our current governor, has endorsed Lamar Alexander.

Sundquist is perceived as wildly unpopular right now for the income tax situation. That spilled over. You know, the U.S. Senate race does not have anything to do with our state tax policy here, but the perception is so -- that's sort of carried over in everything in Tennessee politics, so you see these Senate candidates all -- Lamar says he's rejected a state income tax. Bryant argues that he advocated them.

In truth, he sort of wishy-washied in between there back when he was governor.

Bob Clement is against an income tax too.


HUNT: Tom, I'm just thinking about Lamar Alexander. Twelve years ago on the cover of "Time" magazine, a celebrated new education secretary of the other President Bush, six years ago came within an eyelash of winning the New Hampshire primary.

When he ran for president, he had nothing good to say about Congress, you know, let's cut their pay and send them home, didn't express any interest in ever being a legislator.

Is he running now simply because he's bored?

HUMPHREY: He certainly says that is not the case. He says that he was inspired by this -- events of September 11 to -- but -- he was -- and by Fred Thompson's exit, that suddenly there was a vacuum there, and he felt he was qualified to step in and seize it.

He has -- at one -- if you know Lamar (UNINTELLIGIBLE), there is a sense that, yes, sure, he's maybe a little bit tired of making money and would like to get back into the action there.

SHIELDS: Tom, question, we think about Tennessee, we think about Howard Baker or Fred Thompson or Jim Sasser, people like that, who were -- all of whom were moderate national figures. To listen to the competing commercials we heard, you'd think this was a fight over who was going to lead the Mississippi Republican Party.

Is -- now, does this mean in the, in the November election that the (UNINTELLIGIBLE) -- the contest will be decided on who's the most conservative or the more conservative candidate?

HUMPHREY: I don't know that the November contest will be decided like that. Ninety-four was a watershed year here in Tennessee, a big sweep. The Republicans won everything in sight, governor, both Senate seats, took control of the congressional delegation.

Bob Clement will tell you that he believes this is '94 in reverse, and that may be the case here in Tennessee. It's -- the unpopularity of our present Republican governor, the pendulum swaying, the economic issues that have -- coming home in Tennessee, make that at least possible.

In the Republican primary, though, that -- the Lamar Alexander, Howard Baker, Don Sundquist wing of the party is sort of on -- is waning, while the '94 guys, we have a -- Ed Bryant, Van Hillary (ph), who is running for governor of Congress (ph) now, are waxing.

SHIELDS: OK, Bob Novak?

NOVAK: Tom, some of the, the big, the big talk here in Washington of the upset specials (ph) is Ed Bryant being one of the real upset possibilities. I find it a little hard to see how he does it, but there are people who know politics think that Ed Bryant could do it. And they say that it's because although Lamar Alexander is a good, very good general election candidate, he is uncomfortable in this Republican primary where he has to drift to the right.

You've seen him campaign in this primary. Do you -- is that discomfort obvious on the part of Lamar?

HUMPHREY: There is a bit of discomfort apparent. Lamar is a very smooth campaigner, as you well know if you've watched him in action. He does not let things be that obvious. But if you've listened to him in his presidential rhetoric and so forth, he is a different Lamar. He is -- you know, he's -- without plaid and without exclamation point this time around.

He is making his point, repeating over and over again his conservative message. He does try to be a new Lamar, if that makes sense.


O'BEIRNE: Tom, any predictions for Tuesday in either the gubernatorial...


O'BEIRNE: Yes, next week, either the gubernatorial or the Senate primary, Van Hillary or the Bryant-Alexander race?

HUMPHREY: I believe that Lamar by a nose in the Senate race. I think it will be fairly close, but I believe Lamar will prevail in that one. In the gubernatorial race, Van Hillary probably will win fairly comfortably in the Republican primary. The former mayor of Nashville, Phil Bettison, will probably win fairly even more comfortably in the Democratic primary.


HUNT: OK, Tom, if you're going to go out there on that plank, let's go to November. Bob Clement against Lamar Alexander, who wins?

HUMPHREY: Real close race. I would actually think maybe Bob Clement by a nose, or just a whisker, maybe. He -- Clement looks at that campaign as the -- this is sort of involving the way he -- a Democrat would like to see it, the corporate accountability scandals. And Lamar has had some business dealings in the past. He has sat on the boards of directors of a number of corporations, and some of his business dealings have been a bit questionable and controversial, historically speaking.

And you bring that into play, Bob Clement will exploit that to the hilt. He already is in some of his rhetoric anticipating Lamar as the opponent. So I would say this is a good chance for a Democratic pickup.

SHIELDS: Tennessee is worth watching, and we have to thank you, Tom Humphrey, for being with us.

THE GANG will be back with our Outrages of the Week.


SHIELDS: Now for the Outrages of the Week.

American Catholics are an important voting group. Since 1972, every winning presidential candidate except George W. Bush in 2000 carried Catholics. In fact, Al Gore won them by 20 points.

So how dumb and offensive can the Democratic National Committee be? Consider this. On the DNC Web site, you will find links to interest -- of groups of interest such as environmentalists, gay and lesbian voters, Jewish-American and African-American voters. Under "Catholics," there is only one link. It goes to the militantly pro- abortion group Catholics for a Free Choice.

How offensive would it be if Jews for Jesus were the only link to Jewish voters recommended by the Democratic Party? Democrats who talk about a big tent turn out to be hypocrites.

Bob Novak.

NOVAK: Congress is rough on corporate executives these days, especially Democratic Senator Carl Levin of Michigan, who chairs the Senate investigation. But one executive is exempt, Robert Rubin, Bill Clinton's revered secretary of the Treasury, who now heads Citigroup's executive committee. Citigroup was Enron's largest creditor, and it's accused by Senator Levin's own investigators of helping to hide Enron debt.

Besides that, Mr. Rubin telephoned the Treasury seeking intervention to support Enron's credit rating. But Robert Rubin is a Democratic icon, and Senator Levin will not call him before his committee.

SHIELDS: Kate O'Beirne.

O'BEIRNE: This week we were treated to the latest spectacle in the Senate Democrats' attempt to block an unprecedented number of George Bush's nominees to the federal courts of appeals. Texas Judge Priscilla Owen won the highest rating from the ABA and the label "extreme activist" from liberal Democrats.

Her scary offense? She's upheld a law requiring parental notification before a minor can get an abortion, as has the U.S. Supreme Court. A huge majority of the public supports such laws.

Who are the extremists here?


HUNT: Mark, essential tenet of American politics these days is something called spin. Sources try to convince reporters something's true whether it is or not.

I thought about this when the sad news that Jack DeVore (ph) died last week. For more than 20 years, Jack was press secretary to Senator and then Treasury Secretary Lloyd Bentsen. He never dissembled, believing in a simple principle, tell the truth. He also never Washington disloyal to Lloyd Bentsen.

A lot of us will miss him as a relic of better days.

SHIELDS: Amen, Al. I just say one thing, Kate, thank goodness the Bush administration totally disregarded ABA recommendations.

This is Mark Shields saying good night for THE CAPITAL GANG. If you missed any part of our show, do not despair. You can catch the replay at 11:00 p.m. Eastern and again at 4:00 a.m. Eastern.

Coming up next, "CNN PRESENTS: WAR BIRDS."


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