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End of Ashcroft Era; Gruesome Discovery in Falluja; Internet Claims That Bush Stole '04 Election; Terror Alert Status To Be Lowered; Leading the Democrats

Aired November 10, 2004 - 15:00   ET


ANNOUNCER: The ending of the Ashcroft era. What political message is President Bush sending in his selection of a new attorney general?

Conspiracy theories. We will investigate probes into voting irregularities, the worst fears and the unanswered questions.

UNIDENTIFIED MALE: It could have gone smoothly. It could have gone horribly wrong. We actually don't know.

ANNOUNCER: In the fight for Falluja, a gruesome discovery, hostage slaughterhouses. We are tracking developments in Iraq and the reaction here at home.


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

WOODRUFF: Thank you for joining us.

Whatever criteria President Bush may have set to fill John Ashcroft's job, he appears to have turned to someone he is comfortable with to replace the politically polarizing attorney general. White House counsel Alberto Gonzales is a longtime confident who goes back with Bush to his Texas years.

Our White House correspondent Suzanne Malveaux has more on Bush's choice and when we can expect a formal announcement -- hi, Suzanne.

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Hello, Judy. I hope you can hear us over the construction noise.

But there's also a lot of buzz, a lot of activity here inside the gate at the White House. It is widely expected that the president is formally and officially going to make his choice known, White House counsel Alberto Gonzales, as you said, of course, White House officials, senior officials saying this was not a difficult choice.

These two men are very close. They go back to their Texas days some 10 years or so, Gonzales serving as a justice in the Texas Supreme Court, as well as secretary of state and general counsel when President Bush was then governor. Now, this of course would be historic. It would be the first time that an Hispanic would actually hold this post. This comes, of course, after the controversial reign of Attorney General John Ashcroft, many criticisms about the Patriot Act from those who feel that it basically rolled back some of the civil liberties that Americans enjoy.

It is not surprising that Gonzales may face some of those same challenges as well. Now, he does not come without controversy himself. He has been really at the centerpiece of many of the legal decisions, the thinking of this administration. He wrote a memo February 2002 which questioned circumstances that you could wave some of the Geneva Convention requirements for detainees.

Some human rights groups say that that led to the kind of environment that created that Abu Ghraib prison scandal in Iraq. But what this does do, this appointment does two things. It basically sets up and leaves vacant a possible Supreme Court position, if that becomes available. Gonzales' name was once in the hat for that. He has been taken out of that because he is considered to be too -- perhaps moderate. It allows a conservative person to fit that particular position. And then, finally, of course, Judy, also, it gives him a better chance of being confirmed by the Senate.

WOODRUFF: And, Suzanne, I should tell you, I am just being told that it's at 3:40 this afternoon Eastern time that we are told the president will be making the announcement about Alberto Gonzales going to the attorney general's spot. And that will happen in the Roosevelt Room in the White House. So I know you're going to be right there when the president makes that announcement.

Suzanne, quickly onto the Department of Commerce, the president's good friend Don Evans announcing he's leaving. What about that replacement?

MALVEAUX: Well, it's widely believed that it will be Mercer Reynolds. As you know, of course, this is the man who raised $100,000, actually, more than $200,000 -- million -- for the Bush campaign. This is someone who is very valuable to the president. As you know, of course, before, Don Evans did the same about four years ago. That is the person that they are looking for this time around.

WOODRUFF: All right, Suzanne Malveaux, we will let you go back to work. Thanks very much. We appreciate it.

Well, Senator John Kerry is taking a parting shot at Attorney General Ashcroft while trying to hold President Bush's feet to the fire. In a statement, the defeated presidential candidate said -- quote -- "America lived through four difficult years with an attorney general who became one of the most divisive faces in this administration. With the end of the era of John Ashcroft, the president now has an opportunity to heal those divisions and make good on his promise of renewed bipartisan cooperation" -- end quote.

While Ashcroft has been a top target of Democrats, he's been a hero to many conservatives, not just for his policies, but for his personal life and beliefs.

Here's CNN's Bruce Morton. (BEGIN VIDEOTAPE)

JOHN ASHCROFT, ATTORNEY GENERAL (singing): She soared above the lifted lamp to guard sweet freedom's door.

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): John Ashcroft is a son and grandson of ministers, a devout member of the Assemblies of God, a denomination which opposes drinking and dancing.

In a 1998 memoir, he compares his triumphs to resurrections and his defeats to crucifixions. In his career in politics, he's had both. He was elected governor in 1984, served two terms, and elected senator in 1994, where he was a member of a vocal group, the Singing Senators.

He is very religious. After successful elections, he has had himself anointed with oil, like ancient kings, though once it was Crisco oil from the kitchen. He's very conservative, sponsored constitutional amendments to ban abortions, ban flag burning, require a balanced budget and make it easier to amend the Constitution, among other things.

He was the first senator after the Monica Lewinsky scandal broke to call on President Bill Clinton to resign. Ashcroft ran briefly for president in the run-up to the 2000 campaign.

ASHCROFT: Thanks a lot.

MORTON: But he dropped out to concentrate on tough Senate reelection fight running against the Democratic Governor Mel Carnahan. Carnahan died in a plane crash just weeks before the election, but his name stayed on the ballot. He won. And the new governor appointed his widow, Jean, to the Senate seat.

Then President Bush named Ashcroft attorney general. He attends a prayer service each workday. One highly publicized episode he is associated with is when his staff covered these two statues called the Spirit of Justice and the Majesty of Law, which are on view in the department. One of Justice's breasts was exposed.

But, substantively, he was an aggressive champion of the Patriot Act, which let the government look at library's records and conduct secret searches. He's been a controversial attorney general. Privacy advocates hated all that. And it will be interesting to see what he does next.

Bruce Morton, Washington.


WOODRUFF: We want to bring you now some videotape that has just come into CNN. These are some comments from President Bush meeting with the secretary-general of NATO.


GEORGE W. BUSH (R), PRESIDENT OF THE UNITED STATES: ... free societies and democracy around the world.

BUSH: And I thank you for your vision and your commitment. And welcome to the Oval Office.

JAAP DE HOOP SCHEFFER, NATO SECRETARY GENERAL: Well, thank you very much, Mr. President.

The fact that I'm sitting here now in the Oval Office as the first foreign visitor is the best proof, I think, for the full commitment of the United States of American and this President Bush to NATO.

That's of the utmost importance, because NATO is the unique transatlantic forum where everything we have, the big challenges of the world we are facing in the world today, should be discussed.

And NATO is the only organization which can deliver. We delivered, as the president said, in Afghanistan, less (INAUDIBLE) and more ballot boxes. That's what it's all about.

We are delivering in Kosovo.

We are delivering by setting up a training implementation mission in Iraq.

There is no second forum, there's no second organization in the world like NATO where 26 democracies are defending values: democracy, respect for human rights, freedom of religion and all those basic values which are at the heart of all these 26 societies.

And it gives me pleasure to have the full support -- I knew that already, of course -- of President Bush for this endeavor, because I think NATO has a very challenging, challenging agenda. And I'll make sure that we can deliver, NATO can deliver, and we can face all those challenges successfully.

Thank you so much.

And it's a great pleasure to be here in the Oval Office once again.

BUSH: Welcome back.

We'll be glad to answer a couple of questions.

QUESTION: Thanks, Mr. President.

In June 2002, you urged the Palestinian people to replace Yasser Arafat with a leader, in your words, "not compromised by terror." Arafat today is gravely ill. In fact, the Palestinians have already selected a successor. Do you see a new opening for peace here?

BUSH: I do. There will be an opening for peace when leadership of the Palestinian people steps forward and says, "Help us build a democratic and free society." And when that happens -- and I believe it's going to happen, because I believe all people desire to live in freedom -- the United States of America will be more than willing to help build the institutions necessary for a free society to emerge so that the Palestinians can have their own state.

The vision is two states, a Palestinian state and Israel, living side by side in peace. And I think we've got a chance to do that, and I look forward to being involved in that process.

QUESTION: Mr. President, today you met with your secretary of state. Do you want him to stick around to lead your efforts to revive the Middle East peace talks?

BUSH: I'm proud of my secretary of state. He's done a heck of a good job.

QUESTION: (OFF-MIKE) the elections in Iraq will be free and fair without the participation of Sunnis? And you've also said you'd give the commanders in Iraq what they need.

QUESTION: Does this mean that you're open to substantially increasing the level of troops?

BUSH: That is a loaded question, and I don't blame you for asking it.

The commanders on the ground will have that which they need, and they have yet to say we need a substantial number of troops.

As a matter of fact, I met with the commanders on the ground today, General Casey -- commander on the ground, General Casey, the commander on the ground -- and he said things are going well in Falluja, and they're making very good progress of securing that country.

But I haven't changed -- look, the job of the commander in chief is to set the strategy and to set the direction of policy and say to those who are in charge of implementing the policy, "You'll have that which you need."

And I have said that ever since we've begun operations in Iraq. I said it when we began operations in Afghanistan. And it's still true.


BUSH: And if the commanders were to bring forth the request, I would look at it -- I would listen to it very seriously and implement the request. They have yet to do so.

QUESTION: (OFF-MIKE) you need Sunni participation to make the elections free and fair?

BUSH: I'm confident when people realize that there's a chance to vote on a president, they will participate. People want to be free. This is tough right now in Iraq, because there are people that are willing to commit violent acts to stop elections.

But as I reminded our citizens prior to the Afghanistan elections, there is a deep desire in every soul to vote and to be free and to participate in the presidential elections, which is precisely what happened in Afghanistan, in spite of the doubt of some and in spite of the violence that took place in Afghanistan prior to the vote.

I believe that a lot of citizens in Iraq will want to vote for their leaders. And I believe that because I believe deep in everybody's soul is the desire to be free.

Thank you all.

QUESTION: Thank you Mr. President.


WOODRUFF: President Bush meeting in the Oval Office with the secretary-general of NATO.

The president saying quickly there at the end, expressing confidence that the Iraqi people will want to participate in the election now scheduled for January, saying the commanders on the ground leading the operation in Falluja, he said they are telling him that they have that things are going well, that they are making progress, and he said, if they need more troops, they will have what they need.

He -- just a word about Colin Powell. He said, he's done a heck of a good job as the secretary of state. And, finally, on the Middle East, when asked about Yasser Arafat and the opportunity for peace in the Middle East. The president said the United States will be more than willing to build the institutions necessary in for a free society to develop in the Middle East and for the Palestinians to develop their own state.

So, President Bush commenting. You heard that just from moments ago in the Oval Office.

Well, the president may have quickly settled on Alberto Gonzales, his White House counsel, as his choice to be attorney general, but will the Senate give Gonzales its blessing? Coming up, the early take on Capitol Hill about his confirmation process. And, by the way, that announcement coming up.

Plus, the Republican advantage on the Hill. We will ask House Majority Whip Roy Blunt about his party's post-election plans.

And later, a John Kerry sighting and what it may tell us about his political future.

This is INSIDE POLITICS, the place for campaign news.


WOODRUFF: Just recapping, we've learned President Bush will be naming his White House counsel, Alberto Gonzales, to be the next attorney general. We expect that announcement from the president to come up a little later this hour, we are told about 3:40 Eastern time.

First, Alberto Gonzales, though, will need to be confirmed by the U.S. Senate before he can move to the Justice Department.

Our Ed Henry joins us now from Capitol Hill with a little preview of how the confirmation process might shape up.

Ed, what are you learning?

HENRY: Good afternoon, Judy.

Senate Democrats are vowing that they will ask some very tough questions about Judge Gonzales' tenure as White House counsel, especially memos he wrote interpreting the Geneva Convention and how it applied to the prisons at Abu Ghraib and also at Guantanamo Bay, Cuba. And the Democrats are saying that they will be tough on Gonzales in his confirmation hearings.

But, privately, they are acknowledging, the Democrats are, that they have to pick their battles very carefully after this last election. They realize they may have to same their steam, some of their filibusters and potential blocking maneuvers for Supreme Court nominations or maybe some even some even more high-profile fights.

And also Democrats are candidly admitting privately that they do not want to be seen as blocking the first Hispanic attorney general, especially after President Bush did so well among Hispanic voters in the last election. Interestingly, some of the biggest shots being fired at Gonzales are coming from conservatives.

I told earlier to conservative activist Richard Viguerie, who said that, while he thinks Mr. Gonzales will make a fine attorney general, he and other conservatives are very concerned that now, within a year or two, President Bush may groom Judge Gonzales to become a nominee on the Supreme Court.

And Richard Viguerie compared Judge Gonzales to another nominee to the high court by the first President Bush. Here's what he said.


RICHARD VIGUERIE, CHAIRMAN, AMERICAN TARGET ADVERTISING: He's never gone out and publicly identified himself or even privately that conservatives are aware of with the president's social agenda, political agenda. And he's basically a blank slate.

And President Bush's father, when he was president, sent up an attorney who was a blank slate to be on the Supreme Court, and his name was David Souter. And so conservatives have a saying among themselves: Do you know how to say David Souter in Spanish? And it's Alberto Gonzales. (END VIDEO CLIP)

HENRY: But I can tell you that Republican Senator John Cornyn, who sits on the Senate Judiciary Committee, said that conservatives should calm down. He believes the fact that the president is now apparently going to appoint Judge Gonzales as attorney general should show that maybe he will never be appointed to the high court, in fact, that it's just a game of speculation to be wondering who is going to be picked for the high court down the road.

Instead, Senator Cornyn told me a short while ago that the focus should be on what he believes is the point here. He believes that Judge Gonzales will be a fine attorney general.


SEN. JOHN CORNYN (R), TEXAS: Judge Gonzales is the kind of guy that's extremely professional. He doesn't throw curve balls. And I think he will withstand the confirmation process very well.


HENRY: And, Judy, one final note. Judge Gonzales' nomination, of course, has to go through the Senate Judiciary Committee, where Arlen Specter is still fighting to become chairman of that committee in January.

CNN has learned that Senator Specter is now telling his Republican colleagues, he wants a private, closed-door meeting next week with all of the Republicans on the Judiciary Committee, where Arlen Specter can face all of them and explain himself about what he meant when he was talking about whether or not there would be pro- choice or pro-life justices to the Supreme Court. He wants to explain himself. And I can tell you, a lot of Republican senators want to do that, because they are saying privately Arlen Specter still has a lot of explaining to do -- Judy.

WOODRUFF: Ed, very quickly, so the Gonzales confirmation wouldn't take place until next year?

HENRY: That's not completely clear at this point. We have to see what the president says.

I have been talking to Democrats privately on the Judiciary Committee who say they think it would be a slap in the face if the president tries to do this next week during the lame-duck session, because Democrats say they need more time to go through Judge Gonzales' background. They want the right amount of time for advise and consent. They want to make sure they have the time to do the right background check to make sure that this nomination goes through smoothly.

So we are expecting it will be in January, but there's no final word on that, but the expectation is that it would be in January, when there's a new chairman at the Senate Judiciary Committee -- Judy. WOODRUFF: All right, Ed Henry, thank you. And, obviously, we will be listening very closely when the president does make that announcement coming up in about 20 minutes or so. Ed, thank you.

Well, a week after most election results became officials, many Republicans are still giddy. Coming up, we'll be joined by one Republican congressman who had a particularly successful Election Day, House Majority Whip Roy Blunt, after the break.


WOODRUFF: One week ago today, John Kerry conceded to George W. Bush and Republicans began their celebration.

Well, one person who may have been celebrating more than most was the House majority whip, Roy Blunt of Missouri. Blunt not only won reelection in his district and saw Republicans gain at least two seats to increase their margin in the House. He also saw his son elected governor of Missouri.

Congressman Blunt joins us now.

All right, I want to know what's it like around your table at Thanksgiving.

REP. ROY BLUNT (R-MO), MAJORITY WHIP: Well, I think the governor is more powerful than any member of Congress, so things are going to change.


BLUNT: But a great opportunity for Matt, a great opportunity for our state, and pretty nerve-racking. It's easier to be the candidate than it is to be the relative of the candidate, I found out this time when Matt was running.

WOODRUFF: Well, congratulations to you and to your son, the governor-elect, Matt Blunt.

BLUNT: Thanks.

WOODRUFF: Congressman Blunt, first of all, do the Republicans automatically know in the House what it is that you want to push, what are your priorities coming up this year?

BLUNT: We know that we want to get some significant things done in 2005; 2005 is a critical opportunity for us to define our majority, to move forward.

The president has put some big items on the table. My view is, we really need to set a big target on at least one of those and push for as much of a conclusion in this first year of this Congress as we can, because I think, frankly, Judy, our opportunity to get things done is greater right now than it has been or probably will be at any time in the Bush presidency. WOODRUFF: You and I were speaking earlier about Social Security and the importance of that, but, frankly, everybody talks about the price tag. The transition costs of moving to a form of privatization would run in the trillions of dollars. How do you get that done?

BLUNT: Well, I think the price tag is largely determined by what group gets a chance to be part of the system, where they have a lot of traditional Social Security, but they also have some of their own money in their own private account, their own personal account that they get to have some direction on how it's invested.

Depending on how big that group is, if that group is just people who have gone to work in the last 10 years, the cost of transition is obviously a lot less than if it's people who have gone to work in the last 15 or 20 years.

WOODRUFF: So it's limiting the number of people, perhaps?

BLUNT: Limiting the number. I think there's no doubt that people in their -- certainly in their 50s, probably earlier than that, won't have a chance to participate in a new system.

This is a transition for younger workers. It might have been better if we had done it quicker, like a decade, decades ago, but we didn't. If we do this transition, we will never have a baby boomer problem again, because every group is doing more to take care of its own retirement, rather than just take care of the retirement of how ever many people happen to be retired at that time.

WOODRUFF: Let me ask you about a couple of other very quick things.

Yesterday, we happened to talk to Congressman John Spratt on this program, who is a part of the House Democratic leadership. And he said, Republicans need to be on guard against hubris right now, against overreaching. He said, look at the twin deficits. He said the trade deficit at a record high, $600 billion. Of course, the budget deficit.

Do you agree that this is a problem for you and others in the majority? It's your responsibility.

BLUNT: Well, if you are whip in the House, the majority whip in the House, you have got to be pretty optimistic just to go to work every day and believe you can get these hard things done. But you also have to be very aware that hubris doesn't work.

We have got hard work to do. We still have one of the narrowest margins in congressional history, quite a bit bigger than the margins we've had off and on for the last decade. I think we can move forward, but not if we can think it's easy to move forward, not if we think we can take anything for granted, or that we somehow don't have to make the case to the American people and always be looking for those Democrats on any given day who want to help us on the work that we need to get done that day. WOODRUFF: Very quickly, the Senate is going to be asked to confirm the president's counsel, White House counsel, Alberto Gonzales, to be attorney general. Do you foresee any problems for him? Because we are hearing conservatives like Richard Viguerie say, how do you say David Souter in Spanish? Alberto Gonzales.


You know, the president has full confidence in Alberto Gonzales. I don't know him nearly -- I know him. I like him. I don't know him nearly as well as I know John Ashcroft, who I have known for over 30 years now, but the president has full confidence in him.

I don't think there's any chance that Alberto Gonzales is not going to be confirmed. Probably, when you confirm him, whether we do it this year or next year is a legitimate question to ask. But he's done a great job on the Supreme Court in Texas, as the president's counsel for four years now. There's plenty out there to know about him, and it's good. And he will be confirmed as attorney general I think no later than early next year.

WOODRUFF: Congressman Roy Blunt, newly reelected, who is the majority whip in the House of Representatives, good to see you. Thank you very much for coming by.

BLUNT: Thank you.


WOODRUFF: We appreciate it. Thank you.

Well, John Kerry is back in Washington and he's making the rounds for a second straight day. Ahead on INSIDE POLITICS, we are going to look at what he's up to.

Conspiracy theories? Were there voting irregularities in last week's election? We're going to sift through the facts when we come back.

Plus, he only grabbed 1 percent of the vote, but Ralph Nader is asking for a recount. We will tell you why.



WOODRUFF: I'm Judy Woodruff in Washington. We'll have more INSIDE POLITICS in just a moment. But first, a quick check of what is happening right now in the news.

First off, we have just learned that the federal government will lower, lower the terror alert status -- and I'm just reading this from The Associated Press -- from orange to yellow. And this is for financial institutions in New York, New Jersey and Washington, D.C. And again, this is lowering the terror alert level from orange to yellow. It was raised back in August. And today is November the 10th. So it has been at the higher level for several months, being lowered today by the federal government, again, for these financial institutions.

For the second time in two days, a juror has been dismissed from the Scott Peterson double-murder trial in California. The latest juror to be dismissed had been serving as jury foreman. No reason has been given for his dismissal. Three alternates remain in the case.

The Federal Reserve announced its fourth interest rate increase of the year today. The rate that banks charge each other on overnight loans increased by a quarter point. Short-term rates for consumer and business loans are expected to increase by the same amount.

A top Palestinian official says that when Yasser Arafat dies a state funeral will be held in the Egyptian capital of Cairo. According to the plan, the body of the Palestinian leader will then be taken to the West Bank city of Ramallah for burial. Arafat is in a coma in a Paris hospital, and some of his organs reportedly have shut down.

The second half-hour of INSIDE POLITICS begins right now.

President Bush expected to name this man, Alberto Gonzales, as his pick to succeed John Ashcroft. We will have live coverage of that White House announcement in just about eight or 10 minutes.

Welcome back to INSIDE POLITICS. I will have details on that story in a moment.

But first, John Kerry of course has officially conceded the presidential race. But some diehard Kerry supporters apparently aren't completely accepting the election results. In fact, the Internet is brimming with theories that George W. Bush, according to some of them, somehow stole the election. In today's "Boston Globe," a top Kerry adviser is dismissing the Internet rumors, but the online buzz continues.

Our Boston bureau chief, Dan Lothian, joins us now. He's been looking into some of these claims that are being made.

Hello, Dan. What are you learning?


The cry has been heard all across cyberspace in college campuses, conspiracy theories of rigged voting machines, a stolen election, even corrupt officials. Now, six Democratic members of Congress, including Robert Wexler, are calling on the General Accountability Office, of GAO, to look into voting irregularities.

Some of the problems center around Florida, where some small counties with a heavy population of Democratic registered voters which used optical scan equipment voted overwhelmingly for President Bush. The reality, though, is that they have been doing this for years, voting their party and local issues, but often going with Republicans in national races.

Now, another problem is in North Carolina, where some 4,500 votes in Carteret County were lost when machines officials were told could hold more than 10,000 votes were set to take in no more than 3,000 votes. Officials there calling this a glitch. They say it will not impact the presidential race, although it could impact a tight Senate race there.

And another problem. In Columbus, Ohio, President Bush got 4,000 extra votes because of a computer problem. Officials said it was an isolated incident, but they're investigating statewide. So the big question, Judy, is do all of these problems or perceived problems add up to a conspiracy where computer systems hacked. or is all of this just post-election irregularity -- irregularities?

WOODRUFF: So Dan, it appears that even if you add all this up, there's no chance the results of this election are going to change. But I guess the question people have is, does this highlight continued problems with our vote-counting system in this country.

LOTHIAN: You're right, that rally brings up an important point. Everyone who we have spoken with said that if you add up the numbers, you might find a few votes here, a few votes there. They chalk this up to the typical election problems that you have every election cycle.

But one thing that some people want to point out is that this should not be dismissed. You have to look at this, because it does point out that there are some flaws in the system. Everyone will tell you our system is not -- is not perfect. But what they're saying is they believe based on the information we have now, the system is fair.

WOODRUFF: Well, we certainly learned there can be problems back in 2000. And it's -- with a system as big and complex as this one, it's easy to understand why there's some mistakes.

LOTHIAN: That's correct.

WOODRUFF: Dan Lothian on the trail. Thank you very much, Dan. We appreciate it.

Well, questions about the election results in a battleground state lead the headlines in our "Campaign News Daily." Independent candidate Ralph Nader has requested a recount of the presidential vote in New Hampshire.

Nader says he did not think he won the state, but he says he is concerned about the accuracy of the results. John Kerry won New Hampshire and its four electoral votes, but in a letter to the secretary of state, Nader claims problems with electronic voting machines inflated George Bush's share of the vote. Nader will have to pay for the recount himself, and he has until Friday to give the state a $2,000 check, along with a pledge to cover any additional recount costs.

In Washington State they are still counting ballots in the race for governor. Republican Dino Rossi now is leading Democrat Christine Gregoire by about 2,100 votes. But about 150,000 absentee and provisional ballots still have been have to be counted. Next Wednesday is the deadline for counties to certify their election results.

The U.S. continues its fight for Falluja in Iraq. Up next, a look at the strategy behind the assault and the road ahead for U.S. troops.


WOODRUFF: As we just reported, the federal government lowering the terror alert level for financial institutions in three major cities. Jeanne Meserve is with us now to explain -- Jeanne.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Those cities are New York, New Jersey and Washington, D.C. It was raised on August 1 because some computer materials were recovered in Pakistan which showed that some sites like Wall Street, like the International Monetary Fund had been surveilled very extensively and the documents indicated they had details that the federal government described as chilling.

Well, nothing has happened. And the federal government has decided to bring that threat level down in those locations.

They say this doesn't mean that they are not still worried about al Qaeda and the threat it poses. But according to one official I talked to, there is a lack of specific and credible intelligence that anything is happening. And there is a feeling, Judy, that they have bolstered security around these sites sufficiently.

They have done things like improved surveillance, they've created security buffer zones. They're doing more screening of people and packages coming into those buildings. And they feel at this point in time, because of those additional measures which have become permanent, they feel they can lower the threat level in those states.

WOODRUFF: And also, as you said, a lack of specific credible intelligence about these locations.

MESERVE: Intelligence at this point in time that they are being targeted, correct.

WOODRUFF: OK. Jeanne Meserve, jumping on the story very quickly, which we just learned about moments ago. Jeanne, thank you very much.

We are told that any moment now in the White House Roosevelt Room President Bush will announce his choice to replace John Ashcroft as the United States attorney general. This is a picture, a live picture coming to us from the White House.

The president is expected to name Alberto Gonzales, someone he's worked with for at least 10 years. Alberto Gonzales went to work for George Bush when he was governor of the state of Texas. Here's the president.


WOODRUFF: President Bush, as expected, naming White House legal counsel Alberto Gonzales, there with his two sons and his wife, to be the nation's 80th attorney general, replacing John Ashcroft, who announced yesterday he is resigning. Among other things, the president said the nation today is safer and more just because of John Ashcroft. We heard him go on to say Al Gonzales is calm -- has been, he said, a calm and steady voice in a time of crisis.

CNN's White House correspondent Suzanne Malveaux is with us.

Suzanne, the president didn't waste any time in making this decision.

MALVEAUX: Well, no, he didn't. as a matter of fact, senior officials say it was not a difficult decision for the president. He has a lot of confidence in Alberto Gonzales.

And I have to tell you, Judy, his fingerprint is on almost every decision that is made from this administration, from the implementation of the Patriot Act, to also holding detainees, U.S. policy regarding that. Some of it quite controversial.

It is expected that he is going to face a lot of the tough questions and the challenges about how you balance people's rights, their civil liberties against protecting them. There are quite a few controversial rulings of his own that -- that the Senate is going to be looking very carefully at. Already we are getting e-mails from some liberal groups, from some civil rights groups saying that they are going to try to fight this nomination -- Judy.

WOODRUFF: That's right. We are getting the same e-mails here from some of those groups, expressing concern about how Alberto Gonzales has interpreted the law, particularly elements of the Patriot Act.

And Suzanne, before I let you go, I just want to read a quick comment from one Democratic member of the Senate Judiciary Committee, New York Senator Charles Schumer, who says, "It's encouraging that the president has chosen someone less polarizing than John Ashcroft." He said -- and that's the reference here.

He said, "We will have to review his record," meaning Mr. Gonzales' record very carefully, "but I can tell you already he's a better candidate than John Ashcroft." So it's a slap at the man who's been holding the job, but at least a tentative nod in the direction of Alberto Gonzales. The president calling him Al Gonzales, someone who's worked with him for the last 10 years.

Suzanne Malveaux, thank you very much.

And INSIDE POLITICS will be right back.


WOODRUFF: Just quickly recapping, President Bush just moments ago naming White House legal counsel Alberto Gonzales to be the next attorney general. This was the scene in the White House just a few moments ago.

Gonzales having worked with President Bush for the last 10 years, dating back to the president's service as governor of the state of Texas. We are not sure when confirmation hearings will begin on the Hill. It could be this fall. But we are told more likely in January.

Well, turning now to Iraq and the fighting under way there now, U.S. and Iraqi forces say that they now control some 70 percent of Falluja in the fight to retake that city. Falluja has been seen as a key insurgent stronghold in Iraq.

Joining me now to talk about the significance of the battle, Ken Pollack, of the Brookings Institution Saban Center on Middle East Policy.

Ken, what is your understanding right now of the situation in Falluja?

KEN POLLACK, BROOKINGS INSTITUTION SABAN CENTER: Well, U.S. forces continue to press into Falluja. And what they are finding, the most important thing, is very little resistance.

Most of the guerrilla fighters seem to have fled the city. This is something that could have been predicted.

They are following a traditional guerrilla strategy which says when you are confronted by mass firepower, or forces of the government, you don't stay and get destroyed. You run away and live to fight another day.

WOODRUFF: But the U.S. military appears to be saying that at the very least they have driven them out of an urban environment where it's harder to confront them. Is that correct?

POLLACK: That's true. And I think we have to recognize that there are very important short-term gains.

Falluja was the center of opposition. And if we are going to have this vote in January of 2005 just coming up, having Falluja in the hands of the rebels was a nonstarter. We could not allow a town that size to be outside the scope of the election. So gaining control over that town so that we can actually have elections there, that is a very important short-term gain.

WOODRUFF: But in the long term, where are -- where are these insurgents going?

POLLACK: Well, that's the problem. They are melting away into the tribal hinterlands. That's the thing to recognize, is that most of the guerrillas are members of various Iraqi, Sunni Arab tribes. And it is very easy for them. They don't wear uniforms. They look like just about everybody else in the street. They put away their Kalashnikov, they put away their RPG, they go about their business. And at some point in the future they'll pull out those Kalashnikovs, they'll be right back at it. And that's the key, is over the long term, taking down the city has no relevance to defeating the insurgency.

WOODRUFF: So was it a mistake to wait as long as the U.S. forces had to go into Falluja?

POLLACK: I would say it was in the sense that we should have taken down Falluja 18 months ago and never allowed the insurgency to establish itself there. That was one of the problems with the size of the force we went in with. We didn't have enough troops to take down every town in Iraq.

As far as taking down this city, I think it is clear we needed to wait to build up the firepower so that we could go in. Had we not done so, the rebels might have decided to stay and fight it out with us. We might have had a real bloodbath on our hands in Falluja. That would have hurt the government.

WOODRUFF: So given what you are describing, Ken, what are the prospects for the elections in January?

POLLACK: Well, this is just it. I think now that we've gotten control of Falluja, there's a greater expectation we can at least have the elections in Falluja. They'll do this in other towns around Iraq.

My guess is by January they will be able to have elections in most of these places. But what we need to recognize is that, while it's important that we can have the elections in each of these places, taking down each of these towns doesn't solve the bigger problems of Iraq and, in particular, it really doesn't get at the issue of insurgency.

You can't defeat an insurgency by killing all of its people, by taking down all of the towns. That's not how you do it.

You do it by dealing with the underlying political and economic grievances. And I know talking to my friends in uniform, what they are all nervous about, what they are saying is, look, we have taken down Falluja, we have done our part of the job. It's now up to the political and economic side of the U.S. government to make sure that they make the Sunni Arabs in Iraq happy enough to actually participate in the process of reconstruction.

WOODRUFF: And that is something that hasn't completely happened yet.

POLLACK: Not at all.

WOODRUFF: There's still a lot of work done -- to be done in that area.

All right. Ken Pollack, we're going to have to leave it there. But I hope we can talk with you again soon.

POLLACK: My pleasure.

WOODRUFF: Clearly, this story seems to -- is not going away anytime soon.

POLLACK: Unfortunately not. Thanks, Judy.

WOODRUFF: Ken, thank you very much. Appreciate it.

Well, President Bush is, I guess you could say, tweaking his team as he heads into his second term. Coming up, two veteran political operatives look at the holes in Bush's cabinet and ask whether he's filling them well.

And Democratic insider Donna Brazile tells us what John Kerry has been up to today. And she'll talk about her own future within the party.



WOODRUFF: We're just upon 4:00 on the East Coast and as the markets get set to close on Wall Street I'm joined by Lou Dobbs in New York for "The Dobbs Report." Hi, Lou.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Hi, Judy. The Federal Reserve today raising interest rates by a quarter point as expected for a fourth time since June. The move as I said widely expected. The Fed fund's rate is now 2 percent. The last time it was there three years ago. And the Fed signaled it's not done raising interest rates saying the jobs market is doing better, the economy appears to be growing at a moderate pace, and so far this year's series of interest rate hikes have had surprisingly little effect on pushing consumer rates higher. In fact, mortgage interest rates have actually declined since the Fed started raising rates. Stocks on Wall Street today showing little reaction to the rate hike as well as the final trades are being counted. The Dow Jones Industrials should close at around three points higher. But technology stocks weak again following a disappointing sales outlook from Cisco Systems. The Nasdaq Composite down nine points.

In currency trading today the dollar snapped back from another record low against the euro. Earlier today the euro topped $1.30 for the first time. The dollar's decline came on news that our trade deficit narrowed by nearly 4 percent in September. But still held above $50 billion for a fourth straight month. The U.S. trade deficit on its way to another record high.

Oil prices up nearly $1.50 today. Concerns about lower winter fuel supplies driving prices, crude oil settling near $49 a barrel.

In corporate news MGM-Mirage wants to remake a big part of the Las Vegas strip. It wants to build a $4 billion mega resort it's calling Project City Center. That development would include a 4,000- room hotel and casino, 600 condominiums, dozens of restaurants and an outdoor shopping center designed like New York City's SoHo area.

Coming up on CNN at 6:00 p.m. Eastern on "LOU DOBBS TONIGHT," our special report the Bush agenda. We focus on the president's plans for immigration policy. We'll take a closer look at legislation the Bush administration would like to push through Congress, including temporary guest worker programs that would give legal status to millions of illegal aliens now in this country.

Also tonight, he's the man who unseated Democratic Minority Leader Tom Daschle. South Dakota's Senator-Elect John Thune will be my guest. We'll be talking about the Bush agenda.

And the president chooses a long-time friend to replace Attorney General John Ashcroft. White House Counsel Alberto Gonzales is the president's nominee. We'll have the latest and a report from Iraq on the fight for Fallujah. General David Grange will be with me to assess the battle now raging there.

That's it from New York. Now back to Judy Woodruff -- Judy.

WOODRUFF: So, Lou, with the trade deficit numbers we're hearing for this past month, a little better than expected, does that mean that's less of a worry for the economy overall and for the president?

DOBBS: Not at all, Judy. Unfortunately, what we saw record exports, but they only went up 0.1 percent. We have a trade deficit that is approaching $600 billion, almost 6 percent of our GDP. It is a serious problem, and not likely to improve soon, even with the declining dollar.

WOODRUFF: All right. Lou Dobbs, thank you very much. We'll see you at 6:00.

DOBBS: Thanks, Judy.

WOODRUFF: INSIDE POLITICS continues right now.


ANNOUNCER: John Ashcroft was a lightning rod for liberals, but will Alberto Gonzales be as controversial?

We'll take a closer look at the man the president wants as our next attorney general.

When Bill Clinton speaks, Democrats listen.

BILL CLINTON, FMR. PRESIDENT OF THE UNITED STATES: We cannot be nationally competitive unless we feel comfortable talking about our convictions.

ANNOUNCER: We'll tell you what other political advice the former president is offering the Democratic party.

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


WOODRUFF: Welcome back. Given the flack that John Ashcroft has gotten during his tenure as attorney general, almost anyone President Bush might choose to replace him could seem to be politically tame by comparison. But Alberto Gonzales does have his critics. Our justice correspondent Kelli Arena joins me now with more on the man that the president officially tapped for this job just moments ago -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Alberto Gonzalez is clearly a close Bush confidante. And some say that in itself could pose some problems. If he's confirmed, he'll start his job amid a lot of controversy over the administration's handling of the war on terror. The president made the announcement a short time ago. Here's what he had to say.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: His sharp intellect and sound judgment have shaped help our policies in the war on terror, policies designed to protect the security of all Americans.


ARENA: As White House counsel, Gonzales feted some of the most important decisions, among them, dividing the legal line between interrogation and torture and advising the president on the legal rights of enemy combatants arguing that they were not subject to the Geneva Conventions. Now that issue is currently making its way through the courts.

And Gonzales could be headed for some more controversy. The Justice Department has some very politically charged operations under way. There's the Halliburton probe and the investigation into who leaked the name of a covert CIA operative. Interestingly Gonzalez is drawing criticism even from some Republican camps, although none would speak on the record. They say the White House might be able to control him. But let's face it, the attorney general is often called upon to do the president's bidding. For example, Gonzales would have to work to win renewal of some portions of the Patriot Act, and he would have to help push through judicial nominations. Overriding all of this, obviously is the war on terror, and preventing future attacks.

Gonzales' supporters say he is well qualified on all fronts. He has the experience necessary to handle what comes his way. And they point out that there is a long tradition of close relationships between presidents and attorney generals, and don't see why this close relationship should make any difference.

WOODRUFF: And it also sounds, Kelli, as if -- this coming so soon after the president won reelection, that Democrats are going to be reluctant to use up a lot of political capital opposing him.

ARENA: That is a strategy that some are suggesting is going to override this whole thing, that he will get confirmed, that they'll wait and see, that there might be bigger fish down the road that they'll have to contend with.

WOODRUFF: But we're still waiting to find out exactly when the confirmation hearing will take place. That has not been made clear yet.

OK. Kelli Arena. Thank you, very much.

ARENA: You're welcome.

WOODRUFF: While the president is making changes in his cabinet, his predecessor is urging changes within the Democratic party. Bill Clinton has been speaking out about the '04 election results and why the vote went the way it did. And our senior political analyst Bill Schneider has been listening.


WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): It's rare to hear Bill Clinton and Karl Rove agree on something, but yesterday they did. Asked about the impact on the presidential election of the Massachusetts supreme judicial court's decision allowing same-sex marriage, Rove said, "I will grant you that the actions of a few activist judges in Massachusetts captured and colored the national imagination."

Bill Clinton said the same thing more directly in a speech at Hamilton College in New York on Tuesday.

CLINTON: With regard to the gay marriage issue, it was an overwhelming factor in the defeat of John Kerry. There's no question about it.

SCHNEIDER: Noting the astonishing turnout of evangelical Christians, Clinton congratulated President Bush for what he called a brilliant campaign.

CLINTON: It worked superbly, but probably part of it's our fault for not making it clear that -- what our position was.

SCHNEIDER: Clinton argued that Kerry had a story to tell that did not get told in his campaign.

CLINTON: He had a position that I don't think most Americans knew or wouldn't take seriously, which was that for over 200 years marriage has been left to religious doctrine and state law.

SCHNEIDER: Most voters take a moderate position. Let the states and the churches define marriage.

CLINTON: We don't go off and amend the constitution every time the Supreme Court says something we don't agree it.

SCHNEIDER: Most voters take a moderate position on abortion as well. Clinton's position: that abortion should be safe, legal and rare. CLINTON: I'm proud of the fact that we reduced the number of abortions by 25 percent without repealing Roe v. Wade, without demonizing anybody. But trying to promote what the president calls a culture of life.

SCHNEIDER: Clinton is advising Democrats to tell their story.

CLINTON: We cannot be nationally competitive unless we feel comfortable talking about our convictions.


SCHNEIDER: Some Democrats will hear that as a call to defend their liberal positions. But that is not what Clinton is saying. He's saying Democrats should rally a moderate majority on issues like same-sex marriage and abortion and condemn the Republicans for dividing the country -- Judy.

WOODRUFF: And Bill, do we know if Clinton spoke to Kerry about this during the campaign?

SCHNEIDER: Well, the latest issue of "Newsweek" reports that Bill Clinton telephoned John Kerry during the campaign and urged him to back the statewide bans on same-sex marriage. And Kerry's response, according to "Newsweek" is, I'm not ever going to do that. You may recall that back in 1996 Bill Clinton supported and signed the Defense of Marriage Act which prohibited the federal government from recognizing same-sex marriages. Kerry was one of 14 senators to vote against that measure.

WOODRUFF: That's right. Reminding us of a little history, Bill Schneider, thank you very much. We appreciate it.

Bill Clinton's days of running for president are behind him, but does John Kerry want another shot at the White House. Up next, we'll find out what Kerry has been telling labor leaders.

Also ahead, Democratic and Republican political veterans go head- to-head in the president's nomination of Alberto Gonzales as attorney general and more.


WOODRUFF: Reaction starting to come in to President Bush's announcement he's naming White House Counsel Alberto Gonzalez to replace John Ashcroft as the U.S. attorney general, to nominate him for that position.

And we want to tell you about one reaction we just received from Senator Patrick Leahy of Vermont. He's the ranking Democrat on the Senate Judiciary Committee. Of course, that's the committee that would have to confirm Gonzales.

Among other things, he says, "I like and respect Judge Gonzalez," he said, "but," he says, "the Justice Department in the first Bush term was the least accountable Justice Department in my lifetime." He goes on to say, "These confirmation hearings will be a rare opportunity for the Senate and the public to finally get some answers on several issues for which the administration has resisted accountability."

Again, this from -- this statement from Senator Patrick Leahy of Vermont. He says, "Including the administration's use of the Patriot Act, the lack of cooperation with Congress on oversight, and the policies that have rejected by the courts on the treatment of detainees." He said, "This also may be the only remaining forum in which to examine more fully the steps that were taken to weaken U.S. policy on torture in the period that led to the prison scandals at Abu Ghraib and Afghanistan."

Again, these comments coming from Patrick Leahy, who is the ranking Democratic senator on the Judiciary Committee, the committee that will have to confirm Alberto Gonzalez.

Well, one day after meeting with Democratic leaders on Capitol Hill, John Kerry was out and about again, speaking at a closed meeting of political leaders of the AFL-CIO. And by the way, John Kerry this morning had breakfast with Terry McAuliffe, chairman of the DNC.

Just a short time ago, I spoke with Democratic strategist Donna Brazile about Kerry's future and her own. I started by asking her what she's hearing about what Kerry said today.


DONNA BRAZILE, DEMOCRATIC STRATEGIST: Well, it appears that Senator Kerry attended today along with his campaign manager Mary Beth Cahill. What he said to the labor union leaders is pretty much the talk of the town right now.

He's not ready to lick his wounds. He wanted to take on this value fight. He's ready to roll up his sleeve and be a voice on Capitol Hill, but continue to fight the issues that he raised in the campaign.

Look, Judy, he told him he them that he lost by less than 65,000 votes, and there was no time to act like he was defeated in any way.

WOODRUFF: How do you figure 65,000 votes?

BRAZILE: Well, clearly it was a very tough race. It was a very slim margin of victory for President Bush. The outcome is not in doubt, but Senator Kerry is ready to rally the troops and then get back out there to fight those issues that he cared about.

WOODRUFF: But you're looking at the close votes in the states like Ohio and some of the others?

BRAZILE: Absolutely.

WOODRUFF: Does this party go forward -- what sort of leadership does it need? Is the party going to accept a John Kerry resurrecting himself right away as a potential candidate for '08?

BRAZILE: Well, Senator Kerry also has met with a number of other leaders. In addition to Senator Reid and Ms. Pelosi, he's met with Terry McAuliffe. He wants to be part of the process. He wants to help to choose the next leader of the Democratic party. Clearly, he has an interest in doing it as a United States senator, but more importantly, it appears that the door to 2008 is still open.

WOODRUFF: All right. Speaking of the next leader of the Democratic party, your name has been prominently mentioned as somebody who would be -- who the party would be interested in placing as chairman of the Democratic National Committee.

Now, you said earlier today you're not interested. Have you really fully closed the door on this?

BRAZILE: I closed the door. Look, I haven't even opened the door, Judy. I don't want this job. I mean, this job requires somebody who is able to devote the next four years of their life to helping rebuild the Democratic party. I want to be a part of the process as a member of the DNC, of course -- I've invested a lot in this party -- but not as party chair. Perhaps going back to being just a regular party activist.

WOODRUFF: You've been talking to Howard Dean. You've been talking to others. Who's interested in the job?

BRAZILE: Well, Howard Dean is making calls all across the country. As you know, the activists are calling upon him to consider this, as former finance chairman and national chair. Steve Grossman, another chair -- the former chair of the DNC -- is actively recruiting people to support Howard Dean. Most of his support right now lies outside the Beltway. He's very interested.

Former Governor Roy Barnes is being contacted...

WOODRUFF: Of Georgia.

BRAZILE: Of Georgia, that's correct. He is someone that people believe is a moderate southern former governor, could perhaps help the party reengineer, retool its message in the south. Former Congressman -- well, he's still a Congressman -- Martin Frost, his name is also being bantered about.

So, we're hearing from a lot of people right now. But the door right now is still wide open.

WOODRUFF: Howard Dean is also thinking about running for president. Are the two things compatible?

BRAZILE: I think Howard Dean will have to make a decision to either go for chair or to run for president. I don't think he can do both. I think the party will not put him in that position if he decides to, you know, continue to pursue the presidency.

WOODRUFF: How important is this DNC chairmanship, Donna, number one? And number two, how strong a sentiment is there to get a southerner in there, frankly?

BRAZILE: Well, when your party is out of power, as the Democratic party now has been for a number of years, it's important to have a very strong chairperson who can really articulate the values and goals of the party.

In 2001, after the 2000 campaign, it was Terry McAuliffe who rallied the party to go back and win those gubernatorial seats in New Jersey and Virginia. So, it's important that you have somebody who can raise money, but also go out there and reenergize the party to come together and to fight the next battle.

WOODRUFF: And what about the southern...

BRAZILE: Well, there's no question. I'm hearing from a lot of southerners, they felt that John Kerry did not compete for their votes. They want someone who will not only visit the south, but also -- and raise money, of course -- but also someone who will, you know, basically go down there and compete for southern votes.

WOODRUFF: What's the first thing -- once the DNC chair is chosen, what's the first thing the party needs to do now?

BRAZILE: I think in the interim period between now and next February, when the next leader will be chosen, the party really needs to sit back and evaluate what happened these last couple of weeks of the election.

John Kerry had a tremendous number of new voters, new activists who came into the fold. They want to hear from the party. They want someone who will talk to them, who will help them reevaluate their status in the play.

I think the party needs to also figure out ways to keep all of those activists, you know, energized out there. We need to figure out ways to continue to raise some money, but really prepare for the new political season, which will begin in less than 90 days.


WOODRUFF: Donna Brazile saying she's not interested in being chair of the Democratic party, but talking about others who might be.

A look ahead to the new Bush cabinet, and a look back at the election results. Two long-time political observers join me to assess the Bush victory and prospects for his second term when INSIDE POLITICS returns.


WOODRUFF: Two highly respected political observers join me now to talk about the election and some changes in the Bush cabinet. Jack Valenti is a former aide to president Lyndon Johnson. He joins us from West Palm Beach, Florida. Ed Rollins is in New York. He's a GOP strategist and former campaign manager for Ronald Reagan. Ed Rollins, to you first. The selection of Alberto Gonzales to be attorney general, do you expect any bumps for the president on that?

ED ROLLINS, GOP STRATEGIST: I don't expect any bumps. I think he'll get a fair hearing and I think it may be an aggressive hearing in the sense that the Democrats are now an opposition party. I think they're going to take the opportunity to question him thoroughly. But he's a confidante of the president. Historically, the attorney general's often been a confidante of the president. And I think to a certain extent he will be an excellent choice.

WOODRUFF: Jack Valenti, is there anything -- is it worthwhile for the Democrats to use up some political capital going after Alberto Gonzales?

JACK VALENTI, FMR. AIDE TO PRESIDENT JOHNSON: Not with that Hispanic Harvard law graduate in his background that Judge Gonzales has. He'll have some tough questions, because some of the Democratic senators will want to do a little bumping on Attorney General Ashcroft. But he will sail through for all the right reasons.

WOODRUFF: But to Ed Rollins, so the Ashcroft tenure is pretty much history now, and we move on?

ROLLINS: Well, I certainly think we move on a lot of different fronts. You know, John, I think, did a very aggressive job and a very effective job at a very difficult time. But he himself became very much a point of opposition. And I think to a certain extent, the new attorney general will be much lower profile. A very important job, obviously, in the fight on terrorism and everything else. But I think his profile will be lower and certainly will not be a man who will be quite as a...

VALENTI: Judy, I break in to say, I think what Judge Gonzales' first priority will be to do a balanced, a very delicate balance between the war on terrorism in this country and American civil liberties. I think that is the key roster from which he will spring. And I think that the American people will want to see that that's done right.

ROLLINS: I agree totally.

WOODRUFF: I'm going to move you both quickly looking back to the election. Because we've had comments from Karl Rove, the president's top political adviser, and now from Bill Clinton and John Kerry on this whole matter of gay marriage with Karl Rove saying same-sex marriage was part and parcel of a broader fabric where this year moral values ranked higher than they traditionally do. You have John Kerry apparently saying to AFL-CIO leaders today that he should have been clearer -- he should have made clearer his position, and Bill Clinton weighing in the same.

Ed Rollins, how much of a problem is it for Democrats that they didn't articulate their view, or were their views articulated sufficiently?

ROLLINS: Well, I think at end of the day, the public re-elected Bush because they saw him as the more able commander-in-chief at a very difficult time. I think for the Democrats though who historically have had very strong support in the Catholic faith and other constituency groups of different religions, they've lost a lot of that. And Kerry was the first practicing Catholic since John Kennedy. When I was young boy and Jack was a younger boy, Kennedy was -- every Catholic had an obligation to go out and help Jack Kennedy. Today obviously Kerry couldn't carry the Catholic constituency. I think to a certain extent, this is a character thing that people -- they sort of define morals in their own way, and I think it's part of ethics, and I think a part of a whole variety of things. But I think at the end of the day this president won because people didn't want to change horses at a very critical time.

WOODRUFF: Jack Valenti, Bill Schneider reported a little while ago that former president Clinton actually called John Kerry and the campaign and told him to speak up in favor of these state resolutions supporting a ban on gay marriage. And John Kerry said he would never do that. Was that a mistake?

VALENTI: Politically, I think it was. Keep in mind, I've been saying for years based on my long experience that in presidential races people vote (UNINTELLIGIBLE) they vote with their heart and not their head. And I think sometimes Democrats and Republicans lose sight of that fact. This was a race about values, but values are not just held by the right wing of the Republican party, they're held by everybody left, right and center. You know, the old varities (ph) of duty, honor, service, integrity, pity, pride, and compassion, sacrifice, these are what William Faulkner called the ovarities (ph) and they're very, very important in presidential elections, because of the fact that these issues are so complicated, so riddled with contradiction, that nobody knows who's right.

What people do know is which one they think is right and that's how they vote. I might even go on to say, if I may, Judy, the Democrats ought to remember one thing. In politics nothing lasts. In '64, Lyndon Johnson won the 61 percent of the vote. Bush had 50.1 percent. He had a 33-seat majority in the Senate, Bush has 5. He had 140-seat margin in the House, Bush has 30. The only point I'm making is, four years after Johnson took office, and everybody wrote off the Democratic party for a generation, four years later Nixon was president and the Republicans took over. So that's the old maxim that nothing lasts in politics.

WOODRUFF: A little bit of history. We're going to have to leave it there. Much more to talk about. And I hope to have you back on -- both of you very soon to finish this conversation. Ed Rollins, Jack Valenti. Thank you.

INSIDE POLITICS will be right back.


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


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