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Arnold Schwarzenegger Officially in Charge; Interview With Pete Wilson

Aired November 17, 2003 - 15:30   ET


ANNOUNCER: The opening scene of Arnold Schwarzenegger's turn. Can the new California governor deliver the action he's promised?

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I say to everyone here today and to all Californians, I will not forget my oath and I will not forget you.

ANNOUNCER: Hardening attitudes toward President Bush. While many Britains protest his visit tomorrow, are Americans having second thoughts about his integrity?

GOV. KATHLEEN BLANCA (D), LOUISIANA: I want to thank all of you for making history in Louisiana by making me the first woman governor of our great state.

ANNOUNCER: Louisiana voters write a new page in the state's colorful political history.


ANNOUNCER: Now, live from Sacramento, California, JUDY WOODRUFF'S INSIDE POLITICS.

JUDY WOODRUFF, HOST: Thank you for joining us here at the California state capitol, where Republican Arnold Schwarzenegger now is officially in charge. The actor-turned-governor made his inaugural entrance with his wife and family at his side, and with Hollywood celebrities and political stars both on hand.

Few Californians might have imagined this moment even six months ago, least of all Gray Davis. The Democrat ousted in California's unprecedented recall election looked on as Schwarzenegger took the same oath of office that he had taken less than a year ago.


SCHWARZENEGGER: I, Arnold Schwarzenegger...

UNIDENTIFIED MALE: Do solemnly swear...

SCHWARZENEGGER: ... do solemnly swear...

UNIDENTIFIED MALE: ... that I will support and defend...

SCHWARZENEGGER: ... that I will support and defend...

UNIDENTIFIED MALE: ... the Constitution of the United States...

SCHWARZENEGGER: ... the Constitution of the United States...

UNIDENTIFIED MALE: ... and the Constitution of the state of California...

SCHWARZENEGGER: ... and the Constitution of the state of California...


WOODRUFF: After being sworn in just about an hour ago, Schwarzenegger portrayed his political inexperience as an asset as he starts trying to dig California out of its financial crisis.


SCHWARZENEGGER: It was not about replacing one man. It was not about replacing one party. It was about changing the entire political climate of this state.


SCHWARZENEGGER: Everywhere I went during my campaign, I could feel the public hunger for our elected officials to work together, to work openly, and to work for the greater good. This election was the people's veto for politics as usual. With the eyes of the world upon us, we did the dramatic. Now we must put the rank of the past behind us and do the extraordinary.


WOODRUFF: In his 12-minute inaugural speech, Schwarzenegger again said that his first act as governor will be to order a repeal of a hike in state vehicle registration fees, a move that actually will increase the state budget gap. And we've just learned, in fact, that the governor has already signed the papers that will make that happen.

Now let's bring in my colleague, our senior political correspondent, Candy Crowley. Candy, before we talk about that car tax increase and repealing it, you and I were just talking about the three, in a way, separate forces that have come together to make this a really unique moment.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: As we were sitting here, I was thinking, here's a Republican who is going to govern what is largely a Democratic state. A Republican who married into a modern-day most famous Democratic family, the Kennedys.

Here is an immigrant in a state of immigrants, a man who knows what it's like to be poor and then make it rich, and all the dreams there are in between. Here, in fact, is a man who, in the South, has his star on Hollywood Boulevard and will very soon have his portrait hung here in the north in the state capitol. So all of these things kind of come together. And it may be that in this state, which has grown tired of politics, this non-politician may be the guy for the job.

WOODRUFF: Candy, we also -- you and I were just talking about how even though they said the tone of this was to be low-key, that may have been the intention. But it was inevitably not going to be that.

CROWLEY: No. I mean, it's hard to have 700 media folks and people that came here just outside the fences to watch this. It's hard to be a Hollywood star who comes to office in a way no other California governor ever has, without having it be a bit of a show.

Having said that, I was really struck by the tone of this entire thing. It was very businesslike. No longer cute "Terminator, Governator."

This was business. And it was a very short, very sweet, and very to the point inaugural address. And then he got right down to business.

I think that's the signal they want out there, which is, hey, yeah, he was an actor, he's the governor now. He's working for you.

WOODRUFF: And very quickly, Candy, you couldn't ask for more goodwill to get this new administration started. But it's a tough job ahead.

CROWLEY: Absolutely. You know, I was reading in one of the papers today about 70 percent of this budget that he has to deal with, and the huge deficit, about 70 percent of the budget spending is really off the table. So there's not a lot of wiggle room here in this budget. And he's in fact taken out some of the revenue by signing the end of that car tax that basically led to the downfall of Gray Davis.

Look, inaugural days are always optimistic. I've never seen one that wasn't full of hope. But I think it's fairly safe to say that, given what is facing California, this is probably the best day that Arnold Schwarzenegger is going to have for some time -- Judy.

WOODRUFF: All right. Candy, thank you very much.

And joining me now, a key Schwarzenegger advisor. You recognize him, the last Republican to serve as California's governor, Pete Wilson.

Governor, thank you for talking with us.

PETE WILSON, FMR. CALIFORNIA GOVERNOR: Judy, happy to be with you.

WOODRUFF: The rhetoric today was soaring. The "golden dream by the sea, the miracle of Sacramento." How much of that can be transformed into reality?

WILSON: I think we have the right man for the job. He is appealing to the legislature to give him the cooperation that will make it an easy thing to do. I hope he gets that cooperation.

If he doesn't, the alternative is to go to the people. Do it the hard way on the ballot. But it would be much better if people responded to the challenge that he set, because the state is in crisis.

It's basically a healthy state. A very healthy state with much to be happy about. But we've neglected things.

Workers' comp premiums, as he mentioned, are the worst in the nation. He ran down a litany of things that need to be repaired. Much of that really depends upon the kind of prompt response, effective response, the cooperation that he asked for.

WOODRUFF: Well, some Democrats are saying they will cooperate, but Governor Wilson, some Democrats are also saying that there's some exaggeration going on here. That, in effect, some of the people around Governor Schwarzenegger are exaggerating the problem in order to get this bond issue through, borrowing $20 some odd billion to get the state...

WILSON: That really doesn't wash, because the people that created this terrible hole, the reason that the bond is necessary, is to legitimatize spending that they voted for in violation of the state constitution. They're really in no position to make that protest.

WOODRUFF: It's interesting. There are clearly Republicans advising this new governor, you've been advising him. But there are also some Democrats.

WILSON: Oh, yes.

WOODRUFF: Does it worry you that he may slip over and have to compromise with some of those Democrats to make them happy too?

WILSON: No, because I think he has basic core principles. He is, as you've pointed out, not a career politician. You know, experience is fine. It's not the most essential ingredient.

Ronald Reagan came to this office with no political experience. He once remarked that to me, and I said, "Mr. President, you came with something more important. You knew why you wanted to be here, what you intended to do with the office." So does Arnold.

WOODRUFF: What he said today in his speech, Governor Wilson, was really something. I mean, he's promising something -- or I should say nothing short of miraculous, because he's saying, we're going to do away with the partisanship, with the bitterness. We're going to completely turn over a new leaf.

I mean, again, is this -- how much of this is talk and how much...

WILSON: Well, it is not only sincere hope on his part, but I think you've got the response from the crowd. They are tired of the partisanship. They are tired of the kind of failure of performance that has created the crisis. And it's certainly not an exaggeration to describe it as a crisis.

We did have five years ago probably the best business climate in America. Jobs were being created. Now we have lost them wholesale. That's got to be changed.

WOODRUFF: He's a celebrity Republican governor. You were a Republican governor. With all due respect, not the celebrity that Arnold Schwarzenegger is.

WILSON: Not a celebrity, no.

WOODRUFF: What can he do because of his celebrity that you and another...

WILSON: Well, he attracts enormous attention by virtue of the celebrity. But when he started this campaign, at the very beginning of the recall campaign, the response was, sure everybody knew him, they liked him. But they weren't certain that he was equipped to be governor.

Clearly he overcame that. He communicated to them his desire to make change. They communicated by their vote a very clear desire for change. He got a much larger vote in a recall election, a special election, than Governor Davis had less than a year before for his reelection in a general.

WOODRUFF: Right. Well, Governor Pete Wilson, it is a new day in California, as the governor just said himself.

WILSON: It is, and a good one.

WOODRUFF: It's good to see you. Thanks very much for coming in to talk to us. We appreciate it.

WILSON: Nice to see you, Judy. Thank you.

WOODRUFF: Thank you.

Well, people around the country seem to have confidence in Governor Schwarzenegger, as long as he stays in California. Our new poll out this hour shows that 62 percent of Americans surveyed say they think Schwarzenegger will be successful as governor. But nearly the same amount, 60 percent, say that they would not vote for Schwarzenegger to lead their state. For what it's worth.

Well, in Washington, the White House is pushing hard to get a Medicare compromise through Congress.


SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: It is time that we bring Medicare into the 21st century. It is time that we act on this historic opportunity to improve the health care for America's seniors.


WOODRUFF: Up next, would seniors actually benefit from the bill? And which party is likely to take the blame if they don't?

Plus, the Democratic horse race in New Hampshire. How big is Howard Dean's lead now?

And later, more on the challenges ahead for Arnold Schwarzenegger and whether state Democrats are planning to help him out.


WOODRUFF: A bill to overhaul Medicare that includes a prescription drug benefit for older Americans got an important boost today. AARP, the American Association for Retired People, endorsed the plan which is now headed for a showdown on Capitol Hill. In a new CNN-"USA Today" Gallup poll, 32 percent of the respondents say they will blame Republicans if Congress does not pass a prescription drug plan. Eighteen percent say they will blame Democrats, 16 percent say they'll blame both parties.

CNN's congressional correspondent Jonathan Karl is keeping track of the latest developments on the Medicare front. Jon, it has taken them a long time to get from there to here. What are the prospects this is actually going to pass?

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Well, the prospects got a lot better with that AARP endorsement you mentioned. The AARP, of course, has more than 35 million members and a lot of lobbying muscle up here on Capitol Hill. And they're going to use that muscle to help pass this bill.

As a matter of fact, I have already seen transcripts of an ad that the AARP will start running tomorrow nationally, urging members of Congress to vote in favor of the bill. In their statement today, the AARP said in part, "The bill will provide prescription drug coverage at little cost to those who need it most and people with very high drug costs. And will provide modest relief for millions more."

Now, the AARP is very critical to the Republican efforts and they will need that help. The Democrats have put up some heavy resistance here to help get the bill passed through Congress. Key members of Congress are going to the White House. As a matter of fact, they're already on their way down there for an event with the president in about 25 minutes.

That event will feature the top Republicans on this, including the speaker of the House, the Republican leader here in the Senate, and Bill Thomas, the person that helped craft it over on the House side. As well as the two key Democrats that helped draft the bill, John Breaux and Max Baucus. They will be at the White House with a public event with the president in just a little while.

But Democrats are ready to use whatever means possible to block this. One of the key Democrats on that effort, of course, is Senator Ted Kennedy, who took to the floor of the Senate to take issue once again with the provisions in the bill that would put Medicare in competition with private insurance companies.


SEN. TED KENNEDY (D), MASSACHUSETTS: Talk about a fair playing field between the private sector and the Medicare. That's hogwash. That's hogwash.


KARL: And there are some conservative Republicans that also don't like this bill. You can expect them to make some noise in the coming day. One of those is Jeff Flake, a conservative Republican from the state of Arizona in the House of Representatives.

He put out a statement today saying, "This proposal flies in the face of the principles of limited government and individual responsibility the Republicans are supposed to stand for." And then adds this stinging line: "I think this looks like nothing more than an extremely expensive way to buy votes."

Those conservatives, Judy, think that the cost of this bill will be much more than the $400 billion that is currently estimated over 10 years -- Judy.

WOODRUFF: It does make it tougher having critics both from the left and the right. All right. Jon, thank you very much.

Well, as he gets ready to cross the Atlantic for a state visit to Britain, President Bush vows to keep a close watch on the looming showdown over Medicare. Ahead of his trip, our new survey shows what Americans think of Mr. Bush and his job performance.

Fifty percent of those surveyed now say they approve of how the president is handling his job. That is down slightly from earlier this month. Forty-seven percent say they disapprove. When asked whether Mr. Bush is honest and trustworthy, 59 percent of the respondents say yes. In a similar poll last year, 77 percent had said yes.

CNN White House correspondent Dana Bash keeping track of the president's busy agenda. Dana, how does the White House plan to push this Medicare package through before the president takes off for Europe?

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, Judy, in the words of a senior official I spoke with today, it is not to let the paint dry to work as hard as they can to talk to as many members of Congress as possible over the next week. Now, Bush aides have been in contact, have been confering with the Hill leadership over the weekend and again today, also with major groups, including AARP.

And the way the White House tends to approach tough legislation, even something as high a political priority as a prescription drug benefit for Medicare, is not to get into the weeds of the differences as they are discussing them on Capitol Hill, but to wait until something actually evolves and then to work to push it over the finish line. And that is exactly what you are seeing start to come from this White House. Now, they are planning a full court press. Jon mentioned this meeting that is starting to take place here at the White House shortly. We expect a photo op, where you'll see the president not only with Republicans, but with two senior Democrats from the Senate. We're also expecting to see some interviews, some local interviews in key states with senior Bush officials, according to the White House.

But the stamp of approval from the AARP, this White House knows could be more powerful than any presidential arm-twist. They know that the AARP does carry a lot of weight, not only with seniors, but with members of Congress.

Now, a key problem though, Judy, for this White House is that President Bush gets on a plane tomorrow morning and heads for Great Britain. So he will not be here to have public events every day. His attention will be focused elsewhere.

However, the White House does remind us there are phones in Great Britain. He certainly will be able to work the phones to key targeted members of Congress, and he will do so if needed. But they do admit privately it is going to make the job a lot tougher. They also say that there are plans in the works for presidential events when he returns just in case it isn't passed this week -- Judy.

WOODRUFF: Dana, let me ask you about that trip to England. What does the White House plan to do about these huge anti-war demonstrations that we understand are being planned for the time the president's in London?

BASH: Are being planned and are already under way, we understand, as we speak, even before the president touches down. Basically, Judy, the White House plan and strategy is to embrace them. In every interview that President Bush has done with the British press, every time he faces the White House press corps and is asked about this, he says that what he will face is freedom, and freedom is a beautiful thing.

And that is what the president and his top aides will continue to say even as they face these protests. They say this is exactly what they are fighting for in Iraq, the right for the Iraqis to protest, just like we're seeing in Great Britain -- Judy.

BASH: OK. Dana, thank you.

Well, Howard Dean's campaign for president has a new target in its sights. The former Vermont governor is running a TV commercial in Iowa, specifically criticizing Congressman Dick Gephardt.


NARRATOR: October 2002, Dick Gephardt agrees to co-author the Iraq war resolution, giving George Bush the authority to go to war. A week later, with Gephardt's support, it passes Congress. Then last month, Dick Gephardt votes to spend $87 billion more on Iraq. Howard Dean has a different view.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: I opposed the war in Iraq and I'm against spending another $87 billion there.


WOODRUFF: A recent poll shows that Dean right now is trailing Congressman Gephardt in Iowa, where this new ad is running.

Well, new poll pictures paint interesting pictures -- rather poll numbers paint interesting pictures of the Democratic presidential race both in New Hampshire and nationwide. They are next.


WOODRUFF: Some new and interesting poll numbers head up the Monday edition of our "Campaign News Daily."

A new (UNINTELLIGIBLE) poll shows Howard Dean increasing his lead in New Hampshire. The poll shows 44 percent of likely Democratic primary voters in New Hampshire support Dean. John Kerry is a distant second with 23 percent.

But a new nationwide poll shows a tight race between Howard Dean and Wesley Clark. Both Clark and Dean get 17 percent among registered Democrats. Joe Lieberman and Dick Gephardt tie at 13 percent.

There is a significant arrival as -- well, some departures to report in the Carol Moseley-Braun campaign. Former National Organization for Women, President Patricia Ireland is joining the former senator's presidential bid as campaign manager. On Friday, Braun lost two key advisors, and her campaign treasurer left, effective today. The campaign insists that Braun is staying in the race.

Well, Louisiana's governor-elect is taking a few days off of after her historic weekend victory. Democrat Kathleen Blanco narrowly beat Republican Indian-American Bobby Jindal in Saturday's runoff. Blanco's win reverses the trend in previous elections this year. Republicans were elected governor in California, as we've been reporting today, of course, and Kentucky and Mississippi just a couple of weeks ago. The GOP will now have a 28 to 22 edge among the nation's governors. But in Louisiana, it was the Democrats who were celebrating, as Blanco vows to usher in a new era.

Here's CNN's Bruce Morton.


BRUCE MORTON, CNN CORRESPONDENT (voice-over): Louisiana's new governor is Democrat Kathleen Blanco, (UNINTELLIGIBLE), a Cajun, a grandmother and a conservative who opposes abortion with few exceptions, opposes affirmative action, a hunter and gun collector. She got 52 percent of the vote to 48 percent for Republican Bobby Jindal, an Indian-American who at one time had run the state Department of Health and Hospitals.

BLANCO: I had people continually coming up to me saying, "Why do I sense and feel all this momentum but it's not showing in the polls?" And the polls indeed were showing us kind of far down.

MORTON: Polls had showed Jindal ahead, but Blanco closed with an ad blitz, claiming he was a numbers crusher who didn't care about people.

WAYNE PARENT, LOUISIANA STATE UNIVERSITY: He was a problem solver, he was new politics versus old politics. And that was working really well. But at the end, she was running as compassion versus cut, cut, cut. And compassion works in a state that's fairly poor like Louisiana.

MORTON: Republican Governor Mike Foster, whose term limit had endorsed Jindal, of course, so had the Democratic mayor of New Orleans, Ray Nagin, an African-American. But that may have backfired.

Blanco carried New Orleans and ran well among blacks. She carried the Cajun part of the state; Jindal ran best in the Protestant northern parishes.

Louisiana is used to governors who were colorful rascals: the Longs, Edwin Edwards. Jindal and Blanco were clean, but historic. He'd have been the first non-white ever elected. She is the first woman.

UNIDENTIFIED MALE: I think the suspicion is the ethnicity was probably a little more of a drag than the gender was. But they were both at play.

MORTON: Blanco will have her hands full. The state may face a $300 million budget deficit next year. It has a lot of people without health insurance, and a troubled school system. But Blanco, 20 years in politics, is good at coalitions.

BLANCO: Our kids have great talents that have gone untapped. And we're going to challenge them to come to the table and be amongst the finest in the United States.

UNIDENTIFIED MALE: For such a tough job ahead of her, she's got a pretty good resume. I think she's got a pretty good handle on things.

MORTON: And she's a bright spot for Democrats who needed a win after three earlier losses this fall. When all the new governors are sworn in, Republicans will hold 28 of the 50 state houses.

Bruce Morton, CNN, reporting.


WOODRUFF: And I think she's the seventh woman to be elected governor as well. So it's a shift in power in Louisiana. And in California here as well.

But will a Republican governor here be able to deal with the state house dominated by Democrats? I'll speak with top lawmakers from both parties. Stay with us. Our special edition of INSIDE POLITICS LIVE FROM SACRAMENTO continues in a moment.



ANNOUNCER: It's Governor Schwarzenegger now. But will the action hero-turned-politician be able to get his way with Republicans and Democrats in Sacramento?

SCHWARZENEGGER: It was not about replacing one party. It was about changing the entire political climate of this state.

ANNOUNCER: Between the lines of his inaugural speech.

SCHWARZENEGGER: In the words of President Kennedy, I am an idealist without illusions.

ANNOUNCER: Could did a Democrat like the words uttered by Republicans' new star?

Hillary Clinton center stage, on the campaign trail.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: It begins in Iowa and ends on Pennsylvania Avenue!

ANNOUNCER: Did the former first lady and senator from New York steal the spotlight from the Democrats running for the White House?

Now, live from Sacramento, California, JUDY WOODRUFF'S INSIDE POLITICS.


WOODRUFF: Welcome back.

Arnold Schwarzenegger already has made good on his first campaign promise less than two hours after being sworn in as California's 38th governor. A short while ago he ordered the repeal of a recent and unpopular hike in car registration fees. That puts California's budget even deeper in the hole that Schwarzenegger's vowing to dig the state out of.

Schwarzenegger spoke of hope for the future in his relatively, relatively low-key and brief inaugural ceremony.


SCHWARZENEGGER: ... today is a new day in California.

I did not seek this office to do things the way things have been done. What I care about is to restoring your confidence in your government.

When I became a citizen 20 years ago, I had to take the citizenship test. I had to learn about the history and principles of our republic. And what I learned and what I have never forgotten is that sovereignty rests with the people -- not with the government.


WOODRUFF: Let's talk about Governor Schwarzenegger's inauguration and what he faces ahead with Dan Walters of "The Sacramento Bee." Dan, you've been covering politics in this state for a number of years. What's different about this stay?

DAN WALTERS, "THE SACRAMENTO BEE": What's different is that it's Arnold Schwarzenegger and not some gray-suited politician. It's not Pete Wilson or Gray Davis or George Deumejian the three guys on the stand with him. In fact it was the most interesting group since Jerry Brown, another guy on the stand with him today.

The celebrity makes it different. You're here, a lot of media are here, this makes it a different kind of day. He's going to be a different governor as a result of that.

WOODRUFF: Can he deliver? He made soaring promises today. I was talking to former Governor Wilson about this a little while ago. The shining golden city, golden state of California. Can he deliver though on what he's talking about?

WALTERS: That's to be seen. He could. He's got a lot of advantages. Celebrity is one of them. He can command the bully pulpit. He's free of major obligations to interest groups and ideological interest groups, economic interest groups.

He's a free agent. He got here kind of on his own, doesn't owe anybody much of anything as he said himself. So, yes, he could do that. If he can marshal public support for a reasonable set of reforms, yes, he could do it. Because the legislature is a little scared. They knew they'd have been recalled if they'd been on the ballot too.

WOODRUFF: Are they scared? What is the incentive for Democrats to cooperate with him?

WALTERS: They are afraid that somebody, namely the people who put the recall on the ballot, will put on the ballot some punitive measures against the legislature, making them part-timers, cutting their salaries in half. And the voters will vote for it and strip them. Or maybe even change redistricts in mid-decade, change their districts.

So they want to be seen in a better light. They want Arnold Schwarzenegger to succeed or be seen as succeeding so they can look better, so they're not looking like obstructionists or narrow special interest toadies or something like that.

WOODRUFF: This talk of bond issue, borrowing up to $20 billion to get the state's fiscal house in order, carries debt with it. Interest on the debt. Is this something that's likely to come through, despite that? Because what other choices are there? WALTERS: If you don't want to make deep cuts in spending which Democrats don't, if you don't want to raise taxes which Republicans don't want, if you're going to cut taxes which he's done today, it's probably the only way out for him. And it carries risk, as well as a large cost.

But it may be a way, like a corporate workout plan, to clear the books, start fresh, and get kind of a fresh start. Then hope that the economy picks up and starts pumping money into the treasury that can bring the state's books into balance.

WOODRUFF: Dan Walters of "The Sacramento Bee" who's never covered an inauguration like this one.

WALTERS: No, never before like this one.

WOODRUFF: Dan, thank you very much. Great to see you again. We appreciate it, thank you.

California Republicans have a lot riding on Governor Schwarzenegger's success or failure in office. I spoke earlier with the Republican leader of the state Senate, Jim Brulte, and asked him if Schwarzenegger will be able to fulfill the public's great expectations.


JIM BRULTE, CALIF. SENATE GOP LEADER: I think so. He said during the campaign his first act would be to repeal the illegal tripling of the car tax. He will do that right after he's sworn in and talks to the people of California.

He said he wants to fix our budget crisis. He's going to issue a proclamation calling us back into special session to do that. And he wants to deal with workers' compensation, and he's going to call us back to deal with that.

WOODRUFF: He also talked about California living within its means and it sounds as if he's going to have to call for a bond issue, the state borrowing maybe $30-40 billion to get its budget in order. Is that what's going to happen?

BRULTE: There are three things that have to happen. One, he has to find a way of dealing with his inherited debt. He is going to inherit more debt than any governor in American history. He's got to find a way of repackaging that, refinancing it so we can take that off the table.

Second, he has to find a way of capping spending so never again can a governor and a legislature take us from surplus to deficit.

Finally, we have reduce spending in the current year because Governor Davis has already told us he's going to overspend in a couple of program areas.

WOODRUFF: Right the state is $10 billion over. But you're -- he's going to be asking for $30 billion to $40 billion?

BRULTE: I don't believe that that's the case. I think it will be significantly under $20 billion. And we have about $15 billion in inherited debt.

And my guess is, he will probably ask us to find a way of financing that inherited debt. We probably should find a way of doing that.

WOODRUFF: But any contradiction between a governor coming in and saying, we need to live within our means -- as a candidate he said this. And now essentially he's going to be asking to borrow money and have the state go into debt. And as you know, the interest that one pays on that debt can be enormous.

BRULTE: Well the key thing for California is not to do anything that stifles of economic growth. We've already been driving jobs out of the state for the last five years and we don't want to do that.

There are two ways you can deal with inherited debt. You either find a way of restructuring it and refinancing it. This is inherited debt, debt that's already on the books.

Or you can raise taxes. And if you raise taxes, you will have less revenue, you'll drive more jobs out of the state, and you'll have even greater debt.

So there are two ways to deal with it. One is bad, the other is not so bad, but not great. I think he'll choose the not so bad, not great option, rather than the really bad option of raising taxes.

WOODRUFF: You can guarantee he won't raise taxes?

BRULTE: I don't expect him to raise taxes.


WOODRUFF: Jim Brulte, the minority Republican leader of the California state Senate.

Getting California's Democratic majority to work with Governor Schwarzenegger may be easier said than done. Next I'll talk with the state Senate's top Democrat.

Of course, Schwarzenegger has strong family ties to Democrats. We'll tell you how the Kennedy connection made it's way into his speech.

And later...


CLINTON: It begins in Iowa and ends on Pennsylvania Avenue!


WOODRUFF: We'll look at Hillary Clinton's close encounter with the 2004 presidential race.


WOODRUFF: The Democratic leader of the California Senate, Don Perata, is with me to talk about the changes and challenges in store for California and its new governor, Arnold Schwarzenegger.

Mr. Perata, First of all, is this tough for Democrats to swallow, the idea that 10, 11, 12 months after you put a Democratic governor in office, you've got to deal with a Republican?

DON PERATA (D), CALIF. SENATE LEADER: Yes. I don't think frankly we've gotten over getting hit by the bus yet.

But it's very clear, it wasn't even a narrow victory, it was dynamic. We're prepared to work with him. Our problems are legion. They're no different today than they were when Governor Davis is here. So working together, we may be able to solve them. If he can help solve them, more power to him.

WOODRUFF: We know that just a moment ago after he was sworn in, he's already signed the papers that repeal this car tax increase. He's a governor who's not wasting any time. Today we're told he's going to call the special session of the state legislator tomorrow.

Dan Walters of "The Sacramento Bee" said he thinks some Democrats are afraid of this governor and the public pressure he might bring to bear on Democrats. What do you think?

PERATA: If you look around here today, we've never had media coverage for a swearing-in like this one. He can hop right over the legislature, go right to the people. That's his hole card.

Also, our ratings among the public, our approval ratings were lower than Gray Davis.

WOODRUFF: You mean among Democratic legislators?

PERATA: Among the legislature in general. They'd recall all of us if they'd get the chance. So he does has a number of things going for him.

I think what he'll find vexing is how complicated the process gets to be. He has yet to experience the right wing of his own party which will begin to dig in. I don't think a lot of them will want to support that bond.

And then he has to deal with some of the issues the more liberal members of the Democratic office will want.

WOODRUFF: Let's talk about that bond. Borrowing money, maybe $20 billion to take care of the state's debt. There is some interest on that. But the Republicans are saying, it's a lot better doing it that way than by raising taxes. What do you think?

PERATA: Ironically, they're now inheriting the position they used to accuse us of, mortgaging the future. The interest on a $20 billion bond is about $39 billion. So we are really taking money out of the system throughout the future in order to pay for it today.

Some of us don't believe that is too wise. I don't know how Wall Street's going to respond. They told us they were worried about our bond rating before.

So I don't know how carefully this has been thought through. But if he wants to bring it to us, we're going to entertain it.

WOODRUFF: Have you told him what you're saying here, that you think it could make the state's problems worse?

PERATA: No. The appropriate time for us to deal with this is when he gives us his proposal, we will fully vet it and it debate it. And at that time our views will become known.

In all fairness to Mr. Schwarzenegger, Governor Schwarzenegger, he just got sworn in. So his ability to communicate with us with any authority wasn't there until about 11:30 today.

WOODRUFF: But after this, you're at least going to hear what he has to say?

PERATA: Absolutely. I can read a box score. We lost. We didn't have enough runs.

WOODRUFF: OK. Don Perata, Democratic leader of the California state Senate, thank you very much.

PERATA: My pleasure.

WOODRUFF: We appreciate you talking to us.

PERATA: Thanks for being here.

When we come back, how involved is Democratic consultant in Bob Shrum Arnold Schwarzenegger's inauguration? We're going to get some answers from Chuck Todd in our new weekly feature on INSIDE POLITICS, "Hotline Tipsheet."


WOODRUFF: We're in Sacramento today. The inauguration of California's new governor, Arnold Schwarzenegger, is part of the focus of our new weekly feature, the "Hotline Tipsheet."

With us now from Washington, Chuck Todd, the editor in chief of "The Hotline." Chuck, the Republicans I'm talking to here say that Ronald Reagan's former speech writer Landon Parvin was involved in writing the Schwarzenegger inaugural address. What are you hearing back there?

CHUCK TODD, "THE HOTLINE": What was interesting this morning is the first actual news that Bob Shrum, Democratic consultant, heavy Kennedy ties, obviously very involved with John Kerry's presidential campaign, also had a role in the inaugural speech today.

But more importantly we've also learned he also helped look over and possibly make additions to Arnold Schwarzenegger's victory speech back during the recall election itself. And it's got some Democrats in California very upset that one of the most partisan elections at the time is seeing a Democratic consultant help.

Now who knows how much of a role Shrum really had. I talked to some folks who say it was more through Maria Shriver, that she would give him a copy of the speech to look over and make suggestions.

But still, helping on the other side at all in a state that is so critical for Democrats to win back the White House, with a gentleman so much involved with a presidential campaign, has a lot of California Democrats upset with Bob Shrum today.

WOODRUFF: We wonder what the John Kerry campaign thinks as well. Of course, John Kerry, Bob Shrum has been working with his campaign for president.

I want to ask you about Iowa and the governor there, Tom Vilsack. He may make an endorsement soon?

TODD: He seemed to be following Tom Harkin's lead for a long time, where Harkin said he was probably not going to endorse. He wanted to let Iowa be the star and not overshadow the Iowa caucuses themselves. And Vilsack seemed to follow that lead.

But it was interesting to see him say he might endorse -- all at the same time while talking from -- using almost talking points, that John Kerry's been using in attacking Howard Dean -- Vilsack said over the weekend there's questions about -- some Democrats might have with Howard Dean about whether he's tough enough to deal with national security issues.

Of course, that's right out of the John Kerry for president playbook right now. And of course, a lot of people think that maybe Vilsack sees himself as a potential John Kerry running mate someday. And maybe that's why he has a lot of nice things to say about John Kerry and maybe not so nice things to say about Howard Dean.

WOODRUFF: We pay attention to every tidbit out of Iowa these days, don't we?

TODD: Absolutely.

WOODRUFF: Last but not least, we understand that -- well all of us know there's been a lot speculation about veteran Democratic Senator John Breaux of Louisiana, whether he's going to run for reelection. What are you hear?

TODD: With this election, with the governor's race out of the way Saturday it maybe a double-edged sword. While Democrats saw victory, it could mean it makes John Breaux more comfortable deciding to go ahead and call it a Senate career. That had always been the speculation that if he decided -- if Democrats prove they can win this governor's race, then he would feel more comfortable leaving it as an open seat, showing that Democrats can still hold the seat without his help.

That said, there are some folks over in the national Democratic side of things that have been more optimistic of late, saying they've noted especially during this Medicare thing, renewed interest in the Senate that John Breaux showed, and maybe he does want another six years.

Needless to say, his office would only tell us that he will have something to say probably right after Thanksgiving. So we won't have to wait too long, Judy.

WOODRUFF: All right, that would be another piece of news out of Louisiana. OK, Chuck, great to see you, thanks very much.

The "Hotline Tipsheet" is what we're calling it. "The Hotline," of course, an insider's political briefing produced daily by "The National Journal." You can log on to and click on "The Hotline" icon for subscription information.

Joe Lieberman may be skipping Iowa, but he's in New Hampshire. We'll catch up on candidate comings and goings in just a minute. As well as the travels of one of the Democrats' most prominent non- candidates.


WOODRUFF: Candidates and non-candidates hit the road for an extra edition of the "Campaign News Daily." Joe Lieberman filed papers today entering the New Hampshire primary. A new poll today shows him tied for fourth place in the Granite State, behind Howard Dean, John Kerry, and John Edwards.

Wesley Clark's campaign is launching an RV tour. A pair of recreational vehicles will travel through a dozen states, handing out 2004 Clark bars. One is going from Washington, D.C. to New Hampshire. The other will head from Little Rock, Arkansas to South Carolina.

There will be no Democratic straw poll in Florida. In return for dumping plans for the so-called "beauty contest" at next month's party convention, Florida's Democrats won commitments for in-person appearances by all nine of the presidential candidates.

And finally, a case of Hillary Fever in Iowa. The senator attracted a big crowd for her star turn at a fund raising dinner on Saturday. Candy Crowley has a recap.


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): There she is, the Democrats' favorite Democrat, the much longed for, most talked about non-candidate of the presidential season.

Two months before the Iowa caucuses, center stage at the state's biggest Democratic bash of the season.

CLINTON: It begins in Iowa and ends on Pennsylvania Avenue!

CROWLEY: No, no, not for her. For one of the people actually running for president. Personally, Senator Clinton puts no stock in criticism that the '04 field is weak.

CLINTON: Never forget, pundits and polls don't pick presidents. People pick presidents! And that's what's going to happen!

CROWLEY: Having been left some oxygen, the '04 strutted their stuff, by and large the usual stuff with some flourish. Richard Gephardt waxed poetic.

REP. DICK GEPHARDT (D-MO), PRESIDENTIAL CANDIDATE: Like father, like son -- four years and another Bush is done!

CROWLEY: The Des Moines Gay Men's choir kicked things off with the national anthem. State party officials figure more than 7,000 Democrats showed up. Screaming, banner waving, deeply committed pin- buying activists who are most appreciative of anti-Bush lines.

REP. DENNIS KUCINICH (D-OH), PRESIDENTIAL CANDIDATE: The truth is this administration lied to the American people.

CROWLEY: Still, they are running against each other though more accurately, they are all running against Howard Dean. Nobody mentioned anybody else's name but who needed it? John Edwards languishing in the middle tier.

SEN. JOHN EDWARDS (D-NC), PRESIDENTIAL CANDIDATE: Anger won't change America. Action will. If we are the party of anger in 2004, we will not win.

CROWLEY: The well-seasoned, long-resumed John Kerry, currently running third in Iowa to Howard Dean.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: Iowa, Iowa, don't just send them a message next January, send them a president.

CROWLEY: Nor were names needed when Dean played his strong suit, criticizing the president for going to war with Iraq and the lawmakers who let him do it.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: We're there not only because of George W. Bush, we're there because we didn't fight hard enough to keep us out.

CROWLEY: Despite the zingers everybody agreed that anybody there would be preferable to the man currently in the Oval Office.


WOODRUFF: Candy was in Iowa over the weekend to cover the Democratic dinner. Today, she's right here with us in Sacramento. You heard from her earlier. That's it for this special edition of INSIDE POLITICS. I'm Judy Woodruff. Thanks for joining us. "CROSSFIRE" starts right now.


Pete Wilson>

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