Return to Transcripts main page

Inside Politics

Interview with Dick Gephardt; Behind Flap Over Bush 9/11 Photo; Did Administration Set Up President Jimmy Carter to Boost Bush's Political Fortunes?

Aired May 15, 2002 - 16:00   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: I'm Judy Woodruff in Washington. House Democratic leader Dick Gephardt goes "On the Record" about the Republican sale of a September 11th photo, and his own party's agenda.

JEFF GREENFIELD, SR. CNN POLITICAL ANALYST: I'm Jeff Greenfield in Washington. Behind the flap over that 9-11 photo of President Bush, there are some lessons from America's political history.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: I'm Bill Schneider in Washington. Did administration officials set up former President Jimmy Carter to boost the Bush's political fortunes in Florida?

WOODRUFF: Also ahead, actress Laura Dern. She plays a crusader against HMOs in a new TV movie. She will join our health care debate.

Thanks for joining us. We begin in Florida, where Governor Jeb Bush is responding today to the case of missing 5-year-old Rilya Wilson. Bush signed a law, a bill, making it a felony for state workers to falsify records. The state legislature approved the measure last week in special session after officials said a child welfare worker falsely claimed to be keeping up with Wilson's case.

CNN's Susan Candiotti is in Miami, where Rilya Wilson vanished. Susan, does this bill signed by the governor today have teeth in it?

SUSAN CANDIOTTI, CNN CORRESPONDENT: Judy, it has some teeth. Before it was always against the law to falsify documents, but it was a first-degree misdemeanor. This does make it a felony and would typically increase the penalties.

But the question everyone is asking is, will anyone be charged as a result of this? And more so if, for example, a caseworker decided to falsify documents, would it make them change their mind if they knew it was a felony as opposed to a misdemeanor?

In fact, some of the people I talked with who agreed to the law, who signed on to it, sponsored it and helped pass it, said do we really think this will change anything? No. They're calling it window dressing.

WOODRUFF: Susan, meantime, what's the latest on the investigation into what happened to this child? CANDIOTTI: Well, there are still no hard leads as to where little 5-year-old Rilya Wilson is, who disappeared from the custody of the state at least 16 months ago now. The blue ribbon panel had another meeting today, appointed by Governor Bush, to look into the matter. And they admitted that, for example, here in Miami, that state welfare officials should have called in the police earlier than they did.

They waited for six days while they searched their own records to see if they could find the little girl. And in addition to that, they are also acknowledging -- the child welfare agency -- that they really should start fingerprinting anyone with whom they place a child. They didn't in this case.

And if they had done fingerprints, through a state crime computer and national crime computers, they would have learned, for example, that the caretaker in this particular matter had 33 aliases, had a long criminal record.

Although it is important to state that the caretaker who you are seeing, Geralyn Graham, is not considered a suspect. Police say they don't know who is telling the truth in this case, including a number of state employees who they don't think are being straight with the police.

WOODRUFF: Such a tragedy. Susan Candiotti, thanks very much.

Now we go to California, where Republicans are lining up to criticize Governor Gray Davis' new budget proposal that will raise taxes and cut into state programs. When Davis unveiled the plan yesterday, he gave more fodder to his critics, who already were taking aim at the Democrat's fund-raising practices. Here now, CNN's Rusty Dornin.

(BEGIN VIDEOTAPE)

RUSTY DORNIN, CNN CORRESPONDENT (voice-over): It didn't take long after California Governor Gray Davis held his hand up to be sworn in that he held it out for donations.

Fund raising furiously for four years, Davis has raised nearly $43 million for his reelection campaign -- a sizable war chest, that critics say was built in part with promises of fat contracts and key decisions to generous contributors.

Oracle donated $25,000 to Davis. The computer company happened to get a $95 million no-bid contract. Only one of several no-bid contracts under scrutiny. Democrats and Republicans alike are asking questions about political favors.

STEVE MAVIGLIO, GOV. DAVIS PRESS SECRETARY: That's simply ludicrous. We have a long list of bills that the governor has vetoed for people that have supported him, as well that he supported.

DORNIN: Political consultant Mark O'Hara organized two fund- raisers for Davis. MARK O'HARA, POLITICAL CONSULTANT, There is an enormous amount of pressure to give to the governor. And there's a real sense that the failure to give has political consequences.

DORNIN: The big consequence for Davis might be in clouding what would was to be been a shoo-in against a relative unknown, Bill Simon.

BILL SIMON (R), CALIFORNIA GOV. CANDIDATE: Governor Davis has been raising money in record amounts. And yet he refuses to turn over his fund-raising calendar.

UNIDENTIFIED MALE: At the minimum, I think it has put Simon back into the race. It's put the Davis campaign on the defensive.

DORNIN (on camera): Adding to the controversy, now the bottom line. The governor announced this week the state will be short more than $23 billion. That has Republican lawmakers grumbling that the governor cared more about his own campaign coffers than those of California's.

(voice-over): Now he wants Californians to pay higher taxes, despite insisting for months that he had no intention of doing that. One controversy that, if anything, may help the Davis campaign, it's a vindication of his crusade against the energy giant, Enron -- a company he claimed was driving up power prices during the energy crisis.

O'HARA: Last year at this time, everybody thought the governor was just whistling Dixie and blaming the crisis on energy generators. But low and behold, it turns out, through a series of Enron memos we've seen in the last week, they're to blame.

DORNIN: Davis supporters are hoping that will make voters remember their governor as a tireless crusader, and not as a money- hungry politician. Rusty Dornin, CNN, Sacramento, California.

(END VIDEOTAPE)

WOODRUFF: Ron Brownstein of the "Los Angeles Times" is here now with us, for more on Enron and California politics. Ron we know there's a Senate commerce committee hearing on these Enron memos implicating the company. How is this issue affecting the governor's race so far in California?

RON BROWNSTEIN, "LOS ANGELES TIMES": Really, it's one of the few pieces of good news that Gray Davis has had in recent weeks, with this big budget deficit and the other questions about his fund-raising. Basically, the Enron memos have allowed the California officials to resume their offensive aimed at the Federal Energy Regulatory Commission for a whole series of measures that Davis says are necessary to compensate the state for what it says were market manipulation during the energy crisis.

They're looking for big refunds from FERC, from the power providers. They're also looking from FERC to order a renegotiation of long-term contracts, that he's signed that are now under intense fire in the state --the argument, they've overpaid in these contracts.

Basically what the Enron memos have done is allowed California officials to say, look, we told you so. We told you they were manipulating the market. The market wasn't fair. And you have to provide relief.

WOODRUFF: So, does this take all the heat off Governor Davis then?

BROWNSTEIN: No, it doesn't. I mean, Davis' approval rating is under 50 percent, which is why you can never call this race over, anytime you have an incumbent under 50 percent. And a lot of the reason for that is a sense of disappointment in his handling of the energy crisis.

But what this does do is allow officials again to resume their criticism of national administration, of the federal government, for not doing enough to protect California consumers. Because really, since last June, when the federal regulators somewhat reluctantly imposed price caps in California, there's been a truce or a cease-fire between the California Democrats and the Bush administration.

What you saw at this hearing today in front of Senate commerce committee was the ending of that truce and the beginning, I think, of a new round of conflict.

WOODRUFF: Just because of these memos. All right, Ron Brownstein, thanks very much. See you later.

The Bush administration today is standing firmly behind the U.S. trade embargo on Cuba, despite Former President Jimmy Carter's call in Havana yesterday to lift the sanctions. Mr. Carter continues his Cuban tour a day after delivering a landmark address to the people of the communist nation.

The White House says some parts of Carter's speech, in which he calls for human rights reforms in Cuba, were helpful. Our senior political analyst, Bill Schneider, has more on the Bush administration, Cuba and Carter's trip -- Bill.

SCHNEIDER: You know, two days before President Carter's trip, a State Department official accuses Cuba of developing bioterrorism capability. Two days after Carter returns, President Bush is expected to go to Miami to call for tougher sanctions against Cuba. There is something funny going on here.

(BEGIN VIDEOTAPE)

(voice-over): Is this a political setup? One historian who has written a book about Former President Carter, thinks so.

DOUGLAS BRINKLEY, PRESIDENTIAL HISTORIAN: They can say, look, Carter went down there and apologized to Fidel Castro, someone who's been an enemy of the United States since 1959. And it may make the Bush-Cuban policy seem more popular with the American people. SCHNEIDER: Jimmy Carter did not apologize to Castro. But he did call on Cuba to accept democratic reforms and the U.S. to end its trade embargo.

JIMMY CARTER, FMR. PRESIDENT OF THE UNITED STATES (through translator): The embargo freezes and it induces resentment.

SCHNEIDER: And, he said, the U.S. should act first.

CARTER (through translator): The United States is the most powerful nation. We are the ones that should take the first step forward.

SCHNEIDER: That's exactly the opposite of what President Bush said a year ago on Cuban independence day.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: My administration will oppose any attempt to weaken sanctions against Cuba's government. And I will fight such attempts until this regime frees political prisoners, holds democratic free elections and allows for free speech.

SCHNEIDER: On Cuban independence day this year, President Bush plans to go to Miami and say the same thing -- Carter's trip, notwithstanding.

BUSH: I didn't complicate my foreign policy because I haven't changed my foreign policy.

SCHNEIDER: What Carter's trip does do is turn the embargo into a partisan issue. Democrats say, end it.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: We can democratize Cuba with greater trade and greater outreach.

SCHNEIDER: Republicans say Castro must act first.

GOV. JEB BUSH (R), FLORIDA: Before we change our policy, he should as well. He should do it first.

SCHNEIDER: Note: the president is going to Florida to raise money for his brother's reelection campaign.

(END VIDEOTAPE)

President Carter's trip helps Republicans draw a partisan line. They can say, if you care passionately about keeping pressure on Castro -- as most Cuban-Americans and conservatives do -- you must vote Republican -- Judy.

WOODRUFF: All right, Bill Schneider, thanks.

Still ahead, the Republicans and the September 11th photo flap. It's part of our daily debate.

And, our conversation with House Democratic leader Dick Gephardt. I'll ask him about his presidential aspirations in '04.

We'll have the "Inside Buzz" on why Representative J.C. Watts was so angry, he stood up President Bush.

And later...

(BEGIN VIDEO CLIP)

LAURA DERN, ACTRESS: Personally, I have decided even one death is too much.

(END VIDEO CLIP)

WOODRUFF: Actress Laura Dern and the doctor she plays in a new TV movie share their concerns that HMOs provide "damaged" care. And we'll get a response from an industry representative.

(COMMERCIAL BREAK)

WOODRUFF: Now the minority leader of the House of Representatives, Dick Gephardt. Thank you for being with us.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: Good to be with you.

WOODRUFF: First, that controversial photograph. The White House officials there are saying that using a picture of President Bush on September the 11th, there's nothing wrong with doing this to raise money for the Republican Party because it is a public photograph.

GEPHARDT: Well, that isn't the point. I think it's disappointing because we have really tried hard, and I think the president has tried hard, since September 11th, to keep everybody together, to be bipartisan, and to not let the war become -- or anything surrounding the war -- become a partisan, political issue.

So this calls that into question. I'm sorry it happened. And I hope it won't happen again. I hope we don't go back into this.

I think we've done a good job. We've trusted one another. We've worked together as Americans, not Democrats and Republicans, to solve this problem. And we need to stay there.

WOODRUFF: They're saying the problem is just that Democrats are having a hard time coping with the fact that this president is so popular.

GEPHARDT: No, we're not having any trouble with it at all. We understand his popularity, and we understand, most importantly, that America has to win this war. This, again, cannot become political.

We can't drag it into politics. We've got to stay together. We've got to be bipartisan and we've got to work together every day, not only on the war against terrorism, but on the Middle East and a lot of other foreign challenges that we face in the world today. WOODRUFF: Well, speaking of the president's popularity, the November midterm elections, historically, as you know very well, the party out of power picks up seats in the first midterm after a new president takes office.

But this time, with President Bush so popular, are the Democrats at a disadvantage?

GEPHARDT: I don't think so, Judy. Five weeks after 9-11, when he was probably in the 90s in the polls, the Democrats won the governorship of Virginia and New Jersey. We also know that even when the country's at war, presidents don't do so well in elections.

Franklin Roosevelt lost 50-some-odd seats in the House 11 months after Pearl Harbor. It's almost as if it's counterintuitive. I think people don't want any president to have all the power. And especially in wartime, they get nervous about that. So I think the history shows us that the party out of power does well in the next election.

WOODRUFF: But they have an enormous money advantage, don't they?

GEPHARDT: Well, they do and they don't. They've always raised more money than we do. But if you look at the House committees, they've raised double what we have in 2001, but they only have $3 million more than we have in the bank. They tend to spend more money than we do to raise the money.

WOODRUFF: Let me ask you about Social Security. You and other Democrats have been raising the issue of Social Security. But your counterparts, the congressional Republican leaders in the Congress, are saying nothing is going to be done on this this year, that they have no plans to privatize Social Security. And they say when you and other Democrats keep raising it, that you're not telling the public the truth.

GEPHARDT: Well, I don't think they're telling the public the truth. The president has talked about privatizing Social Security for three years now.

Many Republicans in the House agree with his proposal and have said that. They put together bills that really accomplish that. We suspect that what they're doing is trying to stay away from this debate until after the election.

WOODRUFF: Let me ask you a question quickly, finally, about 2004. Congressman, you have said repeatedly that your main focus this year is on the Democrats retaking control of the House. But the money raised by your leadership PAC, according "Roll Call," most of it, or almost entirely, that money, has gone to local races in Iowa and New Hampshire, the states that are the sites of the first two presidential primaries in '04. This smells like a presidential campaign.

GEPHARDT: Well, we have a matter of winning the House back before then. And we have hot races, many good races, in New Hampshire and Iowa, and a lot of other states.

WOODRUFF: But you have to admit, it smells like a presidential campaign.

GEPHARDT: My focus is winning the House back. We make contributions all over the country for candidates at the local level and at the congressional level, that we're trying to help.

WOODRUFF: But most of the money has gone to Iowa and New Hampshire, right?

GEPHARDT: Well, some of it has so far, because we have very strong congressional races in those states. We probably have, between those two states, five seats that we can definitely win.

WOODRUFF: But a lot of the money has gone to local races, not just congressional races.

GEPHARDT: Well, the reason you help in local races is to help get the vote out when the congressional race comes. And so it all goes towards the same end. This is what the DCCC does, and this is what I do, and what I'll continue to do.

WOODRUFF: So you're saying it's just a coincidence?

GEPHARDT: It is where we have strong congressional races.

WOODRUFF: All right.

GEPHARDT: These are two of our best states.

WOODRUFF: All right. Dick Gephardt, we're listening to you very carefully. Thank you so much for joining us today.

GEPHARDT: Thank you.

Our "Newscycle" is next.

Plus, why CBS is under fire for last night's newscast.

(COMMERCIAL BREAK)

WOODRUFF: A quick update on the stories in our "Newscycle." Florida Governor Jeb Bush today signed a bill making it a felony for state employees to falsify records. The bill was passed after reports the caseworkers in charge of Rilya Wilson, a missing 5-year-old girl, falsified records related Wilson's care.

Here in Washington, President Bush honored the memory of America's fallen law enforcement officers at a ceremony outside the Capitol. Mr. Bush made special mention of the 72 officers who died in New York on September 11th.

And more details on a tank fire in Texas. One soldier is dead, eight others injured, after an Army tank caught fire today at Fort Hood. The tank was an M1A2, which is the Army's newest model. It was on a firing range, but had not fired a shot when the incident occurred, just before 6:00 this morning. With me now to talk about some of this day's other top stories, Margaret Carlson of "TIME" magazine and Tucker Carlson, co-host of CNN's "CROSSFIRE."

Tucker, that photograph that we keep talking about, the one the Republican Party is using to raise money, selling the picture of the president on Air Force 1, on the phone with the vice president -- the White House is saying that it's perfectly fine, it's a publicly available photo. There's nothing wrong with using it.

TUCKER CARLSON, "CROSSFIRE": I think it's a picture of the president doing his job. So, I mean, compared to other options, say, the president wagging his finger at the public and lying, you know, it's not as bad as it could be.

That said, it was a mistake and I think Republicans recognize it was a mistake, to sell the picture. But it was not -- I mean, the argument the Democrats always use, with judges, for instance, is, well, they did it to us.

And Republicans, of course, using the exact same argument, roughly. But it's is accurate, that Clinton did make reference at fund-raisers to his former policy successes in Bosnia and Haiti, and that ti's just sort of par for the course. That's what presidents do.

MARGARET CARLSON, "TIME" MAGAZINE: Well, it's accurate, but childish. It's childish when Democrats do it about judges, and it's childish to do it here about, Clinton was just as bad. Because as Tucker says, it isn't the right thing do.

And it's not so bad that he's running about Democrats -- who, by the way, are not allowed to say anything against the president as commander-in-chief -- but against the families. If he gets crosswise with the families, I think then the president will have to admit that it wasn't the right thing do.

The picture may be publicly available, but it's being used for private fund-raising purposes.

WOODRUFF: So, what we're talking about here is the fact that it was a September 11th scene.

T. CARLSON: See, here you have a really, I think, potentially interesting story, though. I heard this morning, and I believe it's true, that Democrats are searching about for widows or widowers or children of people killed on September 11th, to get up and attack the president. So I think that would be an overplaying of the hand, it seems toe me.

(CROSSTALK)

M. CARLSON: Unless, I think the families -- maybe there is some ginning up of it. But I think the families have complained.

T. CARLSON: But talk about leveraging a tragedy to the most grotesque way for political gain, if Democrats do that, then they lose all high ground, it seems. Not that they had any. But let's say they did. They would lose it.

WOODRUFF: There's a video I want to ask you about. Last night on the CBS evening news, the network decided to use portions of the video that the kidnappers, the killers, of Daniel Pearl, the "Wall Street Journalist," who they killed, that video that they released at the time of his death.

Margaret, the White House saying that this was a mistake. The State Department talked to CBS. They went ahead and did it anyway. What was right and what was wrong here?

M. CARLSON: It may not be wrong to show it. It didn't show the actual murder. But that the network of "Survivor" and "Fear Factor" did it, makes you think it's just another crass commercial ratings move on CBS' part, not thought through. I hope Marianne Pearl has a V-chip on her television set.

WOODRUFF: And CBS, Tucker, is saying they didn't air the portions of the video that were the most painful to watch. They simply aired portions where he was being asked about whether he was a Jew, his father was a Jew.

TUCKER CARLSON: That's right, and that is why I think -- look, most news, much news, anyway, is about tragedy. You can understand why the Pearl family wouldn't like it. On the other hand, we learned something sort of interesting, here, that Daniel Pearl was not killed simply because he was a journalist or an American but because he was Jewish.

That tells us something about the perversity of the people who killed him. I think it is an important bit of new people might not have realized. It puts his killers into a context that I think they need to be put in as anti-semites in addition to everything else. I think it is useful, if depressing.

WOODRUFF: All right. We will leave it there. Tucker Carlson, Margaret Carlson, thank you both. We appreciate it.

And we have a lot of inside buzz coming up next. Has DNC chairman Terry McAuliffe given up his dream of a new party headquarters?

(COMMERCIAL BREAK)

On Capitol Hill today, the fourth-ranking House Republican was conspicuously absent during a meeting between President Bush and GOP leaders. Two Republican aides say representative J.C. Watts refused to attend because he is "very upset" that he did not get a heads-up about the administration's decision last week to kill the Crusader howitzer program.

The Crusader is manufactured in Watts' home state of Oklahoma. One aide quoted Watts as saying, "The way they've treated me, the way they've handled it was indecent. This is the thanks I get." A House Republican source says other leadership members are not pleased with Watts. They say the GOP conference chairman could have shown his displeasure with the White House in another way. White House officials refused to comment.

The Democratic National Committee says today that no final decision has been made on whether to go ahead and build a costly new party headquarters here in Washington. The DNC says it is still exploring all of its options, including the possibility of renovating the current party headquarters and purchasing an adjacent restaurant and bar.

"The New Republic" reports the DNC will likely do just that after widespread criticism of Chairman Terry McAuliffe's great plan for a new headquarters at an estimated cost of $32 million.

The Republican party's coffers are $30 million fatter today, thanks to last night's RNC presidential gala here in Washington.

As predicted, the Republicans broke the previous one-night fund- raising record of $26 million set by Bill Clinton and Al Gore back in 2000. To put it in more context, last night's $30 million haul is three times what the RNC pulled in at its last gala back in 1998.

Public watchdog groups today called for the replacement or overhaul of the federal election commission. They say that the agency has failed miserably at enforcing America's campaign finance laws.

Here is a brief look at the FEC by the numbers. In the last presidential election cycle the FEC received 225 complaints, considerably more than the 146 cases that were processed and completed in that period. In the 1999-2000 election cycle the FEC imposed more than $100,000 in penalties. That is no match for what the agency costs taxpayers. The FEC's budget this year is more than $43 million.

Now let us get the inside buzz on some of the hot governor's races across the country. Stu Rothenberg of "The Rothenberg Political Report" gives us the big picture.

(BEGIN VIDEO CLIP)

STU ROTHENBERG, ROTHENBERG POLITICAL REPORT: The numbers are simply with the Democrats when it comes to governorships. The Republicans are defending 23 governorships out of the 36 up this cycle. Republican governors have been in office 4, 8, sometimes 12 years. The voters often want change.

It looks like the Democrats are going to pick up somewhere between a low of three or four governorships, and as many as seven or eight. A half dozen governorships are already prime takeover opportunities with the Democrats prime to pick up four seats, including those in Michigan likely; in New Mexico, where former energy secretary, former Congressman Bill Richardson looks like a likely winner; in Rhode Island and in Wisconsin, where the sitting Republican governor is, in fact, was never elected, but succeeded to the office when Tommy Thompson went to the Bush cabinet.

On the other hand, the Republicans look like they could win in Alaska, where Senator Frank Murkowski is the front-runner for the seat, as well as in Alabama where Republicans have a slight advantage -- a crowded Republican primary, but incumbent Democrat governor, Don Siegelman, is in trouble over ethics and budgetary issues.

While a half dozen governorships are already primed to change party control, another eight to 10 governorships look like toss-ups at this point, or quite vulnerable for both parties, and the Republicans are the most vulnerable.

They have Republican governors who are not seeking re-election, open seats. Republicans are trying to hold onto are states like Illinois and Arizona, Kansas, Massachusetts, Pennsylvania and Tennessee.

It is going to be very difficult to hold many if not most of these states. On the other hand, there are only two Democratic governors who are toss-ups at this point -- I would cite New Hampshire, where Governor Jeanne Shaheen is leaving her seat to run for the Senate, and Hawaii, where there is a difficult Democratic contest and the Republicans have a nominee, Linda Lingle, who lost narrowly four years ago and hopes to come back and win this time.

One problem for Republicans is that seven of the 10 most vulnerable governor's races are in states that were won by Democrat Al Gore in the 2000 presidential race. So you start in the Northeast with Massachusetts and Rhode Island, go to Pennsylvania, and in the upper Midwest with Illinois and Michigan and Wisconsin, and add New Mexico, and you see why Republicans have problems.

These are basically Democratic or Democratic-leaning states with open Republican governorships. It is going to be awfully hard for the Republicans to hold all those states.

(END VIDEO CLIP)

WOODRUFF: That was Stu Rothenberg, and now checking the headlines in our campaign news daily.

(BEGIN VIDEO CLIP)

Longtime Newark, New Jersey mayor Sharpe James overcame a tough challenge from newcomer Cory Booker and won a fifth term in office. James won 53 percent of the vote to Booker's 46 percent. The two candidates waged a sometimes bitter campaign that led to federal observers being called in to ensure fair elections.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

Florida governor Jeb Bush's day-long swing to promote education yesterday may have included a violation of school district policies in Tampa. Hillsborough County officials say campus political appearances are against district policy. A spokesman for Governor Bush says campaign aides did everything possible to make sure that the school knew it was a campaign event.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

New Hampshire senator Bob Smith received a re-election boost today from former New York mayor Rudy Giuliani. In a statement released by Smith, Giuliani endorsed the senator and said Smith "always gets results." Smith faces a GOP primary challenge from Congressman John Sununu.

(END VIDEO CLIP)

U.S. presidents and political donations up next. Our Jeff Greenfield on the fund-raiser, the photo, and where Americans draw the line.

(COMMERCIAL BREAK)

WOODRUFF: It is not unusual for American presidents who come through crisis to use that achievement for political gain, but our Jeff Greenfield says there is something different about the current dispute over the Bush photo fund-raiser.

JEFF GREENFIELD, SENIOR ANALYST: Now if we step back for a minute from the charges and the countercharges surrounding this now- famous photo of President Bush on the phone, what we find is one of the enduring realities of American political life.

There is always a major political impact on a president in crisis. When they lead a nation successfully through hard times it is almost always to their advantage and the president and his party are never supposed to say anything about this.

(BEGIN VIDEO CLIP)

GREENFIELD (voice-over): Throughout most of 1864, President Lincoln believed he might well lose the White House in November. Democrats saw Lincoln's civil war record as enough of a liability to nominate General George Mcclellan, the commander Lincoln had sacked, as their presidential candidate.

But Union victories in the fall of that year helped put Lincoln back in the White House. Franklin Roosevelt's wartime leadership was bound up tightly with his re-election. He visited military bases, and one of the campaign slogans was "Go Fourth to Win the War" -- fourth term, of course.

When a war slogs on, a president's political opponents don't hang back. In 1952, Republican nominee Eisenhower pledged, "I shall go to Korea," exploiting his stature as supreme allied commander in World War II. And in 1968, Republican nominee Richard Nixon specifically cited the length and cost of the Vietnam War as a reason why new leadership was needed in the White House.

Moreover, any time a president becomes the nation's voice in time of crisis, it helps him. Think of President Reagan when the space shuttle Challenger blew up, or President Clinton after the Oklahoma city bombing in 1995, or President Bush and New York mayor Giuliani after September 11. So what has really fueled this flap? It is not the photo itself -- it did not show the president at a funeral or consoling a family -- but the fact that it was used to raise money. If there is one thing most Americans believe about politics, it is that power and influence are up for auction to the high bidder.

Any association between the worst attack on America in history and cold, hard political cash is simply, Judy, a bad idea.

WOODRUFF: Jeff Greenfield, bite of the apple. Thanks very much.

A TV movie and real life health crisis. Up next actress Laura Dern is featured in our discussion about the problems with HMOs. Do they provide, as her new film suggests, damaged care?

(COMMERCIAL BREAK)

WOODRUFF: Now, questions about damaged care. That is the title of a film that airs on a cable network Showtime later this month. Actress Laura Dern stars in the true life story of Dr. Linda Peeno, who became an advocate for patients who did not get act adequate health care or insurance money. In the film, Dern's character takes on the HMOs.

(BEGIN VIDEO CLIP)

LAURA DERN, ACTRESS: We have enough experience from history to demonstrate the consequences of secretive, unregulated systems that go awry. One can only wonder how much pain, suffering and death will we have before we have the courage to change our course.

(END VIDEO CLIP)

WOODRUFF: And we are joined now by actress Laura Dern and the woman she plays in the film, Dr. Linda Peeno. Laura Dern, why did you do this movie?

DERN: Judy, first of all, thank you so much for having us, and I have my own individual experience with the managed care industry, and the more I have learned and the more I have talked to others about this issue, the more I realize that we all do.

Now having done the film I realized that there was really only one question to ask, which is do we care? And the managed care industry seems to answer with a resounding no to date, saying we are managing money, not care for patients, and that is the travesty and that is why I wanted to be involved.

WOODRUFF: Dr. Peeno, at one point in this film, you are playing the role of a doctor -- of someone working at an HMO who has to reject a patient's request for a heart transplant. The patient dies later. Is this tracking what happened in real life?

DR. LINDA PEENO, FORMER HMO MEDICAL DIRECTOR: Yes, it is, actually. I was a medical reviewer and the request came for a heart transplant, and of course all the pressure is to limit and deny expensive procedures, and a heart transplant is very expensive and so the pressure was placed upon me to figure out a way to not pay for it.

WOODRUFF: So is that, do you believe -- does the movie give, do you believe, an accurate portrayal overall of the HMO industry?

PEENO: Yes, I think that we've evolved a managed care system that succeeds financially only to the extent that it limits and denies care rather than making care available appropriately, quality care especially. And I think that the sophisticated methods by which that is done and the co-opting of doctors and nurses who are supposed to be committed to providing care, but instead end up committed to providing a means for corporations to benefit financially from the restriction of that care.

WOODRUFF: Laura Dern, you mentioned earlier, you said you had your own individual experience with the managed care industry. What do you believe the solution is here?

DERN: Well, clearly, as we've learned, the money is there, because the money is going toward bonuses, high salaries, and I think first of all, individuals need to be told when they are signing up and spending their hard earned money every month, that at the end of the day when they need care, they may not receive it.

And there may be someone 3,000 miles away who doesn't know about their specific circumstance who will be denying their care. And I think that of course Dr. Peeno can address how we can make changes in a new patient bill of rights to support better health care. And I just want to add too that the individuals who seemingly are in opposition of this, that there shouldn't be an argument.

We should all be working together saying this is a systemic problem. People are being hurt and even killed. How do we make it better?

WOODRUFF: Dr. Peeno, what would you add to that, in terms of what solutions are needed?

PEENO: I think we are going to need a fundamental change in the way in which we think about medical care, and we have got to get back to something that is patient centered rather than profit centered.

And what concerns me about all the patient protection provisions that have been proposed is those are just band-aid treatments and in fact they are almost going to be ineffective treatments because they are targeting a system that is really outmoded.

Most of the things that are portrayed in the movie portray a health plan or a medical director in the role of denying care, where now we have more sophisticated and insidious methods where the treating physicians are acting as virtual company doctors, and they now have financial incentives to withhold or limit care.

So we are going to have to have something that fundamentally changes the way in which we deliver the care and pay for it.

WOODRUFF: All right. We are going to leave it there. Dr. Linda Peeno and Laura Dern, we thank you very much for being with us. We appreciate it.

DERN: Thank you, Judy.

WOODRUFF: Good to see you both.

WOODRUFF: And now for a competing view on HMOs and the overall health care debate, we turn to Karen Ignagni. She is president and CEO of the American Association of Health Plans.

Karen Ignagni, pretty much a sweeping indictment of the managed care industry here.

KAREN IGNAGNI, PRESIDENT AND CEO, AMERICAN ASSOCIATION OF HEALTH PLANS: Judy, I was really thinking about how to respond to where we are right now, and I think the best way to put it as I was listening to Ms. Dern and Dr. Peeno is to the extent that JFK the movie told us about the Kennedy assassination, this movie tells us about health care in America.

This case that is highlighted in the movie -- now I must say I have not seen the movie yet, it has not premiered yet, although it has been premiered on Capitol Hill -- the movie is based on a 15-year case which the companies involved have disputed the facts of this case.

So I think we're talking about a hatchet job with a political agenda, and I think it is time to have a real debate. I do believe Ms. Dern is right in calling for a real debate, but I think the prescription is not to wipe the slate clean and go to a government run system which seems to be the end game here for folks who are promoting this film.

The solution is to have a debate that talks about why are coasts exploding, why is access declining, and what can we do about it, and how can we fix it and address it?

WOODRUFF: This one instance that I asked Dr. Peeno about, and she says this is what happened and when she worked for a managed care company, when she had to, she said, deny the request for a heart transplant. The patient later died. Are you suggesting there's information to suggest that is not what happened or...

IGNAGNI: Let me say I have not seen the movie, but I appreciate the question and I think that this really brings us back to the nub of the issue. We have a situation in this case, as I've been told and as I understand it -- it was 1987. The employer involved did not provide experimental treatment, did not cover experimental treatment in its benefit package.

The situation here was determining what was covered, what wasn't covered. We support our members, the health plans in this country, affirmatively have supported the concept of independent external review, and you and I have talked about it with the idea that when there are difficult decisions, when there are contract disputes, when there are issues with respect to judgment calls, tough decisions, we should move to a process where there is a second opinion.

There is an objective party, it is not bureaucrats, it is not executives, but it is physicians making these calls.

WOODRUFF: I think what patients want to know is, is there adequate separation between the corporate bottom line, a need to make a profit in these companies on the one hand, and on the other hand the interests of the patients?

IGNAGNI: That's a good question. I'm glad you asked it also. The editors of newspapers tell me what doesn't sell magazines or newspapers in fact are the millions of lives that we have saved every day.

What it doesn't obviously make it on television, but for the American people who now are confronted with concerns about costs exploding, access declining, they want to have a real debate, but they want to know the bottom line and where we can go to actually address these issues.

I think there is a remedy which a number of stakeholders can get behind. There is no -- actually it is a little ironic that this movie is being promoted on Capitol Hill, in Sacramento, on INSIDE POLITICS. There is a political agenda here but I think there is more at stake for the American people.

WOODRUFF: All right. Karen Ignagni with the American Association of Health Plans, we appreciate your being with us.

IGNAGNI: Thanks. Thanks for the opportunity.

WOODRUFF: Thank you. And INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: CNN's coverage continues now with WOLF BLITZER REPORTS, LIVE FROM JERUSALEM. Thanks for joining us.

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