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Pocketbook Politics; Interview With Madeleine Albright

Aired June 30, 2004 - 15:30   ET


ANNOUNCER: A matter of interest. How does the Fed's latest decision add up for the Bush campaign?

The trial of the century?

UNIDENTIFIED MALE: We have a long, long, long list of crimes against Saddam Hussein.

ANNOUNCER: With Saddam Hussein now in Iraqi custody, we'll look ahead to his day in court and the political ramifications.

Strange but true. If a Democrat can speak at the GOP Convention, should John Kerry's party try to win one for the Gipper?



JUDY WOODRUFF, CNN ANCHOR: Thank you for joining us.

We begin with pocketbook politics. A little over an hour ago, the Federal Reserve threw a new curve into the race for the White House. The Fed raised a key short-term rate a quarter percentage point to 1.25 percent. It is the first rate hike in almost four years and a clear sign that Fed policymakers think the economy is on more solid ground.

Let's find out how the Bush and Kerry camps are characterizing this expected but still important move. CNN's Joe Johns is tracking the reaction on Capitol Hill -- hi, Joe.


John Kerry economic adviser Gene Sperling released an announcement on the rate hike just a little while ago. We have a graphic to show you of part of what he had to say: "Over the long- term, economists estimate that Bush's fiscal policies would raise long-term interest rates by about 1 percentage point higher, meaning a typical family would have to pay $1,200 more for a home mortgage each year and $120 more for a student loan each year. The higher debt passed on to our children and the higher long-term interest costs working families and American businesses will bear amount to a Bush debt tax that will require a new economic strategy with a renewed commitment to fiscal discipline to repeal." The question, of course, is whether this rate hike could become a factor in this year's election.


JOHNS (voice-over): Even before the rate hike was announced, White House Press Secretary Scott McClellan was arguing that the move by the Fed is the result of good economic news.

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: As the economy grows and jobs are being created, I think it's always expected that a rate increase would be part of that strengthening economy. It's a reflection of our strong economy.

JOHNS: The Democratic National Committee also got out ahead of the Fed's announcement, a whole day ahead with a whole different spin. On Tuesday, the DNC said a higher interest rate would further squeeze the middle class, echoing a Kerry campaign theme.

And then today, the DNC followed up with a statement charging: "Bush brought back the days of deficits, spend now, pay later. And, as a result, American families today face costlier mortgages and higher credit card rates."

For the financial markets and for economists, it's a relative relatively small step that had been expected for some time.

GREG VALLIERE, SCHWAB WASHINGTON RESEARCH GROUP: But in terms of the Fed move today, that just confirms what the markets have already done. Going forward, it's a more intriguing issue. Will interest rates continue to rise? And it's possible because the economy is so strong right now, that rates may rise further during the summer.


JOHNS: With the economy already a hot-button issue, obviously, the question is whether all of this will keep the battle going. What is even harder to gauge is the impact eventually on the election -- Judy.

WOODRUFF: For sure. All right, Joe Johns, thank you very much, reporting for us from the Hill.

And now we turn to Iraq and a powerful symbol of a new era. The new government in Baghdad has taken legal custody of Saddam Hussein and 11 high-profile officials from his former regime. He remains in a U.S.-controlled jail guarded by Americans, as he has been since his capture. The former Iraqi leader is expected to appear in court tomorrow, setting the stage for a trial on war crimes charges. Saddam was said to appear thinner and visibly shaken but in good health.

President Bush today passed up the opportunity to talk about the latest milestones in the new Iraq.

Let's check in now with our White House correspondent Dana Bash -- Dana. DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, Judy, if you look at the date on today's calendar, some might have already forgotten the importance of it. June 30, today, was when the transition was supposed to happen.

In fact, the president we're told was planning to give an address today to the American people and the Iraqi people discussing the handover. But it was shortened and it was given of course on Monday, when the president was in Istanbul, when the handover actually happened two days early. And instead, Mr. Bush spent time today with his now former Iraqi administrator, Paul Bremer.

The two spent some time. They had a private lunch. But it was all notably low-key, Judy. In fact, we didn't hear from the president all day today. Only still photographers were allowed into the lunch that the two had. There you see Paul Bremer, by the way, notably wearing his famous military boots that he wore all over Iraq.

But the M.O. here at the White House is to try to reinforce that the White House is now not necessarily running the show, isn't running the show at all, and the Iraqi people are. And even questions today at the White House briefing about Saddam Hussein's fate, questions that the White House were not shy about answering in the past, were answered by saying that it's in the Iraqis' hands for now.

So, certainly, the White House is trying to recede and they're hoping politically that that will help the president try to regain some of what he has lost, not only in terms of how much voters approve of the situation in Iraq, but his own personal approval rating.

But, Judy, as we discussed yesterday, Republican pollsters and strategists say what really matters to voters is Americans and Americans' fate. And today, the White House is trying to recede, but the Pentagon is announcing that 5,600 or more civilians are going to be called back into uniform. Those are ready reserve members of the Army. And this is something that the Kerry campaign is seizing on.

And they say this is proof the Pentagon and the Bush administration did not plan well enough for what is going on in Iraq and proof that the president is not able to internationalize what is going on, on the ground in Iraq. And, Judy, the White House simply says that this is a decision for the Pentagon to make and anybody who is called up will do so because it's their duty -- Judy.

WOODRUFF: All right, Dana Bash, thank you very much.

And let's talk more now about Iraq and the Bush administration's handling of it with former Secretary of State Madeline Albright.

Very good to see you.


WOODRUFF: Listening to Dana Bash talk about low-key at the White House, not having a lot of comment about what's going on in Iraq, is this president now going to be able to separate himself to a degree from what's going on in Iraq?

ALBRIGHT: I think it's very difficult because we would not be in this situation in Iraq if he had not in fact decided that this was a war that was necessary to fight.

So I think it's important for the United States to let Iraq run its own business. But I think it's going to be very hard for the president to kind of wash his hands of this because this war is identified with him.

WOODRUFF: The posture pretty much of the Bush administration is now that, in so many words, they've done all they could to put Iraq on the road to stability.

ALBRIGHT: Well, I don't think they have. And given the news that we just heard, the security situation in Iraq is not exactly under control. And, in fact, they are going to have to try to get more troops over there.

So Paul Bremer left, but there are a lot more Americans that are going to be going in. And I think that the NATO summit had very low expectations. And, in fact, even now, there are questions about how much was accomplished and whether in fact President Bush was able to get some kind of internationalization of this.

WOODRUFF: Yesterday, I spoke with the House majority leader, Tom DeLay. And, among other things, he said, well, there are going to be the pessimists out there who say, yes, we're going to have a hard time. But he said, I give this administration an A-plus or an A for its handling of Iraq so far.

ALBRIGHT: Well, I have to say, that's part of this kind of happy talk.

It's not a matter of being a pessimist or an optimist. It's being a realist and seeing what's happening truly on the ground, instead of trying to blend things and make them seem that they're better than they are. This is a very, very difficult situation. I think it's very good that it's been handed over to the Iraqis, but it's the beginning of a new phase.

It's not the end of the story. And we can't just all of sudden keep giving ourselves good grades, when, in fact, people are still afraid to come out and we have got huge steps ahead in terms of watching how the Iraqi government itself now is going to handle the security situation, deal with the whole issue of reconstruction, so that the people of Iraq feel that they are getting something out of a new democratic or a new government there.

WOODRUFF: But doesn't it help the Bush administration that Saddam Hussein is going to be facing a judge tomorrow, an Iraqi judge?

ALBRIGHT: Well, I think all of us have said how important it is that Saddam Hussein was in fact captured. And I think it is important that this trial is going to begin. But it is going to be a long process. It's important that the Iraqis handle it. But they are going to need help. This is a brief that is going to have to stand up to a lot of scrutiny. I think we all know what the end result is. But, ultimately, there has to be very careful work done in order to put this together so that it stands the test of time. And that's a lot of work for a brand-new government.

WOODRUFF: Secretary Albright, on this call-up of 5,600, these are so-called individual ready reserves, people who had retired from the military gone back to civilian life, being called back, what does that say to you about the state of our Army, of our military, that the reserves are having to be dipped into?

ALBRIGHT: Well, I think it shows how very stretched thin we are and in fact how a lot of the planning for this war seems to have been inadequate, that there was not enough listening to the military commanders at the beginning, General Shinseki, who thought that more people, more military should go in.

Our troops are magnificent. And every day, as we watch the news, we can see what they're going through. But this is kind of a back- door draft of people who thought that they were finished with their military duty. And I think it's very unusual. The last time this was done was in the first Gulf War. But it's an unusual step to take these kinds of people out of the reserve.

WOODRUFF: Very quick last question. Is there now, looking ahead, really very much difference between John Kerry's and George W. Bush's policy toward Iraq?

ALBRIGHT: I think so, because what isn't Senator Kerry has been talking about all along is the need to internationalize. And President Bush is realizing it, but the truth is that had that work been done earlier, I think it would have been easier.

And Senator Kerry I think has some very specific ideas in terms of how to get the reconstruction going, how to get the Iraqis to take over, but also how to get additional help from the international community. What's happened is that President Bush in some ways has moved towards what Senator Kerry was suggesting two years ago.

WOODRUFF: We are going to leave it there. Former Secretary of State Madeleine Albright, we thank you for coming by.

ALBRIGHT: Great to see you, Judy. Thank you.

WOODRUFF: We appreciate it. Thank you.

And we are going to get a Republican view of Iraq just ahead from Senator Kay Bailey Hutchison.

Plus, Al Sharpton's new reality and how it will keep him in the limelight.

Howard Stern has a new platform to threaten to influence the presidential race.

And our own Jeff Greenfield has an idea in the making for the upcoming Democratic Convention to make it truly different.

With 125 days until the election, this is INSIDE POLITICS, the place for campaign news.


WOODRUFF: Joining me now with a Republican view of this week's developments in Iraq is Senator Kay Bailey Hutchison of Texas. She joins us from Dallas.

Senator Hutchison, I don't know if you were able to hear, but former Secretary of State Madeleine Albright basically said, yes, Iraq is moving forward, but still many obstacles to go. She said it's not matter of pessimism or optimism, but realism.

SEN. KAY BAILEY HUTCHISON (R), TEXAS: Well, certainly, I think we have made major progress in the last week. But we all know that there is a long way to go.

What we all want is to stabilize Iraq with the Iraqi government that is now in place and to start giving people jobs and making sure that the education system works. And security of course is a major part of that. So we know it's a hard road ahead. But we certainly have taken a major step. And we have seen the violence go down in the last couple of days, whereas we were very fearful that it was going to escalate working up to today.

WOODRUFF: Yes. And, at the same time, you had three U.S. soldiers who were killed yesterday, another 11 wounded today. How much of this can the United States take? You hear from your constituents. What do they say about it?

HUTCHISON: Well, Judy, of course, all of us know that we're in a war. My constituents know we're in a war. But one thing that everyone agrees on is, we've got to see this through. And we have got to do everything we can to stop the killing and stop the maiming, but we cannot turn around and go back, so we've got to see it through.

WOODRUFF: Our White House reporter Dana Bash described how, at the White House the , there was more of a low-keying, if you will, of comment on Iraq. The president met privately with Paul Bremer. The statements were low-key. And when I asked Secretary Albright about this, she said it really is not going to be possible for this president to separate himself from what's going on in Iraq. How do you see that?

HUTCHISON: Well, clearly, our president took a bold stand after 9/11 that we were going to have a war on terrorism. He has not veered or gotten in any way less committed to that goal. And that means that we are going to see Iraq through. We are going to see Afghanistan through. We are going to help those people stabilize and show what a democracy or a representative government can be in those countries and hopefully make an example to the rest of the Middle East. That's what the president said in his State of the Union message and that's what he's following through to do. So it is part of him, absolutely. And I think people will have the choice, do they want President Bush as commander in chief or do they want a President Kerry?

WOODRUFF: There's a new poll I was just hearing about; 41 percent of Iraqis say that they think Saddam Hussein should be released from custody. What does that say about the Iraqis' people reaction to American policies?

HUTCHISON: Well, I think that what is very important with regard to Saddam Hussein, who is now under the control of the Iraqis, although he is in a U.S. prison, but I think it's important that we show what a fair trial can be.

And I think when the Iraqi people, in general, see the evidence about what Saddam did to his own people, I don't think you'll see 41 percent of them thinking that he should be let go.

WOODRUFF: Senator, this call-up of 5,600 former soldiers, members of the so-called Individual Ready Reserve, there's a congressman from Washington state, a Democrat on the House Armed Services Committee, Rick Larsen, said, if there was any doubt that this administration was conducting a pseudodraft, this call-up should dispel that doubt.

HUTCHISON: It's certainly not a draft. There is not even any talk of a draft.

This is something that is in the law that can be done. It's like a stop-loss order that also can be used in a time of war. Certainly, I know that our Department of Defense doesn't want to have stop-loss orders or bring people back, as they have the right to do, but when you have experienced people, and we are looking for certain kinds of experience, from time to time, that is going to be necessary.

But, at the same time, I think you have to see that the Department of Defense has already said they're going to call up more troops on a temporary basis over the next four years, that they're going to train them for the kind of security risks and threats that we have, this different asymmetric kind of warfare that we're having to retrain, in some instances, to combat.

And I think the department is doing everything that it can to use the troops that we have and to build up temporarily, rather than permanently, because we hope that, in four years, the risk will be abated because we will have won the first part of the war on terrorism, knowing, Judy, though, that we're going to have to have patience for the next 25 years to finish this job by educating people in the Middle East about what a democracy and freedom can do for them.

WOODRUFF: Senator Kay Bailey Hutchison, thank you very much. It's good to see you. We appreciate it.

HUTCHISON: Thank you, Judy. WOODRUFF: Straight ahead, radio shock jock Howard Stern claims that he can influence the outcome of the presidential election.

Also ahead, Jeff Greenfield has a radical idea for Democrats, a convention-night tribute to GOP icon Ronald Reagan. We'll let Jeff explain when INSIDE POLITICS returns.


WOODRUFF: Former Democratic presidential hopeful Al Sharpton will remain in the public eye this fall as the host of a new reality TV know. Sharpton has agreed to host a show called "I Hate My Job" on the Spike cable TV network. The program will feature eight male contestants who quit their jobs to work with Sharpton and a career counselor to find more meaningful jobs. In Sharpton's words -- quote -- "I'm the working man's Donald Trump." We shall see.

Radio host Howard Stern today said that he has the power to influence the November elections and said he's going to work to defeat President Bush. Stern blames the FCC and by extension President Bush for trying to censor his often racy radio show.


HOWARD STERN, RADIO TALK SHOW HOST: I am going to try my best to hang in there, particularly until George W. Bush is out of office. If you notice, a lot of these markets are swing states. If you've read some the recent surveys, our audience is full of independent voters. The research shows we're having an effect on the election. This will bolster, this will bolster our position, in terms of what's going to happen in the election. John Kerry will receive more votes as a result of this.


WOODRUFF: Stern made those comments as he announced that his show has been picked up in nine new markets, including several cities where he was recently yanked from the airwaves by station owner Clear Channel Communications. The company pulled his show after the FCC fined it $495,000 back in February, citing Stern's comments as indecent.

Prime-time tributes to former presidents are common fare at political conventions. As the Democrats prepare to gather in Boston just a few weeks from now, our Jeff Greenfield thinks the party should think outside the box, as they say, and consider a prime-time salute to Republican.


JEFF GREENFIELD, CNN SR. ANALYST: Every once in a while, I wonder what I would do if I were still in my old line work as a political operative. What shrewd strokes of genius would I employ on behalf of President Bush or Senator Kerry?

Well, here's one idea for the upcoming Democratic Convention that, as far as I know, has never been tried before, honoring a hero of the other side.

(voice-over): We're pretty sure that when the Democrats meet in Boston, we'll be hearing from Massachusetts Senator Ted Kennedy, from former President Bill Clinton, from former Vice President Al Gore. And we know what we're going to see at the Republican Convention, a parade of centrists, like Rudy Giuliani , Governor Schwarzenegger, a Democrat-turned-Bush supporter Georgia Senator Zell Miller, and Arizona's John McCain, with big appeal to independents.

But what if, on Tuesday night in Boston, the Democrats pause to pay tribute to:


RONALD REAGAN, PRESIDENT OF THE UNITED STATES: I accept your nomination for the president of the United States.


GREENFIELD: Yes, the Gipper himself, the late Ronald Reagan?

Now, they could cheerfully acknowledge that they had real disagreements with Reagan while saluting his eloquence and some of his more liberal ideas, the earned income tax credit, pushing for democracy in Latin America and the Philippines, working with the leader of what he once called the evil empire. And to acknowledge this tribute, who better than the young Ronald Reagan, not to politicize the event, heaven knows, but maybe to draw an implicit contrast between his father and George W. Bush, as he seemed to do at Reagan's funeral?

RON REAGAN, SON OF RONALD REAGAN: But he never made the fatal mistake of so many politicians, wearing his faith on his sleeve to gain political advantage.

GREENFIELD (on camera): Of course, such a tribute could run the risk of angering some of the more liberal Democrats, who see Reagan as the guy who slashed social programs and favored the affluent. But in a country where there seems to be a real appetite for a less polarized slash-and-burn kind of politics, that might well be a reasonable political price to pay.

Now, if it happens at the Democratic Convention, remember, you heard it here first. If it doesn't happen, forget I ever mentioned it.

Jeff Greenfield, CNN, New York.


WOODRUFF: But, if it does happen, we want Jeff to get the credit.

Next up, debate news, no, not between President Bush and Senator Kerry. We're going to tell you about the upcoming clash that pits Howard Dean against Ralph Nader. Plus, will Mr. Bush make a repeat appearance at ground zero during his stay in New York during the Republican Convention?

The story when INSIDE POLITICS returns.



ANNOUNCER: There is nothing stupid about it. The economy keeps playing a featured role in 2004. Is it giving one candidate a needed pick-me-up?

Bad blood in Boston? It's the mayor vs. the Kerry camp just weeks before the Democratic Convention. Can their relationship be saved?

Music to his ears at 30,000 feet.

GROUP: The Real Deal keeps on flying. John Kerry keeps on trying.

Now, live from Washington, JUDY WOODRUFF'S INSIDE POLITICS.


WOODRUFF: Welcome back. President Bush keeps saying the economy is rebounding and the federal reserve would seem to agree given its move to raise short term interest rates a quarter percentage point.

But are voters buying the rosier scenario, especially when John Kerry keeps talking about the squeeze on the middle class? Our senior political analyst Bill Schneider looks at the politics of the economy and election year polls.


WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): In 1992, when the first President Bush was running for reelection, all the voters were interested in was the economy, stupid. Now, the second President Bush is running for reelection, and this time, the economy is improving.

G.W. BUSH: Our economy is strong today. People are getting back to work. There is an excitement amongst the risktakers. Capital is moving.

SCHNEIDER: But the voters don't seem to be too interested in the economy, stupid. Don't they know things are getting better? Well,yes.

In May, more people said the economy was getting worse than better. Now, those numbers have flipped. So this Bush administration is on the road, trying to do something the first Bush administration could not do, sell the economy.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: America added 248,000 jobs in May, our ninth consecutive month of job creation. SCHNEIDER: So are happy days here again? Well, no. The voters take the long view. By nearly 2-1, they know under President Bush more jobs have been lost than gained. The administration's answer, don't look at the record and despair, look at the current upswing and rejoice.

CHENEY: Senator Kerry looks at all this economic growth and the efforts of work workers across America and somehow can only find cause for pessimism.

SCHNEIDER: Back in 1992, President Bush's father tried to paint his Democratic challenger as the candidate of pessimism.

GEORGE H.W. BUSH, PRESIDENT OF THE UNITED STATES, 1989-1993: I guess you'd say his plan really is Elvis economics. America will be checking into the Heartbreak Hotel.

SCHNEIDER: It didn't work then and it may not work now. Voters still prefer the challenger over the incumbent when it comes to dealing with the economy despite recent improvements.

Why? Because Kerry's economic platform isn't pessimism.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: I say the most pessimistic thing you can say is that we can't do better in the United States of America.

SCHNEIDER: It's the Democrat's record.

KERRY: Under Bill Clinton over eight years wages went up an average of $7,100. Under this president, the wages of average Americans have gone down $1,600.


SCHNEIDER: Why are so many people buying Bill Clinton's book? Why are Clinton and Al Gore speaking on the first night of the Democratic Convention? The economy, stupid -- Judy.

WOODRUFF: You think that's the reason?


WOODRUFF: OK, Bill Schneider. Thanks very much.

We're going to get dueling takes on the economy, on interest rates and the election a little later, when I talk to Kerry economic adviser Gene Sperling and Club for Growth president and Bush supporter Stephen Moore.

John Kerry and his wife are at their home in Pittsburgh today heading there overnight from a campaign appearance in Phoenix. Kerry has no public events today. He tells us he's taking pen to paper to work on his convention speech.

He's making phone calls, too. And we can only speculate some conversations may be about his choice of a running mate.

Meantime, Kerry is running a new TV ad in the showdown state of New Mexico highlighting his credentials as a father, pilot, prosecutor and much more.


AD ANNOUNCER: Author of a strategy to win the war on terror. A combat veteran who's been praised by the former chairman of Joint Chiefs of Staffs under both Presidents Reagan and Clinton. Stronger at home, respected in the world. John Kerry for president.


WOODRUFF: Kerry still is introducing himself to voters less than a month before his crowning moments in Boston. And that, it turns out, is not the only relationship he apparently needs to mend.


WOODRUFF (voice-over): Boston Mayor Tom Menino is one unhappy Democrat. Sure he's hosting his party's national convention. But the nominee has been making his life more than difficult of late.

MAYOR TOM MENINO (D), BOSTON: I didn't hang up at all.

WOODRUFF: Yes, it's come to that.

The headaches started in May when John Kerry's campaign briefly considered having the candidate delay accepting the nomination until weeks after the Democratic Convention in order to skirt spending limits for the general election.

That didn't sit well with Mayor Menino.

MENINO: You can't make a campaign about money. It's not about money.

WOODRUFF: Many Democrats agreed and Camp Kerry eventually ditched the idea with the candidate saying it never seemed right to him.

KERRY: I felt the journey to the nomination ought to be properly completed in Boston.

WOODRUFF: And there was peace between the Boston mayor and the Massachusetts senator -- until this week.

Menino was hosting the U.S. Conference of Mayors and Kerry was the featured speaker. But the police union, locked in a contract war with Menino, was protesting the event and Kerry withdrew, refusing to cross a picket line.

That reportedly sent Menino into a rage, especially after a local paper wrote he hung up on Kerry when the senator called to explain.

So, did he?

MENINO: No, I didn't, as a matter of fact. You can ask my wife, she'll tell you. She was sitting right next to me when I took the call. And I talked to him. I was -- and she said, I can't believe how calm you were.

WOODRUFF: But Menino did tell "The Boston Herald" that Kerry's aides are, quote, "trying to find scapegoats for their own incompetency." And that, quote, "Maybe the should use some of their energies to get their message across to the American people instead of trying to destroy someone who is on their team."

Kerr's spokesman implied the mayor is stressed out, saying, "The mayor is in the middle of running the city and helping prepare Boston for the national and international spotlight. These are two very pressure-packed jobs."

The Dems invade Boston in about 3 1/2 weeks.


WOODRUFF: Don't you love those feuds?

Checking the headlines now on our "Campaign News Daily." Bush- Cheney campaign manager Ken Mehlman says President Bush does not plan to visit Ground Zero during the Republican Convention in New York. Mehlman says the president's schedule an other factors will keep him away. However, a Bush visit to the site three years after 9/11 just days after the convention ends has not been ruled out.

A new poll from the showdown state of Arizona finds the state looking less and less like a showdown. A new poll by KAE television and Arizona State University gives George W. Bush a 12-point lead over Kerry, 47 percent to 35 percent. Ralph Nader, receiving 2 percent. In 2000, Bush won Arizona by more than 6 percentage points.

Vice President Dick Cheney plans to hit the road this weekend on a three-state bus tour. Cheney starts out Saturday morning in Parma, Ohio followed by an afternoon rally in Wheeling, West Virginia. The trip resumes on Sunday with stops in Pittsburgh and Altoona, Pennsylvania.

Ralph Nader and one-time Democratic hopeful Howard Dean will square off next Friday in a debate at the National Press Club. National Public Radio is hosting the debate which will focus on issues surrounding the election including Nader's White House campaign. Dean has been outspoken in urging would-be Nader supporters to vote for John Kerry.

Now that interest rates are going up, what's the bottom line for the presidential race? Up next, a debate from Bush and Kerry campaign surrogates, Stephen Moore and Gene Sperling.

Plus, is Kerry willing to open the books on his marital history?

And later, the battle for the house. A big Hollywood name will get dropped as we bring you the "Inside Buzz" on the races to watch.


WOODRUFF: Today's Federal Reserve decision to raise a key interest rate is not surprisingly being interpreted differently by the Bush and Kerry campaigns. With me now to talk about today's Fed action and how the economy will play as an election issue are Kerry economic adviser Gene Sperling and Stephen Moore, president of the Anti-Tax Group Club For Growth.

Gentlemen, good to see both of you. Gene Sperling to you first. This is the first time the Fed has raised rates in four years. Clearly, they think the economy is doing well, they talked about -- they said it's expanding at a solid rate, labor markets are improving, what's there to disagree with?

GENE SPERLING, KERRY ECONOMIC ADVISER: Well, Judy, it's a little bit like a football coach. It's gone 0 and 14 and wins its last two games. There's no doubt there's an improvement. The question is, is it a good record and when you've had such a weak period of job growth and you've had such a weak period of wage growth, how much is it going to take to actually make most Americans feel that their incomes have been lifted, that their situations have been lifted. And I think what you're seeing and I think you saw it in the report you just did is that most Americans are still not optimistic about this economy because a few good months does not do well for people over a four-year period of job loss and income stagnation.

WOODRUFF: Stephen Moore, is that what's going on out there?

STEPHEN MOORE, CLUB FOR GROWTH: No. I think if anything, the Federal Reserve board thinks that there's a risk that the economy may be overheating, growing too quickly. Let's not forget, we've had about 5 percent real economic growth over the last year which is a tremendous rate of progress. One interesting thing about this rate hike, Judy, is that -- let's not forget that when George Bush Senior lost his election in 1992 to Gene's old boss, Bill Clinton, a lot of those Bush people still blame Alan Greenspan for raising interest rates and hurting the economy and therefore swinging Clinton in. I think that's not the situation today. The only negative on that economy right now as I see as an economist is this whiff of inflation. I think that hopefully this rate hike will snuff that out.

WOODRUFF: What's to stop that from being the case?

SPERLING: It really goes to why people are dissatisfied with the economy. When you've had a period like this over four years where you've actually had an economy lose 1 million jobs, where wages are actually down below where they were in December of 2001, perhaps the good news is it doesn't put as much pressure on the Fed to raise rates as quickly.

But the bad news for most people is that there's still lots of people who've been unemployed for six months or longer, the most since 1984. There's still a million more people working part-time who want to work full time. And when you have people not getting raises, it may not put as much push on inflation but it's also not making most American families feel that this economy is doing well for them.

WOODRUFF: In fact, Stephen Moore, what I was reading today, is that hourly wages of most workers are actually falling behind inflation?

MOORE: That's not exactly true. I mean, if you look at the central economic figures right now, the growth rate, the stock market is doing well, productivity is up, business spending is up, it seems like a very robust expansion that we're in right now. Gene is right that people's feelings about the optimism of the economy isn't matching the statistics which show progress. I think partly that's because just three or four years ago, Democrats were saying, George Bush is talking down the economy. Now, it's the Kerry people that are trying to talk down this economy. But I think they're going to have a hard time doing that because fundamentally the statistics show real progress.

SPERLING: The truth is we have a much more optimistic view. We are not the ones out there saying losing a million jobs is the best our economy can do. But, Judy, the statistic you mentioned is right. Over the last year wages have not kept pace with inflation. And actually since December of 2001, weekly wages are actually down.

So the difference between us and some of the Bush people is they think American people are just confused, they don't understand that they should be feeling better. People aren't feeling good because their wages aren't up, because healthcare and energy and gas prices are up and they're feeling the squeeze.

MOORE: Let's look at another statistic besides income. Let's look at net wealth. One of the things the Federal Reserve Board just reported last month is that the wealth of the average American family is higher today than it's ever been in American history in real term.

So there is progress. When the stock market goes up, when the value of people's homes rise, when there are more jobs in the economy that helps everybody. So I wouldn't want to be Gene Sperling helping John Kerry run against this economy because I think it's very strong.

WOODRUFF: But Stephen Moore, you still have polls like ours done last week that show 53 percent of the folks say John Kerry would do a better job of handling the economy.

MOORE: That's a big problem. The good news is that people aren't going to have four months to really assess the economic program of Kerry. If I were George Bush, I'd make the case, how are you going to create jobs? How are you going to get America going even faster if you're going to raise taxes, which is what the Kerry program is.

WOODRUFF: And what is he going to say?

SPERLING: What is he going to say?

Well, I'm glad they're going to agree they're going to assess John Kerry's plan. What they are going to see is somebody who's focused on rising healthcare costs, which is biting families, energy independence so we're not as vulnerable, helping tuition so tuition's not going up. And they're not going to hear a message that this is a president that thinks a few good months is enough to make American economy strong. People are supporting Senator Kerry economically because they hear him addressing their needs, they hear him addressing their anxiety. And they know he'd be fighting on their side.

WOODRUFF: Stephen Moore, final question very quickly. Who is going to win this debate between Republicans in the Congress over the tax cuts?

SPERLING: It's a tax cutting party on the Republican side of the aisle. I think Republicans, it's interesting because if you go back six months ago all the Democrats wanted to talk about was the economy. Now it seems like all they want to talk about is the war because the economy is doing so well.

WOODRUFF: The question we're talking about of course is that budget holdup in the House.

SPERLING: We need more fiscal discipline, right, Steve?

MOORE: Well, that's the one thing we both agree on.

SPERLING: We need better fiscal discipline policies in the next administration, more likely the Kerry administration.

WOODRUFF: All right. We're getting a little agreement here. Stephen Moore, Gene Sperling, great to see you both. Thank you very much.

From the economy to education a new survey shows the country is evenly split on education reform. President Bush's signature issue in the 2000 campaign and a theme Kerry touted on the trail earlier this week. The Hart Coldwater Poll shows 39 percent of all Americans have a favorable opinion of No Child Left Behind. That's the president educational reform measure. 38 percent have an unfavorable opinion. And the survey suggests those with a dim view of No Child Left Behind hold stronger opinions than those who support it. The split is almost identical in the showdown states where by most accounts the presidential race will be decided.

Senator John Kerry meanwhile will soon have to decide how to pay back a $6.4 million loan that he used to beef up his campaign. Kerry can repay the loan secured by his Boston home with campaign funds but he must do so within 20 days after the Democratic Convention, otherwise he has to pay it back with his own money. A Kerry adviser tells the "Los Angeles Times" no decision has been made on how the loan will be repaid. Meanwhile Kerry says he has no plans to release the divorce records from his first marriage. Kerry tells the Spanish- language network Telemundo, quote, "I have no intention of doing that at all. There is no reason whatsoever. It's history, ancient history." End quote.

In just a minute, we'll turn our attention to Capitol Hill. Stay with us. We're going to check out some of this year's most competitive races for the House of Representatives. We'll be right back.


WOODRUFF: A lot more than the White House is going to be up for grabs this November. We know that. Every seat in the House of Representatives is up for reelection. Although only a few dozen are considered truly competitive. Amy Walter is keeping an eye on those contests and more of them. She's the House editor of "The Cook Political Report."

First of all, let's get a sense of the overall state of play. We keep hearing Democrats have a reason to be energized. Is that true?

AMY WALTER, HOUSE EDITOR, "THE COOK POLITICAL REPORT": Yes, well they're certainly feeling energized. And part of it is they're looking at President Bush's sinking numbers, the right direction wrong track numbers that suggest that voters aren't very happy now. Sense that there might be a mood to change.

And when you are the Republican Party, you control the House, the Senate and the White House, and voters say they want a change, that means they want somebody's who's not a Republican. That would make things certainly -- you know, reason then for some optimism for Democrats.

The problem is you pointed out in the opening is there just aren't that many seats out there. The playing field still is very, very small. probably 36 seats right now that are competitive. And then you have that question of Texas. Can Democrats really hold on in Texas?

So those are the things still working against Democrats. Let's see -- we haven't seen yet any imperical evidence that these sort of -- this sort of anxiousness among voters at the top of the ticket has worked its way down to individual races. But it's certainly something to watch.

WOODRUFF: Well we know that Democrats are trying to make some inroads in traditional Republican constituencies. I mean one example would be rural voters. What are some examples of this?

WALTERS: Yes, you know, this is parts of the country where Democrats just haven't done that well over the pat few years. And cultural issues have been a big reason.

But they're really looking at Arizona's 1st district this year. They narrowly lost last time. This is a big, sprawling big district in northern Arizona. Rick Renzi is the Republican incumbent. He barely beat a really flawed Democrat opponent.

This Democrats are happy because the have a big name: Paul Babbitt. he's a county supervisor, brother of Bruce Babbitt, the former governor, former Clinton cabinet official. They're hoping that that name ID is going to overcome some of the other problems of running in such a big district. The problem is Renzi is an incumbent now. And, you know, has he gotten a foothold? We will see. Arizona's obviously a battleground state for the presidential race. Let's see if the turnout -- that both parties are putting in there is also going to impact this race.

WOODRUFF: All right, let's talk some of the other -- a couple of other really interesting races in Washington State and Kentucky, maybe.

WALTERS: Well that's what's fun about this year. And it's that there's not one part of the country or one specific kind of district in play this year. You're really looking all over the country, rural we just talked about.

This district in Washington state is more suburban. It's almost your quintessential soccer mom district. This is suburban Seattle. Jennifer Dunn is a Republican. She's held it for 12 years. But she sort of belies the underlying competitiveness of this district. Gore narrowly won this district. These are the kinds of voters that Democrats have been making inroads into. These suburban soccer mom types. And they're really hoping for a chance here now that Jennifer Dunn is retiring.

There are two big names in here. There's a TV host -- talk radio host who's a Democrat, Dave Ross. And then on the Republican side you have Dave Reichert and he's King County sheriff. He caught the Green River Killer who was a well-known serial killer in the Seattle area. So two big names in a very competitive (UNINTELLIGIBLE).

WOODRUFF: They know who he is. What about in Kentucky? (UNINTELLIGIBLE)?

WALTERS: In Kentucky, that's also a little bit fun. Again this is a district that is very Republican, held currently by a Democrat. That Democrat Ken Lucas retiring. Republicans thought this was a slam dunk.

So Democrats came up with an interesting candidate, Nick Clooney, who is the father of George, brother of Rosemary. But he's also known in his own right. He was a TV anchor in Cincinnati for 20 years.

So voters here know him not as George's dad but they know him as a guy who's been on TV for a long time. So he has his own personality. I think that's going to help him.

It's still a very Republican district. And you know the Republicans are going to try to make his ties to his son part of this Hollywood versus the heartland, that he's some sort of liberal Hollywood pack trying to come in and take over this district.

That may be hard to do because Clooney is pretty well-known as a local to voters here. So that's going to be a really fun place to watch too.

WOODRUFF: These House races help us remember that politics takes many shapes in an election year where we tend to be so focused on the presidential.

Amy Walter, thanks very much.


WOODRUFF: We appreciate you coming by.

A liberal watchdog group that says Bush reelection campaign and two allied groups are illegally working to help Ralph Nader get on the Oregon ballot. A complaint filed today alleges members of the Oregon Family Council and Citizens for a Sound economy are calling their members to say that they can divide John Kerry's base of support by helping Nader get on the ballot.

Now Citizens for Responsibility and Ethics in Washington, which filed the complaint, says that the phone calls are inkind contributions and that they are banned by federal law.

The Green Party has its nominee, David Cobb. We talked to him yesterday. And it has ballot lines in 22 states. But Green Party vice presidential candidate Pat LeMarc is so eager to see President Bush defeated that she's not if she's going to vote for herself. LeMarc tells Maine's "Portland Press Herald" that she cannot commit to voting for the Green Party ticket even.

Instead she said she'll vote for whomever has the best chance to beat George W. Bush.

A movie ticket agency has put together a team you don't want to miss. Coming up George W. Bush and Michael Moore as you probably never thought of them.


WOODRUFF: You probably never thought of them as a team. But if you call Fandango -- that's a service that lets you purchased movie tickets in advance over the phone -- and then ask for the movie "Fahrenheit 9/11," you hear something that might raise your eyebrow. Listen closely.


UNIDENTIFIED MALE: "Fahrenheit 9/11," staring George W. Bush and Michael Moore, rated R.


WOODRUFF: At least the president gets top billing.

And finally, being a presidential candidate has its perks. When is the last time flight attendants serenaded you? John Kerry got an earful when flight attendants on board his campaign plane, the Real Deal, performed a revamped version of "Proud Mary." They call it "Proud Kerry."

(BEGIN VIDEO CLIP) UNIDENTIFIED FEMALE: Has a great job in the Senate, working for mankind every night and day. Oh, he never stopped for one minute of sleeping. Going to make a difference for the USA.

GROUP: The Real Deal keeps on flying. John Kerry keeps on trying. Trying, trying.


WOODRUFF: You think the Grammy judges are listening? We'll find out.

That's it for INSIDE POLITICS. I'm Judy Woodruff. Thanks for joining us. "CROSSFIRE" starts right now.


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