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Inside Politics

Will War in Iraq Damage U.S. Economy?; Sifting Through Democratic Presidential Field

Aired January 01, 2003 - 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.


ANNOUNCER: The U.S. military on parade: As Americans welcome 2003, will a war with Iraq trigger another dive in the economy?
After a terror-free New Year's Eve, five wanted men still are on the run. Did someone drop the ball?

Snapshots of John Edwards moving deeper into presidential waters: His political assets may also be liabilities.

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D), NORTH CAROLINA: We are going to win the White House in 2004.

(END VIDEO CLIP)

ANNOUNCER: Making sense of the Democratic presidential field. Who has the bang and who has the bucks?

Live from Washington, this is INSIDE POLITICS WITH JUDY WOODRUFF.

CANDY CROWLEY, HOST: Thanks for joining us and happy new year. Judy is off this week. I'm Candy Crowley.

While Americans would prefer to spend this January 1 focusing on parades and football games, the war on terror and a possible war with Iraq still weigh on many minds.

In this "Newscycle": U.S. troops spending this holiday in the Persian Gulf region will be getting reinforcements. The Pentagon has ordered more than 11,000 desert-trained troops to head to the region. It's the first deployment of a full combat division to the area since the 1991 Gulf War.

And, in the war on terror, an administration source tells CNN that the U.S. government believes five men wanted for questioning by the FBI were smuggled into the country. A nationwide manhunt continues for the men.

Now CNN's Jeanne Meserve joins us with more on that story and the war on terror -- Jeanne.

JEANNE MESERVE, CNN CORRESPONDENT: Candy, an administration official tells CNN it believes the men were smuggled in because a check of U.S.-Canadian border crossings and their records has not turned up any trace of the men.

Also, their names came from the interrogation of an alleged smuggler of illegal aliens picked up in Canada. Although they might not have used them, sources have told CNN that the five men are believed to have fraudulent British travel documents. And that is where the second spread of this story begins.

Look at this picture posted on the FBI Web site of one of the men identified as Mustafa Khan Owasi. Now compare it to this picture of a Pakistani jeweler from Lahore named Mohammed Asghar. He says the picture of is him, the picture on the FBI Web site. And it certainly looks like him. Asghar tells the Associated Press that he once tried unsuccessfully to use forged travel documents. And he theorizes that the forgers reused his photograph.

An administration official says it is -- quote -- "not inconceivable" that the photo is a fraud. And it should be noted that the FBI has always said the names and dates of birth of the five individuals could be fraudulent. But if the photos are too, what would be the use of releasing any of the information to law enforcements and the public? An administration official says the matter is being looked into.

Meanwhile, the five men are believed to be somewhere in the U.S. Raids were conducted Monday night at six locations in and around New York City and New Haven, Connecticut. According to a law enforcement source, a number of Middle Eastern and Pakistani men were picked up for questioning, but all were released. A source says intelligence in several investigations have turned up the names of individuals at those locations. And authorities had hoped they would have information about the five men they are so interested in finding -- Candy.

CROWLEY: Well, Jeanne, what happened here? It seems to me that there are any number of things that could have led to this photo, assuming it is the same man. Could they have a bad source, this guy they picked up? Could they just have made a mistake?

MESERVE: That's absolutely possible, that they had a bad source.

This individual, who I'm told they interrogated up in Canada, is an alleged smuggler. He is not in a legitimate line of business. That is an area where the business is to make things murky, to make things unclear. And if that is where the photograph came from, allegedly, of this man Owasi, experts in the field say there would be nothing surprising about the fact that it might not be an actual photograph of the man the FBI are hunting for.

CROWLEY: So, if there are questions about the pictures -- and I'm assuming there must now be questions about all the pictures, if there's a question about this one -- and they don't know the births, and they don't know the names, and there's no record they came into the country, how can they be sure that they're actually in the country?

MESERVE: Well, they have never been sure they're in the country. They have always said, it's a possibility that they came over the country. I think that the liability of all the intelligence has always been of some question. Clearly, the FBI must have felt at some point that this was reliable information, because they went to this extraordinary step of posting the names, of posting the pictures, of posting the dates of birth on their Web site on a Sunday afternoon.

They made sure the media knew this was happening, so it would get publicity, so that they would get everybody's eyes opened looking for these individuals. So, they must have felt this was reliable information. Of course, this raises some questions about whether indeed it was.

CROWLEY: Homeland security expert, thanks very much, Jeanne. Appreciate it.

On this New Year's Day, Democratic presidential hopeful John Edwards is hosting a sort of coming-out party in his home state of North Carolina to tell friends about his plans to run for the White House. Tomorrow, the senator is excepted to take more public steps toward a campaign, forming an exploratory committee and giving a series of interviews designed to introduce him to the American people.

(BEGIN VIDEOTAPE)

EDWARDS: We are going to win the White House in 2004!

CROWLEY (voice-over): There's something about John Edwards: a picture-perfectness, a fresh face in a field flooded with familiar ones. Turning 50 this year, the senator from North Carolina can be charming, a plus in the endless grip-and-grin world of a politician.

He is telegenic, with a family to match. "People" magazine once named him sexiest politician. Now add articulate. A personal injury trial lawyer, Edwards has a gift for bringing clarity to complicated issues.

EDWARDS: If we don't fight for a real patient's bill of rights, who will?

CROWLEY: And that's a genuine Southern drawl, a plus in a party that has to win some state, any state in the South to have a chance in '04.

The Edwards story is of a boy raised in a home of modest means, the first in his family to go to college and law school, now a self- made millionaire many times over. What's wrong with this picture is the same thing that's right. He's a fresh face because he hasn't been at it very long.

EDWARDS: Judge, I want to ask you some questions about...

CROWLEY: Edwards has been a senator four years, his first and only political job, though his natural gifts and ambitions have raised his profile beyond his tenure. Edwards has taken opportunities to play in the international arena, but he's green and sometimes it show. There have been awkward news conferences and at least one really bad talk show performance. And speeches can fall short of scintillating.

Edwards' voting record is more liberal than not, but he's been in the Senate so short a time, he's an easy mark for rival camps, who privately deride the junior senator as substance-free or Clinton- light. In truth, Edwards is no more or less schooled in governance than the current president, who had been Texas governor for 4 1/2 years when he ran for president.

But that was then and this is post-9/11. Voters might prefer an old hand to a fresh face.

(END VIDEOTAPE)

CROWLEY: I'll be interviewing John Edwards tomorrow. And you will hear it in its entirety right here on INSIDE POLITICS.

This weekend, Senate Democratic leader Tom Daschle plans to sound out friends back home in South Dakota about whether he should run for president, after a powwow with top advisers here in Washington yesterday. Sources who have spoken to Daschle say he's leaning heavily toward running, but they say he is not 100 percent decided.

And, in recent weeks, some Democrats have tried to make the case that Daschle would better serve his party by staying on as minority leader, which would be difficult to do if he seeks the presidency. A source close to the No. 2 Democrat, Harry Reid, tells CNN Reid has the votes to replace Daschle in the leadership if Daschle runs for president.

Daschle, John Edwards, Joe Lieberman and Dick Gephardt all plan to announce their presidential intentions this month. And we should also get a better sense in the next few weeks if several other Democrats plan to join the fray. We'll discuss the presidential field and how John Edwards stacks up later on INSIDE POLITICS.

Whoever runs for president will be keeping close watch on two big areas of uncertainty for the nation: the troubled economy and a possible war with Iraq.

We asked CNN financial news correspondent Allan Chernoff how military action might influence the markets.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT: Candy, Wall Street has been worrying about a war for months. Talk of impending military action, of course, creates uncertainty, especially for families of servicemen.

In that environment, people tend to pull back on their spending. And, in fact, that's probably one reason that retail sales were disappointing this past holiday season. Many companies also have been very careful about their spending. As long as the threat of war hangs over the country, that caution may continue to affect big-purchase decisions.

Now, another important consideration is oil. Energy companies fear a war with Iraq could block the flow of oil through the Persian Gulf. It almost certainly would keep Iraqi oil off the market. Those concerns, along with the strike in Venezuela, have been pushing up the price of oil over the past six weeks to more than $31 to the barrel right now.

When oil climbs, so do prices at the pump. They now average about $1.45 a gallon. And if we're paying more money for gas, that leaves less money to spend elsewhere. A quick, successful war would likely bring the price of oil back down and could boost confidence. That's exactly what did happen after the Gulf War in 1991.

But a protracted war could have a very different impact on the nation. All this, of course, at a time when the U.S. is trying to pull itself out of an economic pit -- Candy.

(END VIDEOTAPE)

CROWLEY: CNN's Allan Chernoff.

We'll have reports from Iraq and North Korea when we return and the latest defiant moves by the leaders of those nations. We'll tell you why Koreans are feeling shaken and stirred by the new "James Bond" movie.

Plus: Mr. Popularity, a New Year's look at the president's approval ratings. Can they only go down from here?

(COMMERCIAL BREAK)

CROWLEY: As word came the U.S. Army plans to deploy thousands more soldiers to the Persian Gulf region, U.N. weapons inspectors in Iraq carried out business as usual.

CNN's Rym Brahimi has more from Baghdad.

(BEGIN VIDEOTAPE)

RYM BRAHIMI, CNN CORRESPONDENT (voice-over): No respite for U.N. weapons inspectors on this New Year's Day.

Four teams were out. One team of missile experts went up north, 40 kilometers north of the Iraqi capital, to the huge Al Taji complex to check in on a facility involved in missile engines. A team of chemical experts went inside Baghdad to a warehouse that stores electronic equipment. And two biological teams went out, one of them to a brewery, another one to a factory that bottles soft drinks.

Now, in the middle of this stepped-up inspection regime, a lot tension, particularly in the southern no-fly zone, where the state-run Iraq News Agency says one person was killed in a U.S.-British air raid. So, this may be the beginning of a new year, but, for many Iraqis, a lot of the problems are the same as in the old year.

Rym Brahimi, CNN, Baghdad.

(END VIDEOTAPE)

CROWLEY: And now a New Year's Day treat from INSIDE POLITICS: We are going to take you aboard the USS Constellation, which is currently somewhere in the Persian Gulf region.

And this is Jason Reid, Petty Officer Jason Reid.

Thanks for joining us.

PETTY OFFICER JASON REID, U.S. NAVY: Thank you.

CROWLEY: OK.

Yesterday, you re-upped. First of all, tell me why you did that. And, second of all, tell me what New Year's is like aboard the Constellation.

REID: OK.

I re-enlisted yesterday for orders. I'm going to be going to Tampa sometime in August. And New Year's on the ship is pretty different. It's very different. It's my first New Year's on board the ship. And it's quite an experience.

CROWLEY: In what way? Did you all celebrate or was it pretty much business as usual?

REID: Kind of both. We did find time to do a little bit of celebration. I brought in the new year by re-enlisting right exactly at midnight. And we did a little bit of celebration.

CROWLEY: Jason, tell me. You often hear that, when you're out on a ship for so long, that you get antsy to do something. Has it become pretty routine? Has there been any change in the feeling aboard the ship?

REID: Actually, the feeling on the ship has been pretty much the same since our deployment.

I would like to say that we're not kind of like a football team. It's like, we have worked so hard and done a lot of things to get ready to be out here. And we're ready for whatever is happening and is required of us. The mood is pretty much the same. People are a little homesick, because they're not home for the holidays. But we also know that we do have a job to do. And everybody out here is ready to do it.

CROWLEY: Jason, let me ask you -- first of all, let me tell our listener that what you're hearing, I think, are the planes on the ship. That's that noise that sometimes overcomes you.

But it's quiet now. And I want to give you a chance to say happy new year to whoever you'd like to say happy new year to.

REID: All right.

First, I'd like to say happy new year to my mom, my sister, my nephew, all my friends back home in Florida and California, and Latisha (ph), Demetria (ph), everybody, everybody out there that I care for and support me, and people that support me, and my grandparents, everywhere.

I'd like to say happy new year to my family and everybody back in the United States. We'll hold it down out here. And keep us in your prayers and in your thoughts and pray that we'll make it back home safely and all in one piece.

CROWLEY: Petty Officer Jason Reid, we will do that. Happy new year to you and everybody else aboard the USS Constellation.

Now, Iraq's daily newspaper, owned by the son of Saddam Hussein, is suggesting that Iraq follow the example of North Korea by expelling U.N. nuclear monitors. South Korean officials, meantime, are looking to China for help in finding a diplomatic solution to the crisis over North Korea's nuclear program.

Here's CNN's Rebecca MacKinnon.

(BEGIN VIDEOTAPE)

REBECCA MACKINNON, CNN CORRESPONDENT: South Korea's deputy foreign minister is now in Beijing. He's scheduled to meet Thursday with China's vice foreign minister.

South Korea's goal in this meeting is to try and convince China to take a more active role in ratcheting down tensions here on the Korean Peninsula. with North Korea having kicked out nuclear inspectors from its nuclear facilities.

Now, China is North Korea's closest alley. It has the largest amount of trade with North Korea than any other country in the world. China has a lot of cards to play. South Korea would like to see some of these cards being played more actively as it seeks a diplomatic situation (sic) to this current ratcheting up of tensions.

Now South Korea's new president-elect, Roh Moo-hyun, who takes office in February, gave a new year's message today in which he made it clear his team is working very hard to find a diplomatic solution.

ROH MOO-HYUN, SOUTH KOREA PRESIDENT-ELECT (through translator): We have examined and debated the nuclear issues. The conclusion is that we can solve this matter with dialogue and compromise, if our people and politicians gather their strength. I am confident, I will resolve this problem without fail.

MACKINNON: Meanwhile, more bellicose rhetoric coming from North Korea today. The state-run news agency, in an editorial, accusing the United States of targeting North Korea for an invasion and calling on the people of North Korea to strengthen the military to protect North Korea's dignity and sovereignty. So on this day, no signs of conciliation coming from North Korea, as the inspectors have now left North Korea with the international community having no way of monitoring what is going on in North Korea's nuclear facilities.

Rebecca MacKinnon, CNN, Seoul.

(END VIDEOTAPE)

CROWLEY: The long-simmering tensions between North Korea and the West form the backdrop for the new "James Bond" movie. As the film arrives in Korean theaters, some people from both sides of the DMZ say the film goes too far.

Here's CNN Seoul bureau chief, Sohn Jie-Ae.

(BEGIN VIDEOTAPE)

SOHN JIE-AE, CNN SEOUL BUREAU CHIEF (voice-over): Anyone who thinks North Korea deserves more than warnings about its nuclear weapons should see the latest Bond thriller "Die Another Day."

In it, Bond, James Bond that is, annihilates North Koreans in the demilitarized zone dividing the two Koreas. And in the end, gets his just revenge against a North Korean renegade.

But while James Bond dodges bullets, the movie hasn't been able to escape the barrage of criticism from South and North Koreans alike.

A small group of protesters lined the street in front of the theater where the Bond movie opened, displaying banners calling for a boycott of the film. They were angry at what they called the movie's war mongering tones.

UNIDENTIFIED FEMALE (through translator): We think it is outrageous that such a film that promotes war and belittles Koreans should be shown here.

SOHN: Internet sites are overrun with claims that several parts of the film portray South Korean soldiers as inferior to the American military and the countryside as poor and underdeveloped.

North Korea's official media channels have called the movie, quote, "dirty and cursed," end quote, and said it slanders North Korea and insults the Korean people.

Nevertheless, most people buying tickets to the flick don't seem that concerned.

UNIDENTIFIED MALE (through translator): I really didn't think about that factor. I will judge for myself when I finish seeing the movie.

UNIDENTIFIED MALE (through translator): I think the film should be judged for its entertainment value, not its political meanings. SOHN: However, opening day box office figures don't seem very high. But the movie's distributors hope this will pick up as initial furor dies down.

While the recent North Korea controversy may or may influence how well this film does at the box office, this Bond movie certainly has Koreans on both sides of the border shaken and stirred.

Sohn Jie-Ae, CNN, Seoul.

(END VIDEOTAPE)

CROWLEY: Amid tensions overseas and economic troubles at home, can President Bush keep his approval ratings high? Up next, we'll track his poll numbers and the challenges ahead.

And, as John Edwards moves closer to a presidential bid, we'll bring reporters together to discuss his chances and compare him to the competition.

(BEGIN VIDEOTAPE)

(voice-over): It's time to test your "I.P. I.Q.": What was the first President Bush's highest job approval rating during his one term in office? Was it, A, 65 percent, B, 77 percent or, C, 89 percent?

We'll have the answer after the break.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): How's your "I.P. I.Q.?" We asked you what the first President Bush's highest job approval rating was during his four years in office. Was it, A, 65 percent, B, 77 percent or, C, 89 percent? The answer is C. President Bush's job approval rating peaked at 89 percent in February 1991, just after the end of the Gulf War.

(END VIDEOTAPE)

CROWLEY: One of the many lessons President Bush learned from his father's presidency is that high approval ratings can be fleeting.

Our senior White House correspondent, John King, looks at Bush 43's popularity at the dawn of a new year.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The president of the United States!

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT (voice-over): The president begins the New Year in an enviable position in terms of public approval. MATTHEW DOWD, BUSH POLLSTER: He's at an historic point. This the longest sustained time a president has been this high of any president going back all the way to the Great Depression with FDR.

KING: Sixty-one percent of Americans say they approve of how Mr. Bush is handling his job. That is down significantly from a high of 90 percent just after the September 11, 2001 attacks. Still, the president's approval rating is 10 points higher now than it was just a day or two before the attacks.

STANLEY GREENBERG, DEMOCRATIC POLLSTER: I think this is due, you know, one-half to the war on terrorism and the threat the country faces, one-quarter to adept White House handling of the politics this year, and about a quarter to Democratic silence on the issues. But above all, this is, you know, a special period. We were attacked.

KING: Nearly 6 in 10 Americans in a year-end CNN/USA Today/Gallup Poll favor invading Iraq to destroy its weapons programs; 53 percent favor an invasion if the goal is removing Saddam Hussein from power.

GLEN BOLGER, REPUBLICAN POLLSTER: Our military has been so successful since Vietnam that expectations are high that this would be, you know, a relatively bloodless war and happen fairly quickly, and I think people would be stunned if that were not the case. And that's, I think, the risk that's out there.

KING: The economy is the most glaring trouble spot for a president gearing up for a reelection campaign.

GREENBERG: They've gone into very serious deficits. Unemployment has lagged. Income has lagged. And so, I think they have on the most important issue before the country, you know, very serious questions.

KING: Just 24 percent of Americans say the economy is in excellent or good shape, way down from the 67 percent who voiced that same opinion just before Mr. Bush took office. So far, Mr. Bush does not bear the brunt of the blame.

BOLGER: Most people say the terrorist attacks. Then, the second highest number is the natural business cycle. And then, the third biggest factor that they blame is the policies of the president, but that's only 13 percent of the people say that.

KING: The president knows the struggling economy is his biggest political headache, and plans a stimulus package early in what promises to be a challenging New Year.

(on camera): The president often has said his father's biggest mistake was wasting the political strength he built up during the first war with Iraq. This President Bush believes he enters the New Year with significant political capital of his own, and says he won't hesitate to spend it.

John King, CNN, the White House.

(END VIDEOTAPE)

CROWLEY: We want to talk now about the Democrats who want President Bush's job, including this week's semi-official addition to the field, Senator John Edwards.

I'm joined by Thomas Edsall of "The Washington Post" -- thanks, Tom -- and Ken Rudin of National Public Radio; and, in Raleigh, John Wagner of "The Raleigh News and Observer."

John, I want to start with you and ask you, as the one who probably has known John Edwards the longest and certainly the closest, how is this likely to play in North Carolina? Because we're talking about a man who also is up for a reelection.

JOHN WAGNER, "RALEIGH NEWS AND OBSERVER": Right.

And a lot of that really does remain to be seen. There's certainly some enthusiasm among those who are close to him. He has a few dozen people over at his house today. And I expect they will all be very favorable coming out of that gathering in a couple hours.

Beyond that, we'll have to see. It's been more than 25 years since anyone from North Carolina has run for president. And it's just going to take a little time to see how it plays.

CROWLEY: John, and let me also ask you, in terms of how you view him, what do you think Edwards' biggest strength is at this point for a presidential candidate?

WAGNER: He is very good at communicating in small groups, one on one. He's a former trial lawyer and is really in his element. He's been to many house parties in New Hampshire and out in Iowa. He's at his best when he's really trying to make a sale to a jury, if you will.

CROWLEY: And let me turn to my in-house guys.

I know you couldn't hear him, but what John says is that Edwards' biggest strength is the retail campaigning, the one-on-one. But he's had some slip-ups. Do you think he enters this sort of worse off than when we thought he would run for president?

THOMAS EDSALL, "THE WASHINGTON POST": His real problem, that all the presidential candidates have, is really overcoming a war on terrorism. They have to be a credible candidate in the face of a very serious situation.

And it's particularly troublesome for Democrats, who just do not have the same credibility that Republicans do when you get into issues of fighting wars, fighting battles, basically hostilities.

CROWLEY: And particularly, since this is only his fourth year that he's just completed as a senator, Ken, right?

KEN RUDIN, NATIONAL PUBLIC RADIO: Well, right. But they said that about George W. Bush as well in 2000, that he was only governor for five years at that time and did he have the gravitas to run for president then.

However, if gravitas was that important in 2000, Al Gore would have won the presidency, not George W. Bush. And, two, this is a different time, different era since 2000, when, obviously, as Tom just said, the war on terrorism and what's happened since 9/11 has really changed the landscape.

CROWLEY: So, is there anything that can shift this focus? Because the war on terrorism is not going away. Is that what Democrats have to try do? Or do they have to do what other Democrats -- in particular, former President Clinton -- have said, which is, you guys, you've got to get in there and compete on this foreign policy field?

EDSALL: I think the war on terrorism has become kind of a threshold issue.

You have to be on top of that. You have to be credible on it. You have to be seen as someone who is capable of being a commander in chief under very trying circumstances in order to be a credible candidate. That's the hurdle that all of these Democratic candidates have right now. And it's a pretty tough one. And it's tough for Edwards.

CROWLEY: And John, I want to turn back to you and then I'm going to ask all three of you. Stack him up against John Kerry and Joe Lieberman, since those are the two names that are sort of floating to the top of the poll. Stack Edwards up against those two.

WAGNER: Well, I guess what he brings to the table is a fresh face. They're really trying to sell that as an asset. Also, he's from the South. And unless Bob Graham gets in from Florida and you consider a Southerner, Edwards would be the only candidate from the South. And, obviously, the Democrats will need to carry at least one Southern state if they intend to win in 2004.

CROWLEY: Ken, stack him up. How does he measure up to these guys?

RUDIN: Well, I think the Southern is a big example.

The last three Democrats who were elected president were Lyndon Johnson, Jimmy Carter and Bill Clinton, all coming from the South. So he has that region, whereas nobody else does -- and, as John say, John Wagner says, that he is that fresh face.

But again, whether he stacks up, whether his resume stacks up compared to John Kerry, the war hero, been a senator since 1984 -- Joe Lieberman has been in the Senate for over a dozen years. So, as far as compared -- it's one thing to run against George Bush and fight the war on terrorism in the fall of 2004. The other thing is to stack up against the other Democrats and whether he can do it against the other field. CROWLEY: So, Tom, is it -- it's sort of fresh face vs. old hand, right? Do people want experience or do they want some breath of fresh air?

EDSALL: In a large sense.

But John Edwards, also -- I don't know what he's like in reality, because I don't know him personally as a friend. But he comes across, really, as probably the nicest of the guys running for president. And he comes across very well on television. It did him a lot of good running when he ran as an unknown in North Carolina. He gained value when his face appeared on television. He got a quality, a Q-value, I think you may call it in television, or something. And that is a real asset to have going into this.

What he lacks is really experience, presence, the kind of strength of command. We'll have to see if he can develop that as his campaign goes.

CROWLEY: But we should never underestimate charm in a presidential race, right?

EDSALL: No, not at all.

CROWLEY: Tom Edsall, "Washington Post," thank you all very much.

Ken Rudin of NPI, thank you.

I'm always grateful for people taking time to talk to me. But on New Year's Day, I owe both of you. And we owe also John Wagner as well from "The Raleigh News and Observer."

Thank all three of you.

Ahead: mystery in Modesto. What are police saying about the disappearance of a pregnant woman? We'll get a live report from Rusty Dornin.

(COMMERCIAL BREAK)

CROWLEY: Coming up in this second half-hour of INSIDE POLITICS: the newest members of the governors club, taking office during tough financial times -- but, first, this "News Alert."

In California, police have shifted their focus to foul play in the disappearance of a pregnant woman.

CNN's Rusty Dornin is in Modesto with an update -- Rusty.

RUSTY DORNIN, CNN CORRESPONDENT: Well, Candy, this is the park where Laci Peterson used to walk her dog.

You can see folks riding their bike and walking the pathway all along here. It's also become the center of sort of a shrine for Laci Peterson. You can see the reward, the half-million dollar reward, and also the candles that people have left here that they have continued to come this morning and light in her memory.

Last night, there were some 1,200 people here lighting candles, singing and praying, talking about the contributions that Laci Peterson has made to this community, and also just praying for her safe return. But, just hours earlier, at a press conference, the police did say that they suspect that foul play was involved in this case.

And the reason is that she was -- is gone for so long during the holidays -- she, of course, is eight months pregnant -- but was also very close to her family. Police also say they have not eliminated her husband, Scott, from the investigation.

(BEGIN VIDEO CLIP)

DOUG RIDENOUR, MODESTO POLICE DEPARTMENT: Mr. Peterson and anybody else connected with this investigation will be considered and is considered a suspect. But we have not focused on him to the point of saying he's a suspect, no. Everybody -- every part of the investigation is being considered. Nothing's ruled out.

(END VIDEO CLIP)

DORNIN: Now, the search continues through New Year's Day. Just within the last hour, you can see some men on horseback that have combing the Dry Creek area in this park where we are.

Now, of course, this was searched long ago in the very beginning, but they are still concerned that there's a possibility that something was missed. So, they are continuing to comb the riverbanks, the farmlands, the rural areas.

Candy, there has just been no leads in this case. And they are very frustrated at this point.

CROWLEY: Well, Rusty, that's what I wanted to ask you.

Since they're going over the same area, it says to me that they are no closer to finding this woman than they were the day they found out she was missing, yes?

DORNIN: Exactly.

Every single lead -- they're getting a lot of tips through their hot lines and the volunteers. And, of course, this huge reward is attracting a lot of people to call. But there has not been one thing that's been solid enough that they really -- he said, they got excited about.

Everywhere we go, the police we meet are just extremely frustrated. The searcher that you just saw on that video, we talked to him. He'd been searching all morning and just said there's nothing.

CROWLEY: Rusty Dornin in Modesto, California, it looks like a beautiful new year, but a pretty awful story. Thanks, Rusty. In Yemen today, a memorial service was held to remember the three American missionaries shot and killed by an Islamic extremist. Among those who attended the ceremony was Don Caswell, a pharmacist who was wounded in the attack. A Yemeni official, meantime, said scores of suspects have been detained in connection with the attack. Officials also say the attack is linked to the recent killing of a secular political leader who had criticized religious extremists.

New governors for a new year. Up next: who's being sworn in to another term and who's starting a new term in the New Year's edition of "Campaign News Daily."

(COMMERCIAL BREAK)

CROWLEY: The new year brings with it some new state laws all around the country. In addition to the usual tax and budget issues, we found a few that caught our eye.

Starting today, California kids have to wear a helmet while riding skateboards, skates and scooters. Connecticut and Alaska are increasing the minimum wage to $7.15 an hour. And Connecticut is also phasing in a law banning the use of mercury thermometers.

Our New Year's edition of "Campaign News Daily" highlights a day of inaugurations. In New York, George Pataki has been sworn in to his third term as governor. Pataki took the oath just after midnight in a small ceremony. He did it all again around noon in a public event attended by about 2,000 guests.

Former Congressman and Clinton Cabinet member Bill Richardson is New Mexico's first Democratic governor in eight years. Like Pataki, Richardson took the oath early this morning in private. A public ceremony was held a few hours ago at the Capitol.

And in Michigan, Jennifer Granholm has taken office as that state's first woman governor. Granholm was sworn in on the steps of the state Capitol just before noon.

When Congress returns, many governors are pressuring lawmakers to focus on unemployment benefits. The federal government typically helps out with extra benefits during times of economic weakness. But this time, Congress let the federal help expire.

Here's CNN's Peter Viles.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): You can expect partisan fighting over extended unemployment benefits. President Bush said it should be Congress' first priority. Senator Hillary Clinton says Republicans have already dropped the ball behind the politics, real people like Derrick Codougan, a chef who worked catering jobs for Wall Street firms. He has been out of work for a year, he has run out of benefits, he was evicted, moved his family of four into a friend's apartment. DERRICK CODOUGAN, UNEMPLOYED CHEF: If there a job there is 2,000 people apply for those same type of jobs. So it's hard to be unemployed with family in this season.

VILES: Terry White was caught in the same Wall Street downdraft, laid off 14 months ago at Salomon and Smith Barney. He too ran out of benefits eight weeks ago.

TERRY WHITE, UNEMPLOYED: Collecting unemployment is something that survived this long. If it weren't for I'd be in real trouble, I don't know what I would do. So I'm hoping for Hillary, I hope she gets them to pass an extension of unemployment benefits.

VILES: The economics of unemployment somewhat complicated. Right now, 8 1/2 million Americans are out of work, 3 1/2 million filed for state unemployment benefit, the average benefit $260 a week, it lasts about 26 weeks.

Another 780,000 had used up the state benefits but until last week were eligible for another 13 weeks of federal benefits. Another one million like Derrick and Terry used up both their state and federal benefits and received nothing. The rest about, 3 million people either don't file for unemployment or were never eligible. You can't collect if you quit your job or never had one.

The question for Congress and the president is not whether to extend new benefits. It's under what terms. Simply renewing the 13 week federal program is not going to help Terry White or Derrick Codougan, which is why labor leaders are pushing for 26 weeks of federal aid.

CHRISTINE OWENS, AFL-CIO: This is similar to what Congress has done in the early 1990s when the elder George Bush was president. That program was in operation for 30 months, it provided between 26 and 33 weeks of benefits, and it didn't stop operating until unemployment had fallen and long-term unemployment was declining.

(on camera): Now, at 6 percent, the unemployment rate itself is not running at a historically high level. But the percentage of people who are unemployed who are exhausting their state unemployment benefits is running very high. It was 48 percent in October. And that was the highest October reading in 22 years.

Peter Viles, CNN Financial News, New York.

(END VIDEOTAPE)

CROWLEY: Coming up: the new year scramble to set the political agenda. The No. 1 Democrat in the House, Nancy Pelosi, talks to our Jonathan Karl.

Stay with us.

(COMMERCIAL BREAK)

CROWLEY: Pundits can try -- and trust me, they will -- to make predictions about the political year ahead.

Our Bruce Morton thinks it's safe to say at least this much: Washington will be abuzz with officials competing to get out their messages.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): President Bush will be trying to set national agenda, of course, helped by Republican majorities in the House and the Senate.

In some areas, he's a radical Republican. His education program greatly expanded the federal government's role in the schools. Fiscally, he's a Reagan Republican: big tax cuts titled toward the rich. And if that means deficit spending, so what? He's pro- business, wants oil drilling in Alaska and offshore, would let coal plants pollute the air more.

Voters like his leadership in the war on terror. They're less happy with how he's handling the economy. And why not? The stock market just ended its third straight losing year. So, Democrats are likely to concentrate on these domestic issues. Their proposed anti- recession tax cuts will be aimed at lower- and middle-income Americans. Their prescription drug plan is likely to involve the government. Mr. Bush's relies on the drug industry.

But the Democrats won't all be speaking with one voice, of course. Each of the presidential candidates will want to establish his own agenda. John Kerry, Joseph Lieberman, John Edwards and the rest will first be trying to raise serious money and, second, to find a theme that strikes a chord with voters.

UNIDENTIFIED MALE: I don't think the Republicans are fiscal conservatives, because we haven't a Republican president that has balanced the budget in 33 years in this country. We need balanced budgets.

MORTON: Will voters respond to that? We'll see.

But they'll all be looking for an agenda that commands attention and support. And, in the wake of Trent Lott's fall, the Democrats may try to use race as an issue.

STUART ROTHENBERG, CNN POLITICAL ANALYST: I'm sure the Democrats are going to keep this issue on the front burner, both to energize African-Americans, make sure they vote in big numbers in 2004, but also to appeal to swing moderate whites, to try to portray the Republicans as intolerant.

MORTON: All of these issues, these agendas battling for your attention will play out in a Republican Congress. They will decide what to have hearings about.

But, in the Senate, you need 60 votes to pass most legislation, because the other side can threaten a filibuster. And Congress is more partisan than it used to be: fewer conservative Democrats, fewer liberal Republicans.

(on camera): One other note: If Congress is to do anything major this year -- Social Security, prescription drugs, whatever -- they'll probably have to do it early. Otherwise, politics, planning for the presidential and congressional elections, will just take over and drown out everything else.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

CROWLEY: One of the leading figures in the battle of the political agendas will be the new House minority leader, Nancy Pelosi.

And she spoke recently with congressional correspondent Jonathan Karl.

(BEGIN VIDEOTAPE)

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Congresswoman Pelosi, thank you for joining us.

REP. NANCY PELOSI (D), CALIFORNIA: My pleasure.

KARL: There's a story in "Roll Call" that says that some of the moderates in your caucus may not be voting for you for leader as a show of lack of support. They think you're perhaps too liberal to represent the Democrats.

What do you make of that?

PELOSI: Well, I haven't seen the article, so I don't know of what you speak.

But I do know that, on January 7, for the first time in our history, the name of a woman will be placed in nomination for speaker of the House of Representatives. I was chosen by my caucus not because I am a woman. But the fact that I am is not lost on anyone in this country, least of all the women. So, it is with great pride, I think, that my colleagues will advance my name. I know I'll have a strong vote.

And because -- some certain conservative elements in certain parts of the country are trying to fan the flame and call me radical, because I support civil rights and ending discrimination against all people in our country and educating the American people and having an economy that is fair.

KARL: Now, your counterpart on the Republican side is Tom DeLay. They call him the hammer around here. What kind of a working relationship do you think you're going to have with Tom DeLay? You two are going to be paired time and time again.

PELOSI: Tom DeLay and I have served for many years on the Appropriations Committee. I think we have a good working rapport, and, indeed, even a friendship. So, I believe that we'll have a cordial relationship.

He knows what he believes in and I represent my caucus. So, our friendship will not be an issue in terms of where we stand on issues. Clearly, there is a big difference, but I think we respect each other.

KARL: Will this be a polarized place, though? Because DeLay represents the suburbs of Houston, perhaps the most conservative area of country, or one of them. You represent San Francisco, perhaps one of the more liberal areas in the country. Certainly, you represent different parts of your own parties. Will this be a polarized place?

PELOSI: Well, I'm very proud to represent the district that I do and have for over 15 years.

As leader, I represent my caucus. And I believe that we will be able to be constructive on how we reach solutions to the challenges the American people face. Tom DeLay takes great pride in being in the extreme right of his party. I think that he would not deny that. They are trying to characterize me as a counterpart to that -- counterpoint to that. It simply isn't so.

But we'll just advance our issues of a fair economy, protecting the environment, access to quality health care for all Americans, educating the American people, early childhood education to lifelong learning. The list of priorities for the Democrats is a very clear one and one that I think the American people support.

KARL: Well, you have had a record, a voting record, that has been on the left of your party, at least by the groups that rate voting, the ADA, the ACU. And either side would certainly rate you to the left of your party.

But now you are leader. I mean, do you see your positions perhaps changing a little bit?

PELOSI: Are you asking me if I'm changing my beliefs because I've become leader? No.

I'm now the leader of the party to present the views of the Democrats in the Congress of the United States. They have decided overwhelmingly that they want me to be the person to do that. And I will do that with great pride. I am the leader of the Democratic caucus and will carry that banner and those issues and the consensus that we have built very proudly.

KARL: One of the first issues out of the box is going to be economic stimulus. When are we going to see your plan and what will it look like?

PELOSI: Our Democratic caucus will come together as Congress convenes in the beginning of January. And we will focus on the safety and soundness of our country, the safety of the American people and homeland security and the soundness of the economy, an economy that is fair, that is fiscally -- we'll propose a package at some point which will be fair, which will be fiscally responsible, which will create jobs and will grow the economy. We are right now analyzing what is ailing this economy, so that we can be current on what needs to -- what fixes will work. So, while, when we come together, we will continue our work to do that, at the start, we will have an economic stimulus package, which we will announce at that time. And that will be part of our overarching approach to growing the economy in a way, again, that is fair, fiscally sound and creates jobs.

KARL: The White House is talking about a plan of about $300 billion in terms of tax cuts and tax incentives. Does that sound like something within the ballpark that Democrats could work with?

PELOSI: I don't know what they're spending that money on.

It's not just a question of how much money you're going to spend on a package. It's a question of what you're spending the money on and over what period of time. So, there are many questions that have to be addressed. And when you talk about comparing one amount of money to the next, you have to know what the priorities are, what is left out of the Republican plan, and what the duration of it is.

Again, I will say that our plan will be one that will not tolerate a jobless recovery, that we will have a plan that will grow the economy in a way that creates jobs, that is fair, that enables all Americans to participate in the economic success of our country as we grow that economy.

KARL: Well, Congresswoman Pelosi, I really appreciate your time and look forward to seeing you as leader.

PELOSI: Thank you very much.

(END VIDEOTAPE)

CROWLEY: A very brisk change of pace when INSIDE POLITICS returns, with a traditional New Year's Day big chill.

(COMMERCIAL BREAK)

CROWLEY: Just checking what's in the works for tomorrow's INSIDE POLITICS: I'll be joined by North Carolina Democratic Senator John Edwards. We expect he will confirm plans to create a presidential exploratory committee, the first step in a run for the White House in 2004.

Now, there is nothing political, so far as we can tell, about the Coney Island Polar Bear Club. But we're bipartisan here. We enjoy watching their annual antics anyway. The Polar Bears took their traditional New Year's day dip in the frigid Atlantic Ocean, with hundreds of spectators cheering them on.

The National Weather Service reports the air and water temperatures were in the lower to middle 40s. This was the 100th annual Polar Bear swim. Why have so many taken the chilling plunge for so many years? One swimmer says it's about doing crazy stuff and living your life. Amen to that.

That is it for INSIDE POLITICS. I'm Candy Crowley.

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





Democratic Presidential Field>


Aired January 1, 2003 - 16:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: The U.S. military on parade: As Americans welcome 2003, will a war with Iraq trigger another dive in the economy?
After a terror-free New Year's Eve, five wanted men still are on the run. Did someone drop the ball?

Snapshots of John Edwards moving deeper into presidential waters: His political assets may also be liabilities.

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D), NORTH CAROLINA: We are going to win the White House in 2004.

(END VIDEO CLIP)

ANNOUNCER: Making sense of the Democratic presidential field. Who has the bang and who has the bucks?

Live from Washington, this is INSIDE POLITICS WITH JUDY WOODRUFF.

CANDY CROWLEY, HOST: Thanks for joining us and happy new year. Judy is off this week. I'm Candy Crowley.

While Americans would prefer to spend this January 1 focusing on parades and football games, the war on terror and a possible war with Iraq still weigh on many minds.

In this "Newscycle": U.S. troops spending this holiday in the Persian Gulf region will be getting reinforcements. The Pentagon has ordered more than 11,000 desert-trained troops to head to the region. It's the first deployment of a full combat division to the area since the 1991 Gulf War.

And, in the war on terror, an administration source tells CNN that the U.S. government believes five men wanted for questioning by the FBI were smuggled into the country. A nationwide manhunt continues for the men.

Now CNN's Jeanne Meserve joins us with more on that story and the war on terror -- Jeanne.

JEANNE MESERVE, CNN CORRESPONDENT: Candy, an administration official tells CNN it believes the men were smuggled in because a check of U.S.-Canadian border crossings and their records has not turned up any trace of the men.

Also, their names came from the interrogation of an alleged smuggler of illegal aliens picked up in Canada. Although they might not have used them, sources have told CNN that the five men are believed to have fraudulent British travel documents. And that is where the second spread of this story begins.

Look at this picture posted on the FBI Web site of one of the men identified as Mustafa Khan Owasi. Now compare it to this picture of a Pakistani jeweler from Lahore named Mohammed Asghar. He says the picture of is him, the picture on the FBI Web site. And it certainly looks like him. Asghar tells the Associated Press that he once tried unsuccessfully to use forged travel documents. And he theorizes that the forgers reused his photograph.

An administration official says it is -- quote -- "not inconceivable" that the photo is a fraud. And it should be noted that the FBI has always said the names and dates of birth of the five individuals could be fraudulent. But if the photos are too, what would be the use of releasing any of the information to law enforcements and the public? An administration official says the matter is being looked into.

Meanwhile, the five men are believed to be somewhere in the U.S. Raids were conducted Monday night at six locations in and around New York City and New Haven, Connecticut. According to a law enforcement source, a number of Middle Eastern and Pakistani men were picked up for questioning, but all were released. A source says intelligence in several investigations have turned up the names of individuals at those locations. And authorities had hoped they would have information about the five men they are so interested in finding -- Candy.

CROWLEY: Well, Jeanne, what happened here? It seems to me that there are any number of things that could have led to this photo, assuming it is the same man. Could they have a bad source, this guy they picked up? Could they just have made a mistake?

MESERVE: That's absolutely possible, that they had a bad source.

This individual, who I'm told they interrogated up in Canada, is an alleged smuggler. He is not in a legitimate line of business. That is an area where the business is to make things murky, to make things unclear. And if that is where the photograph came from, allegedly, of this man Owasi, experts in the field say there would be nothing surprising about the fact that it might not be an actual photograph of the man the FBI are hunting for.

CROWLEY: So, if there are questions about the pictures -- and I'm assuming there must now be questions about all the pictures, if there's a question about this one -- and they don't know the births, and they don't know the names, and there's no record they came into the country, how can they be sure that they're actually in the country?

MESERVE: Well, they have never been sure they're in the country. They have always said, it's a possibility that they came over the country. I think that the liability of all the intelligence has always been of some question. Clearly, the FBI must have felt at some point that this was reliable information, because they went to this extraordinary step of posting the names, of posting the pictures, of posting the dates of birth on their Web site on a Sunday afternoon.

They made sure the media knew this was happening, so it would get publicity, so that they would get everybody's eyes opened looking for these individuals. So, they must have felt this was reliable information. Of course, this raises some questions about whether indeed it was.

CROWLEY: Homeland security expert, thanks very much, Jeanne. Appreciate it.

On this New Year's Day, Democratic presidential hopeful John Edwards is hosting a sort of coming-out party in his home state of North Carolina to tell friends about his plans to run for the White House. Tomorrow, the senator is excepted to take more public steps toward a campaign, forming an exploratory committee and giving a series of interviews designed to introduce him to the American people.

(BEGIN VIDEOTAPE)

EDWARDS: We are going to win the White House in 2004!

CROWLEY (voice-over): There's something about John Edwards: a picture-perfectness, a fresh face in a field flooded with familiar ones. Turning 50 this year, the senator from North Carolina can be charming, a plus in the endless grip-and-grin world of a politician.

He is telegenic, with a family to match. "People" magazine once named him sexiest politician. Now add articulate. A personal injury trial lawyer, Edwards has a gift for bringing clarity to complicated issues.

EDWARDS: If we don't fight for a real patient's bill of rights, who will?

CROWLEY: And that's a genuine Southern drawl, a plus in a party that has to win some state, any state in the South to have a chance in '04.

The Edwards story is of a boy raised in a home of modest means, the first in his family to go to college and law school, now a self- made millionaire many times over. What's wrong with this picture is the same thing that's right. He's a fresh face because he hasn't been at it very long.

EDWARDS: Judge, I want to ask you some questions about...

CROWLEY: Edwards has been a senator four years, his first and only political job, though his natural gifts and ambitions have raised his profile beyond his tenure. Edwards has taken opportunities to play in the international arena, but he's green and sometimes it show. There have been awkward news conferences and at least one really bad talk show performance. And speeches can fall short of scintillating.

Edwards' voting record is more liberal than not, but he's been in the Senate so short a time, he's an easy mark for rival camps, who privately deride the junior senator as substance-free or Clinton- light. In truth, Edwards is no more or less schooled in governance than the current president, who had been Texas governor for 4 1/2 years when he ran for president.

But that was then and this is post-9/11. Voters might prefer an old hand to a fresh face.

(END VIDEOTAPE)

CROWLEY: I'll be interviewing John Edwards tomorrow. And you will hear it in its entirety right here on INSIDE POLITICS.

This weekend, Senate Democratic leader Tom Daschle plans to sound out friends back home in South Dakota about whether he should run for president, after a powwow with top advisers here in Washington yesterday. Sources who have spoken to Daschle say he's leaning heavily toward running, but they say he is not 100 percent decided.

And, in recent weeks, some Democrats have tried to make the case that Daschle would better serve his party by staying on as minority leader, which would be difficult to do if he seeks the presidency. A source close to the No. 2 Democrat, Harry Reid, tells CNN Reid has the votes to replace Daschle in the leadership if Daschle runs for president.

Daschle, John Edwards, Joe Lieberman and Dick Gephardt all plan to announce their presidential intentions this month. And we should also get a better sense in the next few weeks if several other Democrats plan to join the fray. We'll discuss the presidential field and how John Edwards stacks up later on INSIDE POLITICS.

Whoever runs for president will be keeping close watch on two big areas of uncertainty for the nation: the troubled economy and a possible war with Iraq.

We asked CNN financial news correspondent Allan Chernoff how military action might influence the markets.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT: Candy, Wall Street has been worrying about a war for months. Talk of impending military action, of course, creates uncertainty, especially for families of servicemen.

In that environment, people tend to pull back on their spending. And, in fact, that's probably one reason that retail sales were disappointing this past holiday season. Many companies also have been very careful about their spending. As long as the threat of war hangs over the country, that caution may continue to affect big-purchase decisions.

Now, another important consideration is oil. Energy companies fear a war with Iraq could block the flow of oil through the Persian Gulf. It almost certainly would keep Iraqi oil off the market. Those concerns, along with the strike in Venezuela, have been pushing up the price of oil over the past six weeks to more than $31 to the barrel right now.

When oil climbs, so do prices at the pump. They now average about $1.45 a gallon. And if we're paying more money for gas, that leaves less money to spend elsewhere. A quick, successful war would likely bring the price of oil back down and could boost confidence. That's exactly what did happen after the Gulf War in 1991.

But a protracted war could have a very different impact on the nation. All this, of course, at a time when the U.S. is trying to pull itself out of an economic pit -- Candy.

(END VIDEOTAPE)

CROWLEY: CNN's Allan Chernoff.

We'll have reports from Iraq and North Korea when we return and the latest defiant moves by the leaders of those nations. We'll tell you why Koreans are feeling shaken and stirred by the new "James Bond" movie.

Plus: Mr. Popularity, a New Year's look at the president's approval ratings. Can they only go down from here?

(COMMERCIAL BREAK)

CROWLEY: As word came the U.S. Army plans to deploy thousands more soldiers to the Persian Gulf region, U.N. weapons inspectors in Iraq carried out business as usual.

CNN's Rym Brahimi has more from Baghdad.

(BEGIN VIDEOTAPE)

RYM BRAHIMI, CNN CORRESPONDENT (voice-over): No respite for U.N. weapons inspectors on this New Year's Day.

Four teams were out. One team of missile experts went up north, 40 kilometers north of the Iraqi capital, to the huge Al Taji complex to check in on a facility involved in missile engines. A team of chemical experts went inside Baghdad to a warehouse that stores electronic equipment. And two biological teams went out, one of them to a brewery, another one to a factory that bottles soft drinks.

Now, in the middle of this stepped-up inspection regime, a lot tension, particularly in the southern no-fly zone, where the state-run Iraq News Agency says one person was killed in a U.S.-British air raid. So, this may be the beginning of a new year, but, for many Iraqis, a lot of the problems are the same as in the old year.

Rym Brahimi, CNN, Baghdad.

(END VIDEOTAPE)

CROWLEY: And now a New Year's Day treat from INSIDE POLITICS: We are going to take you aboard the USS Constellation, which is currently somewhere in the Persian Gulf region.

And this is Jason Reid, Petty Officer Jason Reid.

Thanks for joining us.

PETTY OFFICER JASON REID, U.S. NAVY: Thank you.

CROWLEY: OK.

Yesterday, you re-upped. First of all, tell me why you did that. And, second of all, tell me what New Year's is like aboard the Constellation.

REID: OK.

I re-enlisted yesterday for orders. I'm going to be going to Tampa sometime in August. And New Year's on the ship is pretty different. It's very different. It's my first New Year's on board the ship. And it's quite an experience.

CROWLEY: In what way? Did you all celebrate or was it pretty much business as usual?

REID: Kind of both. We did find time to do a little bit of celebration. I brought in the new year by re-enlisting right exactly at midnight. And we did a little bit of celebration.

CROWLEY: Jason, tell me. You often hear that, when you're out on a ship for so long, that you get antsy to do something. Has it become pretty routine? Has there been any change in the feeling aboard the ship?

REID: Actually, the feeling on the ship has been pretty much the same since our deployment.

I would like to say that we're not kind of like a football team. It's like, we have worked so hard and done a lot of things to get ready to be out here. And we're ready for whatever is happening and is required of us. The mood is pretty much the same. People are a little homesick, because they're not home for the holidays. But we also know that we do have a job to do. And everybody out here is ready to do it.

CROWLEY: Jason, let me ask you -- first of all, let me tell our listener that what you're hearing, I think, are the planes on the ship. That's that noise that sometimes overcomes you.

But it's quiet now. And I want to give you a chance to say happy new year to whoever you'd like to say happy new year to.

REID: All right.

First, I'd like to say happy new year to my mom, my sister, my nephew, all my friends back home in Florida and California, and Latisha (ph), Demetria (ph), everybody, everybody out there that I care for and support me, and people that support me, and my grandparents, everywhere.

I'd like to say happy new year to my family and everybody back in the United States. We'll hold it down out here. And keep us in your prayers and in your thoughts and pray that we'll make it back home safely and all in one piece.

CROWLEY: Petty Officer Jason Reid, we will do that. Happy new year to you and everybody else aboard the USS Constellation.

Now, Iraq's daily newspaper, owned by the son of Saddam Hussein, is suggesting that Iraq follow the example of North Korea by expelling U.N. nuclear monitors. South Korean officials, meantime, are looking to China for help in finding a diplomatic solution to the crisis over North Korea's nuclear program.

Here's CNN's Rebecca MacKinnon.

(BEGIN VIDEOTAPE)

REBECCA MACKINNON, CNN CORRESPONDENT: South Korea's deputy foreign minister is now in Beijing. He's scheduled to meet Thursday with China's vice foreign minister.

South Korea's goal in this meeting is to try and convince China to take a more active role in ratcheting down tensions here on the Korean Peninsula. with North Korea having kicked out nuclear inspectors from its nuclear facilities.

Now, China is North Korea's closest alley. It has the largest amount of trade with North Korea than any other country in the world. China has a lot of cards to play. South Korea would like to see some of these cards being played more actively as it seeks a diplomatic situation (sic) to this current ratcheting up of tensions.

Now South Korea's new president-elect, Roh Moo-hyun, who takes office in February, gave a new year's message today in which he made it clear his team is working very hard to find a diplomatic solution.

ROH MOO-HYUN, SOUTH KOREA PRESIDENT-ELECT (through translator): We have examined and debated the nuclear issues. The conclusion is that we can solve this matter with dialogue and compromise, if our people and politicians gather their strength. I am confident, I will resolve this problem without fail.

MACKINNON: Meanwhile, more bellicose rhetoric coming from North Korea today. The state-run news agency, in an editorial, accusing the United States of targeting North Korea for an invasion and calling on the people of North Korea to strengthen the military to protect North Korea's dignity and sovereignty. So on this day, no signs of conciliation coming from North Korea, as the inspectors have now left North Korea with the international community having no way of monitoring what is going on in North Korea's nuclear facilities.

Rebecca MacKinnon, CNN, Seoul.

(END VIDEOTAPE)

CROWLEY: The long-simmering tensions between North Korea and the West form the backdrop for the new "James Bond" movie. As the film arrives in Korean theaters, some people from both sides of the DMZ say the film goes too far.

Here's CNN Seoul bureau chief, Sohn Jie-Ae.

(BEGIN VIDEOTAPE)

SOHN JIE-AE, CNN SEOUL BUREAU CHIEF (voice-over): Anyone who thinks North Korea deserves more than warnings about its nuclear weapons should see the latest Bond thriller "Die Another Day."

In it, Bond, James Bond that is, annihilates North Koreans in the demilitarized zone dividing the two Koreas. And in the end, gets his just revenge against a North Korean renegade.

But while James Bond dodges bullets, the movie hasn't been able to escape the barrage of criticism from South and North Koreans alike.

A small group of protesters lined the street in front of the theater where the Bond movie opened, displaying banners calling for a boycott of the film. They were angry at what they called the movie's war mongering tones.

UNIDENTIFIED FEMALE (through translator): We think it is outrageous that such a film that promotes war and belittles Koreans should be shown here.

SOHN: Internet sites are overrun with claims that several parts of the film portray South Korean soldiers as inferior to the American military and the countryside as poor and underdeveloped.

North Korea's official media channels have called the movie, quote, "dirty and cursed," end quote, and said it slanders North Korea and insults the Korean people.

Nevertheless, most people buying tickets to the flick don't seem that concerned.

UNIDENTIFIED MALE (through translator): I really didn't think about that factor. I will judge for myself when I finish seeing the movie.

UNIDENTIFIED MALE (through translator): I think the film should be judged for its entertainment value, not its political meanings. SOHN: However, opening day box office figures don't seem very high. But the movie's distributors hope this will pick up as initial furor dies down.

While the recent North Korea controversy may or may influence how well this film does at the box office, this Bond movie certainly has Koreans on both sides of the border shaken and stirred.

Sohn Jie-Ae, CNN, Seoul.

(END VIDEOTAPE)

CROWLEY: Amid tensions overseas and economic troubles at home, can President Bush keep his approval ratings high? Up next, we'll track his poll numbers and the challenges ahead.

And, as John Edwards moves closer to a presidential bid, we'll bring reporters together to discuss his chances and compare him to the competition.

(BEGIN VIDEOTAPE)

(voice-over): It's time to test your "I.P. I.Q.": What was the first President Bush's highest job approval rating during his one term in office? Was it, A, 65 percent, B, 77 percent or, C, 89 percent?

We'll have the answer after the break.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): How's your "I.P. I.Q.?" We asked you what the first President Bush's highest job approval rating was during his four years in office. Was it, A, 65 percent, B, 77 percent or, C, 89 percent? The answer is C. President Bush's job approval rating peaked at 89 percent in February 1991, just after the end of the Gulf War.

(END VIDEOTAPE)

CROWLEY: One of the many lessons President Bush learned from his father's presidency is that high approval ratings can be fleeting.

Our senior White House correspondent, John King, looks at Bush 43's popularity at the dawn of a new year.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The president of the United States!

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT (voice-over): The president begins the New Year in an enviable position in terms of public approval. MATTHEW DOWD, BUSH POLLSTER: He's at an historic point. This the longest sustained time a president has been this high of any president going back all the way to the Great Depression with FDR.

KING: Sixty-one percent of Americans say they approve of how Mr. Bush is handling his job. That is down significantly from a high of 90 percent just after the September 11, 2001 attacks. Still, the president's approval rating is 10 points higher now than it was just a day or two before the attacks.

STANLEY GREENBERG, DEMOCRATIC POLLSTER: I think this is due, you know, one-half to the war on terrorism and the threat the country faces, one-quarter to adept White House handling of the politics this year, and about a quarter to Democratic silence on the issues. But above all, this is, you know, a special period. We were attacked.

KING: Nearly 6 in 10 Americans in a year-end CNN/USA Today/Gallup Poll favor invading Iraq to destroy its weapons programs; 53 percent favor an invasion if the goal is removing Saddam Hussein from power.

GLEN BOLGER, REPUBLICAN POLLSTER: Our military has been so successful since Vietnam that expectations are high that this would be, you know, a relatively bloodless war and happen fairly quickly, and I think people would be stunned if that were not the case. And that's, I think, the risk that's out there.

KING: The economy is the most glaring trouble spot for a president gearing up for a reelection campaign.

GREENBERG: They've gone into very serious deficits. Unemployment has lagged. Income has lagged. And so, I think they have on the most important issue before the country, you know, very serious questions.

KING: Just 24 percent of Americans say the economy is in excellent or good shape, way down from the 67 percent who voiced that same opinion just before Mr. Bush took office. So far, Mr. Bush does not bear the brunt of the blame.

BOLGER: Most people say the terrorist attacks. Then, the second highest number is the natural business cycle. And then, the third biggest factor that they blame is the policies of the president, but that's only 13 percent of the people say that.

KING: The president knows the struggling economy is his biggest political headache, and plans a stimulus package early in what promises to be a challenging New Year.

(on camera): The president often has said his father's biggest mistake was wasting the political strength he built up during the first war with Iraq. This President Bush believes he enters the New Year with significant political capital of his own, and says he won't hesitate to spend it.

John King, CNN, the White House.

(END VIDEOTAPE)

CROWLEY: We want to talk now about the Democrats who want President Bush's job, including this week's semi-official addition to the field, Senator John Edwards.

I'm joined by Thomas Edsall of "The Washington Post" -- thanks, Tom -- and Ken Rudin of National Public Radio; and, in Raleigh, John Wagner of "The Raleigh News and Observer."

John, I want to start with you and ask you, as the one who probably has known John Edwards the longest and certainly the closest, how is this likely to play in North Carolina? Because we're talking about a man who also is up for a reelection.

JOHN WAGNER, "RALEIGH NEWS AND OBSERVER": Right.

And a lot of that really does remain to be seen. There's certainly some enthusiasm among those who are close to him. He has a few dozen people over at his house today. And I expect they will all be very favorable coming out of that gathering in a couple hours.

Beyond that, we'll have to see. It's been more than 25 years since anyone from North Carolina has run for president. And it's just going to take a little time to see how it plays.

CROWLEY: John, and let me also ask you, in terms of how you view him, what do you think Edwards' biggest strength is at this point for a presidential candidate?

WAGNER: He is very good at communicating in small groups, one on one. He's a former trial lawyer and is really in his element. He's been to many house parties in New Hampshire and out in Iowa. He's at his best when he's really trying to make a sale to a jury, if you will.

CROWLEY: And let me turn to my in-house guys.

I know you couldn't hear him, but what John says is that Edwards' biggest strength is the retail campaigning, the one-on-one. But he's had some slip-ups. Do you think he enters this sort of worse off than when we thought he would run for president?

THOMAS EDSALL, "THE WASHINGTON POST": His real problem, that all the presidential candidates have, is really overcoming a war on terrorism. They have to be a credible candidate in the face of a very serious situation.

And it's particularly troublesome for Democrats, who just do not have the same credibility that Republicans do when you get into issues of fighting wars, fighting battles, basically hostilities.

CROWLEY: And particularly, since this is only his fourth year that he's just completed as a senator, Ken, right?

KEN RUDIN, NATIONAL PUBLIC RADIO: Well, right. But they said that about George W. Bush as well in 2000, that he was only governor for five years at that time and did he have the gravitas to run for president then.

However, if gravitas was that important in 2000, Al Gore would have won the presidency, not George W. Bush. And, two, this is a different time, different era since 2000, when, obviously, as Tom just said, the war on terrorism and what's happened since 9/11 has really changed the landscape.

CROWLEY: So, is there anything that can shift this focus? Because the war on terrorism is not going away. Is that what Democrats have to try do? Or do they have to do what other Democrats -- in particular, former President Clinton -- have said, which is, you guys, you've got to get in there and compete on this foreign policy field?

EDSALL: I think the war on terrorism has become kind of a threshold issue.

You have to be on top of that. You have to be credible on it. You have to be seen as someone who is capable of being a commander in chief under very trying circumstances in order to be a credible candidate. That's the hurdle that all of these Democratic candidates have right now. And it's a pretty tough one. And it's tough for Edwards.

CROWLEY: And John, I want to turn back to you and then I'm going to ask all three of you. Stack him up against John Kerry and Joe Lieberman, since those are the two names that are sort of floating to the top of the poll. Stack Edwards up against those two.

WAGNER: Well, I guess what he brings to the table is a fresh face. They're really trying to sell that as an asset. Also, he's from the South. And unless Bob Graham gets in from Florida and you consider a Southerner, Edwards would be the only candidate from the South. And, obviously, the Democrats will need to carry at least one Southern state if they intend to win in 2004.

CROWLEY: Ken, stack him up. How does he measure up to these guys?

RUDIN: Well, I think the Southern is a big example.

The last three Democrats who were elected president were Lyndon Johnson, Jimmy Carter and Bill Clinton, all coming from the South. So he has that region, whereas nobody else does -- and, as John say, John Wagner says, that he is that fresh face.

But again, whether he stacks up, whether his resume stacks up compared to John Kerry, the war hero, been a senator since 1984 -- Joe Lieberman has been in the Senate for over a dozen years. So, as far as compared -- it's one thing to run against George Bush and fight the war on terrorism in the fall of 2004. The other thing is to stack up against the other Democrats and whether he can do it against the other field. CROWLEY: So, Tom, is it -- it's sort of fresh face vs. old hand, right? Do people want experience or do they want some breath of fresh air?

EDSALL: In a large sense.

But John Edwards, also -- I don't know what he's like in reality, because I don't know him personally as a friend. But he comes across, really, as probably the nicest of the guys running for president. And he comes across very well on television. It did him a lot of good running when he ran as an unknown in North Carolina. He gained value when his face appeared on television. He got a quality, a Q-value, I think you may call it in television, or something. And that is a real asset to have going into this.

What he lacks is really experience, presence, the kind of strength of command. We'll have to see if he can develop that as his campaign goes.

CROWLEY: But we should never underestimate charm in a presidential race, right?

EDSALL: No, not at all.

CROWLEY: Tom Edsall, "Washington Post," thank you all very much.

Ken Rudin of NPI, thank you.

I'm always grateful for people taking time to talk to me. But on New Year's Day, I owe both of you. And we owe also John Wagner as well from "The Raleigh News and Observer."

Thank all three of you.

Ahead: mystery in Modesto. What are police saying about the disappearance of a pregnant woman? We'll get a live report from Rusty Dornin.

(COMMERCIAL BREAK)

CROWLEY: Coming up in this second half-hour of INSIDE POLITICS: the newest members of the governors club, taking office during tough financial times -- but, first, this "News Alert."

In California, police have shifted their focus to foul play in the disappearance of a pregnant woman.

CNN's Rusty Dornin is in Modesto with an update -- Rusty.

RUSTY DORNIN, CNN CORRESPONDENT: Well, Candy, this is the park where Laci Peterson used to walk her dog.

You can see folks riding their bike and walking the pathway all along here. It's also become the center of sort of a shrine for Laci Peterson. You can see the reward, the half-million dollar reward, and also the candles that people have left here that they have continued to come this morning and light in her memory.

Last night, there were some 1,200 people here lighting candles, singing and praying, talking about the contributions that Laci Peterson has made to this community, and also just praying for her safe return. But, just hours earlier, at a press conference, the police did say that they suspect that foul play was involved in this case.

And the reason is that she was -- is gone for so long during the holidays -- she, of course, is eight months pregnant -- but was also very close to her family. Police also say they have not eliminated her husband, Scott, from the investigation.

(BEGIN VIDEO CLIP)

DOUG RIDENOUR, MODESTO POLICE DEPARTMENT: Mr. Peterson and anybody else connected with this investigation will be considered and is considered a suspect. But we have not focused on him to the point of saying he's a suspect, no. Everybody -- every part of the investigation is being considered. Nothing's ruled out.

(END VIDEO CLIP)

DORNIN: Now, the search continues through New Year's Day. Just within the last hour, you can see some men on horseback that have combing the Dry Creek area in this park where we are.

Now, of course, this was searched long ago in the very beginning, but they are still concerned that there's a possibility that something was missed. So, they are continuing to comb the riverbanks, the farmlands, the rural areas.

Candy, there has just been no leads in this case. And they are very frustrated at this point.

CROWLEY: Well, Rusty, that's what I wanted to ask you.

Since they're going over the same area, it says to me that they are no closer to finding this woman than they were the day they found out she was missing, yes?

DORNIN: Exactly.

Every single lead -- they're getting a lot of tips through their hot lines and the volunteers. And, of course, this huge reward is attracting a lot of people to call. But there has not been one thing that's been solid enough that they really -- he said, they got excited about.

Everywhere we go, the police we meet are just extremely frustrated. The searcher that you just saw on that video, we talked to him. He'd been searching all morning and just said there's nothing.

CROWLEY: Rusty Dornin in Modesto, California, it looks like a beautiful new year, but a pretty awful story. Thanks, Rusty. In Yemen today, a memorial service was held to remember the three American missionaries shot and killed by an Islamic extremist. Among those who attended the ceremony was Don Caswell, a pharmacist who was wounded in the attack. A Yemeni official, meantime, said scores of suspects have been detained in connection with the attack. Officials also say the attack is linked to the recent killing of a secular political leader who had criticized religious extremists.

New governors for a new year. Up next: who's being sworn in to another term and who's starting a new term in the New Year's edition of "Campaign News Daily."

(COMMERCIAL BREAK)

CROWLEY: The new year brings with it some new state laws all around the country. In addition to the usual tax and budget issues, we found a few that caught our eye.

Starting today, California kids have to wear a helmet while riding skateboards, skates and scooters. Connecticut and Alaska are increasing the minimum wage to $7.15 an hour. And Connecticut is also phasing in a law banning the use of mercury thermometers.

Our New Year's edition of "Campaign News Daily" highlights a day of inaugurations. In New York, George Pataki has been sworn in to his third term as governor. Pataki took the oath just after midnight in a small ceremony. He did it all again around noon in a public event attended by about 2,000 guests.

Former Congressman and Clinton Cabinet member Bill Richardson is New Mexico's first Democratic governor in eight years. Like Pataki, Richardson took the oath early this morning in private. A public ceremony was held a few hours ago at the Capitol.

And in Michigan, Jennifer Granholm has taken office as that state's first woman governor. Granholm was sworn in on the steps of the state Capitol just before noon.

When Congress returns, many governors are pressuring lawmakers to focus on unemployment benefits. The federal government typically helps out with extra benefits during times of economic weakness. But this time, Congress let the federal help expire.

Here's CNN's Peter Viles.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): You can expect partisan fighting over extended unemployment benefits. President Bush said it should be Congress' first priority. Senator Hillary Clinton says Republicans have already dropped the ball behind the politics, real people like Derrick Codougan, a chef who worked catering jobs for Wall Street firms. He has been out of work for a year, he has run out of benefits, he was evicted, moved his family of four into a friend's apartment. DERRICK CODOUGAN, UNEMPLOYED CHEF: If there a job there is 2,000 people apply for those same type of jobs. So it's hard to be unemployed with family in this season.

VILES: Terry White was caught in the same Wall Street downdraft, laid off 14 months ago at Salomon and Smith Barney. He too ran out of benefits eight weeks ago.

TERRY WHITE, UNEMPLOYED: Collecting unemployment is something that survived this long. If it weren't for I'd be in real trouble, I don't know what I would do. So I'm hoping for Hillary, I hope she gets them to pass an extension of unemployment benefits.

VILES: The economics of unemployment somewhat complicated. Right now, 8 1/2 million Americans are out of work, 3 1/2 million filed for state unemployment benefit, the average benefit $260 a week, it lasts about 26 weeks.

Another 780,000 had used up the state benefits but until last week were eligible for another 13 weeks of federal benefits. Another one million like Derrick and Terry used up both their state and federal benefits and received nothing. The rest about, 3 million people either don't file for unemployment or were never eligible. You can't collect if you quit your job or never had one.

The question for Congress and the president is not whether to extend new benefits. It's under what terms. Simply renewing the 13 week federal program is not going to help Terry White or Derrick Codougan, which is why labor leaders are pushing for 26 weeks of federal aid.

CHRISTINE OWENS, AFL-CIO: This is similar to what Congress has done in the early 1990s when the elder George Bush was president. That program was in operation for 30 months, it provided between 26 and 33 weeks of benefits, and it didn't stop operating until unemployment had fallen and long-term unemployment was declining.

(on camera): Now, at 6 percent, the unemployment rate itself is not running at a historically high level. But the percentage of people who are unemployed who are exhausting their state unemployment benefits is running very high. It was 48 percent in October. And that was the highest October reading in 22 years.

Peter Viles, CNN Financial News, New York.

(END VIDEOTAPE)

CROWLEY: Coming up: the new year scramble to set the political agenda. The No. 1 Democrat in the House, Nancy Pelosi, talks to our Jonathan Karl.

Stay with us.

(COMMERCIAL BREAK)

CROWLEY: Pundits can try -- and trust me, they will -- to make predictions about the political year ahead.

Our Bruce Morton thinks it's safe to say at least this much: Washington will be abuzz with officials competing to get out their messages.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): President Bush will be trying to set national agenda, of course, helped by Republican majorities in the House and the Senate.

In some areas, he's a radical Republican. His education program greatly expanded the federal government's role in the schools. Fiscally, he's a Reagan Republican: big tax cuts titled toward the rich. And if that means deficit spending, so what? He's pro- business, wants oil drilling in Alaska and offshore, would let coal plants pollute the air more.

Voters like his leadership in the war on terror. They're less happy with how he's handling the economy. And why not? The stock market just ended its third straight losing year. So, Democrats are likely to concentrate on these domestic issues. Their proposed anti- recession tax cuts will be aimed at lower- and middle-income Americans. Their prescription drug plan is likely to involve the government. Mr. Bush's relies on the drug industry.

But the Democrats won't all be speaking with one voice, of course. Each of the presidential candidates will want to establish his own agenda. John Kerry, Joseph Lieberman, John Edwards and the rest will first be trying to raise serious money and, second, to find a theme that strikes a chord with voters.

UNIDENTIFIED MALE: I don't think the Republicans are fiscal conservatives, because we haven't a Republican president that has balanced the budget in 33 years in this country. We need balanced budgets.

MORTON: Will voters respond to that? We'll see.

But they'll all be looking for an agenda that commands attention and support. And, in the wake of Trent Lott's fall, the Democrats may try to use race as an issue.

STUART ROTHENBERG, CNN POLITICAL ANALYST: I'm sure the Democrats are going to keep this issue on the front burner, both to energize African-Americans, make sure they vote in big numbers in 2004, but also to appeal to swing moderate whites, to try to portray the Republicans as intolerant.

MORTON: All of these issues, these agendas battling for your attention will play out in a Republican Congress. They will decide what to have hearings about.

But, in the Senate, you need 60 votes to pass most legislation, because the other side can threaten a filibuster. And Congress is more partisan than it used to be: fewer conservative Democrats, fewer liberal Republicans.

(on camera): One other note: If Congress is to do anything major this year -- Social Security, prescription drugs, whatever -- they'll probably have to do it early. Otherwise, politics, planning for the presidential and congressional elections, will just take over and drown out everything else.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

CROWLEY: One of the leading figures in the battle of the political agendas will be the new House minority leader, Nancy Pelosi.

And she spoke recently with congressional correspondent Jonathan Karl.

(BEGIN VIDEOTAPE)

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Congresswoman Pelosi, thank you for joining us.

REP. NANCY PELOSI (D), CALIFORNIA: My pleasure.

KARL: There's a story in "Roll Call" that says that some of the moderates in your caucus may not be voting for you for leader as a show of lack of support. They think you're perhaps too liberal to represent the Democrats.

What do you make of that?

PELOSI: Well, I haven't seen the article, so I don't know of what you speak.

But I do know that, on January 7, for the first time in our history, the name of a woman will be placed in nomination for speaker of the House of Representatives. I was chosen by my caucus not because I am a woman. But the fact that I am is not lost on anyone in this country, least of all the women. So, it is with great pride, I think, that my colleagues will advance my name. I know I'll have a strong vote.

And because -- some certain conservative elements in certain parts of the country are trying to fan the flame and call me radical, because I support civil rights and ending discrimination against all people in our country and educating the American people and having an economy that is fair.

KARL: Now, your counterpart on the Republican side is Tom DeLay. They call him the hammer around here. What kind of a working relationship do you think you're going to have with Tom DeLay? You two are going to be paired time and time again.

PELOSI: Tom DeLay and I have served for many years on the Appropriations Committee. I think we have a good working rapport, and, indeed, even a friendship. So, I believe that we'll have a cordial relationship.

He knows what he believes in and I represent my caucus. So, our friendship will not be an issue in terms of where we stand on issues. Clearly, there is a big difference, but I think we respect each other.

KARL: Will this be a polarized place, though? Because DeLay represents the suburbs of Houston, perhaps the most conservative area of country, or one of them. You represent San Francisco, perhaps one of the more liberal areas in the country. Certainly, you represent different parts of your own parties. Will this be a polarized place?

PELOSI: Well, I'm very proud to represent the district that I do and have for over 15 years.

As leader, I represent my caucus. And I believe that we will be able to be constructive on how we reach solutions to the challenges the American people face. Tom DeLay takes great pride in being in the extreme right of his party. I think that he would not deny that. They are trying to characterize me as a counterpart to that -- counterpoint to that. It simply isn't so.

But we'll just advance our issues of a fair economy, protecting the environment, access to quality health care for all Americans, educating the American people, early childhood education to lifelong learning. The list of priorities for the Democrats is a very clear one and one that I think the American people support.

KARL: Well, you have had a record, a voting record, that has been on the left of your party, at least by the groups that rate voting, the ADA, the ACU. And either side would certainly rate you to the left of your party.

But now you are leader. I mean, do you see your positions perhaps changing a little bit?

PELOSI: Are you asking me if I'm changing my beliefs because I've become leader? No.

I'm now the leader of the party to present the views of the Democrats in the Congress of the United States. They have decided overwhelmingly that they want me to be the person to do that. And I will do that with great pride. I am the leader of the Democratic caucus and will carry that banner and those issues and the consensus that we have built very proudly.

KARL: One of the first issues out of the box is going to be economic stimulus. When are we going to see your plan and what will it look like?

PELOSI: Our Democratic caucus will come together as Congress convenes in the beginning of January. And we will focus on the safety and soundness of our country, the safety of the American people and homeland security and the soundness of the economy, an economy that is fair, that is fiscally -- we'll propose a package at some point which will be fair, which will be fiscally responsible, which will create jobs and will grow the economy. We are right now analyzing what is ailing this economy, so that we can be current on what needs to -- what fixes will work. So, while, when we come together, we will continue our work to do that, at the start, we will have an economic stimulus package, which we will announce at that time. And that will be part of our overarching approach to growing the economy in a way, again, that is fair, fiscally sound and creates jobs.

KARL: The White House is talking about a plan of about $300 billion in terms of tax cuts and tax incentives. Does that sound like something within the ballpark that Democrats could work with?

PELOSI: I don't know what they're spending that money on.

It's not just a question of how much money you're going to spend on a package. It's a question of what you're spending the money on and over what period of time. So, there are many questions that have to be addressed. And when you talk about comparing one amount of money to the next, you have to know what the priorities are, what is left out of the Republican plan, and what the duration of it is.

Again, I will say that our plan will be one that will not tolerate a jobless recovery, that we will have a plan that will grow the economy in a way that creates jobs, that is fair, that enables all Americans to participate in the economic success of our country as we grow that economy.

KARL: Well, Congresswoman Pelosi, I really appreciate your time and look forward to seeing you as leader.

PELOSI: Thank you very much.

(END VIDEOTAPE)

CROWLEY: A very brisk change of pace when INSIDE POLITICS returns, with a traditional New Year's Day big chill.

(COMMERCIAL BREAK)

CROWLEY: Just checking what's in the works for tomorrow's INSIDE POLITICS: I'll be joined by North Carolina Democratic Senator John Edwards. We expect he will confirm plans to create a presidential exploratory committee, the first step in a run for the White House in 2004.

Now, there is nothing political, so far as we can tell, about the Coney Island Polar Bear Club. But we're bipartisan here. We enjoy watching their annual antics anyway. The Polar Bears took their traditional New Year's day dip in the frigid Atlantic Ocean, with hundreds of spectators cheering them on.

The National Weather Service reports the air and water temperatures were in the lower to middle 40s. This was the 100th annual Polar Bear swim. Why have so many taken the chilling plunge for so many years? One swimmer says it's about doing crazy stuff and living your life. Amen to that.

That is it for INSIDE POLITICS. I'm Candy Crowley.

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