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JUDY WOODRUFF'S INSIDE POLITICS

Anti-Kerry Group's TV Ad Questions Kerry's Record; Keyes for Senate?; Preparing For The RNC; Campaign Issues; Politics And "The Manchurian Candidate"

Aired August 5, 2004 - 15:30   ET

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


(BEGIN VIDEOTAPE)
ANNOUNCER: John Kerry's war record comes under attack.

UNIDENTIFIED MALE: John Kerry has not been honest about what happened in Vietnam.

UNIDENTIFIED MALE: He is lying about his record.

ANNOUNCER: Are these charges true? And who's paying for this commercial?

ALAN KEYES (R), FMR. PRESIDENTIAL CANDIDATE: I'm deeply honored, of course, and also deeply challenged by the offer that they have made.

ANNOUNCER: But will Alan Keyes take on Democrat Barack Obama for the open Senate seat in Illinois?

(MUSIC - WILLIE NELSON)

Some big names rock the Democratic convention. We'll tell you which major musicians may perform for the Republicans in New York.

(END VIDEOTAPE)

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

JUDY WOODRUFF, HOST: Thank you for joining us.

Well, anyone who follows the presidential race knows that John Kerry's Vietnam military service is a key pillar of his campaign. Kerry often refers to his combat experiences, and veterans who have served with him had staring roles at the Democratic convention.

Now, a group of veterans who oppose Kerry's White House bid is taking aim at Kerry's war record. They've launched a harsh new TV ad in three battleground states, and it is already drawing fire from members of both parties.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Kerry lied...

WOODRUFF (voice-over): Vet versus vet, as the ghosts of Vietnam invade another wartime election.

UNIDENTIFIED MALE: John Kerry lied to get his Bronze Star. I know. I was there. I saw what happened.

WOODRUFF: A new ad from a group called Swift Boat Veterans for Truth trashing John Kerry's much heralded military service. They say Kerry lied about his heroics, lied about his injuries, and betrayed his comrades by agitating against the war upon his return to the states.

UNIDENTIFIED MALE: When the chips were down, you could not count on John Kerry.

WOODRUFF: Tough ad, and it's facing some tough criticism. For one thing, none of the 13 vets featured in the spot were actually aboard Kerry's swift boats, though some were on nearby boats. And though it's not a Bush campaign ad, it is largely funded by top Republican contributors.

All but one of the Democrat's surviving crewmates, some of whom starred in a pro-Kerry commercial...

UNIDENTIFIED MALE: When he pulled me out of the river, he risked his life to save mine.

WOODRUFF: ... have rushed to his defense. And so, has one of the nation's most admired vets, GOP Senator John McCain, who has endorsed the president. McCain denounced the commercial as dishonest and dishonorable, adding, "I think the Bush campaign should specifically denounce the ad."

A Bush-Cheney spokesman responds that the campaign has never and will never question John Kerry's service in Vietnam, insisting there's no connection whatsoever between the reelection effort and Swift Boat Veterans for Truth.

(END VIDEOTAPE)

WOODRUFF: Well, as part of his comments criticizing the TV ad, Senator John McCain also mentioned his own experience running against then Governor Bush back in 2000. During that primary season, McCain faced a whisper campaign against his own military service in Vietnam. Referring to the new ad against Kerry, McCain says, "It was the same kind of deal that was pulled on me."

We're going to have a debate in just a moment between two Vietnam veterans, one who has endorsed John Kerry, who was with him on his swift boat, another who was part of that anti-Kerry ad we saw just a moment ago.

To Illinois now, where Republicans are having to hurry up and wait as they continue their quest to find a replacement candidate in the U.S. Senate race. They are now asking presidential hopeful Alan Keyes to face off against Democratic convention star Barack Obama. But as CNN's Keith Oppenheim reports, Keyes says he needs a few days to think it over. (BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: We have voted to make him an offer.

KEITH OPPENHEIM, CNN CORRESPONDENT (voice-over): It's an offer he hasn't refused, at least not yet.

KEYES: I think that a serious offer of this kind, now made a reality, requires that I sit down and deliberate.

UNIDENTIFIED MALE: Keyes for senator!

UNIDENTIFIED MALE: Keyes for senator!

UNIDENTIFIED FEMALE: Keyes for senator!

OPPENHEIM: Alan Keyes came to Chicago Wednesday and got a rousing reception from fans.

UNIDENTIFIED FEMALE: I am supporting him because he's pro-life, he's pro-marriage.

OPPENHEIM: He's also from Maryland. And it was Keyes himself who, in 2000, blasted Hillary Clinton for moving to New York to run for Senate, saying he would not imitate such a move. Some Illinois voters view Keyes as an outsider.

UNIDENTIFIED FEMALE: I think they're grasping at straws. They're looking outside of the state of Illinois, which, in the long run, is not the best thing for Illinois voters.

OPPENHEIM: The search for a candidate has gone on for six weeks, ever since Republican primary winner Jack Ryan left the race over a sex scandal that erupted during his divorce case.

JACK RYAN (R), FMR. ILLINOIS SENATORIAL CANDIDATE: On behalf of the great state of Illinois...

OPPENHEIM: In the meantime, Democratic candidate Barack Obama has been on a national stage. And while Obama said he'd welcome the possibility of Keyes to this race, he told the "Chicago Tribune," "What I have seen of Mr. Keyes' record I think is not in tune with even the Republicans of Illinois."

UNIDENTIFIED MALE: Seeing these two black men running is still positive.

OPPENHEIM: To be sure, this matchup would be historic, the first time two African-Americans from two major parties competed for the same Senate seat. But political observers say in a race that's become down right bizarre, Keyes is out-of-state choice who may be out of range for the moderate tendencies of Illinois voters.

UNIDENTIFIED MALE: He has no chance of winning. He will be a huge -- he'll face at least high double digits, perhaps over 20 point defeat. (END VIDEOTAPE)

OPPENHEIM: So, the bottom-line question is: Why did this state committee select an out-of-state candidate with very conservative views? And the simple answer may be name recognition.

The Republicans at this late point in the game, Judy, know they don't have a great chance of winning the election, but they may have a chance of winning some respectability and perhaps avoiding humiliation and potential disaster for other state candidates in other races.

Whatever the reasons may be, we're not going to know whether or not Alan Keyes is running for sure until Sunday, when he says he'll announce his decision -- Judy.

WOODRUFF: Keith Oppenheim reporting for us on that Illinois Senate race. Thank you very much.

And right now, we have some breaking news out of Iraq. In Baghdad, just in the last several minutes, explosions heard in downtown Baghdad. These are some live pictures coming in to CNN.

Again, three loud explosions, we are told, in Baghdad. Then gunshots were heard. It is not known at this point if there are any injuries, but we, of course, are trying to get more information, and will get that to you just as soon as we have it.

Coming up, much more on John Kerry's war record coming under attack. We'll hear from Vietnam veterans on both sides.

Also ahead, an unlikely byline on the opinion page. Bruce Springsteen shares his thoughts on the race for the White House.

And later, Bush and Kerry return to the Midwest battlegrounds. We'll have updates on both candidates and their travels.

With just 89 days until the November elections, you're watching INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

WOODRUFF: Checking the headlines now in our "Campaign News Daily," a new poll finds John Kerry is enjoying a so-called convention bounce in at least one state, New Jersey. A new Quinnipiac survey gives Kerry a 13-point lead over Bush. Ralph Nader, who will be on the New Jersey ballot this fall, picks up six percent. A New Jersey poll taken just before the convention had Kerry with a six-point lead.

"Wall Street Journal" columnist and Former Ronald Reagan speechwriter Peggy Noonan has decided to offer her political skills to the Republican Party. Noonan announced today that she is taking three months' leave from the "Journal" to work with the GOP.

"No one has asked me to do this," she writes, "and I do it as a volunteer, not for salary, but simply to give my time to help what I think is the more helpful side." Rocker Bruce Springsteen has taken his election views to the opinion page of "The New York Times." As we reported, Springsteen is among a group of musicians who plan to perform concerts to raise money to help elect John Kerry.

In today's newspaper, Springsteen writes, "I don't think John Kerry and John Edwards have all the answers. I do believe they are sincerely interested in asking the right questions and working their way to honest solutions."

Well, it's 25 days and counting until the Republican convention opens in New York City. As the opening day gets closer, we are getting more details about what and especially who the delegates will be seeing.

CNN political editor John Mercurio keeping track of it all.

All right, John. In Boston, it was Dave Matthews. Or we heard. We've learned since Boston...

JOHN MERCURIO, CNN POLITICAL EDITOR: Right.

WOODRUFF: ... that it's going to be Dave Matthews, it's going to be Bruce Springsteen.

MERCURIO: Right. Ben Affleck wandering around.

WOODRUFF: Yes, we have Ben Affleck wandering around. But who are the Republicans going to put up to -- to hold up their end of this?

MERCURIO: Well, Republicans readily admit that the Democratic Party, that they can't keep up. That the Democratic Party is the party of Hollywood, it's the party of Broadway.

But nonetheless, we've gotten our hands on sort of a top-secret list of entertainers that he Bush-Cheney campaign has invited to perform in Madison Square Garden over the convention. And the list is pretty heavy on country western singers, it's kind of light on rap music.

It includes names like the Gatlin Brothers, Lee Ann Womack, Brooks & Dunn, Sarah Evans. We also hear that in the Ben Affleck category there are some TV and film celebrities who are going to be roaming the convention hall. They're going to be appearing on the sort of TV talk show circuit as the Bush surrogates.

Again, not really big box office names like Ben and Leonardo, but definitely names we know. Names like Ben Stein, Dennis Miller, Ron Silver and Angie Harman are sort of among that list.

Now, there are several other celebrities we know, of course, who support Bush, support Cheney. Names like Britney Spears has come out for him, Kid Rock, Jessica Simpson, Kelsey Grammer of "Frasier" fame. Not clear at this point whether or not they're going to be in New York, though. WOODRUFF: In fact, I'm going to be talking to Ben Stein during the 5:00 hour on CNN.

MERCURIO: Yes.

WOODRUFF: So, we're already hearing from these folks.

MERCURIO: Yes.

WOODRUFF: All right. John, the Democrats made a big deal out of trying to remain positive they said during their convention. What do Republicans say we can expect from that?

MERCURIO: Well, first of all, Republicans heavily challenge the notion that Democrats were positive up in Boston at the FleetCenter. I mean, they point out several examples of times when Kerry and his party personally attacked Bush, personally attacked the Republicans.

But to your question, I mean, Republicans expect to do exactly the same thing. In fact, I'm hearing sources telling me that the Republican National Committee is seriously considering airing a short video attacking Kerry on the issue of Iraq, using his own words and airing it from the podium at the Fleet -- at -- the podium at Madison Square Garden.

Now, this is a short video that the Republicans released last week in Boston. It basically attempts to attack Kerry on his so- called double speak on the issue of Iraq. It's about 11 minutes long. They edited it recently to add some of Kerry's acceptance speech. Now it's a little bit longer.

They're trying to get as much air time for this -- for this -- for this video as possible. They're launching a Web site, kerryoniraq.com. And apparently Ed Gillespie is actually also talking to Miramax about trying to distribute the film, something that Michael Moore, as you recall, did for "Fahrenheit 9/11." We'll see whether or not that will happen.

WOODRUFF: Distribute it in theaters, you mean?

MERCURIO: Distribute it in theaters, distribute it as a trailer that would go with movies. The RNC isn't particularly optimistic that Miramax is going to agree to do it. But nonetheless, they're giving it a shot.

WOODRUFF: All right. Security, there was a lot of it in Boston.

MERCURIO: Yes.

WOODRUFF: What should we expect in New York? What are you hearing?

MERCURIO: Well, right. I mean, compare Boston to New York. You've got the city of New York, you've got the site of Madison Square Garden, the presence of a sitting president and more than 30,000 people. I mean, you know, you combine all those factors and Madison Square Garden looks extremely difficult to defend or to -- to secure.

In addition to that, several thousand protesters expected to show up, some of them threatening illegal demonstrations. It's going to be -- it's going to be quite a seen.

Now, with that in mind, the New York Police Department is already putting 10,000 officers through special training exercises. They're going through classroom instruction, and also apparently some sort of simulation exercise where, among other things, they pretend to react to people pretending to be terrorists releasing poisonous gases on subways -- on subways.

And also, of course, in May, we heard Mayor Michael Bloomberg telling us that Penn Station, one of the largest commuter stations in the country, will close down for at least the two to three hours that President Bush is giving his acceptance speech. Perhaps even longer than that.

WOODRUFF: Very serious. It sounds like they're taking all this very seriously. All right. John Mercurio working -- working his sources.

MERCURIO: Trying.

WOODRUFF: Thank you very much. We appreciate it.

MERCURIO: Thank you.

WOODRUFF: And now, coming up, refighting the Vietnam War. We will hear from veterans on both sides of the battle over John Kerry's war record.

And later, Hollywood remakes a chilling political thriller from the 1960s. Are today's story and characters modeled after real world events? Our Bill Schneider will give his take on "The Manchurian Candidate."

(COMMERCIAL BREAK)

WOODRUFF: We've been reporting on the debate between Vietnam veterans for and against John Kerry. With me now, two central figures in this debate. Larry Thurlow, he's with me here in Washington. Like John Kerry, he commanded a swift boat in Vietnam. He appears in that anti-Kerry television ad that we showed you a little earlier.

In Eugene, Oregon, is Jim Rassmann. He served under John Kerry's command and he credits Kerry with saving his life. Rassmann, you may remember, spoke at last week's Democratic convention.

Larry Thurlow, I want to -- I want to begin with you. You essentially, as I understand it, you, too, won a Bronze Star, like John Kerry did. The incident in which John Kerry pulled Jim Rassmann out of -- out of the river...

LARRY THURLOW, APPEARS IN ANTI-KERRY AD: Yes? WOODRUFF: ... in Vietnam, Kerry says that this happened under enemy fire, that Rassmann had been knocked in the water, he went back and was the first to get to Rassmann and pulled him out of the water. You essentially said that's not what happened. What are you saying?

THURLOW: My recollection of that day is still pretty vivid after all these years. And what I remember, Judy, is that the incident involving Mr. Rassmann, five boats had come out of the river after running an operation up in the canal earlier that day. Three boats were going through a fishing weir on the left side of the river that had put in place between the time we entered and when we were leaving.

I'm the third boat in that column left. In the column right, there are two boats. The lead boat is John Kerry's.

He's going through a rather small opening on the right bank that (ph) had been left in his boat. The boat leading our column, as it goes through that small opening almost simultaneously, is blasted completely out of the water by a command detonated mine.

WOODRUFF: This is another boat?

THURLOW: This is a 3-boat (ph) -- this is on the opposite side of the river of John Kerry's boat. At this point, John Kerry speeds out of the area, I assume to clear the kill zone. The rest of the boats, however, went to the aid of the 3-boat (ph), which was completely disabled. Two members of that crew are in the water, the rest are badly wounded and basically incapacitated on board that boat.

WOODRUFF: You're basically saying he fled when there was...

(CROSSTALK)

THURLOW: I am saying he fled the area on the explosion under the 3-boat (ph).

WOODRUFF: All right. Well, before -- and let me ask Jim Rassmann about that part of the story before we ask what happened to him.

Jim Rassmann, what -- what do you say happened that day in March, 1969?

JIM RASSMANN, KERRY SUPPORTER: Well, first, I was not part of John Kerry's command. I was a Special Forces officer who happened to be on his boat at that time.

Mr. Thurlow's recollection of what occurred is not accurate. We had the boat hit the mine to our left. And John immediately had his driver, Del Sandusky (ph), turn to the left and head towards it.

And it was at that time that our gunner on the bow got his gun knocked out and he started screaming for another weapon. I ran another weapon up to me, and we hit something or something hit us. There was an explosion, and I was blown off the boat to the right.

WOODRUFF: And you ended up in the water how?

RASSMANN: I was blown into the water, and I had boats coming up behind me. So, I went to the bottom of the river.

WOODRUFF: Now, as I understand it, Larry Thurlow, you have a different version of how Jim Rassmann was in the water.

THURLOW: Yes, I do. My thought is that since no mine was detected on the other side of the river, no blast was seen, no noise heard, there's two things that are inconsistent with my memory.

Our boats immediately put automatic weapons fire on to the left bank just in case there was an ambush in conjunction with the mine. It soon became apparent there was no ambush.

The rescue efforts began on the 3-boat (ph). And at this time, the second boat in line, mine being the third boat on the left bank, began to do this.

Now, two members in this boat, keep in mind, are in the river at that time. They're picked up. The boat that picks them up starts toward Lieutenant Rassmann at this time, that's the 23-boat (ph). But before they get there, John does return and pick him up. But I distinctly remember we were under no fire from either bank.

WOODRUFF: Jim Rassmann, what about that? You hear Mr. Thurlow saying there was no enemy fire at that point.

RASSMANN: Mr. Thurlow is being disingenuous. I don't know what his motivation is, but I was receiving fire in the water every time I came up for air. I don't recall anybody being in the area around us until I came up maybe five or six times for air and Kerry came back to pick me up out of the water.

WOODRUFF: Disingenuous. He says you are being disingenuous in not recalling what happened.

THURLOW: Let me ask Mr. Rassmann this question: I also ended up in the water that day during the rescue efforts on the 3-boat (ph). And my boat, the 51-boat (ph), came up, picked me up, business as usual. I got back on board, went about the business at hand.

I received no fire. But the thing I would like to ask is, we have five boats now, John's returning, and four boats basically dead in the water, working on the 3-boat (ph). If we were receiving fire off the bank, how come not one single boat received one bullet hole, nobody was hit, no sign of any rounds hitting the water while I was in it?

WOODRUFF: What about that, Jim Rassmann, quickly?

RASSMANN: There were definitely rounds hitting the water around me. If Mr. Thurlow feels that what his story is purported to be was the case, he had ample opportunity 35 years ago to deal with it. He never did, nor did anyone else. John Kerry did not tell this story. I told this story when I put him in for a Silver Star for coming back to rescue me. The Navy saw fit to reduce it to a Bronze Star for valor.

That's OK with me. But If Mr. Furlow had a problem with that, he should have dealt with it long, long ago. To bring it up now, I think, is very disingenuous. I think that this is partisan motivation on his part and for the part of his whole organization.

WOODRUFF: Mr. Thurlow, why didn't you bring this up earlier?

THURLOW: For one thing, I did not know that John had been put in for a Bronze Star, a Silver Star or, for that matter, a Purple Heart on that day. I did not see the after-action report, which, in fact, was written by John. And as the years went by, John was not running for the highest office in the free world.

WOODRUFF: What about Mr. Rassmann's point that he thinks you're doing this for partisan purposes?

THURLOW: Well, this is not true because, the fact of the matter is, I have not been active in any political party since I got out of the service. In fact, I basically turned my back on politics because of my experience in the service.

WOODRUFF: But this -- you feel strongly enough about this to be out?

THURLOW: I certainly do. My point is, is that John Kerry, because of the actions he's taken, and then the fantastic stories he made up about this, when many people beside myself know this not to be true, negates him being the leader he claims to be. And I would hate to have him be the commander-in-chief over my grandchildren.

WOODRUFF: Jim Rassmann, you want to respond to that?

RASSMANN: I sure do. I have two wonderful kids. They're very bright, they're compassionate people. I'm here today not just because John Kerry pulled me out of that water. I'm here today because if those two kids of mine were in the military, I would want John Kerry to be the commander-in-chief, not George Bush.

I think that Mr. Thurlow has a very unusual recollection of the events. I think that it's important to note that even today John McCain has come out and called this ad that they have produced dishonest and dishonorable. And I think I would have to agree with him.

WOODRUFF: Well, gentlemen, we are going to have to leave it there. Mr. Jim Rassmann, we thank you for joining us from Eugene, Oregon.

Larry Thurlow, we thank you for joining us here in Washington. We know you're from Kansas. We appreciate it.

And I have a sense we're going to continue to hear more about this story in the days and the weeks to come. Gentlemen, thank you very much.

THURLOW: You're welcome.

WOODRUFF: We appreciate it.

Well, both Senator Kerry and President Bush are on the road this afternoon. We're going to catch up with the campaigns in a minute. We're also going to talk dollars and cents as we look at what each candidate is promising to do for business.

(COMMERCIAL BREAK)

WOODRUFF: A developing story we want to tell you about in Texas. At Dallas-Fort Worth International Airport, a terminal, the American Airlines terminal, has been evacuated after security officials found a suspicious device during a routine baggage screening.

It is reported the device, which resembles a pipe, was discovered during a Transportation Security Administration baggage screening. It set off an alarm, according to airport officials. The bag was dropped off by a passenger for screening, as required by law, and, presumably, the passenger continued onto a gate to get on a flight. A bomb disposal squad has been called to the scene.

We're attempting to get more information. These live pictures coming in to CNN from the American Airlines terminal at Dallas-Fort Worth International Airport. Again, the terminal evacuated.

And now, the second half hour of INSIDE POLITICS begins.

(BEGIN VIDEO CLIP)

ANNOUNCER: John Kerry says he would have done things differently on September 11th.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: Had I been reading to children, and had my top aide whispered in my ear, "America is under attack," I would have told those kids very politely and nicely that the president of the United States had something that he needed to attend to.

ANNOUNCER: Supporting the troops.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The message is clear. In a time of conflict and challenge, America stands behind our military.

ANNOUNCER: George Bush signs a bipartisan defense spending bill before getting back on the campaign trail.

A movie with a strong political message...

LIEV SCHREIBER, "THE MANCHURIAN CANDIDATE": Don't you think this could wait until after the election?

DENZEL WASHINGTON, "THE MANCHURIAN CANDIDATE": Why? For what? ANNOUNCER: No, not "Fahrenheit 9/11." We've got our eye on the "The Manchurian Candidate."

Now, live from Washington, Judy Woodruff's INSIDE POLITICS.

(END VIDEO CLIP)

WOODRUFF: Welcome back. John Kerry took time out from his campaign swing through the nation's political battlegrounds today for a speech here in Washington to minority journalists. But he immediately headed back out of town for a Midwest meet-up with his running mate, John Edwards.

Our Dana Bash has the latest from St. Louis.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CORRESPONDENT: The Senators John hooked up back today, day seven of their cross-country tour here in St. Louis after campaigning separately for four days. Now, the team appeared quite happy to be back together again and talked up their message of the day, which is helping military families they say President Bush has not done enough for.

Now, earlier today, Senator Kerry made a detour back to Washington, spoke to a conference of minority journalists. There he was asked, if he had been president on the morning of September 11th, what would he have done? Here's how he responded.

KERRY: First of all, had I been reading to children, and had my top aide whispered in my ear, "America is under attack," I would have told those kids very politely and nicely that the president of the United States had something that he needed to attend to. And I would have attended to it.

(APPLAUSE)

BASH: Remember, of course, the president, after being told by White House Chief of Staff Andy Card about the attack, continued to read for about five to seven minutes to children. The White House says he didn't want to scare the children.

Now, the Bush campaign just called this another attack by, what they called, a candidate who doesn't know what he stands for. Now, of course, hindsight is 20-20, but Senator Kerry has been trying very hard to combat the attacks from the Bush campaign that he does not have what it takes to be commander-in-chief because he is indecisive.

Meanwhile, back here in the Show-Me state, Senator Kerry is trying to fight hard to break out of the dead heat he is in with President Bush to try to capture the 11 electoral votes here in Missouri, very important electoral votes. No president has gotten the White House in 100 years, except for one election year, without winning this state.

KERRY: The middle class of the United States of America is playing by the rules. People are working two jobs, three jobs, and they're still not getting ahead. And I'm running for president because the middle class deserves a champion and the people struggling to get in it deserve one.

BASH: The senators pulled into this rally on a bus but are leaving on a train. They're trying to capture the magic of the Harry Truman's whistle stop tour in 1948, just like Bill Clinton and Al Gore before them, they are going to get on the very same car that Harry Truman himself rode, hoping to capture votes through Missouri, on to Colorado and Arizona.

Dana Bash, CNN, St. Louis.

(END VIDEOTAPE)

WOODRUFF: So, that's part of John Kerry's day. President Bush left Washington this morning for the first of two stops in Midwest battlegrounds.

For more on the president's Ohio town hall and other developments, let's turn CNN's Jill Dougherty.

(BEGIN VIDEOTAPE)

JILL DOUGHERTY, CNN CORRESPONDENT: The Bush campaign is dismissing criticism from the Kerry campaign, saying that it is a flailing attack, as they put it, and turning its back onto the Democratic candidate saying he has shown indecision in the war on terrorism. Also saying he has an inability to even take a stand on the question of whether it was right or wrong to remove Saddam Hussein from power.

Although this event here in Columbus, Ohio, with the president was essentially dealing with jobs and the issue of the domestic economy, the subject of the war on terrorism came up many times.

BUSH: Free nations are peaceful nations. Free nations, nations that listen to the aspirations of their people, are nations in which it's hard to recruit people willing to kill themselves for radical philosophy.

DOUGHERTY: President Bush has two campaign stops today, Columbus, Ohio and then Saginaw, Michigan, both crucial battleground states.

Jill Dougherty, CNN, Columbus, Ohio.

(END VIDEOTAPE)

WOODRUFF: Before President Bush headed off to campaign this morning, he had an important piece of business here in Washington. He signed a $417 billion defense spending bill, which includes money for the ongoing operations in Iraq and Afghanistan. He used the occasion to make a short speech, but ended up stumbling over one of his lines. Listen closely.

(BEGIN VIDEO CLIP)

BUSH: Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we.

(END VIDEO CLIP)

WOODRUFF: White House spokesman Scott McClellan says the president's comments, quote, "shows that even the most straight- forward and plainspoken people misspeak."

John Kerry's appearance with a group of business leaders yesterday in Iowa highlight Kerry's efforts to form an alliance with a group traditionally considered to lean Republican.

Allan Chernoff of CNN Financial News joins me now from New York with more on how business leaders are taking sides in the presidential race.

Hi, Allen.

ALLAN CHERNOFF, CNN FINANCIAL NEWS: Hi, Judy. Well, certainly, it still is the case that business people are predominantly Republican-backers, and President Bush has plenty of business support in his reelection campaign. In fact, according to Political Money Line, which tracks contributions, President Bush has donations from five times as many chief executives as John Kerry.

But the Democrats are indeed making headway among business leaders and the Kerry campaign is making that point emphatically by releasing a list of more than 200 business leaders who are in their camp.

They include Barry Diller, the entertainment and now Internet mogul, filmmaker Jeffrey Katzenberg, Gerald Greenwald, former chief of United Airlines, designed Donna Karan and Lee Iaccoca, who is also now an ex-supporter of the president, having backed Mr. Bush in 2000.

Some business leaders are angry about the war in Iraq, and they argue John Kerry would be more disciplined in fiscal matters.

(BEGIN VIDEO CLIP)

JIM CLARK, FOUNDER, NETSCAPE: The president has led us down a fairly disastrous fiscal path, with all of the deficits. And quite honestly, giving tax breaks to people like me wasn't really necessary. I mean, I don't need a tax break. I'm sure people with lower income could use a tax break much better than I can.

(END VIDEO CLIP)

CHERNOFF: Many business people feel quite differently, because John Kerry has promised to roll back tax cuts on those earning more than $200,000 and roll back the reduction in taxes on capital gains and dividends for that income bracket. Those are proposals that have Wall Street worried. Partly as a result, some business owners feel they would do better with four more years of President Bush.

(BEGIN VIDEO CLIP)

GARY JOHNSON, ACE CLEARWATER ENTERPRISES: I think the president's good for business. I think the president's good for the American people. I think there's a lot of issues. We live in a very unsafe world right now. I think he's doing everything he can, and doing a very good job to protect jobs where he can and grow jobs where he can, and grow good jobs.

Manufacturing creates good jobs and I think he's focused on that. I think he's doing a great job.

(END VIDEO CLIP)

CHERNOFF: Among the heavyweights backing President Bush, Michael Dell of Dell Computers, Cisco Chief Executive John Chambers, cell phone pioneer Craig McCaw, Meg Whitman, head of eBay, and Terry Semel, the chief executive of Yahoo! One more issue that is unifying business people behind the Bush-Cheney ticket: Tort reform.

The president, of course, has been pushing to reform the nation's liability laws, and John Edwards, a former personal injury lawyer being on the ticket, does not sit well with business executives, whose companies have had to defend against such lawsuits -- Judy?

WOODRUFF: All right. Allan Chernoff, thank you very much. We appreciate it.

Well, the economy is only one point of contention between Republicans and Democrats. In just a minute, Bay Buchanan and Donna Brazile will take issue on some issues in this campaign, including jobs and same-sex marriage.

Later, the newest release in this summer of movies with a political message. We'll also follow up on the bank robberies that occurred during the presidential candidates' duel in Davenport.

(COMMERCIAL BREAK)

WOODRUFF: With us now: Bay Buchanan, president of American Cause; and from the "CROSSFIRE" set at George Washington University, former Gore campaign manager, Donna Brazile.

Donna, first of all, Missouri, the voters there voted overwhelmingly this week to ban gay marriage, to institute -- to say that this is part of law. Is this going to have an effect across the country when other states look at this issue?

DONNA BRAZILE, FMR. GORE CAMPAIGN MANAGER: Well, that's what the extreme right wing is hoping. Look, Judy, this is a very divisive amendment. We already have laws on the books in 39 states. This is duplication. It's a distraction from the real issues that the American people would like to see our political leaders focus on. And unfortunately, this is one way to try to galvanize the right-wing base.

BAY BUCHANAN, AMERICAN CAUSE: You know, Judy, Donna is completely wrong on this issue. She wants to talk about the extreme? This was an incredible turnout -- it's a historic turnout out there in Missouri. They couldn't imagine 41 percent in a primary in the summer.

So, you see an enormous amount of Americans coming out to vote on this very passionately. And it's a 70-30 vote. This is the fifth state that's done this. And always it's these huge numbers. Another 12 states before the end of this year. Four of which are swing states, and it's on in November, key to this election.

BRAZILE: Bay, putting bigotry on the ballot is wrong. It's immoral, and it's offensive. It's a distraction. You don't need these laws when we already have a federal law on the book and we have state laws that prohibit same-sex marriage.

BUCHANAN: It's good for you to say we don't need it. But both Robert Bork and Scalia both believe we do need it. And the American people feel we need it. We see what happened up there in Massachusetts. We don't want that spreading across the country.

(CROSSTALK)

BRAZILE: It cannot spread, Bay. It cannot spread. That's the fear factor. Why not put on the ballot -- you want to talk about something that's spreading all of America it's unemployment. Why not put that on the ballot, that we can get people good jobs? The people that we're leaving behind in our public schools. That's what we should put on the ballot, Bay.

WOODRUFF: Very quickly. John Kerry's formal official position is that he doesn't support the idea of a constitutional amendment on gay marriage. So, I mean -- is this going to hurt him?

BUCHANAN: It's going to hurt him because he's not credible on this issue, Judy. He voted -- he went up there, when DOMA went -- in the Federal DOMA Act, which was to protect marriage. He voted against it. Now, he says he's against this, but he'd be for that. He's all over the lot on this issue.

And he knows his base is in the other side of the issue. They are not with the American people on this issue, so he's caught in between.

BRAZILE: Bay, the American people know that you guys are desperate. You have nothing to run on. You don't have a record. You don't have a plan to improve our economy. John Kerry has plan. You have nothing. That's why you're running on this issue.

BUCHANAN: You know, Donna, you've got 70 percent of the people always vote for marriage, to protect marriage, time and again. Five states, it will continue to be like this around the country. That is not extreme. That's middle America.

WOODRUFF: Let's talk about the economy. Oil prices today up again at a record high we are told. In the last few days, consumer spending dropped more than it has at any time in the last three years, Bay. But yet we're told unemployment benefits are looking a little better. Where is this economy and who is it going to help or hurt?

BUCHANAN: It's no question it's mixed. Alan Greenspan happened to think it's just a momentary problem here and that it's going to be stronger again the fall. But I don't think anyone knows. We'll see what the unemployment figures look like tomorrow.

But the key right now is things are moving along. They have been good. They've been very strong. And clearly the jobs are a lag factor and they need to be stronger, but they are on the upswing.

WOODRUFF: Donna?

BRAZILE: It's sluggish. And one of the reasons why, of course, and Bay would probably admit this, Judy if we weren't on air, is the fact that the Bush deficits is really stalling this economic growth and the economic recovery.

We've got to do something about the deficit spending. And within the next two or three weeks, the Republicans once again will call upon Congress to raise the debt ceiling and the pay for their misleading priorities. So, that's why we need a plan. Bay, I finally read a plan that I believe in.

(CROSSTALK)

BUCHANAN: Do you get a commission on the sales? I was just curious.

BRAZILE: Not until they go on sale, Bay.

WOODRUFF: Bay, does President Bush pay any price for these deficits or are they just a non-issue?

BUCHANAN: I'll tell you where he pays a price. It's not the Democrats, it's not that field out there. It's with independents and with the conservative base. They're very upset that we have these huge deficits, and where government has grown so much under his administration.

This is something that concerns a lot of us. And as you know, that he is concerned about some of that base not going out there to vote.

WOODRUFF: But is that something that can last until November or can he do something about it?

BUCHANAN: Well, he's going to have to start talking tough on the size of government. He's going to have to. And I think he will. I think he recognizes that conservatives have had it. I know Congress is starting to talk much tougher. But there's no question that something needs to be done, and start slashing the spending.

WOODRUFF: Donna?

BRAZILE: He should take just a page out of Bill Clinton and Al Gore's book and pay-as-you-go. That's what John Kerry has said. That's part of his plan. We've got to get the deficits under control in order to get our economic recovery moving forward.

BUCHANAN: You know, but John Kerry is a fraud. John Kerry is a complete fraud on this issue. He has voted just as Bush...

(CROSSTALK)

BRAZILE: Bay, he voted like Republicans on a balanced budget. He's voted like Republicans on pay-as-you-go. He's voted like Republicans on cutting the deficit.

BUCHANAN: He did. You know, Donna, last week he said he wants to cut the deficit by half, all right? In his four years. And then he -- dozens and dozens of new programs. That's fraudulent.

BRAZILE: No, it's not.

WOODRUFF: We're going to leave it there. We're going to leave it there. She says no. She says yes. That's where we're going to leave it, here.

BUCHANAN: She's wrong. I'm right.

BRAZILE: I've got the plan, Bay. I have the plan.

(CROSSTALK)

WOODRUFF: Donna, Bay. Thank you both. We appreciate it. They've both got a plan.

Now playing at a theater near you, an updated version of the '60s political thriller, "The Manchurian Candidate." Bill Schneider takes a look to see if it's also another version of "Fahrenheit 9/11."

(COMMERCIAL BREAK)

WOODRUFF: Cold War paranoia was alive and well in the early 1960s, when a movie called "The Manchurian Candidate" was scaring audiences. A lot has changed since then, including "The Manchurian Candidate."

As Bill Schneider reports, an updated remake is now playing in the theaters and generating new controversy.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Who is the real Manchurian candidate? That's become the big guessing game ever since a re-make of the 1962 movie was released last week.

The original portrayed a Communist conspiracy bent on subverting the American political system.

ANGELA LANSBURY, ACTRESS, "THE MANCHURIAN CANDIDATE": I served them. I fought for them. I'm on the point of winning for them the greatest foothold they will ever have in this country.

SCHNEIDER: But with a twist: The communists were using her husband, a Joe McCarthy-like politician, as a front man.

JAMES GREGORY, ACTOR, "THE MANCHURIAN CANDIDATE": I have here a list of the names of 207 persons who are known by the secretary of defense as being members of the Communist Party.

SCHNEIDER: Cut to 2004.

MERYL STREEP, "THE MANCHURIAN CANDIDATE": I think this is a very different kind of thing, concerned with different kinds of fears, different kinds of paranoia.

SCHNEIDER: In the remake, the scheme to subvert the American political system is masterminded by a powerful, shadowy, multi- national corporation.

JON VOIGHT, "THE MANCHURIAN CANDIDATE": Among the shareholders in Manchurian Global, were they to ever publish a list, which they won't, you would find former presidents, deposed kings, trust-fund terrorists, foreign communist dictators, ayatollahs, African warlords and retired prime ministers.

SCHNEIDER: Modeled on Halliburton, the company Dick Cheney used to run? Ask the film's director.

JONATHAN DEMME, DIRECTOR, "THE MANCHURIAN CANDIDATE": We are once again being terrified by our leaders and giving them carte blanche to conduct our affairs around the globe however they personally see fit, at great profit, by the way, to the multi-national corporations that they have so much involvement in.

SCHNEIDER: On the web, some indignant conservatives say "The Manchurian Candidate" is John Kerry, a wholly-owned and operated subsidiary of George Soros, one of his wealthy backers. There is no end to the speculation about the villain, played by Meryl Streep.

STREEP: Make no mistake: The American people are terrified. They know something's coming. They can feel it. And we can either shovel them the same old sugar or we can arm them, we can arm them with a young vibrant vice president.

SCHNEIDER: Notice the haircut. One conservative Web site asks: "A cold diabolical manipulative member of the U.S. Senate? Any thoughts on a real life middle-aged blonde who might fit the description?"

(END VIDEOTAPE)

SCHNEIDER (on camera): The director has said the studio wanted to get the movie out before the election. Are they trying to influence the election or cash in on the political buzz, or both?

WOODRUFF: Well, it sure landed right in the middle of the election.

SCHNEIDER: It certainly did.

WOODRUFF: Well, Bill Schneider, thank you very much. Going to the movies in the middle of the week.

Well remember those Davenport, Iowa, bank robberies that happened yesterday, while both President Bush and Senator Kerry were campaigning in that state? Well, we wondered, do the candidates have good alibis? Find out when we return.

(COMMERCIAL BREAK)

MARY SNOW, CNN FINANCIAL NEWS CORRESPONDENT: I'm Mary Snow at the New York Stock Exchange, where stocks ended deep in the red as oil prices hit a new high. Crude oil soared a $1.58 a barrel to close at $44.41. The rise came on concerns about surprise disruptions from Russia.

Investors worry the high cost of fuel will cut into consumer spending and slow down the economy. Stocks ended at 163 points lower for the Dow and back below that 10,000 level. The NASDAQ composite lost almost 2 percent. Judy Woodruff's INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: The Democratic ticket is hitting the rails. This the scene just about an hour ago. St. Louis, Missouri, John Kerry, John Edwards on a train, St. Louis, heading to Colorado and Arizona. It's the same train Harry Truman used back in 1948, on his whistle stop tour.

Now, a quick follow-up to a story that made headlines after the headliners left Davenport, Iowa, yesterday. As you may have heard, three local banks were robbed almost at the same time while President Bush and Senator John Kerry were stumping for votes. Well, it turns out at least one person has been arrested. And today, Kerry said police can rule out at least two others.

(BEGIN VIDEO CLIP)

KERRY: While I was there and President Bush there, three banks were robbed, according to television stations. Ladies and gentlemen, all I can say is, President Bush and I have airtight alibis.

(END VIDEO CLIP)

WOODRUFF: Do we believe them?

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

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


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