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Inside Politics

Interview With Josh Bolten; Interview With Leon Panetta; Running From Iraq? Campaign Strategy

Aired June 04, 2004 - 15:30   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.


(BEGIN VIDEOTAPE)
ANNOUNCER: An encouraging jobs report.

UNIDENTIFIED FEMALE: The job market continues to gain across the board.

ANNOUNCER: Will today's numbers impact the race for the White House?

Are some Republicans in Congress trying to run away from the president when it comes to the conflict in Iraq?

UNIDENTIFIED MALE: The bottom line for candidates for Congress is still, you better know and better be talking about what your agenda is on kitchen table issues.

ANNOUNCER: The Bush campaign reaches out to church congregations.

REV. BARRY LYNN, AMERICANS UNITED FOR SEPARATION OF CHURCH AND STATE: Their intention is to have churches in this country become cogs in the political machine to re-elect George Bush. That is illegal, it's unethical and it ought to be stopped.

TERRY HOLT, BUSH CAMPAIGN SPOKESMAN: And there's nothing less sinister and more hopeful than a campaign founded at the neighborhood level and at the grassroots level.

ANNOUNCER: So who's right?

(END VIDEOTAPE)

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

JUDY WOODRUFF, HOST: Thank you for joining us.

The president got a significant boost today in his battle to persuade Americans that he, not John Kerry, is the best candidate to keep the economy moving. New employment numbers released this morning show that almost a quarter of a million new jobs were created last month. While the overall unemployment rate held at 5.6 percent, the new jobs were spread across a broad spectrum of the economy, led by jumps in construction and manufacturing. The president took time from meetings in Europe to talk up the latest numbers. (BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Two hundred and forty-eight thousand jobs for last month is good for the American workers. It shows that our economy is vital and growing. We've added 900,000 jobs over the last three months and 1.4 million jobs since last August. Policies in place are working, entrepreneurial spirit is strong.

(END VIDEO CLIP)

WOODRUFF: The Bush campaign, meanwhile, has already released this new TV ad promoting the growth in new jobs. The spot was put together over the last 10 days or so, but the new numbers were plugged in today.

As for John Kerry, his campaign released this statement: "Any step forward in the job market is good news for workers. But America is still in the worst job recovery since the great depression, with 1.9 million private sector jobs lost in the Bush presidency."

With me now to talk more about all of this is the president's director of the Office of Management and Budget, Josh Bolten.

Good to see you, Mr. Bolten. Is John Kerry right, this is still the worst job recovery since the great depression?

JOSH BOLTEN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Well, having been involved in campaigns myself previously, I have to have some sympathy for the Kerry campaign, which is trying to put a sour face on some very good economic news. The economy is strong, getting stronger. The latest job growth figures are very good. We're very optimistic about the trajectory of this economy.

WOODRUFF: At the same time, you have the number of people counted as out of work, 8.2 million, we're told is up from last month by almost 40,000 people. Is that a concern?

BOLTEN: Sure. Everybody that's unemployed is a concern to the president. We've still got work to do. But the important part is that we've got the economy moving in the right direction. The job numbers are moving strongly in the right direction. And the president has got the right policies in place.

Bear in mind that when the president came into office, he came in with an inherited recession. We had the 9/11 attacks. And since then, we've had to dig ourselves out of a very serious situation. The president's policies have been extremely well designed to do just that, and the direction we're headed is very strong.

WOODRUFF: The Kerry campaign is also talking about how many of these new jobs pay less than the old jobs. There's a quote today from Congressman Pete Stark, Democrat of California, saying most of the new growth we're seeing, he says, has fattened businesses' balance sheets, but not workers' paychecks. BOLTEN: That just seems entirely off to me. I mean, you talk to the working people of America and you'll see folks whose paychecks are growing. We are seeing growth in real wages. People who are making an average income, your average family of four making $40,000, has seen a tax cut, thanks to the president's policies, of $2,000.

This is all going in the right direction. And let me say one thing about the quality of the jobs being created. These jobs that we've seen being created are across some of our best industries for jobs: construction, manufacturing, health care. Three-quarters of the new jobs created are in industries that -- where the salaries are above the average salary in the United States.

So I don't think there's any occasion to put a sour face on this good economic news. The news is good and the policies are in place to make it better over the long run.

WOODRUFF: Let me ask you a question about this year's budget. As you know, there are four Republican holdouts in the Senate who say they won't support the administration budget. They want so-called pay-as-you-go rules implemented. Now there's talk it may be impossible to get any budget agreement this year. Are you prepared for that if it happened?

BOLTEN: Sure. We would like to see the Congress come to a resolution on the budget which all of the Democrats in the Senate have opposed. But if they don't, if they're not able to come around to rules that make it easier to do the appropriating process in an orderly way, there's still plenty of discipline in the system.

The most important part of the discipline is the president, who has sent up a very good budget that funds our priorities but keeps spending overall restrained. And if it's not possible to have a budget resolution on the Hill, the president has the ability and the will to step in and provide some discipline in the appropriations process should it get out of hand.

One more point on the budget process is we've had terrific support from the Republican leadership there, from the committee chairman and from the leaders on both sides. And I think even if they're unable to come to a budget resolution, they would be able to do the people's business on how we spend our money in a good fashion.

WOODRUFF: All right. We're going to have to leave it there. Josh Bolten, who is President Bush's budget director, good to see you.

BOLTEN: Thank you.

WOODRUFF: Thank you very much for talking with me.

Well, critics of the White House say this president does have a long way to go to make up for the total jobs lost during his time in office. Leon Panetta is with me now from San Jose, California. He's a former House Budget Committee chairman. He was also budget director in the Clinton White House. Leon Panetta, you just heard Josh Bolten say you have to go some way to put a bad face on these numbers. Overall, this is growth, it's good solid growth in jobs.

LEON PANETTA, FMR. CLINTON WHITE HOUSE CHIEF OF STAFF: Well, there's no question that it's encouraging news to have Americans getting jobs, finally. It is encouraging for all of us. But the fact is that we did lose 1.9 million jobs during this administration. And so we're nowhere close to regaining those lost jobs.

In addition to that, they set a target of over 300,000 jobs a month, and we haven't even achieved that level of jobs per month. They are temporary; in many instances, temporary jobs. But I think probably the worst concern of all, Judy, is whether or not the economy can be sustained in terms of recovery when you've got the huge budget mess that you've got in Washington.

This administration is running the worst deficits in history. And it has no plan, frankly, to confront those.

WOODRUFF: Well, but just to get back on the jobs figures a minute ago, you heard Josh Bolten say these are quality jobs. And he talked about the growth in real wages in American families. Why isn't that something for the American people to be pleased about?

PANETTA: Well, there's no question, the American people ought to be pleased when Americans are getting jobs. That's important. But they also ought to recognize that we have lost 1.9 million jobs, which is the worst record since Herbert Hoover. And so the real question then becomes, how quickly can we try to regain the lost jobs we have and begin to produce positive job growth in this country? That's the question I think we all have to ask because this is about the future.

It isn't just about looking at the news for today. It's about whether or not we're going to have a strong economy for the future. And there, as I said, I think it's jeopardized by what we're seeing in terms of the budget mess in Washington.

WOODRUFF: We just heard Josh Bolten also say that he kind of feels sorry for the Kerry campaign. They have to look for the dark lining in this cloud. I mean, does this, in essence, Leon Panetta, take the issue of the economy off the table for John Kerry?

PANETTA: Oh, no, not at all. The fundamental problem -- and you can ask the conservative Republicans on Capitol Hill, as well as the Democrats -- the concern we have is that we basically mortgaged this country over the last four years. I have never seen a worse budget situation in my life.

When you're in deficit to $500 billion, and when you're continuing to borrow and spend, and when you're not willing to pay for any initiatives, pay for the war in Iraq or pay for these tax cuts that they want, we continue to raise the worst tax of all, which is the tax on our children who are going to have to pay the debt. I think that's still a very strong issue we have to bring to the American people. WOODRUFF: A very quick last question about California politics, which you know very well. Arnold Schwarzenegger, Republican, turning out to be a pretty popular governor in your state. He's going to be helping George Bush in California. Does that make you worry about whether John Kerry can win the state?

PANETTA: I don't think so, Judy. Right now, neither campaign is spending any money in California. So I think they may know something that I don't. But clearly, I think California is going to be in the Democratic column.

The governor has done a good job. He is willing to cut deals with the Democrats in the legislature. And very frankly, maybe the president can learn that lesson in Washington. You've got to cut deals with the Democrats if you're going to be able to get a budget passed.

WOODRUFF: OK. Leon Panetta, who, of course, was budget director during the administration of Bill Clinton, good to see you. Thanks very much.

PANETTA: Nice to see you, Judy.

WOODRUFF: Thanks.

Well, beyond the budget, Iraq is the other big issue shaping the campaign debate. The war once looked like a political winner for Republicans. Now some GOP House members plan to campaign on issues closer to home.

Searching for votes in houses of worship, how the Bush campaign is targeting church goers in its effort to get out the grassroots.

And later, a Democratic victory in South Dakota. Does it complicate the party's goals come November? We'll look inside Bob Novak's notebook.

This is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

WOODRUFF: A question, how will the news from Iraq play in this year's congressional campaigns? The head of the House Republican Campaign Committee is advising GOP candidates to steer clear. CNN congressional correspondent, Ed Henry, has more from Capitol Hill.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): When Saddam Hussein fell, the war in Iraq was expected to be a major asset for President Bush and congressional Republicans heading into the election. But now the chairman of the House Republican Campaign Committee is saying Iraq is a presidential issue. So GOP candidates should focus instead on domestic matters.

REP. TOM REYNOLDS (R), CHAIRMAN, REPUBLICAN CONGRESSIONAL CAMPAIGN COMMITTEE: Our constituents want to know some answers on Iraq. But they want to know what the kitchen table issues are going on and what their congressman is going to do about it. So I just believe those kitchen table issues are what it's all about, and Iraq, while certainly it is a central issue in 2004, it's more of one that's addressed by the president and the presidential nominee on the Democratic Party.

HENRY: The House Democratic campaign chief pounced on that sentiment, charging that congressional Republicans fear repercussions over Iraq, so they're trying to distance themselves from Bush.

REP. ROBERT MATSUI (D), CHAIRMAN, DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE: It's our belief, frankly, that this situation in Iraq now will probably be a drag on the Republican Party.

HENRY: But Reynolds insists that he's not trying to distance Hill Republicans from the White House.

REYNOLDS: I haven't had any mysterious plan to distance ourselves from it. We're joined from the hip to the ankle with the president on the Bush agenda.

HENRY: But Reynolds repeatedly mentioned No Child Left Behind, Medicare, and jobs as the items in the Bush agenda that Republicans will stress. Matsui says he's thrilled, because he thinks Democrats can win on the domestic front, and he believes it's a mistake for Republicans to downplay Iraq.

MATSUI: I find it hard to understand how one could suggest that their candidates not focus on perhaps the most important issue that the American public is concerned about right now.

(END VIDEOTAPE)

HENRY: Judy, Tom Reynolds basically told CNN that he thinks he's just pointing out a lesson that he learned from the special election in South Dakota this week in which the Republican candidate was down 30 points and then closed the gap to two points at the end by focusing on local issues in South Dakota. Bob Matsui laughed that off, saying the bottom line is the Democratic candidate won, and a win is a win. So he thinks Reynolds learned the wrong lesson this week -- Judy.

WOODRUFF: Well, it won't be long before we know who's right.

HENRY: That's right.

WOODRUFF: OK. Ed Henry, thank you very much.

HENRY: Thank you.

WOODRUFF: Just ahead, a new survey on what Americans have to say on the Church's role in politics. This comes as the Bush campaign launches an effort aimed at attracting churchgoers.

Stay with us.

(COMMERCIAL BREAK)

WOODRUFF: Most Americans, if you ask them, say they think churches should steer clear of politics. A recent ABC News-Washington Post poll shows 64 percent of Americans say church leaders should not try to influence politicians. And with the recent controversy over Catholic politicians being denied communion, 68 percent of all Americans and 72 percent of Catholics say that a candidate who supports abortion should not be denied the sacrament.

Meantime, the Bush-Cheney campaign is turning to churchgoers for help in its re-election effort. CNN's Deborah Feyerick explains.

(BEGIN VIDEOTAPE)

DEBORAH FEYERICK, CNN CORRESPONDENT (voice-over): President Bush is looking for new friends, specifically voters friendly to him in churches across Pennsylvania. An e-mail sent by the Bush re-election campaign seeks 1,600 friendly congregations and asks the recipient to serve as a volunteer coordinator in your place of worship.

The subject of the e-mail? Lead your congregation for President Bush by handing out general information. Tax experts and church watchdogs call the e-mail risky, saying that any church that cooperates could lose tax exempt status.

LYNN: Their intention is to have churches in this country become cogs in the political machine to re-elect George Bush. That is illegal, it's unethical, and it ought to be stopped.

FEYERICK: A spokesman for the Bush campaign says people of faith have every right to participate in the political process.

HOLT: And there's nothing less sinister and more hopeful than a campaign founded at the neighborhood level and at the grassroots level.

FEYERICK: A recent IRS alert warns religious institutions, even activities that encourage people to vote for or against a particular candidate on the basis of nonpartisan criteria violate the political campaign prohibition. Some religious leaders fear targeting churches will have a negative impact on religion as a whole.

UNIDENTIFIED MALE: Religion becomes a part of the strategy of a political campaign, thus desacralizing the very house of worship the administration claims to value.

FEYERICK (on camera): Several years ago, the IRS pulled the tax exempt status from a church that ran a political ad. It warns violations by churches this year could have the same result or, at the least, significant financial penalties.

Deborah Feyerick, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: All right. Bob Novak joins us now from the "CROSSFIRE" set at George Washington University with some "Inside Buzz."

Bob, I understand you have a brand new Novak electoral map out today.

ROBERT NOVAK, CO-HOST, "CROSSFIRE": Yes, and we have George Bush closing the gap a little bit. We have Kerry 280 electoral votes, George W. Bush 258.

We get there by changing Ohio and West Virginia from Kerry to Bush, mainly on the basis of the good economic news. The polling data shows there's a change. Now, that's a 22-vote gap, Judy. And if you remember, Florida is 24 electoral votes.

We have Kerry slightly ahead there. So again, it's Florida. Who wins Florida gets elected president if -- all this is on the basis of if the election were held today.

WOODRUFF: Where have we heard that before about Florida? All right. South Dakota politics, what are you thinking?

NOVAK: In a special election, Stephanie Herseth won. Good news and bad news for the Democrats. It means that even though the race was closer than usual, you have all three members of Congress, the two senators and the lone congressman from this very Republican state are Democratic. And that is the bad news, as well, because Stephanie Herseth is going to have to run again in November for a full term. Senator Tom Daschle is up, and a lot of people feel one of them is going to lose.

The good Republicans of South Dakota aren't going to have an all- Democratic delegation. And Tom Daschle running against a very strong Republican in John Thune. Very close race. May be the victim because of Stephanie Herseth.

WOODRUFF: Wouldn't that be a twist? All right. Let's talk about those independent fundraising groups called 527s. We haven't heard a lot about Republicans. But what are you learning?

NOVAK: Well, now the Republicans are behind the tide because they tried to get them called illegal. The Federal Elections Commission said no. And now I've learned that the Leadership Forum, a 527 run by a very powerful young lobbyists named Susan Hirschman (ph), who was chief of staff to House Majority Leader Tom DeLay, is having a meeting July 7th. And the speaker is the speaker -- at this session is the speaker of the House, Dennis Hastert.

Speaker Hastert's people tell me this is not a fundraiser. You don't have to pay to get in. Just an informational speech. But it is a signal that the Republicans are going into the soft money business. They're starting very far behind, Judy, however.

WOODRUFF: It's what we need, more money in politics. All right. The Motion Picture Association of America, it is one of the more powerful lobbying groups in this town searching for a leader.

NOVAK: Yes, Jack Valenti has been a lame duck for a couple years now, very effective lobbyist. And I am told by a good source that they are going to hold -- they probably are going to hold off the selection of a successor till after the election to see how it comes out.

Is there going to be a Democratic president? Is there going to be A Republican Senate? What is it going to be?

I don't see how that makes much different, because Jack Valenti was a Democrat and he worked very well with both Republicans and Democrats. The names that have been published most widely as possible are Torie Clark on the Republican side. She was a chief spokesman for Don Rumsfeld, and Glickman, the former -- what's Glickman's first name?

WOODRUFF: Dan.

NOVAK: Dan Glickman, the former secretary of agriculture, former congressman from Kansas on the Democratic side. But the new name that I hear, Judy, is Fred Thompson, former senator from Tennessee. He would be the first movie actor to be the lobbyist for the movie industry. Now, can you figure that out?

WOODRUFF: Huh, that would be a first, as you said. And as you said, whoever has this job has got to be able to work both sides of the aisle. OK.

NOVAK: That's right. And it's a nice job, Judy. It only pays about $2 million a year.

WOODRUFF: Bob Novak, that's what he earns at "CROSSFIRE." The other thing Bob -- thank you, Bob. The other thing Bob, of course, will be doing tomorrow is hosting "THE NOVAK ZONE." That's tomorrow morning at 9:30 eastern, when his guest will be the legendary journalist, Ben Bradlee. We'll be watching.

Anti-American protestors take to the streets of Rome as President Bush pays a visit. Coming up next, a live report from Italy on the president's trip and the backlash over Iraq.

When Bill Clinton talks, many people listen. We'll tell you what the former president has to say about the man who succeeded him.

Plus, the budget blues. Are some conservatives fed up with President Bush over the ballooning federal deficit?

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: A rude welcoming by the people of Rome. And an appeal by the pope. President Bush is in Italy, but it's Iraq that's on everyone's mind.

He's been struggling in the polls, but is Mr. Bush ready for a bounce? We've got our eye on a possible surge in the president's numbers. John Kerry drafts an army for his battle for the White House.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: We all became brothers. We all came to love each other and care about each other. And we understood that that is the lesson of service to country and the real definition of patriotism.

ANNOUNCER: Can the presidential hopeful win the hearts of fellow veterans?

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

(END VIDEOTAPE)

WOODRUFF: Welcome back. As the Bush administration worked to make the most of last month's job gains here at home, the president was in Italy discussing Iraq and other issues with the pope and the Italian prime minister. Our senior White House correspondent John King is traveling with the president. He joins me now live from Rome. John, hello.

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Hello to you, Judy, and greetings from Rome. A remarkable day for the President Bush here today. And remarkable contrast, different views about the war in Iraq.

Tonight Mr. Bush is having a working dinner with Prime Minister Silvio Berlusconi. He, among the European leaders who stepped forward and supported Mr. Bush when it came to the decision about war in Iraq. Italy has sent 2,700 security forces to join in the peacekeeping effort now in Iraq. So Mr. Bush in the presence of a friend tonight.

But earlier today at the Vatican, a bit of a lecture. Mr. Bush asking for this audience with Pope John Paul II hoping these pictures perhaps helped persuade some Catholic voters this election year. But in a public ceremony, the pope said the Vatican's position about the war in Iraq was unequivocally opposes. He used the word deplorable to describe the abuses of prisoners at the Abu Ghraib Prison.

The pope also saying that there should be a speedy transfer of sovereignty back to the Iraqi people. The Bush administration taking some solace in the fact the pope did applaud the steps taken this week to put a new interim Iraqi government in place. But Pope John Paul II clearly making known his views about the Iraq war.

Also opposition to the war on the streets here in Rome today. Protesters by the thousands taking to the street to demonstrate. The Italian government had deployed some 10,000 police because they were so worried these protests against Mr. Bush and against the war in Iraq might turn violent. But while the protesters did turn out in large numbers, those demonstrations were largely peaceful.

Judy, Mr. Bush trying to make the case on this campaign trip -- on this overseas trip -- excuse me -- that he is working as closely as he can with traditional allies. Italy today. The president moves onto France tomorrow, trying to blunt the criticism we hear so often from Senator John Kerry that this president does not handle international diplomacy well at all -- Judy.

WOODRUFF: And it will be interesting to see if it does deflect any that criticism.

John, separate questions. Some news from the White House today regarding the United Nations. Tell us about that.

KING: Well, the former U.N. ambassador, John Negroponte, will be the new ambassador in Iraq. So Mr. Bush needed a replacement. The White House announced today he had settled on a former Republican senator from the state of Missouri, Jack Danforth. Mr. Danforth also served as the president's special envoy trying to reach an agreement to end the civil war in Sudan.

The White House views this as a smart pick in this election year. They do not want a rough confirmation battle. They do not want any conformation hearing used as a platform to criticize administration policies. The White House believes Senator Danforth will be quickly and overwhelmingly confirmed by his former colleagues in the Senate -- Judy.

WOODRUFF: Served for a number of years in the Senate. All right, John King, traveling with President Bush in Europe. John, thank you so much.

Back here in the United States, Democrat John Kerry tried to keep his campaign focused on its issue of the day, most notably his continued emphasis on national security issues. Our senior political correspondent Candy Crowley is with the Kerry campaign.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: News that the job market boomed for the third month in a row interrupted the Kerry campaign's focus on national security but only briefly, and begrudgingly.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: I saw that there are 240,000 jobs created last month. That's terrific. But guess what? There's still 1.9 million jobs lost over the course of this presidency. There's still too many people who can't afford health care or can't afford to go to college. There are too many people struggling while at the top end people get ahead.

I think it ought to be the reverse. I think we need to make it possible for every American to get ahead.

CROWLEY: At the end of an 11-day focus on matters of national security, Kerry rallied thousands of supporters in Minneapolis, going over the basic themes he has touched over the past week and a half, bioterrorism, nuclear terrorism and the need to reshape the military.

At the base of all his complaints is one major criticism of George Bush. And that is that he has spoil the well of good will needed to fight global terrorism. KERRY: I believe that over the course of these last few years, the leader of the free world, the United States of America, has lost respect and influence. Alliances are broken. And people are questioning both our values and our ideas.

I intend to restore America's respect and influence. I intend to put us back in the position of leadership.

CROWLEY: At this rally in Minnesota, Kerry was surrounded by what he has come to call his "band of brothers," that is those he fought with in Vietnam. Kerry used the occasion to launch a Veterans for Kerry campaign. The hope is to sign up 1 million active vets for Kerry by the election. Polls currently show that George Bush enjoys a clear margin among veterans.

Candy Crowley, CNN, Minneapolis, Minnesota.

(END VIDEOTAPE)

WOODRUFF: We have an important piece of news coming from the campaign trail. John Kerry doing a couple of radio interviews today in which he says among other things he will announce his choice for a vice presidential running mate in a matter of days.

And I'm going to quote now from a story that has just come in to CNN. He was being interviewed by WJR Radio in Detroit. The reporter asked about his decision. And he said, "Yeah, we'll have that done very, very shortly. We've really got most of them in place and we're on the short list. And we'll have it done in a matter of days."

And he goes on to say, when he's asked, will you announce it now? He says, "Yeah, absolutely that was my plan." And so forth.

So of course, CNN will be working very hard with Candy Crowley and our team who are following the Kerry campaign to try to get more information. But again, John Kerry making some news out there on the campaign trail in Detroit, Michigan today saying that he expects to announce his choice for a vice presidential running mate in just a matter of days.

So we're going to be working that story and we'll get you any more information we can just as quickly as possible.

Turning now to our headlines in our "Campaign News Daily" John Kerry's wife, Teresa Heinz Kerry, is speaking out once again about President Bush. Last night in New York, Mrs. Kerry said a desire to defeat the president has helped to fill the Kerry campaign treasury. Speaking of Bush, she said, quote, "He is our biggest fund raiser."

Former President Bill Clinton is kicking off a tour to promote his memoir. Last night in Chicago he said reliving parts of his past were painful but that political disagreements should not become personal.

(BEGIN VIDEO CLIP) BILL CLINTON, FRM. PRESIDENT OF THE UNITED STATES: If you don't support President Bush, if you go back and read what he said in the campaign, he's just doing what he said he would do. And you've got to give him credit for that. You don't have to say he's a bad person. If you don't support him, you should say I think he's wrong and here's why.

And if you do support him, you should say not that those of us who don't are bad people but you think we're wrong and say why.

(END VIDEO CLIP)

WOODRUFF: Bill Clinton was back in New York today where he delivered the commencement address at City University in New York.

At least a few of the deep-pocketed donors on the political right are saying they may keep their money this year instead of donating to the president. "The New York Times" quotes Stephen Moore, the head of the anti-tax group Club for Growth as saying a lot of his donors are angry with the president over government spending, steel tariffs and other issues. Moore also says, however, that he thinks most conservatives will forgive the president.

Just a little while ago, I spoke with political analyst Stu Rothenberg of "The Los Angeles Times" who has written a column predicting that a Bush surge is forthcoming. He says you can't see or hear it, but he says it will happen. I started by asking him if that's the case, how he knows it's true.

(BEGIN VIDEOTAPE)

STU ROTHENBERG, "THE LOS ANGELES TIMES": Well, Judy, it's the result of being in politics and watching politics for more than a couple decades. Campaigns have an ebb and flow to them. There's a natural progression. One candidate gets favored treatment, another candidate -- then the other candidate gets more positive press.

The way I look at this presidential race, George W. Bush has had pretty much like four months of terrible news. First it was the economy, then Iraq, then four books coming out criticizing him, criticism of the war on terror. Even some misstatements from people at the administration. A whole range of blunders. Some of them not having anything to do with the president, but penalizing the president politically.

It just seems to me it was about time for the Bush administration to start to get some good news. And we've actually seen some the last few days.

WOODRUFF: You've had this week, the job numbers have come out. Good news presumably for the president, the Iraqi interim government put in place. Is all this going to make a measurable difference for him?

ROTHENBERG: First of all, you're exactly right. Two bits of good news. I'd add a third, which is OPEC's decision on oil production. Presumably electrical be relief at the pump at some point.

It's too soon to tell of course whether this good news will filter down to the public. We've had some good jobs numbers for two months and the public hasn't bought it. The public been ready to accept the fact that there's an economic turn around.

I think that there has to be a more general sense of light at the end of the tunnel. And it's not one thing, it's not just jobs numbers. But it's jobs and Iraq and the like.

But maybe this bit of good news will create some positive sentiment for the president.

WOODRUFF: What about some of the polls, Stu, we're seeing in the showdown states, the states that were closest in 2000 where Kerry seems to be doing better? Do you think that is going to follow the national...

ROTHENBERG: I think what we're seeing is a result of all the bad news for the White House and some doubt on the part of the public whether or not the president deserves to be rehired. The question is whether this bit of good news carries forth, gets some press coverage and the public turns around. If the public turns around, then the poll numbers will turn around. If the public doesn't turn, then you'll see continued deterioration in Bush's numbers.

WOODRUFF: Are you saying it's hopeless for John Kerry?

ROTHENBERG: Certainly not. I actually think Senator Kerry is in a much better position now even though he's running even in a number of states where maybe he should be winning because the number I look at is the president's number. That's the key. And George W. Bush is still far below 50 percent in the ballot test and far below where he should be, even if he's running even with John Kerry. I think this race is very much up for grabs. I think the president right now is trailing but I think if he gets good news, we'll have an interesting few months here.

WOODRUFF: But for John Kerry to do better, you're saying in a way there has to be more bad news for the president?

ROTHENBERG: I think if the current environment holds, that is, if there is not a turnaround in public sentiment, if more people don't believe the country is headed in the right direction, I think sooner or later it will benefit Senator Kerry. I don't think we need more bad news for Senator Kerry to be elected president. I think if the current situation holds for another three or four, five months, toward the end of the campaign, voters will simply say do I really want George W. Bush and my guess is they won't. I think it's more important for the president that mood turns around than it is for Senator Kerry that things would get worse.

(END VIDEOTAPE)

WOODRUFF: Stu Rothenberg saying he's predicting a Bush surge. We'll see. Gauging the pulse of the people, what do voters in some crucial showdown states say about George Bush and John Kerry? A new survey gives some answers.

And later, Arnold Schwarzenegger puts it all out on the line. We'll tell you about the California governor's tasty bet.

(COMMERCIAL BREAK)

WOODRUFF: We have a little egg on our face here at CNN on INSIDE POLITICS. I just said on the air a few minutes ago that John Kerry gave a radio interview in Detroit, Michigan, a short time ago, told the radio interviewer that his decision on a vice presidential running mate just days away. He said he would make the decision very, very shortly. Now it turns out even though that transcript was put out by the campaign, the campaign is now saying that the senator was joking with the radio reporter, that they are not close to a decision or announcement on a vice presidential running mate. It's a good lesson for those of us who work in 24-hour news to be sure and check and double check before we go on the air. Our apologies. No decision on a running mate very soon.

Turning to the next story on our plate here as the 2004 campaign moves toward the summer convention season, an estimated 20 battleground states remain in the political crosshairs. According to the University of Pennsylvania Annenberg election survey, the target is 11 percent of the voting public, they are the so-called persuadable voters, the undecided and those who say there's a good chance they may change their minds. Joining me with insight on these swing voters and their swing states is Kathleen Hall Jamieson, she is dean of the university's Annenberg School of Communications. Kathleen Hall Jamieson, first of all, any thoughts on the mistake we just made about John Kerry?

KATHLEEN HALL JAMIESON: No, those things happen. And in fact, I'm the director of the Annenberg Policy Center. I gave up being dean a little while ago and I don't want to have my successor think I'm staging a coup. I'm delighted to be back.

WOODRUFF: We're just piling mistake on top of mistake but we're glad to have you here anyway. First of all, give people a sense of how many undecideds there are out there? What percentage of the electorate are they?

HALL JAMIESON: It's about 11 percent of the public as a whole. In the battleground states, it's about 24-26 percent of those who are possible voters. But we have to qualify that because some of these people aren't registered and some of the people haven't voted much in the past. Although most of the people who are in this category in our survey have voted in the past and are registered, this group is a little less likely to be registered now. The campaigns are after them, a little less likely to have voted in the past.

WOODRUFF: Can you tell what percentage they are of those likely to vote? HALL JAMIESON: Not really because we don't have good predictors from the past. The ones who are most likely to vote are those who have always voted in the past and are now already registered. They are also most likely to have already made up their minds and to say they're not likely to be changing at this point.

WOODRUFF: How are there -- once you've identified these persuadable voters, how are their views different from voters on either side of the political divide?

HALL JAMIESON: This is what's interesting about this group of voters because this persuadable group is more pessimistic about Iraq and the president's handling of it, more pessimistic about the economy, and in a piece of news that's particularly relevant because of today's -- good news for the Bush administration about jobs, this is a group that says, almost 50 percent says that they know someone who has either you or has someone you know lost a job because of the economy in the past six months. That's almost half of this group. That's a statistically significant increase over all respondents in our surveys. This is a group that's pessimistic about the economy but also has more personal experience with job loss. Than the people who have already made up their minds overall.

WOODRUFF: But for the Bush administration, they could argue, well, jobs are coming online. We're going to turn around those opinions. People are going to get more confident.

HALL JAMIESON: That's why this is an important piece of information because this survey draws these people from the entire month of May. It takes that long to find them because they're such a small part of a very large survey. The news today should increase the likelihood that the people they know who have lost a job are finding a job. And so this may be information that as it's updated with new news on the economy that's translated into people's life experiences getting a job will turn out to be much better news for the president.

WOODRUFF: How hard are the two campaigns working to go out and find these voters and to persuade them?

HALL JAMIESON: They're working extremely hard. Voter registration and get out the vote drives are going to have unprecedented importance this year because this is the campaign that may be won on mobilization and identifying those who sometimes stay home.

WOODRUFF: All right. We're going to leave it there, Kathleen Hall Jamieson, she is the director of the Annenberg Survey at the Annenberg School of Communicates at the University of Pennsylvania. Thank you very much. It's always good to see you. We appreciate it. Thanks.

Just ahead on INSIDE POLITICS, our political play of the week. It's a lesson in wielding power. Our Bill Schneider will be along to announce the winner.

(COMMERCIAL BREAK) WOODRUFF: In Iraq this week, a group stepped forward and showed that it could take control of its affairs and by doing so, surprised a few world leaders. Here to explain, senior political analyst, Bill Schneider.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: As of June 30, Iraq will have a new government. Where did it come from? From this week's political play of the week.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Who chose the new government of Iraq? Not me, says President Bush.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I had no role. I mean, occasionally somebody said, this person may be interested or that, but I had no role in picking. Zero.

SCHNEIDER: Then who?

BUSH: It was Mr. Brahimi's selections and Ambassador Bremer and Ambassador Blackwell were instructed by me to work with Mr. Brahimi.

SCHNEIDER: Lakhdar Brahimi, the U.N. envoy was supposed to control the process and give it international legitimacy. Let's ask him.

LAKHDAR BRAHIMI, U.N. SPECIAL ENVOY TO IRAQ: Bremer is the dictator of Iraq. He has the money. He has the signature. Nothing happens without his agreement in this country.

UNIDENTIFIED MALE: Come on, everyone.

SCHNEIDER: Brahimi wanted a transitional Iraqi government run by technocrats to move the country to elections in January, not to build a base of power. But the U.N. envoy had to contend with politicians. The Iraqi governing council, 24 quarrelsome war lords and business people and former exiles appointed by the U.S. with a thirst for power as it turns out. Last week, Brahimi offered the post of interim prime minister to Hussein Shahristani a nuclear scientist once imprisoned by Saddam Hussein. But the council preferred one of its own, Iyad Allawi who had a stronger political base and CIA connections. Vowing to pressure, Shahristani turned the post town. Brahimi wanted to appoint Adnan Pachachi, another U.S. favorite to be the new president of Iraq but the governing council once again balked.

ADNAN PACHACHI, IRAQI GOVERNING COUNCIL MEMBER: There were some elements in the Iraqi political class who were against me.

SCHNEIDER: Bowing to pressure, Pachachi turned the post down. Once again, the council got its man. Ghazi Yawar, a powerful and politically skillful sheik. This time, not the U.S. favorite.

RUBAR SANDI, IRAQI AMERICAN BUSINESSMAN: I think the choice of America was Adnan Pachachi and they went against the choice and they selected Sheikh Ghazi Yawar so I don't think it's really a puppet government.

SCHNEIDER: Iraqi politicians took control of this process.

LAITH KUBBA, IRAQ NATIONAL GROUP: The Iraqi governing council which was appointed by the U.S. but wanted very much to extend its power and influence.

SCHNEIDER: Politicians taking control of government? Is that an outrage? No, it's democracy. And it's the political play of the week.

(END VIDEOTAPE)

SCHNEIDER: The Iraqi governing council's now been dissolved, but the new government looks a lot like that old council. Now it has to establish popular support and ultimately, face the voters. That is real democracy.

WOODRUFF: And the real test.

SCHNEIDER: Absolutely.

WOODRUFF: OK, Bill Schneider, thanks very much.

Still ahead on INSIDE POLITICS, a long distance bet between two governors and why the person who loses won't walk away hungry. Just a little humble.

(COMMERCIAL BREAK)

WOODRUFF: California Governor Arnold Schwarzenegger and Michigan Governor Jennifer Granholm have a friendly wager tied to the NBA finals. If the Lakers win, Schwarzenegger says he will send California wine and asparagus and in and out burger and California strawberries and ice cream to Granholm. But if Detroit wins, Governor Granholm will send a meat and potato Michigan pastry, a Verner's (ph) soft drink, and chocolate-covered Michigan cherries to Schwarzenegger. The losing governor however will have to wear to wear the jersey of the winning team. They'll be well fed.

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

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


Aired June 4, 2004 - 15:30   ET
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(BEGIN VIDEOTAPE)
ANNOUNCER: An encouraging jobs report.

UNIDENTIFIED FEMALE: The job market continues to gain across the board.

ANNOUNCER: Will today's numbers impact the race for the White House?

Are some Republicans in Congress trying to run away from the president when it comes to the conflict in Iraq?

UNIDENTIFIED MALE: The bottom line for candidates for Congress is still, you better know and better be talking about what your agenda is on kitchen table issues.

ANNOUNCER: The Bush campaign reaches out to church congregations.

REV. BARRY LYNN, AMERICANS UNITED FOR SEPARATION OF CHURCH AND STATE: Their intention is to have churches in this country become cogs in the political machine to re-elect George Bush. That is illegal, it's unethical and it ought to be stopped.

TERRY HOLT, BUSH CAMPAIGN SPOKESMAN: And there's nothing less sinister and more hopeful than a campaign founded at the neighborhood level and at the grassroots level.

ANNOUNCER: So who's right?

(END VIDEOTAPE)

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

JUDY WOODRUFF, HOST: Thank you for joining us.

The president got a significant boost today in his battle to persuade Americans that he, not John Kerry, is the best candidate to keep the economy moving. New employment numbers released this morning show that almost a quarter of a million new jobs were created last month. While the overall unemployment rate held at 5.6 percent, the new jobs were spread across a broad spectrum of the economy, led by jumps in construction and manufacturing. The president took time from meetings in Europe to talk up the latest numbers. (BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Two hundred and forty-eight thousand jobs for last month is good for the American workers. It shows that our economy is vital and growing. We've added 900,000 jobs over the last three months and 1.4 million jobs since last August. Policies in place are working, entrepreneurial spirit is strong.

(END VIDEO CLIP)

WOODRUFF: The Bush campaign, meanwhile, has already released this new TV ad promoting the growth in new jobs. The spot was put together over the last 10 days or so, but the new numbers were plugged in today.

As for John Kerry, his campaign released this statement: "Any step forward in the job market is good news for workers. But America is still in the worst job recovery since the great depression, with 1.9 million private sector jobs lost in the Bush presidency."

With me now to talk more about all of this is the president's director of the Office of Management and Budget, Josh Bolten.

Good to see you, Mr. Bolten. Is John Kerry right, this is still the worst job recovery since the great depression?

JOSH BOLTEN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Well, having been involved in campaigns myself previously, I have to have some sympathy for the Kerry campaign, which is trying to put a sour face on some very good economic news. The economy is strong, getting stronger. The latest job growth figures are very good. We're very optimistic about the trajectory of this economy.

WOODRUFF: At the same time, you have the number of people counted as out of work, 8.2 million, we're told is up from last month by almost 40,000 people. Is that a concern?

BOLTEN: Sure. Everybody that's unemployed is a concern to the president. We've still got work to do. But the important part is that we've got the economy moving in the right direction. The job numbers are moving strongly in the right direction. And the president has got the right policies in place.

Bear in mind that when the president came into office, he came in with an inherited recession. We had the 9/11 attacks. And since then, we've had to dig ourselves out of a very serious situation. The president's policies have been extremely well designed to do just that, and the direction we're headed is very strong.

WOODRUFF: The Kerry campaign is also talking about how many of these new jobs pay less than the old jobs. There's a quote today from Congressman Pete Stark, Democrat of California, saying most of the new growth we're seeing, he says, has fattened businesses' balance sheets, but not workers' paychecks. BOLTEN: That just seems entirely off to me. I mean, you talk to the working people of America and you'll see folks whose paychecks are growing. We are seeing growth in real wages. People who are making an average income, your average family of four making $40,000, has seen a tax cut, thanks to the president's policies, of $2,000.

This is all going in the right direction. And let me say one thing about the quality of the jobs being created. These jobs that we've seen being created are across some of our best industries for jobs: construction, manufacturing, health care. Three-quarters of the new jobs created are in industries that -- where the salaries are above the average salary in the United States.

So I don't think there's any occasion to put a sour face on this good economic news. The news is good and the policies are in place to make it better over the long run.

WOODRUFF: Let me ask you a question about this year's budget. As you know, there are four Republican holdouts in the Senate who say they won't support the administration budget. They want so-called pay-as-you-go rules implemented. Now there's talk it may be impossible to get any budget agreement this year. Are you prepared for that if it happened?

BOLTEN: Sure. We would like to see the Congress come to a resolution on the budget which all of the Democrats in the Senate have opposed. But if they don't, if they're not able to come around to rules that make it easier to do the appropriating process in an orderly way, there's still plenty of discipline in the system.

The most important part of the discipline is the president, who has sent up a very good budget that funds our priorities but keeps spending overall restrained. And if it's not possible to have a budget resolution on the Hill, the president has the ability and the will to step in and provide some discipline in the appropriations process should it get out of hand.

One more point on the budget process is we've had terrific support from the Republican leadership there, from the committee chairman and from the leaders on both sides. And I think even if they're unable to come to a budget resolution, they would be able to do the people's business on how we spend our money in a good fashion.

WOODRUFF: All right. We're going to have to leave it there. Josh Bolten, who is President Bush's budget director, good to see you.

BOLTEN: Thank you.

WOODRUFF: Thank you very much for talking with me.

Well, critics of the White House say this president does have a long way to go to make up for the total jobs lost during his time in office. Leon Panetta is with me now from San Jose, California. He's a former House Budget Committee chairman. He was also budget director in the Clinton White House. Leon Panetta, you just heard Josh Bolten say you have to go some way to put a bad face on these numbers. Overall, this is growth, it's good solid growth in jobs.

LEON PANETTA, FMR. CLINTON WHITE HOUSE CHIEF OF STAFF: Well, there's no question that it's encouraging news to have Americans getting jobs, finally. It is encouraging for all of us. But the fact is that we did lose 1.9 million jobs during this administration. And so we're nowhere close to regaining those lost jobs.

In addition to that, they set a target of over 300,000 jobs a month, and we haven't even achieved that level of jobs per month. They are temporary; in many instances, temporary jobs. But I think probably the worst concern of all, Judy, is whether or not the economy can be sustained in terms of recovery when you've got the huge budget mess that you've got in Washington.

This administration is running the worst deficits in history. And it has no plan, frankly, to confront those.

WOODRUFF: Well, but just to get back on the jobs figures a minute ago, you heard Josh Bolten say these are quality jobs. And he talked about the growth in real wages in American families. Why isn't that something for the American people to be pleased about?

PANETTA: Well, there's no question, the American people ought to be pleased when Americans are getting jobs. That's important. But they also ought to recognize that we have lost 1.9 million jobs, which is the worst record since Herbert Hoover. And so the real question then becomes, how quickly can we try to regain the lost jobs we have and begin to produce positive job growth in this country? That's the question I think we all have to ask because this is about the future.

It isn't just about looking at the news for today. It's about whether or not we're going to have a strong economy for the future. And there, as I said, I think it's jeopardized by what we're seeing in terms of the budget mess in Washington.

WOODRUFF: We just heard Josh Bolten also say that he kind of feels sorry for the Kerry campaign. They have to look for the dark lining in this cloud. I mean, does this, in essence, Leon Panetta, take the issue of the economy off the table for John Kerry?

PANETTA: Oh, no, not at all. The fundamental problem -- and you can ask the conservative Republicans on Capitol Hill, as well as the Democrats -- the concern we have is that we basically mortgaged this country over the last four years. I have never seen a worse budget situation in my life.

When you're in deficit to $500 billion, and when you're continuing to borrow and spend, and when you're not willing to pay for any initiatives, pay for the war in Iraq or pay for these tax cuts that they want, we continue to raise the worst tax of all, which is the tax on our children who are going to have to pay the debt. I think that's still a very strong issue we have to bring to the American people. WOODRUFF: A very quick last question about California politics, which you know very well. Arnold Schwarzenegger, Republican, turning out to be a pretty popular governor in your state. He's going to be helping George Bush in California. Does that make you worry about whether John Kerry can win the state?

PANETTA: I don't think so, Judy. Right now, neither campaign is spending any money in California. So I think they may know something that I don't. But clearly, I think California is going to be in the Democratic column.

The governor has done a good job. He is willing to cut deals with the Democrats in the legislature. And very frankly, maybe the president can learn that lesson in Washington. You've got to cut deals with the Democrats if you're going to be able to get a budget passed.

WOODRUFF: OK. Leon Panetta, who, of course, was budget director during the administration of Bill Clinton, good to see you. Thanks very much.

PANETTA: Nice to see you, Judy.

WOODRUFF: Thanks.

Well, beyond the budget, Iraq is the other big issue shaping the campaign debate. The war once looked like a political winner for Republicans. Now some GOP House members plan to campaign on issues closer to home.

Searching for votes in houses of worship, how the Bush campaign is targeting church goers in its effort to get out the grassroots.

And later, a Democratic victory in South Dakota. Does it complicate the party's goals come November? We'll look inside Bob Novak's notebook.

This is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

WOODRUFF: A question, how will the news from Iraq play in this year's congressional campaigns? The head of the House Republican Campaign Committee is advising GOP candidates to steer clear. CNN congressional correspondent, Ed Henry, has more from Capitol Hill.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): When Saddam Hussein fell, the war in Iraq was expected to be a major asset for President Bush and congressional Republicans heading into the election. But now the chairman of the House Republican Campaign Committee is saying Iraq is a presidential issue. So GOP candidates should focus instead on domestic matters.

REP. TOM REYNOLDS (R), CHAIRMAN, REPUBLICAN CONGRESSIONAL CAMPAIGN COMMITTEE: Our constituents want to know some answers on Iraq. But they want to know what the kitchen table issues are going on and what their congressman is going to do about it. So I just believe those kitchen table issues are what it's all about, and Iraq, while certainly it is a central issue in 2004, it's more of one that's addressed by the president and the presidential nominee on the Democratic Party.

HENRY: The House Democratic campaign chief pounced on that sentiment, charging that congressional Republicans fear repercussions over Iraq, so they're trying to distance themselves from Bush.

REP. ROBERT MATSUI (D), CHAIRMAN, DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE: It's our belief, frankly, that this situation in Iraq now will probably be a drag on the Republican Party.

HENRY: But Reynolds insists that he's not trying to distance Hill Republicans from the White House.

REYNOLDS: I haven't had any mysterious plan to distance ourselves from it. We're joined from the hip to the ankle with the president on the Bush agenda.

HENRY: But Reynolds repeatedly mentioned No Child Left Behind, Medicare, and jobs as the items in the Bush agenda that Republicans will stress. Matsui says he's thrilled, because he thinks Democrats can win on the domestic front, and he believes it's a mistake for Republicans to downplay Iraq.

MATSUI: I find it hard to understand how one could suggest that their candidates not focus on perhaps the most important issue that the American public is concerned about right now.

(END VIDEOTAPE)

HENRY: Judy, Tom Reynolds basically told CNN that he thinks he's just pointing out a lesson that he learned from the special election in South Dakota this week in which the Republican candidate was down 30 points and then closed the gap to two points at the end by focusing on local issues in South Dakota. Bob Matsui laughed that off, saying the bottom line is the Democratic candidate won, and a win is a win. So he thinks Reynolds learned the wrong lesson this week -- Judy.

WOODRUFF: Well, it won't be long before we know who's right.

HENRY: That's right.

WOODRUFF: OK. Ed Henry, thank you very much.

HENRY: Thank you.

WOODRUFF: Just ahead, a new survey on what Americans have to say on the Church's role in politics. This comes as the Bush campaign launches an effort aimed at attracting churchgoers.

Stay with us.

(COMMERCIAL BREAK)

WOODRUFF: Most Americans, if you ask them, say they think churches should steer clear of politics. A recent ABC News-Washington Post poll shows 64 percent of Americans say church leaders should not try to influence politicians. And with the recent controversy over Catholic politicians being denied communion, 68 percent of all Americans and 72 percent of Catholics say that a candidate who supports abortion should not be denied the sacrament.

Meantime, the Bush-Cheney campaign is turning to churchgoers for help in its re-election effort. CNN's Deborah Feyerick explains.

(BEGIN VIDEOTAPE)

DEBORAH FEYERICK, CNN CORRESPONDENT (voice-over): President Bush is looking for new friends, specifically voters friendly to him in churches across Pennsylvania. An e-mail sent by the Bush re-election campaign seeks 1,600 friendly congregations and asks the recipient to serve as a volunteer coordinator in your place of worship.

The subject of the e-mail? Lead your congregation for President Bush by handing out general information. Tax experts and church watchdogs call the e-mail risky, saying that any church that cooperates could lose tax exempt status.

LYNN: Their intention is to have churches in this country become cogs in the political machine to re-elect George Bush. That is illegal, it's unethical, and it ought to be stopped.

FEYERICK: A spokesman for the Bush campaign says people of faith have every right to participate in the political process.

HOLT: And there's nothing less sinister and more hopeful than a campaign founded at the neighborhood level and at the grassroots level.

FEYERICK: A recent IRS alert warns religious institutions, even activities that encourage people to vote for or against a particular candidate on the basis of nonpartisan criteria violate the political campaign prohibition. Some religious leaders fear targeting churches will have a negative impact on religion as a whole.

UNIDENTIFIED MALE: Religion becomes a part of the strategy of a political campaign, thus desacralizing the very house of worship the administration claims to value.

FEYERICK (on camera): Several years ago, the IRS pulled the tax exempt status from a church that ran a political ad. It warns violations by churches this year could have the same result or, at the least, significant financial penalties.

Deborah Feyerick, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: All right. Bob Novak joins us now from the "CROSSFIRE" set at George Washington University with some "Inside Buzz."

Bob, I understand you have a brand new Novak electoral map out today.

ROBERT NOVAK, CO-HOST, "CROSSFIRE": Yes, and we have George Bush closing the gap a little bit. We have Kerry 280 electoral votes, George W. Bush 258.

We get there by changing Ohio and West Virginia from Kerry to Bush, mainly on the basis of the good economic news. The polling data shows there's a change. Now, that's a 22-vote gap, Judy. And if you remember, Florida is 24 electoral votes.

We have Kerry slightly ahead there. So again, it's Florida. Who wins Florida gets elected president if -- all this is on the basis of if the election were held today.

WOODRUFF: Where have we heard that before about Florida? All right. South Dakota politics, what are you thinking?

NOVAK: In a special election, Stephanie Herseth won. Good news and bad news for the Democrats. It means that even though the race was closer than usual, you have all three members of Congress, the two senators and the lone congressman from this very Republican state are Democratic. And that is the bad news, as well, because Stephanie Herseth is going to have to run again in November for a full term. Senator Tom Daschle is up, and a lot of people feel one of them is going to lose.

The good Republicans of South Dakota aren't going to have an all- Democratic delegation. And Tom Daschle running against a very strong Republican in John Thune. Very close race. May be the victim because of Stephanie Herseth.

WOODRUFF: Wouldn't that be a twist? All right. Let's talk about those independent fundraising groups called 527s. We haven't heard a lot about Republicans. But what are you learning?

NOVAK: Well, now the Republicans are behind the tide because they tried to get them called illegal. The Federal Elections Commission said no. And now I've learned that the Leadership Forum, a 527 run by a very powerful young lobbyists named Susan Hirschman (ph), who was chief of staff to House Majority Leader Tom DeLay, is having a meeting July 7th. And the speaker is the speaker -- at this session is the speaker of the House, Dennis Hastert.

Speaker Hastert's people tell me this is not a fundraiser. You don't have to pay to get in. Just an informational speech. But it is a signal that the Republicans are going into the soft money business. They're starting very far behind, Judy, however.

WOODRUFF: It's what we need, more money in politics. All right. The Motion Picture Association of America, it is one of the more powerful lobbying groups in this town searching for a leader.

NOVAK: Yes, Jack Valenti has been a lame duck for a couple years now, very effective lobbyist. And I am told by a good source that they are going to hold -- they probably are going to hold off the selection of a successor till after the election to see how it comes out.

Is there going to be a Democratic president? Is there going to be A Republican Senate? What is it going to be?

I don't see how that makes much different, because Jack Valenti was a Democrat and he worked very well with both Republicans and Democrats. The names that have been published most widely as possible are Torie Clark on the Republican side. She was a chief spokesman for Don Rumsfeld, and Glickman, the former -- what's Glickman's first name?

WOODRUFF: Dan.

NOVAK: Dan Glickman, the former secretary of agriculture, former congressman from Kansas on the Democratic side. But the new name that I hear, Judy, is Fred Thompson, former senator from Tennessee. He would be the first movie actor to be the lobbyist for the movie industry. Now, can you figure that out?

WOODRUFF: Huh, that would be a first, as you said. And as you said, whoever has this job has got to be able to work both sides of the aisle. OK.

NOVAK: That's right. And it's a nice job, Judy. It only pays about $2 million a year.

WOODRUFF: Bob Novak, that's what he earns at "CROSSFIRE." The other thing Bob -- thank you, Bob. The other thing Bob, of course, will be doing tomorrow is hosting "THE NOVAK ZONE." That's tomorrow morning at 9:30 eastern, when his guest will be the legendary journalist, Ben Bradlee. We'll be watching.

Anti-American protestors take to the streets of Rome as President Bush pays a visit. Coming up next, a live report from Italy on the president's trip and the backlash over Iraq.

When Bill Clinton talks, many people listen. We'll tell you what the former president has to say about the man who succeeded him.

Plus, the budget blues. Are some conservatives fed up with President Bush over the ballooning federal deficit?

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ANNOUNCER: A rude welcoming by the people of Rome. And an appeal by the pope. President Bush is in Italy, but it's Iraq that's on everyone's mind.

He's been struggling in the polls, but is Mr. Bush ready for a bounce? We've got our eye on a possible surge in the president's numbers. John Kerry drafts an army for his battle for the White House.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: We all became brothers. We all came to love each other and care about each other. And we understood that that is the lesson of service to country and the real definition of patriotism.

ANNOUNCER: Can the presidential hopeful win the hearts of fellow veterans?

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

(END VIDEOTAPE)

WOODRUFF: Welcome back. As the Bush administration worked to make the most of last month's job gains here at home, the president was in Italy discussing Iraq and other issues with the pope and the Italian prime minister. Our senior White House correspondent John King is traveling with the president. He joins me now live from Rome. John, hello.

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Hello to you, Judy, and greetings from Rome. A remarkable day for the President Bush here today. And remarkable contrast, different views about the war in Iraq.

Tonight Mr. Bush is having a working dinner with Prime Minister Silvio Berlusconi. He, among the European leaders who stepped forward and supported Mr. Bush when it came to the decision about war in Iraq. Italy has sent 2,700 security forces to join in the peacekeeping effort now in Iraq. So Mr. Bush in the presence of a friend tonight.

But earlier today at the Vatican, a bit of a lecture. Mr. Bush asking for this audience with Pope John Paul II hoping these pictures perhaps helped persuade some Catholic voters this election year. But in a public ceremony, the pope said the Vatican's position about the war in Iraq was unequivocally opposes. He used the word deplorable to describe the abuses of prisoners at the Abu Ghraib Prison.

The pope also saying that there should be a speedy transfer of sovereignty back to the Iraqi people. The Bush administration taking some solace in the fact the pope did applaud the steps taken this week to put a new interim Iraqi government in place. But Pope John Paul II clearly making known his views about the Iraq war.

Also opposition to the war on the streets here in Rome today. Protesters by the thousands taking to the street to demonstrate. The Italian government had deployed some 10,000 police because they were so worried these protests against Mr. Bush and against the war in Iraq might turn violent. But while the protesters did turn out in large numbers, those demonstrations were largely peaceful.

Judy, Mr. Bush trying to make the case on this campaign trip -- on this overseas trip -- excuse me -- that he is working as closely as he can with traditional allies. Italy today. The president moves onto France tomorrow, trying to blunt the criticism we hear so often from Senator John Kerry that this president does not handle international diplomacy well at all -- Judy.

WOODRUFF: And it will be interesting to see if it does deflect any that criticism.

John, separate questions. Some news from the White House today regarding the United Nations. Tell us about that.

KING: Well, the former U.N. ambassador, John Negroponte, will be the new ambassador in Iraq. So Mr. Bush needed a replacement. The White House announced today he had settled on a former Republican senator from the state of Missouri, Jack Danforth. Mr. Danforth also served as the president's special envoy trying to reach an agreement to end the civil war in Sudan.

The White House views this as a smart pick in this election year. They do not want a rough confirmation battle. They do not want any conformation hearing used as a platform to criticize administration policies. The White House believes Senator Danforth will be quickly and overwhelmingly confirmed by his former colleagues in the Senate -- Judy.

WOODRUFF: Served for a number of years in the Senate. All right, John King, traveling with President Bush in Europe. John, thank you so much.

Back here in the United States, Democrat John Kerry tried to keep his campaign focused on its issue of the day, most notably his continued emphasis on national security issues. Our senior political correspondent Candy Crowley is with the Kerry campaign.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: News that the job market boomed for the third month in a row interrupted the Kerry campaign's focus on national security but only briefly, and begrudgingly.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: I saw that there are 240,000 jobs created last month. That's terrific. But guess what? There's still 1.9 million jobs lost over the course of this presidency. There's still too many people who can't afford health care or can't afford to go to college. There are too many people struggling while at the top end people get ahead.

I think it ought to be the reverse. I think we need to make it possible for every American to get ahead.

CROWLEY: At the end of an 11-day focus on matters of national security, Kerry rallied thousands of supporters in Minneapolis, going over the basic themes he has touched over the past week and a half, bioterrorism, nuclear terrorism and the need to reshape the military.

At the base of all his complaints is one major criticism of George Bush. And that is that he has spoil the well of good will needed to fight global terrorism. KERRY: I believe that over the course of these last few years, the leader of the free world, the United States of America, has lost respect and influence. Alliances are broken. And people are questioning both our values and our ideas.

I intend to restore America's respect and influence. I intend to put us back in the position of leadership.

CROWLEY: At this rally in Minnesota, Kerry was surrounded by what he has come to call his "band of brothers," that is those he fought with in Vietnam. Kerry used the occasion to launch a Veterans for Kerry campaign. The hope is to sign up 1 million active vets for Kerry by the election. Polls currently show that George Bush enjoys a clear margin among veterans.

Candy Crowley, CNN, Minneapolis, Minnesota.

(END VIDEOTAPE)

WOODRUFF: We have an important piece of news coming from the campaign trail. John Kerry doing a couple of radio interviews today in which he says among other things he will announce his choice for a vice presidential running mate in a matter of days.

And I'm going to quote now from a story that has just come in to CNN. He was being interviewed by WJR Radio in Detroit. The reporter asked about his decision. And he said, "Yeah, we'll have that done very, very shortly. We've really got most of them in place and we're on the short list. And we'll have it done in a matter of days."

And he goes on to say, when he's asked, will you announce it now? He says, "Yeah, absolutely that was my plan." And so forth.

So of course, CNN will be working very hard with Candy Crowley and our team who are following the Kerry campaign to try to get more information. But again, John Kerry making some news out there on the campaign trail in Detroit, Michigan today saying that he expects to announce his choice for a vice presidential running mate in just a matter of days.

So we're going to be working that story and we'll get you any more information we can just as quickly as possible.

Turning now to our headlines in our "Campaign News Daily" John Kerry's wife, Teresa Heinz Kerry, is speaking out once again about President Bush. Last night in New York, Mrs. Kerry said a desire to defeat the president has helped to fill the Kerry campaign treasury. Speaking of Bush, she said, quote, "He is our biggest fund raiser."

Former President Bill Clinton is kicking off a tour to promote his memoir. Last night in Chicago he said reliving parts of his past were painful but that political disagreements should not become personal.

(BEGIN VIDEO CLIP) BILL CLINTON, FRM. PRESIDENT OF THE UNITED STATES: If you don't support President Bush, if you go back and read what he said in the campaign, he's just doing what he said he would do. And you've got to give him credit for that. You don't have to say he's a bad person. If you don't support him, you should say I think he's wrong and here's why.

And if you do support him, you should say not that those of us who don't are bad people but you think we're wrong and say why.

(END VIDEO CLIP)

WOODRUFF: Bill Clinton was back in New York today where he delivered the commencement address at City University in New York.

At least a few of the deep-pocketed donors on the political right are saying they may keep their money this year instead of donating to the president. "The New York Times" quotes Stephen Moore, the head of the anti-tax group Club for Growth as saying a lot of his donors are angry with the president over government spending, steel tariffs and other issues. Moore also says, however, that he thinks most conservatives will forgive the president.

Just a little while ago, I spoke with political analyst Stu Rothenberg of "The Los Angeles Times" who has written a column predicting that a Bush surge is forthcoming. He says you can't see or hear it, but he says it will happen. I started by asking him if that's the case, how he knows it's true.

(BEGIN VIDEOTAPE)

STU ROTHENBERG, "THE LOS ANGELES TIMES": Well, Judy, it's the result of being in politics and watching politics for more than a couple decades. Campaigns have an ebb and flow to them. There's a natural progression. One candidate gets favored treatment, another candidate -- then the other candidate gets more positive press.

The way I look at this presidential race, George W. Bush has had pretty much like four months of terrible news. First it was the economy, then Iraq, then four books coming out criticizing him, criticism of the war on terror. Even some misstatements from people at the administration. A whole range of blunders. Some of them not having anything to do with the president, but penalizing the president politically.

It just seems to me it was about time for the Bush administration to start to get some good news. And we've actually seen some the last few days.

WOODRUFF: You've had this week, the job numbers have come out. Good news presumably for the president, the Iraqi interim government put in place. Is all this going to make a measurable difference for him?

ROTHENBERG: First of all, you're exactly right. Two bits of good news. I'd add a third, which is OPEC's decision on oil production. Presumably electrical be relief at the pump at some point.

It's too soon to tell of course whether this good news will filter down to the public. We've had some good jobs numbers for two months and the public hasn't bought it. The public been ready to accept the fact that there's an economic turn around.

I think that there has to be a more general sense of light at the end of the tunnel. And it's not one thing, it's not just jobs numbers. But it's jobs and Iraq and the like.

But maybe this bit of good news will create some positive sentiment for the president.

WOODRUFF: What about some of the polls, Stu, we're seeing in the showdown states, the states that were closest in 2000 where Kerry seems to be doing better? Do you think that is going to follow the national...

ROTHENBERG: I think what we're seeing is a result of all the bad news for the White House and some doubt on the part of the public whether or not the president deserves to be rehired. The question is whether this bit of good news carries forth, gets some press coverage and the public turns around. If the public turns around, then the poll numbers will turn around. If the public doesn't turn, then you'll see continued deterioration in Bush's numbers.

WOODRUFF: Are you saying it's hopeless for John Kerry?

ROTHENBERG: Certainly not. I actually think Senator Kerry is in a much better position now even though he's running even in a number of states where maybe he should be winning because the number I look at is the president's number. That's the key. And George W. Bush is still far below 50 percent in the ballot test and far below where he should be, even if he's running even with John Kerry. I think this race is very much up for grabs. I think the president right now is trailing but I think if he gets good news, we'll have an interesting few months here.

WOODRUFF: But for John Kerry to do better, you're saying in a way there has to be more bad news for the president?

ROTHENBERG: I think if the current environment holds, that is, if there is not a turnaround in public sentiment, if more people don't believe the country is headed in the right direction, I think sooner or later it will benefit Senator Kerry. I don't think we need more bad news for Senator Kerry to be elected president. I think if the current situation holds for another three or four, five months, toward the end of the campaign, voters will simply say do I really want George W. Bush and my guess is they won't. I think it's more important for the president that mood turns around than it is for Senator Kerry that things would get worse.

(END VIDEOTAPE)

WOODRUFF: Stu Rothenberg saying he's predicting a Bush surge. We'll see. Gauging the pulse of the people, what do voters in some crucial showdown states say about George Bush and John Kerry? A new survey gives some answers.

And later, Arnold Schwarzenegger puts it all out on the line. We'll tell you about the California governor's tasty bet.

(COMMERCIAL BREAK)

WOODRUFF: We have a little egg on our face here at CNN on INSIDE POLITICS. I just said on the air a few minutes ago that John Kerry gave a radio interview in Detroit, Michigan, a short time ago, told the radio interviewer that his decision on a vice presidential running mate just days away. He said he would make the decision very, very shortly. Now it turns out even though that transcript was put out by the campaign, the campaign is now saying that the senator was joking with the radio reporter, that they are not close to a decision or announcement on a vice presidential running mate. It's a good lesson for those of us who work in 24-hour news to be sure and check and double check before we go on the air. Our apologies. No decision on a running mate very soon.

Turning to the next story on our plate here as the 2004 campaign moves toward the summer convention season, an estimated 20 battleground states remain in the political crosshairs. According to the University of Pennsylvania Annenberg election survey, the target is 11 percent of the voting public, they are the so-called persuadable voters, the undecided and those who say there's a good chance they may change their minds. Joining me with insight on these swing voters and their swing states is Kathleen Hall Jamieson, she is dean of the university's Annenberg School of Communications. Kathleen Hall Jamieson, first of all, any thoughts on the mistake we just made about John Kerry?

KATHLEEN HALL JAMIESON: No, those things happen. And in fact, I'm the director of the Annenberg Policy Center. I gave up being dean a little while ago and I don't want to have my successor think I'm staging a coup. I'm delighted to be back.

WOODRUFF: We're just piling mistake on top of mistake but we're glad to have you here anyway. First of all, give people a sense of how many undecideds there are out there? What percentage of the electorate are they?

HALL JAMIESON: It's about 11 percent of the public as a whole. In the battleground states, it's about 24-26 percent of those who are possible voters. But we have to qualify that because some of these people aren't registered and some of the people haven't voted much in the past. Although most of the people who are in this category in our survey have voted in the past and are registered, this group is a little less likely to be registered now. The campaigns are after them, a little less likely to have voted in the past.

WOODRUFF: Can you tell what percentage they are of those likely to vote? HALL JAMIESON: Not really because we don't have good predictors from the past. The ones who are most likely to vote are those who have always voted in the past and are now already registered. They are also most likely to have already made up their minds and to say they're not likely to be changing at this point.

WOODRUFF: How are there -- once you've identified these persuadable voters, how are their views different from voters on either side of the political divide?

HALL JAMIESON: This is what's interesting about this group of voters because this persuadable group is more pessimistic about Iraq and the president's handling of it, more pessimistic about the economy, and in a piece of news that's particularly relevant because of today's -- good news for the Bush administration about jobs, this is a group that says, almost 50 percent says that they know someone who has either you or has someone you know lost a job because of the economy in the past six months. That's almost half of this group. That's a statistically significant increase over all respondents in our surveys. This is a group that's pessimistic about the economy but also has more personal experience with job loss. Than the people who have already made up their minds overall.

WOODRUFF: But for the Bush administration, they could argue, well, jobs are coming online. We're going to turn around those opinions. People are going to get more confident.

HALL JAMIESON: That's why this is an important piece of information because this survey draws these people from the entire month of May. It takes that long to find them because they're such a small part of a very large survey. The news today should increase the likelihood that the people they know who have lost a job are finding a job. And so this may be information that as it's updated with new news on the economy that's translated into people's life experiences getting a job will turn out to be much better news for the president.

WOODRUFF: How hard are the two campaigns working to go out and find these voters and to persuade them?

HALL JAMIESON: They're working extremely hard. Voter registration and get out the vote drives are going to have unprecedented importance this year because this is the campaign that may be won on mobilization and identifying those who sometimes stay home.

WOODRUFF: All right. We're going to leave it there, Kathleen Hall Jamieson, she is the director of the Annenberg Survey at the Annenberg School of Communicates at the University of Pennsylvania. Thank you very much. It's always good to see you. We appreciate it. Thanks.

Just ahead on INSIDE POLITICS, our political play of the week. It's a lesson in wielding power. Our Bill Schneider will be along to announce the winner.

(COMMERCIAL BREAK) WOODRUFF: In Iraq this week, a group stepped forward and showed that it could take control of its affairs and by doing so, surprised a few world leaders. Here to explain, senior political analyst, Bill Schneider.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: As of June 30, Iraq will have a new government. Where did it come from? From this week's political play of the week.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Who chose the new government of Iraq? Not me, says President Bush.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I had no role. I mean, occasionally somebody said, this person may be interested or that, but I had no role in picking. Zero.

SCHNEIDER: Then who?

BUSH: It was Mr. Brahimi's selections and Ambassador Bremer and Ambassador Blackwell were instructed by me to work with Mr. Brahimi.

SCHNEIDER: Lakhdar Brahimi, the U.N. envoy was supposed to control the process and give it international legitimacy. Let's ask him.

LAKHDAR BRAHIMI, U.N. SPECIAL ENVOY TO IRAQ: Bremer is the dictator of Iraq. He has the money. He has the signature. Nothing happens without his agreement in this country.

UNIDENTIFIED MALE: Come on, everyone.

SCHNEIDER: Brahimi wanted a transitional Iraqi government run by technocrats to move the country to elections in January, not to build a base of power. But the U.N. envoy had to contend with politicians. The Iraqi governing council, 24 quarrelsome war lords and business people and former exiles appointed by the U.S. with a thirst for power as it turns out. Last week, Brahimi offered the post of interim prime minister to Hussein Shahristani a nuclear scientist once imprisoned by Saddam Hussein. But the council preferred one of its own, Iyad Allawi who had a stronger political base and CIA connections. Vowing to pressure, Shahristani turned the post town. Brahimi wanted to appoint Adnan Pachachi, another U.S. favorite to be the new president of Iraq but the governing council once again balked.

ADNAN PACHACHI, IRAQI GOVERNING COUNCIL MEMBER: There were some elements in the Iraqi political class who were against me.

SCHNEIDER: Bowing to pressure, Pachachi turned the post down. Once again, the council got its man. Ghazi Yawar, a powerful and politically skillful sheik. This time, not the U.S. favorite.

RUBAR SANDI, IRAQI AMERICAN BUSINESSMAN: I think the choice of America was Adnan Pachachi and they went against the choice and they selected Sheikh Ghazi Yawar so I don't think it's really a puppet government.

SCHNEIDER: Iraqi politicians took control of this process.

LAITH KUBBA, IRAQ NATIONAL GROUP: The Iraqi governing council which was appointed by the U.S. but wanted very much to extend its power and influence.

SCHNEIDER: Politicians taking control of government? Is that an outrage? No, it's democracy. And it's the political play of the week.

(END VIDEOTAPE)

SCHNEIDER: The Iraqi governing council's now been dissolved, but the new government looks a lot like that old council. Now it has to establish popular support and ultimately, face the voters. That is real democracy.

WOODRUFF: And the real test.

SCHNEIDER: Absolutely.

WOODRUFF: OK, Bill Schneider, thanks very much.

Still ahead on INSIDE POLITICS, a long distance bet between two governors and why the person who loses won't walk away hungry. Just a little humble.

(COMMERCIAL BREAK)

WOODRUFF: California Governor Arnold Schwarzenegger and Michigan Governor Jennifer Granholm have a friendly wager tied to the NBA finals. If the Lakers win, Schwarzenegger says he will send California wine and asparagus and in and out burger and California strawberries and ice cream to Granholm. But if Detroit wins, Governor Granholm will send a meat and potato Michigan pastry, a Verner's (ph) soft drink, and chocolate-covered Michigan cherries to Schwarzenegger. The losing governor however will have to wear to wear the jersey of the winning team. They'll be well fed.

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

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