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Inside Politics

Bush Promotes Plans for Budget, Social Security; Dean Last Man Standing for DNC Chair; New York Legislative Election Over Three Months After Vote

Aired February 08, 2005 - 16:00   ET

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

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


JUDY WOODRUFF, CNN ANCHOR: President Bush greeting a group at the White House, observing what will be the National Museum of African-American History. It is being built as part of the Smithsonian Institution here in Washington, D.C.
INSIDE POLITICS begins right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Sparring over the Bush budget. While Congress kicks off hearings, the president gets some jabs in, in Detroit.

BUSH: It is essential that those who spend the money in Washington adhere to this principle: a taxpayer dollar ought to be spent wisely or not spent at all.

ANNOUNCER: The Republicans versus Harry Reid.

SEN. HARRY REID (D-NV), MINORITY LEADER: I mean, is he -- is President George Bush a man of his word? He said that he was going to reach out to the Democrats. Strange way to reach out.

ANNOUNCER: Is the Senate minority leader still fuming about an RNC attack memo after dining with the president last night?

A Republican versus Hillary Clinton. We'll tell you who's behind a new campaign called "Stop Her Now."

(END VIDEOTAPE)

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

WOODRUFF: Thank you for joining us.

President Bush took his budget bully pulpit to Michigan today, but once again, his message was meant to be heard loud and clear right back here in Washington. He told the Detroit Economic Club that his $2.5 trillion budget plan makes difficult choices. And now Mr. Bush says Congress must make a choice as well to cut spending.

(BEGIN VIDEO CLIP)

BUSH: Leaders in Congress and in the business sector have expressed their concerns about federal spending. And I've listened. And so I've delivered a budget that reflects our mutual concerns. And now Congress needs to join with me to bring real spending discipline to the federal budget.

(END VIDEO CLIP)

WOODRUFF: Meantime, on Capitol Hill today, top Bush administration officials defended the president's spending proposal, but many lawmakers weren't buying it.

Let's go to our congressional correspondent, Ed Henry.

Hi, Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Good afternoon, Judy.

That's right, as the president hit the road, as you mentioned, some of his top administration officials fanned out across Capitol Hill today, trying to sell this budget. But I can tell you, they're facing a pretty tough audience up here in the halls of Congress.

Top officials like Treasury Secretary John Snow, also the budget director, Josh Bolten, came up to the Hill. They were testifying about this budget.

They are repeating the message that the president said, which is basically that government has to tighten its belt. Democrats, though, hit these officials pretty hard, focusing in on cuts to domestic programs like health and education. Also, Democrats charging that the president is cutting those programs while keeping in tax cuts for the wealthy.

Perhaps more ominous for the administration, though, is some real angst among Republicans in the hallways up here about some of the specifics, including cuts to politically popular programs like Medicaid and Amtrak. And perhaps even more concerning for the White House is that Senate leaders like Senate Majority Leader Bill Frist today said that while they support the general principals of this budget, they offered a fairly mild endorsement of the overall details of the plan. And, in fact, Senator Frist said today that the Congress is going to make some changes.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R-TN), MAJORITY LEADER: The president's priorities were reflected in that budget. You will see the reflection of the Senate's priorities and the House over the next several weeks.

(END VIDEO CLIP)

HENRY: In farm states, Republicans like Saxby Chambliss of Georgia, also Thad Cochran of Mississippi, very upset about cuts to farm subsidies. In fact, Senator Chambliss saying earlier today of the administration, "They really came after us. I'm not sure how well they thought this out."

So some tough words from red state republicans -- Judy.

WOODRUFF: Ed, what we've been hearing the last few hours or last day or so from the Senate minority leader, Harry Reid, who is upset about attacks on him, what he calls attacks by the Republican National Committee.

HENRY: That's right. I mean, this may sound like a pretty petty dispute right now, but it's the kind of spat that can really grow into major argument that ends up really souring relations up here and can really make it more difficult for the president to pass his agenda in the second term.

Yesterday, Senator Reid reacted very angrily to a report in "Roll Call" newspaper that the Republican National Committee was compiling a 13-page attack memo, as the senator called it, that was going after him, his family, including his son's lobbying activities, calling him the chief Democratic obstructionist. Senator Reid saying that this is the complete opposite message that the president himself said in his State of the Union message last week.

And what's very interesting is that last night Senator Reid actually had a previously scheduled dinner at the White House with his wife, also with the president, and the first lady. We were told before the dinner that Senator Reid was not planning to raise this last night, even though on the Senate floor yesterday he demanded that the president stop the RNC from sending out this mailing attacking Reid.

But we've now been told by Democratic sources here on the Hill that last night the president himself actually raised this at the dinner, told Senator Reid that he knew nothing about the mailing, didn't offer up any more details. And then today, the White House press secretary, Scott McClellan, only would address it generally and say that the president is going to continue to work with Senator Reid and others, is going to reach across the aisle. That was not enough, however, for Senator Reid, who just came to the cameras in the last hour.

(BEGIN VIDEO CLIP)

REID: We know when he came here he said he wanted to be a uniter and not a divider. I'm beginning to think that those statements are just absolutely false.

(END VIDEO CLIP)

HENRY: Now, the reason why Senator Reid is fighting back so hard is that Democrats up here are very concerned that Harry Reid is going to end up becoming Daschlized, that basically the Republicans are going to call him an obstructionist, that if he doesn't fight back hard enough, as some Democrats feel Tom Daschle failed to fight back hard enough, he's going to also end up either losing at the polls back home or end up being a real weakened leader up here.

Republicans, though, say this is hardball, that the Democratic National Committee does the same thing. They send out mailings about Republicans. That Harry Reid is now in the big leagues, he better get used to it.

And Republicans are also saying that calling someone an obstructionist is not the problem. It's actually obstructing.

And they say Harry Reid has the choice now. Is he going to be more like Tom Daschle, or is he going to work with the president? And that's what they're trying to lay out there, and that's what they're trying to do. They're trying to hold Harry Reid's feet to the fire.

WOODRUFF: It sounds like they're getting off to a tough start.

HENRY: No doubt about it.

WOODRUFF: All right. Ed, we appreciate it.

When we come down to it, there usually is a big difference between what a president wants in his budget and what a Congress is eventually willing to give him. Our Bruce Morton has more on how the process works.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): The first thing you need to know about the president's budget is that it doesn't exist. Sure, there's a book and all those briefings. But likely nothing close to what he's asking for will ever happen because it all has to go through Congress.

Last year Mr. Bush asked Congress to eliminate 65 government programs for a savings of $4.9 billion. Congress eliminated just four of the 65, saving less than $300 million.

This year he's asking Congress to cut or eliminate 150 programs. How well do you think he'll do?

(on camera): For every government program there's probably an industry that gives money to politicians that wants the program kept alive. There may be a trade union that gives money that wants to keep those jobs. There will be a congressional subcommittee that supervises the program. And if it dies, what will they be in charge of?

(voice-over): When Ronald Reagan said the closest thing to eternal life on this Earth was a government program he wasn't kidding. And it isn't just the programs. It's the little goodies, a park for your district, a research program for the college in my district that congressman stick into spending bills. Earmarks they're called.

The watchdog group Citizens Against Government Waste estimates that in fiscal 2005 there were 13,900 earmarks worth just under $26.5 billion. A record.

The president can veto appropriations bills, of course. The whole bill. He doesn't have a line item veto. But this president has never done that. In fact, the whole issue has changed. Deficit hawks used to be Republicans. The constitutional amendment to balance the budget was part of Newt Gingrich's contract with America back in the 1990s when the Republicans won control of the House. But it was Democrat Bill Clinton who actually ended deficits and ran surpluses. And so the issue has switched sides.

KEATING HOLLAND, CNN POLITICAL DIRECTOR: Now Democrats are almost twice as likely as Republicans to say that the federal deficit is a very important issue the Congress and the president have to deal with in the coming year.

MORTON: It's way too early to know what the budget Congress actually passes will look like. What we know is it won't look much like the one the president sent them this week. It never does.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Thank you, Bruce.

Well, a certain senator named Clinton has been trying not to stand out too much from her peers. But the former first lady is proving once again that she's a lightning rod for Republican attacks. That story ahead.

Plus, scores of Pentagon workers march to Capitol Hill. We'll tell you why they're fighting mad.

And later, when Howard Dean officially wins the DNC chairmanship, who will be the biggest loser?

(COMMERCIAL BREAK)

WOODRUFF: If you had to think of one person who really gets the Republicans' blood boiling, who would it be? Well, the name Senator Hillary Rodham Clinton might just come to mind. And that helps explain why the former first lady appears to be on the receiving end of a new campaign called "Stop Her Now."

(BEGIN VIDEOTAPE)

WOODRUFF (voice-over): Is Hillary Clinton about to get the Swift Boat treatment?

ANNOUNCER: How can the man who renounced his country's symbols now be trusted?

WOODRUFF: Arthur Finkelstein, the reclusive New York political strategist and guru to governor George Pataki, is launching stophernow.com, a political action committee created to attack the senator as she prepares a re-election campaign and a possible presidential run.

UNIDENTIFIED MALE: The honorable Senator... WOODRUFF: Of course the Empire State GOP has yet to find an actual candidate to take on Clinton in 2006. The leading contenders have so far demurred in the face of the senator's formidable political operation.

But Stop Her Now may be less about the Senate race than the next campaign for the White House. "New York" magazine quotes a top state Republican who says the group's aim is to "bloody her up long before her presidential run."

(END VIDEOTAPE)

WOODRUFF: So that's where that stands. We'll be watching.

What do Democrats thing of Hillary Clinton's presidential prospects ? We'll have new poll numbers tomorrow on both parties' potential candidates in 2008.

News of note about a potential Democratic hopeful in 2008 leads off our "Political Bytes." A spokesman for New Mexico Governor Bill Richardson is not denying a report that Richardson has told party leaders he plans to run for president. While it's no secret that Richardson is considering the race, his spokesman tells the "Santa Fe New Mexican" that the governor is focused on state issues and getting reelected in 2006. After that, he said, "We'll see what happens."

The full Senate could vote as early as today on the nomination of Michael Chertoff to be the next Homeland Security secretary. Chertoff is expected to be approved. He will succeed the outgoing secretary, Tom Ridge.

Yesterday, a Senate committee voted 14-0 to approve Chertoff's nomination. One senator, Democrat Carl Levin, voted present because he was denied Justice Department documents related to interrogation techniques at Guantanamo Bay.

Here in Washington, union leaders representing civilian employees at the Department of Defense are threatening to sue the government over new personnel rules. About 200 defense workers from the Pentagon marched on Capitol Hill today to protest those new rules which will replace the traditional civil service system. The unions complained the rules will short-change workers' salaries and remove collective bargaining.

Coming up next, we'll talk with a Republican senator about President Bush's budget. Senator Chuck Hagel of Nebraska, he'll be with us.

(COMMERCIAL BREAK)

WOODRUFF: Our lead story today was the budget. And with me now from Capitol Hill to talk about the president's budget proposal and other issues, Republican Senator Chuck Hagel of Nebraska.

Senator, what do you like about the president's budget, what do you not like? SEN. CHUCK HAGEL (R), NEBRASKA: Well, I think first of all the president has stepped up to one of the great challenges of our time. And that is to get control of a runaway spending binge that this Congress and this administration has been on the last four years.

So this is a tough budget. It is going to require pain everywhere. And I think he's right.

We have no other option here, Judy. If we continue to run $400 billion deficits, we're going to put this country in such a state of bankruptcy, we will never be able to sustain any entitlement programs or -- the future is bleak for our young people.

So we've got to step up and get control of it. That's what I like about this budget. It's tough all the way around.

WOODRUFF: What do you think -- are you happy with all of the proposed cuts in here?

HAGEL: Well, I didn't think it's a matter, Judy, of being happy or not happy. For example, agriculture, I represent a state that is an economy based on agriculture. We're going to have to take some cuts. Everybody's going to have to take some cuts. But I think that's part of the discipline that we're going to have to instill in this process.

You know, I have a lot of people come into my office every day, "Senator, get control of spending. What's wrong with you people?" Then when we talk about cutting their programs, "Well, don't cut my programs. The other guy's program should be cut."

WOODRUFF: It's been noted, Senator, that there is an almost 1 percent cut in this budget in domestic programs, non-security programs, but a 5 percent increase in defense spending. Is that -- is that a pattern that disturbs you or is that one that pleases you?

HAGEL: Well, we're going to have to take a hard look at that increase, Judy, no matter what. I mean, I think most people understand the most significant responsibility a president has, the biggest responsibility all of us have who hold high office, is the security of this country. So you can never play on the margins there.

But we need to find out whether that money is going. And, in fact, it doesn't even tell all the story, Judy.

That increase in the defense budget, as you know, the administration is coming up with an $80 billion emergency supplemental for Iraq. Mostly some of it will be Afghanistan, that's not even included in this budget. So that $80 billion is on top of the numbers that are in the budget.

WOODRUFF: And just quickly, it's been pointed out even by your Republican colleague that there are -- that there's a really tight budget here for the National Institutes of Health, funding for special education. Are those things you're going to be looking at? HAGEL: Well, we -- we're going to have to explore them all, Judy. But I think, again, we're going to have to understand this is going to require a wide-angle view of the entire budget for all of the pieces.

And yes, we need to look at all the departments and all the budgets. But in the end we're going to have to do what's required to get control of this budget. And that means some tough decisions, some cuts and freezes.

WOODRUFF: Very quickly, Senator, the Middle East. There was an agreement today between the Israeli prime minister and the new Palestinian leader, Mr. Abbas, for an effective cease-fire. How confident are you that this will hold?

HAGEL: Well, this is a very significant step forward, Judy. This represents, I think, one of the most significant achievements in the last few years. In a region where there's not been much good news, this is good news.

Now, there's a lot of heavy lifting that needs to go with this. There's an awful lot that needs to be done by both the Palestinians and the Israelis to make all of this work. And the United States is going to have to be more engaged than we have been in the last four years to help keep a focus on this to assure that we have some prospect for peace.

But we should not understate the achievement today. It was significant.

WOODRUFF: And you think the U.S., this administration will stay engaged?

HAGEL: It has to, Judy. It has no choice.

I've spoken with Secretary Rice over the last two, three weeks about this specifically. And she understands, the president understands.

I don't think this opportunity comes again for a long time, Judy. And so we must not squander it. There is a heavy burden on the United States and our quartet partners to work with the Israelis and the Palestinians to assure that we can make progress and get ultimately to a peace, to a cease-fire, and to a two-state solution.

WOODRUFF: Senator Chuck Hagel, who is a member of the Senate Foreign Relations Committee. Senator, we always appreciate your being on the show. Thank you.

HAGEL: Thanks, Judy.

WOODRUFF: Well, President Bush was back on the trail today pushing his plan to change Social Security. So is his stumping changing your opinion? We'll check out our new poll when we come back. Plus, is Karl Rove getting a new job? We asked this question last week, we'll ask it again. We'll go live to the White House this time to find out.

(COMMERCIAL BREAK)

WOODRUFF: It's just before 4:00 Eastern Time. And as the markets get set to close on Wall Street, I'm joined by Lou Dobbs in New York with "The Dobbs Report."

Hello, Lou.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Hi, Judy.

Stocks today on Wall Street making small gains as the final trades are being counted. The Dow Jones industrials up over 15 points. The Nasdaq slightly higher on the day.

Investors are waiting a quarterly earning's report due from Cisco momentarily. Cisco's profits considered a bellwether for other technology companies.

And the dollar gaining strength among major currencies as President Bush suggests his budget proposal could cut the nation's gaping budget deficit. The dollar rose to a two-month high against the yen earlier in the day. Another three-month high against the euro.

Microsoft is buying an anti-virus software company, Sybari, to help it battle the viruses that bog down its Windows operating systems. It may begin bundling Sybari's software right into its Windows system. That deal puts pressure on McAfee and Semantec, which dominate the anti-virus market.

A mess of airwaves has placed hundreds of communities at risk, but now after years of negotiations and lawsuits, Nextel has agreed to end the interference caused by its cell phones. The company had disrupted communications for some police, fire and other emergency crews. The telecom company is giving up those airwaves in a swap for nearly $5 billion worth of government-owned airwaves.

The government's key witness in the trial of Bernard Ebbers places a lot of the blame for the country's largest corporate bankruptcy ever on WorldCom's former CEO. Former Chief Financial Officer Scott Sullivan told a Manhattan court he felt pressure from Ebbers to alter the company's earnings and that to meet Wall Street estimates. WorldCom's bankruptcy cost shareholders billions of dollars.

Coming up on CNN at 6:00 p.m. Eastern tonight on "LOU DOBBS TONIGHT," our special report, "America's Security Risk." Tonight, we're focusing on our nation's railways and what the government is doing it protect those railways from terrorist attacks. Not only are they vulnerable, but they're also in desperate need of repair. And that is putting millions of American lives at risk. Also tonight, Wednesday Congressman Jim Sensenbrenner's real I.D. bill will be debated on the floor of the U.S. House. The new legislation would prevent illegal aliens from obtaining drivers' licenses. We'll be taking a look at why only two Democrats have signed to the legislation. One of those two Democrats co-sponsoring the bill, Congressman Lincoln Davis is my guest tonight.

Also joining me, Senator Debbie Stabenow, who sits on the banking and budget committees, will be talking about the president's budget, Social Security and our massive trade deficit with China. All of that and more coming up here on CNN tonight at 6:00 p.m. Eastern. We hope you'll join us.

Now, back to Judy Woodruff -- Judy.

JUDY WOODRUFF, CNN ANCHOR: Lou, the president's budget proposal that came out yesterday -- his supporters say this is most conservative one since Ronald Reagan, but others say he's really done very little to shrink the size of government. Where's the truth?

DOBBS: The truth is, I think perhaps, in history itself. Presidents put forward a budget plan, Congress has the responsibility of creating that budget, as you well know. To put this in context, the president wants to cut 150 programs. It's $2.6 trillion, the biggest budget ever. By way of history, the last time the president put forward a budget, he proposed cutting 65 programs. After the kabuki dance in Washington was done, Congress cut four of those programs. I don't think we're going to see a much different performance this time around.

WOODRUFF: Well, you know we're all going it be looking at it over the next few months.

DOBBS: Absolutely.

WOODRUFF: Lou Dobbs, thanks very much. And we'll see you at 6:00.

DOBBS: Thank you, Judy.

WOODRUFF: INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Making the case in the Motor City. President Bush sells his new budget in Detroit.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Now Congress needs to join with me to bring real spending discipline to the federal budget.

ANNOUNCER: But will today's campaigning help push his economic plans through Congress?

UNIDENTIFIED MALE: We're not going bankrupt in Social Security. This is a problem, not a crisis. UNIDENTIFIED MALE: Unless we do something about it, my children and grandchildren are going to be out in the cold.

ANNOUNCER: That's the argument here in Washington, but what do you think about Social Security? Stay tuned for our new poll.

He came out on top in the race to run the Democratic party, but was Howard Dean the only winner?

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

(END VIDEOTAPE)

WOODRUFF: Welcome back. While Republicans are using words like lean and austere to describe President Bush's new budget plan, some congressional Democrats are arguing that it would actually create a Mt. Everest of debt. That's why the president took his budget pitch to the people for a second day.

CNN's Elaine Quijano is at the White House. Hi, Elaine.

ELAINE QUIJANO, CNN CORRESPONDENT: Hello to you, Judy.

That's right, President Bush says taxpayer dollars should be spent wisely or not at all. That was the crux of his budget message today as he traveled to speak before the Detroit Economic Club, a group of auto executives and others in Detroit.

Now, the president's $2.5 trillion budget proposal calls for cutting back or cutting completely some 150 federal programs, programs the president says are redundant or not achieving results. Now, Mr. Bush also discussed the centerpiece of his domestic agenda, overhauling Social Security. The president maintains unless lawmakers act soon, the system will run out of money in the year 2042.

(BEGIN VIDEO CLIP)

BUSH: If you see a train wreck coming, you ought to be saying, what are you going to do about it, Mr. Congressman or Madame Congressman? Are you going to sit there and let the train run over younger workers or are you going to act? I'm calling upon the Congress to act.

(END VIDEO CLIP)

QUIJANO: Now, on Capitol Hill today, Bush administration officials echoing the president's views on the budget and also on Social Security. Treasury Secretary John Snow appearing before lawmakers, as well, as the office of management and budget director, Josh Bolten.

They are pushing the president's ideas, that include the solution, the president believes, to saving Social Security, the president says, lies in voluntary private accounts, allowing workers under 55 to put part of their payroll taxes into personal accounts. But Democrats vehemently oppose the idea, saying it would mean cutting benefits and would not provide a long-term fix.

(BEGIN VIDEO CLIP)

SEN. MAX BAUCUS (D), MONTANA: What he has announced so far does not get us one dime closer to solving the problem. What he has proposed thus far would actually make the problem worse.

(END VIDEO CLIP)

QUIJANO: Now, the president later this week is going to be traveling, once again, to make his pitch for Social Security. Specifically the president will be headed to North Carolina and Pennsylvania. But some, even within the president's own party, have expressed reservations about Social Security, specifically, some people saying that they hope that the president's proposal -- or they wish that the president's proposal would go even further beyond just the four percent for the personal accounts, perhaps up to six percent. The president's answer is that he is open to all ideas except for raising payroll taxes -- Judy.

WOODRUFF: Now, Elaine, separate from the budget and Social Security, there were some personnel announcements made at the White House today. Tell us about those.

QUIJANO: That's right. And the headliner out of this the senior adviser to the president, Karl Rove, the man that President Bush called the architect just after his re-election. He will be now assuming the position of deputy chief of staff as well as retaining the position of senior adviser to the president.

Now what does that mean? White House officials say that he will coordinate policy within the various White House council. Those, of course, include the National Security Council, the National Economic Council, the Homeland Security Council, among others. But this new deputy White House chief of staff announcement coming earlier today. Again, officials saying he will still retain the role of senior adviser to the president.

WOODRUFF: We didn't think it was any -- possible for Mr. Rove to get any more powerful than he is. All right. Thank you, Elaine. We appreciate it.

Well, Karl Rove's new job title is apparently not sitting well with some Democrats. Outgoing DNC chairman Terry McAuliffe issued a statement saying, "Bush knows that Rove is neither an economic nor a national security expert. He is simply an ideological strategist." McAuliffe goes on to say, quoting, "Clearly, Bush thinks political manipulation matters more than keeping the president honestly informed about the state of the country." And we're trying now to get a reaction from the White House.

Now, to the president's other sales promotion for Social Security reform. Our new poll offers an early read on public reaction to Mr. Bush's pitch. Here now our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE) WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): President Bush has been on a mission to sell Social Security reform.

BUSH: In the last few days, I've traveled to North Dakota and Florida and now to Michigan to discuss my ideas and plans.

SCHNEIDER: So is it working? Last month 40 percent of Americans thought it was a good idea to allow future retirees to invest some of their Social Security taxes in return for a reduction in their guaranteed benefits. 55 percent said bad idea. And now? Look at that. No change at all. Still a bad idea. Right now 17 percent of Americans believe the Social Security system is in crisis. Do they think allowing private accounts is a good idea? Um, no.

Who does support it? By a small margin, workers who say they've done enough retirement planning to feel secure. People who say they have not done enough retirement planning or none at all reject the president's plan. The more you depend on Social Security, the less you like President Bush's proposal. How is President Bush going to make up for the money that goes into the personal accounts?

BUSH: With the exception of running up payroll taxes or raising payroll taxes, all options are on the table.

SCHNEIDER: Well, here are some options. Limit benefits for wealthy retirees. Screw the rich! Two-thirds of Americans say, fine. How about raising the cap on the amount of wages subject to the Social Security tax, so higher income workers would pay more? Another way to screw the rich, also fine. Is that a tax increase? President Bush has not explicitly ruled it out. It's fine with his fellow Republicans. It's even fine with higher income people.

As far as the public is concerned, no other option is fine. Just 40 percent support further reducing Social Security benefits for early retirees.

We know President Bush won't consider raising payroll taxes, what about the public? Nope. Raise the retirement age? Nope. And the least popular option of all, rereducing benefits for future retirees.

(END VIDEOTAPE)

SCHNEIDER: Democrats warn benefits will be reduced if the president's plan passes. Now, a government Social Security expert warns benefits may have to be reduced if something is not done. For most Americans, a reduction in guaranteed benefits is not the solution, it's the problem.

WOODRUFF: So, Bill, a question. If one were to raise the amount of wages on which Social Security taxes are levied, that $90,000, is that a tax increase?

SCHNEIDER: Well, that's a good point. It certainly is a tax increase for the higher income workers.

WOODRUFF: If you earn over 90,000. SCHNEIDER: Over $90,000, they're going to pay more taxes. Sounds like a tax increase, but whenever the president has been presented with that option, his answer is, I don't support a tax increase. But he doesn't explicitly rule out raising that cap, as far as I know.

WOODRUFF: So, we'll see. We'll continue to ask this question. All right. Bill Schneider, thanks very much.

Howard Dean, all but certain to be elected Democratic Party chairman on Saturday, that makes him an obvious winner but who else will come out on top thanks to Dean's success? We'll name some names ahead.

Plus, an always outspoken Democrat, Senator Chuck Schumer shares his critique of the Bush budget and more.

(COMMERCIAL BREAK)

WOODRUFF: A little earlier this hour, we talked about the federal budget with a Republican senator, Chuck Hagel of Nebraska. With me now from Capitol Hill to share his views on the budget, Senator Charles Schumer of New York.

Senator, good to see you.

SEN. CHARLES SCHUMER (D), NEW YORK: Judy, nice to talk to you.

WOODRUFF: Senator, first of all, virtually everybody agrees that the federal government is spending too much money. Why -- isn't the president going about reducing that spending in a responsible way?

SCHUMER: Well, the bottom line is it's very irresponsible and misleading. His two greatest priorities are permanent tax cuts and Social Security. And somehow just by coincidence the real bite of those programs, which create -- which make the deficit even worse than it is, don't occur until 2009, starting when the president leaves office.

So they can say in the next year or two the budget is sort of flat, but the bottom line is, they're really pulling all sorts of tricks. If a private company did this, they'd be hauled before someone, the accounting board or the SEC or somebody or other.

WOODRUFF: Did any of the cuts the president is proposing make sense, the ones that you've had a chance to lock at?

SCHUMER: Well, you know, we do have to keep growth in. The problem is that the president has chosen one rather small part of the budget to put in all the cuts and it's either cynical because he knows they're so deep that Congress will restore them, or impractical.

Now are those cuts things that I could live with? Of course. For instance, he does deserve credit, in the past they have sometimes cut just urban programs, if you will, blue state programs and not cut agriculture. This time they have cut both. And the way they have cut agriculture is a way that I think makes sense, just giving some money to the small family farmers, not big agribusiness.

But overall, these cuts are so deep and so across the board, it's sort of the most meat-ax approach to at least discretionary spending that I've seen in the 25 years I've looked at budgets here on Capitol Hill as a House member and now as a senator.

WOODRUFF: Senator, is it really worth getting exercised about this president's budget cut proposals when we know last he proposed something like 65 programs? They eliminated -- Congress only ended up eliminating four of those.

SCHUMER: Well, I think it does matter now more than ever because interest rates are hanging in the balance. The problem with interest rates is that our trade deficit requires the Fed to keep interest rates higher than they'd normally be.

And if interest rates -- the prime rate goes up to 4 percent, it's now 2.5 it was 1.5 several months back, and if the economy begins to slow down, there's no give to stimulate the economy. In fact, the budget still sucks money out of the economy.

So not actually reducing the deficit is going to have real severe consequences, not in 2005 but in 2006. And playing this game is going to really hurt people.

WOODRUFF: Let me just name one of the specifics here. You have made an issue of Amtrak in the last day or so. The budget director, Josh Bolten, though, is saying Amtrak was originally set up 30 years ago to be a for-profit, self-sustaining corporate entity not intended to be run on federal government subsidies. He said the market needs to apply, you know, in railroads as everywhere else.

SCHUMER: Well, the bottom line here is he can try to do that by just pulling the subsidy out and the damage that will be is enormous. We subsidize our roads, the nickel gas tax and gasoline taxes pay for those. We subsidize our airports and for some reason only amtrak is supposed to totally go on its own and that's what the administration has done.

Now, if amtrak is to shut down October 1st, which it would do under this budget, it would not just affect New York and Philadelphia and Boston and Washington, the so-called Northeast Corridor, but everyone would then have to fly, the La Guardia Airport, Logan airport, National and Reagan Airports -- I mean Reagan and Dulles would get so backed up that it would back up Chicago and L.A. and air traffic would come to a grinding halt.

These are irresponsible cuts, but when the president says he has to make his own tax cuts permanent, he has to borrow trillions to fix Social Security and he has to increase military spending, not just for the soldiers in Iraq, but while they've cut certain military programs, they haven't cut many others, we still are funding two planes. The F- 22 and the Joint Task Fighter, you know, it is both unfair, wrong and unrealistic. The most conservative Republicans in Congress won't make these cuts. WOODRUFF: Senator Charles Schumer of New York making a passionate defense on behalf of Amtrak. Senator, it's good to see you, thanks very much.

SCHUMER: Thanks, Judy. Nice to talk to you.

WOODRUFF: And you, thank you, Senator.

Coming up next, Chuck Todd of The Hotline. We know that Howard Dean is about to be elected chair of the Democratic Party, but who else is a winner, who's a loser just as he's being elected? We'll be right back with all of that.

(COMMERCIAL BREAK)

WOODRUFF: So, now we see, it's Howard Dean who is the last man standing in the race for Democratic party chairman. We asked Chuck Todd of "The Hotline" to tell us about the winners and losers in the process of selecting a new party leader. Chuck of course is the editor-in-chief of "The Hotline," an insider's political briefing produced every day by the "National Journal."

Chuck, we know it's Howard Dean, are there some other winners in all this?

CHUCK TODD, "THE HOTLINE": I think there are. Let's start out with the thing we care about most here in politics and that's the next presidential race. That means Iowa will turn out to be somewhat of a winner here. They had their Democratic leaders come out early. They're trying very hard to protect their first in the nation status. From my understanding, the Dean folks are very well aware of how early and united the Iowa Democrats were.

Terry McAuliffe is a huge winner out of this. The more people have been nervous about Howard Dean, the more compliments they have been throwing Terry McAuliffe's way. And so more people have been noticing some of the work he did. His election record isn't great but he put the machine in place to keep the Democratic party competitive.

The McMahon clan, this is Steve McMahon, Tom McMahon, McMahon brother-in-law, Mark Squier, the McMahon family has been very big part of the Howard Dean campaigns from the presidential race to this. They're going to be the new go-to consulting firm (UNINTELLIGIBLE) the DNC thing.

And finally, southern Democratic state parties might seem odd to some folks that they're a winner but a lot of people think Dean's almost going to overcompensate and the Scott Maddox for instance in particular the Florida Democratic party are going to be big winners out of this.

WOODRUFF: He came out as an early endorsee.

TODD: An early endorsee and sort of started the avalanche.

WOODRUFF: Chuck, if those are the winners, who has come out of this not exactly smelling like a rose?

TODD: If I were the New Hampshire Democratic party, I'd be nervous. The Dean people have noticed that some of New Hampshire folks were on the anti-Dean bandwagon for a little while and they're trying to protect first in the nation status. Congressional leadership never was quiet or shy about searching for an alternative to Dean particularly relations with Nancy Pelosi and the DNC will be interesting to watch over time. Some of the Democratic governors in particular, Bill Richardson and Ed Rendell were very aggressive in looking for Dean alternatives and the Dean people are well aware of this.

And finally Joe Trippi, I think a year ago when Joe Trippi and Howard Dean parted ways, most people would have predicted that Joe Trippi would be the guy that everybody would be turning to to fix the Democratic party not Howard Dean and the roles are completely reversed.

Trippi is out of politics, Dean is very much running the show on the Democratic side.

WOODRUFF: It will be interesting to see if there is any fence mending going on in the weeks to come. Is there anybody out there who doesn't fall into either category?

TODD: The name that we seem to leave out of these two categories are the Clintons because and there's all sorts of conspiracy theories that I've been hearing from people on some of the -- in that anti-Dean movement -- that the Clintons could have been the people that could have, if they wanted to stop Dean, they could have. They could have united all the factions and told them we're all going to get behind one candidate but they didn't so some people think that the Clintons like this idea that just like Bill Clinton ran against Ron Brown in that DNC when he had to in the primaries in '91 that it might be good for Hillary Clinton that somebody that's prestigious, more liberal than her is running the Democratic party and she can almost run against him, or embrace him, whatever is the better thing to do for 2008. So we'll see if this has been good strategy by the Clintons as time goes by.

WOODRUFF: Could that be a triangle or is that my imagination?

TODD: Familiar tactic, isn't it?

WOODRUFF: Chuck Todd, thank you. "The Hotline" an insider's political briefing is produced every day by the "National Journal." You can go online to Nationaljournal.com for subscription information. Thank you, Chuck.

TODD: Thanks, Judy.

In Senator Schumer's home state, we talked to him a few minutes ago, a seemingly never-ending election finally is over. The story ahead.

(COMMERCIAL BREAK) WOODRUFF: The longest legislative election in New York state history is finally is over at one last recount and more than three months after the vote. Republican state Senator Nicholas Spano officially won reelection today by 18 votes. That leaves just one more election, '04 cliffhanger and that is the state Senate contest in Kentucky. We'll report on that when we know the results. That's it for INSIDE POLITICS this Tuesday. I'm Judy Woodruff. Thank you for joining. "CROSSFIRE" starts right now.

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Aired February 8, 2005 - 16:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: President Bush greeting a group at the White House, observing what will be the National Museum of African-American History. It is being built as part of the Smithsonian Institution here in Washington, D.C.
INSIDE POLITICS begins right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Sparring over the Bush budget. While Congress kicks off hearings, the president gets some jabs in, in Detroit.

BUSH: It is essential that those who spend the money in Washington adhere to this principle: a taxpayer dollar ought to be spent wisely or not spent at all.

ANNOUNCER: The Republicans versus Harry Reid.

SEN. HARRY REID (D-NV), MINORITY LEADER: I mean, is he -- is President George Bush a man of his word? He said that he was going to reach out to the Democrats. Strange way to reach out.

ANNOUNCER: Is the Senate minority leader still fuming about an RNC attack memo after dining with the president last night?

A Republican versus Hillary Clinton. We'll tell you who's behind a new campaign called "Stop Her Now."

(END VIDEOTAPE)

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

WOODRUFF: Thank you for joining us.

President Bush took his budget bully pulpit to Michigan today, but once again, his message was meant to be heard loud and clear right back here in Washington. He told the Detroit Economic Club that his $2.5 trillion budget plan makes difficult choices. And now Mr. Bush says Congress must make a choice as well to cut spending.

(BEGIN VIDEO CLIP)

BUSH: Leaders in Congress and in the business sector have expressed their concerns about federal spending. And I've listened. And so I've delivered a budget that reflects our mutual concerns. And now Congress needs to join with me to bring real spending discipline to the federal budget.

(END VIDEO CLIP)

WOODRUFF: Meantime, on Capitol Hill today, top Bush administration officials defended the president's spending proposal, but many lawmakers weren't buying it.

Let's go to our congressional correspondent, Ed Henry.

Hi, Ed.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Good afternoon, Judy.

That's right, as the president hit the road, as you mentioned, some of his top administration officials fanned out across Capitol Hill today, trying to sell this budget. But I can tell you, they're facing a pretty tough audience up here in the halls of Congress.

Top officials like Treasury Secretary John Snow, also the budget director, Josh Bolten, came up to the Hill. They were testifying about this budget.

They are repeating the message that the president said, which is basically that government has to tighten its belt. Democrats, though, hit these officials pretty hard, focusing in on cuts to domestic programs like health and education. Also, Democrats charging that the president is cutting those programs while keeping in tax cuts for the wealthy.

Perhaps more ominous for the administration, though, is some real angst among Republicans in the hallways up here about some of the specifics, including cuts to politically popular programs like Medicaid and Amtrak. And perhaps even more concerning for the White House is that Senate leaders like Senate Majority Leader Bill Frist today said that while they support the general principals of this budget, they offered a fairly mild endorsement of the overall details of the plan. And, in fact, Senator Frist said today that the Congress is going to make some changes.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R-TN), MAJORITY LEADER: The president's priorities were reflected in that budget. You will see the reflection of the Senate's priorities and the House over the next several weeks.

(END VIDEO CLIP)

HENRY: In farm states, Republicans like Saxby Chambliss of Georgia, also Thad Cochran of Mississippi, very upset about cuts to farm subsidies. In fact, Senator Chambliss saying earlier today of the administration, "They really came after us. I'm not sure how well they thought this out."

So some tough words from red state republicans -- Judy.

WOODRUFF: Ed, what we've been hearing the last few hours or last day or so from the Senate minority leader, Harry Reid, who is upset about attacks on him, what he calls attacks by the Republican National Committee.

HENRY: That's right. I mean, this may sound like a pretty petty dispute right now, but it's the kind of spat that can really grow into major argument that ends up really souring relations up here and can really make it more difficult for the president to pass his agenda in the second term.

Yesterday, Senator Reid reacted very angrily to a report in "Roll Call" newspaper that the Republican National Committee was compiling a 13-page attack memo, as the senator called it, that was going after him, his family, including his son's lobbying activities, calling him the chief Democratic obstructionist. Senator Reid saying that this is the complete opposite message that the president himself said in his State of the Union message last week.

And what's very interesting is that last night Senator Reid actually had a previously scheduled dinner at the White House with his wife, also with the president, and the first lady. We were told before the dinner that Senator Reid was not planning to raise this last night, even though on the Senate floor yesterday he demanded that the president stop the RNC from sending out this mailing attacking Reid.

But we've now been told by Democratic sources here on the Hill that last night the president himself actually raised this at the dinner, told Senator Reid that he knew nothing about the mailing, didn't offer up any more details. And then today, the White House press secretary, Scott McClellan, only would address it generally and say that the president is going to continue to work with Senator Reid and others, is going to reach across the aisle. That was not enough, however, for Senator Reid, who just came to the cameras in the last hour.

(BEGIN VIDEO CLIP)

REID: We know when he came here he said he wanted to be a uniter and not a divider. I'm beginning to think that those statements are just absolutely false.

(END VIDEO CLIP)

HENRY: Now, the reason why Senator Reid is fighting back so hard is that Democrats up here are very concerned that Harry Reid is going to end up becoming Daschlized, that basically the Republicans are going to call him an obstructionist, that if he doesn't fight back hard enough, as some Democrats feel Tom Daschle failed to fight back hard enough, he's going to also end up either losing at the polls back home or end up being a real weakened leader up here.

Republicans, though, say this is hardball, that the Democratic National Committee does the same thing. They send out mailings about Republicans. That Harry Reid is now in the big leagues, he better get used to it.

And Republicans are also saying that calling someone an obstructionist is not the problem. It's actually obstructing.

And they say Harry Reid has the choice now. Is he going to be more like Tom Daschle, or is he going to work with the president? And that's what they're trying to lay out there, and that's what they're trying to do. They're trying to hold Harry Reid's feet to the fire.

WOODRUFF: It sounds like they're getting off to a tough start.

HENRY: No doubt about it.

WOODRUFF: All right. Ed, we appreciate it.

When we come down to it, there usually is a big difference between what a president wants in his budget and what a Congress is eventually willing to give him. Our Bruce Morton has more on how the process works.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): The first thing you need to know about the president's budget is that it doesn't exist. Sure, there's a book and all those briefings. But likely nothing close to what he's asking for will ever happen because it all has to go through Congress.

Last year Mr. Bush asked Congress to eliminate 65 government programs for a savings of $4.9 billion. Congress eliminated just four of the 65, saving less than $300 million.

This year he's asking Congress to cut or eliminate 150 programs. How well do you think he'll do?

(on camera): For every government program there's probably an industry that gives money to politicians that wants the program kept alive. There may be a trade union that gives money that wants to keep those jobs. There will be a congressional subcommittee that supervises the program. And if it dies, what will they be in charge of?

(voice-over): When Ronald Reagan said the closest thing to eternal life on this Earth was a government program he wasn't kidding. And it isn't just the programs. It's the little goodies, a park for your district, a research program for the college in my district that congressman stick into spending bills. Earmarks they're called.

The watchdog group Citizens Against Government Waste estimates that in fiscal 2005 there were 13,900 earmarks worth just under $26.5 billion. A record.

The president can veto appropriations bills, of course. The whole bill. He doesn't have a line item veto. But this president has never done that. In fact, the whole issue has changed. Deficit hawks used to be Republicans. The constitutional amendment to balance the budget was part of Newt Gingrich's contract with America back in the 1990s when the Republicans won control of the House. But it was Democrat Bill Clinton who actually ended deficits and ran surpluses. And so the issue has switched sides.

KEATING HOLLAND, CNN POLITICAL DIRECTOR: Now Democrats are almost twice as likely as Republicans to say that the federal deficit is a very important issue the Congress and the president have to deal with in the coming year.

MORTON: It's way too early to know what the budget Congress actually passes will look like. What we know is it won't look much like the one the president sent them this week. It never does.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Thank you, Bruce.

Well, a certain senator named Clinton has been trying not to stand out too much from her peers. But the former first lady is proving once again that she's a lightning rod for Republican attacks. That story ahead.

Plus, scores of Pentagon workers march to Capitol Hill. We'll tell you why they're fighting mad.

And later, when Howard Dean officially wins the DNC chairmanship, who will be the biggest loser?

(COMMERCIAL BREAK)

WOODRUFF: If you had to think of one person who really gets the Republicans' blood boiling, who would it be? Well, the name Senator Hillary Rodham Clinton might just come to mind. And that helps explain why the former first lady appears to be on the receiving end of a new campaign called "Stop Her Now."

(BEGIN VIDEOTAPE)

WOODRUFF (voice-over): Is Hillary Clinton about to get the Swift Boat treatment?

ANNOUNCER: How can the man who renounced his country's symbols now be trusted?

WOODRUFF: Arthur Finkelstein, the reclusive New York political strategist and guru to governor George Pataki, is launching stophernow.com, a political action committee created to attack the senator as she prepares a re-election campaign and a possible presidential run.

UNIDENTIFIED MALE: The honorable Senator... WOODRUFF: Of course the Empire State GOP has yet to find an actual candidate to take on Clinton in 2006. The leading contenders have so far demurred in the face of the senator's formidable political operation.

But Stop Her Now may be less about the Senate race than the next campaign for the White House. "New York" magazine quotes a top state Republican who says the group's aim is to "bloody her up long before her presidential run."

(END VIDEOTAPE)

WOODRUFF: So that's where that stands. We'll be watching.

What do Democrats thing of Hillary Clinton's presidential prospects ? We'll have new poll numbers tomorrow on both parties' potential candidates in 2008.

News of note about a potential Democratic hopeful in 2008 leads off our "Political Bytes." A spokesman for New Mexico Governor Bill Richardson is not denying a report that Richardson has told party leaders he plans to run for president. While it's no secret that Richardson is considering the race, his spokesman tells the "Santa Fe New Mexican" that the governor is focused on state issues and getting reelected in 2006. After that, he said, "We'll see what happens."

The full Senate could vote as early as today on the nomination of Michael Chertoff to be the next Homeland Security secretary. Chertoff is expected to be approved. He will succeed the outgoing secretary, Tom Ridge.

Yesterday, a Senate committee voted 14-0 to approve Chertoff's nomination. One senator, Democrat Carl Levin, voted present because he was denied Justice Department documents related to interrogation techniques at Guantanamo Bay.

Here in Washington, union leaders representing civilian employees at the Department of Defense are threatening to sue the government over new personnel rules. About 200 defense workers from the Pentagon marched on Capitol Hill today to protest those new rules which will replace the traditional civil service system. The unions complained the rules will short-change workers' salaries and remove collective bargaining.

Coming up next, we'll talk with a Republican senator about President Bush's budget. Senator Chuck Hagel of Nebraska, he'll be with us.

(COMMERCIAL BREAK)

WOODRUFF: Our lead story today was the budget. And with me now from Capitol Hill to talk about the president's budget proposal and other issues, Republican Senator Chuck Hagel of Nebraska.

Senator, what do you like about the president's budget, what do you not like? SEN. CHUCK HAGEL (R), NEBRASKA: Well, I think first of all the president has stepped up to one of the great challenges of our time. And that is to get control of a runaway spending binge that this Congress and this administration has been on the last four years.

So this is a tough budget. It is going to require pain everywhere. And I think he's right.

We have no other option here, Judy. If we continue to run $400 billion deficits, we're going to put this country in such a state of bankruptcy, we will never be able to sustain any entitlement programs or -- the future is bleak for our young people.

So we've got to step up and get control of it. That's what I like about this budget. It's tough all the way around.

WOODRUFF: What do you think -- are you happy with all of the proposed cuts in here?

HAGEL: Well, I didn't think it's a matter, Judy, of being happy or not happy. For example, agriculture, I represent a state that is an economy based on agriculture. We're going to have to take some cuts. Everybody's going to have to take some cuts. But I think that's part of the discipline that we're going to have to instill in this process.

You know, I have a lot of people come into my office every day, "Senator, get control of spending. What's wrong with you people?" Then when we talk about cutting their programs, "Well, don't cut my programs. The other guy's program should be cut."

WOODRUFF: It's been noted, Senator, that there is an almost 1 percent cut in this budget in domestic programs, non-security programs, but a 5 percent increase in defense spending. Is that -- is that a pattern that disturbs you or is that one that pleases you?

HAGEL: Well, we're going to have to take a hard look at that increase, Judy, no matter what. I mean, I think most people understand the most significant responsibility a president has, the biggest responsibility all of us have who hold high office, is the security of this country. So you can never play on the margins there.

But we need to find out whether that money is going. And, in fact, it doesn't even tell all the story, Judy.

That increase in the defense budget, as you know, the administration is coming up with an $80 billion emergency supplemental for Iraq. Mostly some of it will be Afghanistan, that's not even included in this budget. So that $80 billion is on top of the numbers that are in the budget.

WOODRUFF: And just quickly, it's been pointed out even by your Republican colleague that there are -- that there's a really tight budget here for the National Institutes of Health, funding for special education. Are those things you're going to be looking at? HAGEL: Well, we -- we're going to have to explore them all, Judy. But I think, again, we're going to have to understand this is going to require a wide-angle view of the entire budget for all of the pieces.

And yes, we need to look at all the departments and all the budgets. But in the end we're going to have to do what's required to get control of this budget. And that means some tough decisions, some cuts and freezes.

WOODRUFF: Very quickly, Senator, the Middle East. There was an agreement today between the Israeli prime minister and the new Palestinian leader, Mr. Abbas, for an effective cease-fire. How confident are you that this will hold?

HAGEL: Well, this is a very significant step forward, Judy. This represents, I think, one of the most significant achievements in the last few years. In a region where there's not been much good news, this is good news.

Now, there's a lot of heavy lifting that needs to go with this. There's an awful lot that needs to be done by both the Palestinians and the Israelis to make all of this work. And the United States is going to have to be more engaged than we have been in the last four years to help keep a focus on this to assure that we have some prospect for peace.

But we should not understate the achievement today. It was significant.

WOODRUFF: And you think the U.S., this administration will stay engaged?

HAGEL: It has to, Judy. It has no choice.

I've spoken with Secretary Rice over the last two, three weeks about this specifically. And she understands, the president understands.

I don't think this opportunity comes again for a long time, Judy. And so we must not squander it. There is a heavy burden on the United States and our quartet partners to work with the Israelis and the Palestinians to assure that we can make progress and get ultimately to a peace, to a cease-fire, and to a two-state solution.

WOODRUFF: Senator Chuck Hagel, who is a member of the Senate Foreign Relations Committee. Senator, we always appreciate your being on the show. Thank you.

HAGEL: Thanks, Judy.

WOODRUFF: Well, President Bush was back on the trail today pushing his plan to change Social Security. So is his stumping changing your opinion? We'll check out our new poll when we come back. Plus, is Karl Rove getting a new job? We asked this question last week, we'll ask it again. We'll go live to the White House this time to find out.

(COMMERCIAL BREAK)

WOODRUFF: It's just before 4:00 Eastern Time. And as the markets get set to close on Wall Street, I'm joined by Lou Dobbs in New York with "The Dobbs Report."

Hello, Lou.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Hi, Judy.

Stocks today on Wall Street making small gains as the final trades are being counted. The Dow Jones industrials up over 15 points. The Nasdaq slightly higher on the day.

Investors are waiting a quarterly earning's report due from Cisco momentarily. Cisco's profits considered a bellwether for other technology companies.

And the dollar gaining strength among major currencies as President Bush suggests his budget proposal could cut the nation's gaping budget deficit. The dollar rose to a two-month high against the yen earlier in the day. Another three-month high against the euro.

Microsoft is buying an anti-virus software company, Sybari, to help it battle the viruses that bog down its Windows operating systems. It may begin bundling Sybari's software right into its Windows system. That deal puts pressure on McAfee and Semantec, which dominate the anti-virus market.

A mess of airwaves has placed hundreds of communities at risk, but now after years of negotiations and lawsuits, Nextel has agreed to end the interference caused by its cell phones. The company had disrupted communications for some police, fire and other emergency crews. The telecom company is giving up those airwaves in a swap for nearly $5 billion worth of government-owned airwaves.

The government's key witness in the trial of Bernard Ebbers places a lot of the blame for the country's largest corporate bankruptcy ever on WorldCom's former CEO. Former Chief Financial Officer Scott Sullivan told a Manhattan court he felt pressure from Ebbers to alter the company's earnings and that to meet Wall Street estimates. WorldCom's bankruptcy cost shareholders billions of dollars.

Coming up on CNN at 6:00 p.m. Eastern tonight on "LOU DOBBS TONIGHT," our special report, "America's Security Risk." Tonight, we're focusing on our nation's railways and what the government is doing it protect those railways from terrorist attacks. Not only are they vulnerable, but they're also in desperate need of repair. And that is putting millions of American lives at risk. Also tonight, Wednesday Congressman Jim Sensenbrenner's real I.D. bill will be debated on the floor of the U.S. House. The new legislation would prevent illegal aliens from obtaining drivers' licenses. We'll be taking a look at why only two Democrats have signed to the legislation. One of those two Democrats co-sponsoring the bill, Congressman Lincoln Davis is my guest tonight.

Also joining me, Senator Debbie Stabenow, who sits on the banking and budget committees, will be talking about the president's budget, Social Security and our massive trade deficit with China. All of that and more coming up here on CNN tonight at 6:00 p.m. Eastern. We hope you'll join us.

Now, back to Judy Woodruff -- Judy.

JUDY WOODRUFF, CNN ANCHOR: Lou, the president's budget proposal that came out yesterday -- his supporters say this is most conservative one since Ronald Reagan, but others say he's really done very little to shrink the size of government. Where's the truth?

DOBBS: The truth is, I think perhaps, in history itself. Presidents put forward a budget plan, Congress has the responsibility of creating that budget, as you well know. To put this in context, the president wants to cut 150 programs. It's $2.6 trillion, the biggest budget ever. By way of history, the last time the president put forward a budget, he proposed cutting 65 programs. After the kabuki dance in Washington was done, Congress cut four of those programs. I don't think we're going to see a much different performance this time around.

WOODRUFF: Well, you know we're all going it be looking at it over the next few months.

DOBBS: Absolutely.

WOODRUFF: Lou Dobbs, thanks very much. And we'll see you at 6:00.

DOBBS: Thank you, Judy.

WOODRUFF: INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Making the case in the Motor City. President Bush sells his new budget in Detroit.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Now Congress needs to join with me to bring real spending discipline to the federal budget.

ANNOUNCER: But will today's campaigning help push his economic plans through Congress?

UNIDENTIFIED MALE: We're not going bankrupt in Social Security. This is a problem, not a crisis. UNIDENTIFIED MALE: Unless we do something about it, my children and grandchildren are going to be out in the cold.

ANNOUNCER: That's the argument here in Washington, but what do you think about Social Security? Stay tuned for our new poll.

He came out on top in the race to run the Democratic party, but was Howard Dean the only winner?

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

(END VIDEOTAPE)

WOODRUFF: Welcome back. While Republicans are using words like lean and austere to describe President Bush's new budget plan, some congressional Democrats are arguing that it would actually create a Mt. Everest of debt. That's why the president took his budget pitch to the people for a second day.

CNN's Elaine Quijano is at the White House. Hi, Elaine.

ELAINE QUIJANO, CNN CORRESPONDENT: Hello to you, Judy.

That's right, President Bush says taxpayer dollars should be spent wisely or not at all. That was the crux of his budget message today as he traveled to speak before the Detroit Economic Club, a group of auto executives and others in Detroit.

Now, the president's $2.5 trillion budget proposal calls for cutting back or cutting completely some 150 federal programs, programs the president says are redundant or not achieving results. Now, Mr. Bush also discussed the centerpiece of his domestic agenda, overhauling Social Security. The president maintains unless lawmakers act soon, the system will run out of money in the year 2042.

(BEGIN VIDEO CLIP)

BUSH: If you see a train wreck coming, you ought to be saying, what are you going to do about it, Mr. Congressman or Madame Congressman? Are you going to sit there and let the train run over younger workers or are you going to act? I'm calling upon the Congress to act.

(END VIDEO CLIP)

QUIJANO: Now, on Capitol Hill today, Bush administration officials echoing the president's views on the budget and also on Social Security. Treasury Secretary John Snow appearing before lawmakers, as well, as the office of management and budget director, Josh Bolten.

They are pushing the president's ideas, that include the solution, the president believes, to saving Social Security, the president says, lies in voluntary private accounts, allowing workers under 55 to put part of their payroll taxes into personal accounts. But Democrats vehemently oppose the idea, saying it would mean cutting benefits and would not provide a long-term fix.

(BEGIN VIDEO CLIP)

SEN. MAX BAUCUS (D), MONTANA: What he has announced so far does not get us one dime closer to solving the problem. What he has proposed thus far would actually make the problem worse.

(END VIDEO CLIP)

QUIJANO: Now, the president later this week is going to be traveling, once again, to make his pitch for Social Security. Specifically the president will be headed to North Carolina and Pennsylvania. But some, even within the president's own party, have expressed reservations about Social Security, specifically, some people saying that they hope that the president's proposal -- or they wish that the president's proposal would go even further beyond just the four percent for the personal accounts, perhaps up to six percent. The president's answer is that he is open to all ideas except for raising payroll taxes -- Judy.

WOODRUFF: Now, Elaine, separate from the budget and Social Security, there were some personnel announcements made at the White House today. Tell us about those.

QUIJANO: That's right. And the headliner out of this the senior adviser to the president, Karl Rove, the man that President Bush called the architect just after his re-election. He will be now assuming the position of deputy chief of staff as well as retaining the position of senior adviser to the president.

Now what does that mean? White House officials say that he will coordinate policy within the various White House council. Those, of course, include the National Security Council, the National Economic Council, the Homeland Security Council, among others. But this new deputy White House chief of staff announcement coming earlier today. Again, officials saying he will still retain the role of senior adviser to the president.

WOODRUFF: We didn't think it was any -- possible for Mr. Rove to get any more powerful than he is. All right. Thank you, Elaine. We appreciate it.

Well, Karl Rove's new job title is apparently not sitting well with some Democrats. Outgoing DNC chairman Terry McAuliffe issued a statement saying, "Bush knows that Rove is neither an economic nor a national security expert. He is simply an ideological strategist." McAuliffe goes on to say, quoting, "Clearly, Bush thinks political manipulation matters more than keeping the president honestly informed about the state of the country." And we're trying now to get a reaction from the White House.

Now, to the president's other sales promotion for Social Security reform. Our new poll offers an early read on public reaction to Mr. Bush's pitch. Here now our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE) WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): President Bush has been on a mission to sell Social Security reform.

BUSH: In the last few days, I've traveled to North Dakota and Florida and now to Michigan to discuss my ideas and plans.

SCHNEIDER: So is it working? Last month 40 percent of Americans thought it was a good idea to allow future retirees to invest some of their Social Security taxes in return for a reduction in their guaranteed benefits. 55 percent said bad idea. And now? Look at that. No change at all. Still a bad idea. Right now 17 percent of Americans believe the Social Security system is in crisis. Do they think allowing private accounts is a good idea? Um, no.

Who does support it? By a small margin, workers who say they've done enough retirement planning to feel secure. People who say they have not done enough retirement planning or none at all reject the president's plan. The more you depend on Social Security, the less you like President Bush's proposal. How is President Bush going to make up for the money that goes into the personal accounts?

BUSH: With the exception of running up payroll taxes or raising payroll taxes, all options are on the table.

SCHNEIDER: Well, here are some options. Limit benefits for wealthy retirees. Screw the rich! Two-thirds of Americans say, fine. How about raising the cap on the amount of wages subject to the Social Security tax, so higher income workers would pay more? Another way to screw the rich, also fine. Is that a tax increase? President Bush has not explicitly ruled it out. It's fine with his fellow Republicans. It's even fine with higher income people.

As far as the public is concerned, no other option is fine. Just 40 percent support further reducing Social Security benefits for early retirees.

We know President Bush won't consider raising payroll taxes, what about the public? Nope. Raise the retirement age? Nope. And the least popular option of all, rereducing benefits for future retirees.

(END VIDEOTAPE)

SCHNEIDER: Democrats warn benefits will be reduced if the president's plan passes. Now, a government Social Security expert warns benefits may have to be reduced if something is not done. For most Americans, a reduction in guaranteed benefits is not the solution, it's the problem.

WOODRUFF: So, Bill, a question. If one were to raise the amount of wages on which Social Security taxes are levied, that $90,000, is that a tax increase?

SCHNEIDER: Well, that's a good point. It certainly is a tax increase for the higher income workers.

WOODRUFF: If you earn over 90,000. SCHNEIDER: Over $90,000, they're going to pay more taxes. Sounds like a tax increase, but whenever the president has been presented with that option, his answer is, I don't support a tax increase. But he doesn't explicitly rule out raising that cap, as far as I know.

WOODRUFF: So, we'll see. We'll continue to ask this question. All right. Bill Schneider, thanks very much.

Howard Dean, all but certain to be elected Democratic Party chairman on Saturday, that makes him an obvious winner but who else will come out on top thanks to Dean's success? We'll name some names ahead.

Plus, an always outspoken Democrat, Senator Chuck Schumer shares his critique of the Bush budget and more.

(COMMERCIAL BREAK)

WOODRUFF: A little earlier this hour, we talked about the federal budget with a Republican senator, Chuck Hagel of Nebraska. With me now from Capitol Hill to share his views on the budget, Senator Charles Schumer of New York.

Senator, good to see you.

SEN. CHARLES SCHUMER (D), NEW YORK: Judy, nice to talk to you.

WOODRUFF: Senator, first of all, virtually everybody agrees that the federal government is spending too much money. Why -- isn't the president going about reducing that spending in a responsible way?

SCHUMER: Well, the bottom line is it's very irresponsible and misleading. His two greatest priorities are permanent tax cuts and Social Security. And somehow just by coincidence the real bite of those programs, which create -- which make the deficit even worse than it is, don't occur until 2009, starting when the president leaves office.

So they can say in the next year or two the budget is sort of flat, but the bottom line is, they're really pulling all sorts of tricks. If a private company did this, they'd be hauled before someone, the accounting board or the SEC or somebody or other.

WOODRUFF: Did any of the cuts the president is proposing make sense, the ones that you've had a chance to lock at?

SCHUMER: Well, you know, we do have to keep growth in. The problem is that the president has chosen one rather small part of the budget to put in all the cuts and it's either cynical because he knows they're so deep that Congress will restore them, or impractical.

Now are those cuts things that I could live with? Of course. For instance, he does deserve credit, in the past they have sometimes cut just urban programs, if you will, blue state programs and not cut agriculture. This time they have cut both. And the way they have cut agriculture is a way that I think makes sense, just giving some money to the small family farmers, not big agribusiness.

But overall, these cuts are so deep and so across the board, it's sort of the most meat-ax approach to at least discretionary spending that I've seen in the 25 years I've looked at budgets here on Capitol Hill as a House member and now as a senator.

WOODRUFF: Senator, is it really worth getting exercised about this president's budget cut proposals when we know last he proposed something like 65 programs? They eliminated -- Congress only ended up eliminating four of those.

SCHUMER: Well, I think it does matter now more than ever because interest rates are hanging in the balance. The problem with interest rates is that our trade deficit requires the Fed to keep interest rates higher than they'd normally be.

And if interest rates -- the prime rate goes up to 4 percent, it's now 2.5 it was 1.5 several months back, and if the economy begins to slow down, there's no give to stimulate the economy. In fact, the budget still sucks money out of the economy.

So not actually reducing the deficit is going to have real severe consequences, not in 2005 but in 2006. And playing this game is going to really hurt people.

WOODRUFF: Let me just name one of the specifics here. You have made an issue of Amtrak in the last day or so. The budget director, Josh Bolten, though, is saying Amtrak was originally set up 30 years ago to be a for-profit, self-sustaining corporate entity not intended to be run on federal government subsidies. He said the market needs to apply, you know, in railroads as everywhere else.

SCHUMER: Well, the bottom line here is he can try to do that by just pulling the subsidy out and the damage that will be is enormous. We subsidize our roads, the nickel gas tax and gasoline taxes pay for those. We subsidize our airports and for some reason only amtrak is supposed to totally go on its own and that's what the administration has done.

Now, if amtrak is to shut down October 1st, which it would do under this budget, it would not just affect New York and Philadelphia and Boston and Washington, the so-called Northeast Corridor, but everyone would then have to fly, the La Guardia Airport, Logan airport, National and Reagan Airports -- I mean Reagan and Dulles would get so backed up that it would back up Chicago and L.A. and air traffic would come to a grinding halt.

These are irresponsible cuts, but when the president says he has to make his own tax cuts permanent, he has to borrow trillions to fix Social Security and he has to increase military spending, not just for the soldiers in Iraq, but while they've cut certain military programs, they haven't cut many others, we still are funding two planes. The F- 22 and the Joint Task Fighter, you know, it is both unfair, wrong and unrealistic. The most conservative Republicans in Congress won't make these cuts. WOODRUFF: Senator Charles Schumer of New York making a passionate defense on behalf of Amtrak. Senator, it's good to see you, thanks very much.

SCHUMER: Thanks, Judy. Nice to talk to you.

WOODRUFF: And you, thank you, Senator.

Coming up next, Chuck Todd of The Hotline. We know that Howard Dean is about to be elected chair of the Democratic Party, but who else is a winner, who's a loser just as he's being elected? We'll be right back with all of that.

(COMMERCIAL BREAK)

WOODRUFF: So, now we see, it's Howard Dean who is the last man standing in the race for Democratic party chairman. We asked Chuck Todd of "The Hotline" to tell us about the winners and losers in the process of selecting a new party leader. Chuck of course is the editor-in-chief of "The Hotline," an insider's political briefing produced every day by the "National Journal."

Chuck, we know it's Howard Dean, are there some other winners in all this?

CHUCK TODD, "THE HOTLINE": I think there are. Let's start out with the thing we care about most here in politics and that's the next presidential race. That means Iowa will turn out to be somewhat of a winner here. They had their Democratic leaders come out early. They're trying very hard to protect their first in the nation status. From my understanding, the Dean folks are very well aware of how early and united the Iowa Democrats were.

Terry McAuliffe is a huge winner out of this. The more people have been nervous about Howard Dean, the more compliments they have been throwing Terry McAuliffe's way. And so more people have been noticing some of the work he did. His election record isn't great but he put the machine in place to keep the Democratic party competitive.

The McMahon clan, this is Steve McMahon, Tom McMahon, McMahon brother-in-law, Mark Squier, the McMahon family has been very big part of the Howard Dean campaigns from the presidential race to this. They're going to be the new go-to consulting firm (UNINTELLIGIBLE) the DNC thing.

And finally, southern Democratic state parties might seem odd to some folks that they're a winner but a lot of people think Dean's almost going to overcompensate and the Scott Maddox for instance in particular the Florida Democratic party are going to be big winners out of this.

WOODRUFF: He came out as an early endorsee.

TODD: An early endorsee and sort of started the avalanche.

WOODRUFF: Chuck, if those are the winners, who has come out of this not exactly smelling like a rose?

TODD: If I were the New Hampshire Democratic party, I'd be nervous. The Dean people have noticed that some of New Hampshire folks were on the anti-Dean bandwagon for a little while and they're trying to protect first in the nation status. Congressional leadership never was quiet or shy about searching for an alternative to Dean particularly relations with Nancy Pelosi and the DNC will be interesting to watch over time. Some of the Democratic governors in particular, Bill Richardson and Ed Rendell were very aggressive in looking for Dean alternatives and the Dean people are well aware of this.

And finally Joe Trippi, I think a year ago when Joe Trippi and Howard Dean parted ways, most people would have predicted that Joe Trippi would be the guy that everybody would be turning to to fix the Democratic party not Howard Dean and the roles are completely reversed.

Trippi is out of politics, Dean is very much running the show on the Democratic side.

WOODRUFF: It will be interesting to see if there is any fence mending going on in the weeks to come. Is there anybody out there who doesn't fall into either category?

TODD: The name that we seem to leave out of these two categories are the Clintons because and there's all sorts of conspiracy theories that I've been hearing from people on some of the -- in that anti-Dean movement -- that the Clintons could have been the people that could have, if they wanted to stop Dean, they could have. They could have united all the factions and told them we're all going to get behind one candidate but they didn't so some people think that the Clintons like this idea that just like Bill Clinton ran against Ron Brown in that DNC when he had to in the primaries in '91 that it might be good for Hillary Clinton that somebody that's prestigious, more liberal than her is running the Democratic party and she can almost run against him, or embrace him, whatever is the better thing to do for 2008. So we'll see if this has been good strategy by the Clintons as time goes by.

WOODRUFF: Could that be a triangle or is that my imagination?

TODD: Familiar tactic, isn't it?

WOODRUFF: Chuck Todd, thank you. "The Hotline" an insider's political briefing is produced every day by the "National Journal." You can go online to Nationaljournal.com for subscription information. Thank you, Chuck.

TODD: Thanks, Judy.

In Senator Schumer's home state, we talked to him a few minutes ago, a seemingly never-ending election finally is over. The story ahead.

(COMMERCIAL BREAK) WOODRUFF: The longest legislative election in New York state history is finally is over at one last recount and more than three months after the vote. Republican state Senator Nicholas Spano officially won reelection today by 18 votes. That leaves just one more election, '04 cliffhanger and that is the state Senate contest in Kentucky. We'll report on that when we know the results. That's it for INSIDE POLITICS this Tuesday. I'm Judy Woodruff. Thank you for joining. "CROSSFIRE" starts right now.

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