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Cheney Discusses the Budget Battle; Will Bush's Agenda Mend the Divide Between Congress and White House?

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WOLF BLITZER, HOST: It's noon in Washington, 9:00 a.m. in Los Angeles, 6:00 p.m. in Rome and 8:00 p.m. in Moscow. Wherever you're watching from around the world, thanks for joining us for this two- hour LATE EDITION.

We'll get to our interview with Vice President Dick Cheney in just a few moments. But first, a quick check of the hour's top stories.

(NEWSBREAK)

BLITZER: A short while ago, I spoke with Vice President Dick Cheney about the administration's game plan for winning that tough battle with Congress over tax cuts and President Bush's other budget priorities.

(BEGIN VIDEOTAPE)

BLITZER: Mr. Vice President, thanks for joining us once again on LATE EDITION.

And I wanted, first of all, to start off with the whole tax cut proposal. I know that you and other White House officials have been insisting that the estimates, the projected estimates, are very conservative. But the budget surplus of $5.6 trillion is based on, what, 2.9 percent annual growth rate.

In the last quarter of last year, it was only 1.1 percent, and Alan Greenspan, the Federal Reserve chairman, says it could even go down. What happens if that growth rate is not 2.9 percent, as you assume it will be over the course of next 10 years?

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: Well, you've got to remember, Wolf, you talked about one quarter, and the forecast is a 10-year forecast. And certainly, by any historical standard, it's a very conservative forecast. The rate of growth predicted by the Blue Chip prognosticators is above what we've recommended. That almost never happens.

We've also assumed that the rate of increase in revenue is not as great as the rate of increase in the overall size of the economy -- again, very conservative.

We've used a static analysis, in order to determine the impact of the tax cut -- very conservative.

We haven't assumed any feedback into the economy from the tax cut. We've provided in the baseline a growth in inflation, a growth in the population covered by Medicare, Social Security, et cetera. Got all the president's initiatives funded in there.

Plus, when we get all through, after the tax cut, we've still got some $800 billion left for other priorities if that's necessary.

So, it is a conservative budget. In the 32 years I've been involved, since 1969, that's the most conservative set of assumptions I have ever seen.

BLITZER: Well, if you're that confident in these assumptions, why not do what many Democrats, even some moderate Republicans and Chairman Greenspan have suggested, impose some triggers, so that the tax cuts wouldn't be fully implemented in case, for some reason, the assumptions don't turn out to be that good?

CHENEY: Well, the problem is: What do you mean by "trigger?" Now, there are two ways to build a trigger. You can build a trigger that says if the economy goes down, then we're going to raise taxes. Not a very good idea. The other way is to arrange a trigger that says, if Congress spends too much money, then we're not going to go forward with tax reduction. Also not a very good idea.

In one case, you are going to do exactly the wrong thing in terms of economic remedy if you've got a problem. In the other case, you are going to provide incentive for Congress to spend more money.

And part of what's involved here -- I mean, there are really some philosophical differences here. We really believe -- and remember what we're talking about -- we haven't collected the money yet. We're talking about -- we've got a forecast on expected spending, a forecast on the expected growth in the economy and revenues. And we believe, based on that, with the code we have today, that we can adjust the tax code downwards so we never collect money we don't need. That is what we mean.

BLITZER: They're not suggesting that you would increase taxes. What they're suggesting, if the scenario doesn't unfold the way you hope it will, that the tax cuts won't go into effect.

CHENEY: Remember what I said here, now. We've got a tax structure out there today that is taking the highest percentage of national income for federal income taxes since World War II. We've got a tax structure that's got a top rate of 39 percent we think ought to be changed. That ought to come down to 33 percent. We've got inequities in the code, such as the marriage penalty, the death tax, et cetera. And we want to reduce all the rates in all the brackets, collapse the brackets.

We think it'll give us a much better tax system, and we think, again, we've provided for growth in the budget. We've got a 4 percent increase in discretionary spending this year. The increase in next year's budget over the budget year we're now in is $100 billion. We have not starved the federal government by anybody's standards.

CHENEY: And what we have is a conservative set of estimates, and, we think, a very sound policy going forward that says, look, we need to reduce those rates, we need to allow the American people to keep more of what they earn, that that's a good long term economic policy that will encourage hard work, savings, investment, and keep the economy on a course towards prosperity.

BLITZER: The Democrats, the minority leader in the House and in the Senate, Tom Daschle, Dick Gephardt, a lot of other Democrats, insist that your tax cut proposal favors the wealthy. Now, Deloitte and Touche, the respected accounting firm, said what it would mean. And we are going to put these on the screen, and I'll show you what they show.

A childless couple earning $20,000 a year, right now, before the Bush tax cut, pays about $990 in taxes; after the Bush tax cut, they pay $580. They woudl save $410.

CHENEY: That's pretty significant.

BLITZER: A couple with two children making $55,000 a year, look at this, right now before the Bush tax cut, they are paying about $3,500 in taxes; after the Bush tax cut, goes down to about $1,500 dollars in tax cuts. They are saving almost $2,000 a year in tax cuts.

Couple with two children make $400,000 a year, right now they pay about $100,000 in taxes; they go down to almost $90,000 after the Bush tax cut was implemented, saving about $13,500.

The question that Democrats ask is: Why does a couple making $400,000 a year need a tax break that would give them, let's say, $14,000?

CHENEY: Let's remember now, those people are paying significantly higher percentage of the total tax burden. If you look, in fact, at the way the cuts are distributed, the people at upper end of the scale don't get as big percentage reduction as do those in the lower and middle brackets. Folks at the upper end of the scale also pay the vast bulk of income taxes in the country.

So, what we are talking about doing here is just reducing rates. We take the top rate from a 39 percent down to 33 percent; the bottom rate goes from 15 percent to 10 percent. And for that family, once you add in, for example, the child credit, which we double from $500 to $1,000, a couple thousand dollars a year is a very significant item.

Now, if you are going to cut taxes across the board for everybody who pays taxes, then folks who make more and pay more tax now are going to get more of a reduction. But there is nothing unfair, inequitable about that.

BLITZER: The other point that a lot of Democrats are saying is that the estate tax that you want to eliminate completely, including for billionaires, is going to cost a whole bunch of money, a lot of money that could go for other social services, government services, that Bill Gates and Warren Buffett don't really need that kind of break. And they, themselves, say it is not a good idea.

CHENEY: Well, first of all, let's remember what's involved here. There is a principle involved in the question of the death tax. The way it operates now, we tax people twice, not once. And we don't think that is right. We think if you pay taxes on what you earn, that when you die and want to pass it on to your kids, it shouldn't be taxed again.

With respect to sort of the subtext here, Wolf, I really think we've got a lot of people arguing against our proposal because, in the end, they don't really believe in cutting taxes. In the end, they want government to keep all that money because then they get to spend it. And we believe that is a mistake.

We believe it is important to empower the American people by letting them keep more of what they earn. We think these marginal rate reductions are the kinds changes that will guarantee long term prosperity for the nation.

Some of the opponents on the other side, they want a bigger government, they want to spend more money. Last year, before we got to town, they increased discretionary spending 8 percent, the Clinton administration did, working in conjunction with some in Congress. So, it's important for us, we think, to make certain that that money never comes to Washington, because if it does, it will be spent.

BLITZER: The Democrats say they also want a tax cut, $900 billion as opposed to $1.6 trillion.

CHENEY: They are getting close. They're not there yet, but they're getting close.

BLITZER: Well, they say maybe there is some room for negotiation. But Tom Daschle, the Democratic leader in Senate, a man you know quite well, insists that the way the Bush White House came up with these numbers was simply wrong. Listen to what he had to say on Thursday. Listen to this.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D), SOUTH DAKOTA: It is really a classic example of putting the cart before the horse. Let's get this budget put in place first. Let's then make some decisions about what we can spend, and to what we can commit. And that isn't happening here, and it is an amazing demonstration of irresponsibility.

(END VIDEO CLIP)

CHENEY: I beg to differ with the gentleman from South Dakota.

The fact of the matter is that we sent up, the morning after the president's speech last week -- which was a great speech by the way, very well-received -- a complete budget. I mean, it lays out everything department by department what we recommend.

BLITZER: Well, it wasn't the telephone book budget. It was just 80 pages.

CHENEY: But we've got all of that to work on. It's a very good package that we did, in fact, send up there. And all the key decisions have been made. The recommendations have been made.

The fact is, the House will move -- the Ways and Means has already moved, and the House will move the tax bill this coming week. The tax bill has to originate there anyway.

It's up to the Congress to pass a budget resolution, and they will do that. And the budget resolution will in fact pass the Senate before the tax bill comes up on Senate side. So Mr. Daschle is just wrong when he suggests that somehow, you know, we're not addressing the longer-term question or the bigger issue with respect to spending. We are.

BLITZER: You and president have made a major effort to reach out to Democrats, meetings, talking a lot to them. But when the House Ways and Means Committee passed their tax cut this week, it was strictly along party lines, no Democrats, no blue dog Democrats, no conservative Democrats, no moderate Democrats joined the Republican majority. It was strictly along party lines. Is that the kind of budget you want to see passed?

CHENEY: No. We think that, by the time we get down to final passage, I bet there will be a lot of Democrats voting with us.

BLITZER: How many?

CHENEY: I couldn't put a number on it, but I think in the final analysis they are going to have great difficulty voting against a tax cut for the American taxpayer when we are faced with prospect of trillions of dollars in surpluses in the years ahead.

BLITZER: How many senators, though, Republicans senators, do you think you might lose? Already, some of them are expressing concern: Lincoln Chafee of Rhode Island, Jim Jeffords of Vermont.

CHENEY: The Senate and the House both have important roles to play here. This is a legislative process. We get to make recommendations; the president sent up his package. They will dispose of that. There will be a lot of give-and-take back and forth in debate.

The House has already made some modifications in terms of the way they sent our package forward. That's the way should be. We look forward to working with them, and I think, in the end, we in fact are going to get most of what the president requested.

BLITZER: During the campaign, the president had a very bold Social Security initiative, privatizing a small portion of the money that recipients could invest. And now he has come up with a presidential commission to study it once again. You know, you have been around Washington a long time, as have I. Whenever a president doesn't want anything done, they create a commission to study it. How many more commissions do you need on Social Security before you bite the bullet and say, "This has to be done to reform Social Security?"

CHENEY: Well, this president has already done something no other politician had the nerve to do. His predecessor, Mr. Clinton, was in office for eight years and never once made any proposal with respect to Social Security.

George Bush went out and made a cornerstone of his campaign this idea that we ought to create individual retirement accounts, especially for our younger workers, give them the opportunity to earn more of a return on their Social Security taxes, and begin to address the problems in Social Security long-term. It's a very significant development. It was an important part of the campaign, and it was, I think, approved by the American people.

We've got a lot more to do to have a total, final, comprehensive package. And what we want to do is put together a group of people, knowledgeable experts, as well as people who played significant political roles in this area before -- somewhat like the Greenspan commission of 1983, which is the last time any significant changes were made in Social Security -- and take that and take what we have already recommended and move forward with a comprehensive Social Security reform package.

I think it is a good way to go. He has indicated that he will appoint the commission this spring, that we hope to have a report from them by fall so that we can move it up to the Congress and begin to address the question that no other politician in recent years has had the courage to take on, other than the president.

BLITZER: I want to move on and talk about some other issues beyond the budget. One final footnote, though, there was an earthquake in the Pacific Northwest this week. There was a FEMA program, a Federal Emergency Management Agency program, called Project Impact: $25 million, not a lot of money in the big scheme of things, to try to help earthquake-prone areas get ready for the possibility of earthquake. Any second thoughts about eliminating that program in your budget?

CHENEY: No, the program is deemed, generally, to be ineffective. There doesn't appear to be any difference between those communities that got Impact money and those that didn't, in terms of the success of preparation for possible earthquake.

There is plenty of money available in the federal budget to assist the Northwest. The president has declared it a disaster area. Joe Allbaugh, our new head of the Federal Emergency Management Agency, has been out there, and we'll do everything we can to help those folks.

But that decision on that particular line item in the budget, basically, was founded on the notion that it's not effective. BLITZER: OK, we're going to take a quick break. A lot more to talk about with the vice president of the United States, including his thoughts on President Clinton's pardon controversy. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I know Congress had to formally invite me, and it could have been a close vote.

(LAUGHTER)

BUSH: So, Mr. Vice President, I appreciate you being here to break the tie.

(END VIDEO CLIP)

BLITZER: President Bush joking in his first address to a joint session of Congress this past week.

We're continuing our discussion with the vice president of the United States, Dick Cheney.

Mr. Vice President, controversy erupting over the president's faith-based initiative, allowing the federal government to give grants to religious charities to help in social services, drug rehabilitation, prisoners and other areas. But now some religious conservatives, Pat Robertson, Marvin Olasky, who is the author of compassionate conservatism, suggesting this may not necessarily be such a good idea, if the federal government gives money, for example, to the Nation of Islam or the Church of Scientology or the Unification Church. What is the policy?

CHENEY: Well, the president's made it clear that he would in fact like to be able to have these organizations play a more prominent role in terms of dealing with community problems. They do tremendous work out there now. As we campaigned last fall, we stopped and visited an awful lot of these organizations.

Now, the way the federal government works, they're often required, in effect, to give up that component of their activity that really makes them unique in order to receive federal funds. And what we're saying is, we need to allow them to come in -- oftentimes, for example, after-school programs -- and be able to compete for those funds without giving up the religious component of their operations.

BLITZER: Would the Nation of Islam be eligible for these kinds of funds?

CHENEY: Well, no. You've got to have some standards established in terms of what you're going to support. But the key here is that you're not supporting religious views or conviction, you're not using federal funds to propagate a religion. You, in fact, are using funds to go in and do drug rehabilitation or after-school programs or assistance to the homeless of various finds. So, there's no question but that it's got to be carefully crafted, and deliberately done, but I think will be. And this is part of the debate.

BLITZER: And the Unification Church?

CHENEY: I'm not going to get into the business saying, "Yes, this one. No, that one." I think the important thing is that there be standards established as to what kinds of programs the government will support.

BLITZER: Those standards have not yet been established, the guidelines?

CHENEY: Not legislatively, certainly.

BLITZER: The story that we heard earlier today about Robert Hanssen, the accused Russian Soviet spy, having compromised a tunnel that was being built underneath the Soviet embassy here in Washington, a spectacular story, what can you tell us about that? Did Robert Hanssen compromise that tunnel and cause potentially hundreds of millions of dollars of damage to a U.S. intelligence-gathering operation?

CHENEY: Well, if there were such an operation, I couldn't talk about it, Wolf.

If we take the Hanssen case separately, it is a serious case, clearly. It has been viewed that way, given his length of service with the FBI, the level he was at in the agency, the kinds of assignments he had, his access to computer capabilities inside the bureau and the fact that he apparently worked for the Russians for at least 15 years. All of that has to be taken very seriously.

We won't know until they've done a complete assessment whether or not the damage was absolutely severe. The assumption is it was pretty serious, and we'll know more once they've completed the damage assessment, which is going to take probably several months.

BLITZER: Do you and the president have confidence in the FBI director, Louis Freeh?

CHENEY: We do.

BLITZER: Even though this high-level FBI counterintelligence agent allegedly was handing over the crown jewels of the U.S. efforts to spy, in effect, on the Soviet Union and Russia under his watch?

CHENEY: Well, he was very effective as an agent for the Russians, in terms of the way he conducted himself. If you look at the indictment that was filed in court, his conduct and the fact that he never met the Russians, they didn't know what he looked like, they didn't know his real identity, that it was only through good counterespionage work that we were able to find out what happened here. And the president has great confidence in Louis Freeh. He's done an excellent job in this case, and we're convinced he'll do a superb job in the future.

BLITZER: Iraq, a subject close to your heart. You were the defense secretary during the Gulf War. Colin Powell, on February 9, the secretary of state, issued a very direct warning to the Iraqis that since then seems to have moved a little bit to the sidelines.

Listen to what General Powell said on February 9.

(BEGIN VIDEO CLIP)

COLIN POWELL, SECRETARY OF STATE: There's a simple answer, let the inspectors in and we can get beyond this. But until he does that, then I think we have to be firm, we have to be vigilant, and I will be carrying this message to my friends in the region.

(END VIDEO CLIP)

BLITZER: But the message he brought to the region and since then is that, apparently, the Bush administration is prepared to ease the sanctions against Iraq, even if no inspectors are allowed to go back in.

CHENEY: Now, I'm not here to announce a new Iraq policy today, Wolf. But General Powell has been through the area. The president sent him out specifically to begin a dialogue with our friends in the region.

The fact of the matter is here, we've inherited policy that is really a mess. After all this time, the sanction regime that was there has eroded. We see a lot of things now getting across the borders in ways that are no longer controlled or consistent with that policy. A lot of nations doing business in there.

We've also got ongoing problems in connection with the peace process with the Israelis and Palestinians.

What's needed here, I think, is to look at it on a regional basis and look at all facets of our policy in that part of the globe. General Powell has been out to talk to the front-line states, talk to our friends in region, to report back. And at some point in the not too distant future, we'll be able to clarify exactly what it is we hope we can achieve.

Clearly, we continue to have vital interests in that part of globe. We've got a lot of friends there. Saddam Hussein has historically been a significant military threat. I don't believe he is a significant military threat today, but we want to make sure does not become one in the future.

BLITZER: What about Iran? How much of a threat is Iran to the United States and its friends in the region?

CHENEY: Iran, times in the past, has been a problem for us clearly. And they continue to be not friendly to the U.S., shall we say. We don't have relations there at all there. There has been evidence in the past that they have supported terrorism, and that's something we obviously always oppose.

But again, what we need is a comprehensive look at our policy in region. The president's directed that we do that, and that was part of General Powell's trip.

BLITZER: Are you concerned that Iran is developing a nuclear capability?

CHENEY: Well, there are a number of nations around the world that are trying to develop weapons of mass destruction. Some of them are pursuing nuclear weapons, some are pursuing biological or chemical agents.

As a general proposition, the United States needs to have a policy that applies widely around the world, that discourages proliferation of weapons mass destruction. And wherever we see that developing, we want to take steps to oppose it.

BLITZER: Former President Clinton still facing an uproar over his pardon controversy, especially the Marc Rich pardon, the billionaire financier living in Switzerland.

Are you concerned that all this focus of attention on that is undermining the president and your ability to get your message out on tax cuts and other issues?

CHENEY: I don't think so. I mean, the fact of the matter is Bill Clinton's part of the past. He has been gone some six weeks now from office. There is still certain fascination, well, among other things, with they way he left office. We don't determine that. And the press makes decisions for themselves about what are they going to cover.

We feel like we have had good coverage. We're focused on the future. We are trying to finish staffing up the administration, to get our legislative proposals before the Congress, to get Congress to move on them. And that's where the focus ought to be and should be for us. The contrast with the outgoing Clinton administration is an interesting one and not necessarily adverse from our standpoint.

BLITZER: Your chief of staff, Lewis Libby, testified this week before Dan Burton's Government Reform Committee. He had represented Marc Rich for many years as a lawyer here in Washington. Listen to an excerpt of what Mr. Libby said this week before that committee. Listen to this.

(BEGIN VIDEO CLIP)

LEWIS LIBBY: I believe that the Southern District of New York misconstrued the facts in the law and that, looking from all the evidence available to the defense, he had not violated tax laws.

(END VIDEO CLIP)

BLITZER: According to Jack Quinn, the new lawyer who took over the case for Mr. Libby, the case that Mr. Libby and his associates put together was the basis for the eventual pardon request that they gave the president. First of all, do you have confidence in Mr. Libby, who is your chief of staff?

CHENEY: Mr. Libby, Lewis Libby, "Scooter," we call him, has been an old friend of mine. He worked for me at the Pentagon. Did a superb job for me when I was secretary of defense, and I was delighted to get him to give up his very lucrative law practice and come back into public service when I became vice president. He's running my staff operation. A superb individual and a very, very competent, capable lawyer and also a good chief of staff.

BLITZER: Is it sort of embarrassing though, that he...

CHENEY: Why?

BLITZER: I don't know, the point that he called Marc Rich a couple days after he got the pardon and congratulated him?

CHENEY: Look, from the standpoint of Scooter's prior work for Marc Rich, nobody's ever suggested he did anything at all inappropriate or unethical. And I'm sure you wouldn't want to make that suggestion, Wolf.

BLITZER: No, I certainly would not.

CHENEY: He did first rate piece of legal work for him, but that's what he was supposed to do, that's what to get paid to do.

BLITZER: And Mr. Libby did insist that he never supported or was involved in the actual pardon application?

CHENEY: He was not involved in the pardon application, did not intercede with the Clinton White House on behalf of Mr. Rich at all. Most of his work for him really ceased earlier in the year 2000.

But to somehow criticize or suggest that a lawyer who represents a client who later becomes controversial, by virtue of having represented him, should be disqualified from public service, I just think is outrageous.

BLITZER: We only have a few seconds.

When I interviewed your wife the other day, she said you're eating more regularly, you're exercising. She seemed pretty happy with your health right now. A lot of our viewers remember the scare that everyone had during the transition when you had that mild heart attack. How are you feeling?

CHENEY: Well, I feel great. I am well-behaved. They've taken control of my food supply. So, I'm trying to do all those things you need do to be a responsible individual with a history of coronary artery disease and somebody who's 60 years old. So far so good.

BLITZER: No pizza at midnight?

CHENEY: No pizza at midnight. I'm not a big pizza-eater anyway, but lots of fruits and vegetables.

BLITZER: And you're in the new house, the vice presidential residence?

CHENEY: We moved in last Friday night.

BLITZER: How are you liking that?

CHENEY: It's great. It's really a very nice house. It belonged to the chief of naval operations for years. It's been the vice president's residence now, I guess, since Nelson Rockefeller in the mid-'70s.

But it's a lovely old home in Washington, and we're privileged to live in it.

BLITZER: OK, Mr. Vice President, I want to thank you so much for joining us.

CHENEY: Thank you, Wolf.

(END VIDEOTAPE)

BLITZER: And when we return, will President Bush's budget agenda get in the way of a kinder, gentler relationship between the White House and Congress? We'll talk about that and more with Majority Leader Dick Armey of Texas and Democrat Charlie Rangel of New York.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I hope America is noticing the difference, because we are making progress. Together, we are changing the tone in the nation's capital, and this spirit of respect and cooperation is vital.

(END VIDEO CLIP)

BLITZER: Welcome back to LATE EDITION.

President Bush says the acrimony in Washington is disappearing, but what impact will his budget and tax proposals have on his efforts at bipartisanship?

Joining us now are two members of Congress who will have key roles in the debate over the president's plan: in Dallas, the House Republican leader Dick Armey; he's the majority leader in the House of Representatives. And in New York, Congressman Charlie Rangel; he's the top Democrat on the House Ways and Means Committee, which, of course, oversees tax policy.

Congressmen, good to have both of you on LATE EDITION.

I want to begin with you, Congressman Rangel, and get your response to some of the points that Dick Cheney made on our program. For example, the argument that the wealthiest Americans do pay most of the taxes. If there is going to be tax relief, why not give some of that relief to those who pay the most in taxes to begin with?

REP. CHARLES RANGEL (D), NEW YORK: Well, first of all, when it comes to the percentage of income based on the increase of income, I think it is safe to say that the wealthiest people have received a tremendous increase in salary and that the income tax received has been much a lower proportion.

But what we are talking about is the size of the tax cut, and it is impossible for us to forecast what's going to happen 10 years from now, and make a decision today as to what we are going to do. And we don't even have a budget.

As a matter of fact, Dick Armey will tell you, as part of the Republican leadership, that they are going to have to waive the rules even to consider a tax cut, because we don't have a budget. So, all the things we are talking about doesn't lock into place, because we believe, and I think most Republicans do, that the tax cut is going to exceed $1.6 trillion, closer to $2 trillion.

BLITZER: Mr. Leader, what about that, the argument that the budget surplus projections -- you are a trained economist -- may not necessarily materialize? They rarely ever do in the past, do they?

REP. DICK ARMEY (R), TEXAS: Well, these projections are conservative in nature. Frankly, I'm a little surprised at this new- found farsightedness. For years and years and years, the Democrats made spending increases based on their high hopes for future, never thought about looking beyond next year's forecast.

The fact of the matter is, this is about giving people their money back when the government is taking too much. We are going to have over a $5 trillion surplus in the next 10 years, and we are saying we are going to give one-fifth of that or less back to the people who are making that surplus possible. I don't see that unreasonable, whatsoever.

BLITZER: What about the other point that Charlie Rangel just made, though, that you're going have to waive rules in the House of Representatives to get this tax cut approved?

ARMEY: That is a technical consideration. Cutting taxes is good for the American family, it is good for the economy. I have been in the House for 18 years, 10 of it in the minority when Charlie's party was in majority. They waived the rules every time I turned around to increase spending. I'm sure they can handle the process once for cutting taxes. It's not that big a deal. It's purely a technical comment.

BLITZER: On that point, Congressman Rangel, I want to get your response, but the president's plan does eliminate all federal income taxes for some six million of the poorest Americans. I'm sure that is an aspect of the president's tax cut plan that you welcome.

RANGEL: Well, first of all, none of that compassionate conservatism obviously has reached your House leadership because, while they call it a technicality to waive the rules to allow the tax cut to come up before the budget, they don't have enough compassion to waive that same rule to give the Democrats an opportunity to have a vote on our tax package, which would be a substitute.

But to get to the...

(LAUGHTER)

What? You know that, and it's not fair.

ARMEY: Charlie, the rule has not been written. How can you comment about what is in a rule that hasn't even been written or won't be written until next Tuesday? I mean, you get the jump-the-gun award on that one, Charlie.

RANGEL: Well, I jumped the gun because...

ARMEY: I think you ought to wait until Tuesday, and if you have got a complaint on Tuesday, I'll be the first to stand in line to hear it. But right now, you have no complaint because there is no rule such as you just described.

But you see, here is the case: You can't win the argument on the substance whether or not we ought to give the American people a tax cut. In fact, you are now offering yourself a tax reduction that is even larger than what was, two years ago, too big. So now you are fighting the argument on process.

RANGEL: Listen, as long as Tom Delay, your cohort from Texas, is the whip, and he's the one that said that this Democratic substitute would be denied a waiver -- and so, maybe I have more confidence in what he says as you do. But he is the one that calls the shots over there, and I just thought he meant what he said.

Having said that, let me get to Wolf's question. We hear constantly from the vice president and the president that those who pay income taxes should be the ones that would get the relief. A lot of us truly believe that that payroll tax, which is taken out of the income and is a tax on the income of the working and the moderate- income people should be getting relief.

Under the Democratic alternative, we do have an expanded earned income tax credit, which merely means that we give back money to compensate for the payroll taxes. Republicans refuse to believe that, when people come home and they find a substantial part of their taxes taken out for Social Security, for Medicare, they refuse to call it a tax. And we give relief, and they don't.

BLITZER: All right. What about that? What about that payroll- tax issue, Congressman Armey?

ARMEY: Well, first of all, as you know, the payroll tax is for Social Security and Medicare, and the fact of the matter is, we must sustain those two programs. Charlie would be the first in line to say that.

But what Charlie is saying is, he wants an income transfer to people who do not pay income taxes out of the income taxes. We're saying we are going to cut taxes for people who pay taxes.

Now, in doing that, we are going to cut some $6 million -- people out of paying taxes altogether. Charlie doesn't want to concede that as compassionate.

You know, Charlie, you've got to kind of give us a little credit every now and then for the good things we do that you didn't get done, that you wouldn't do, that you blocked from happening two years ago, before you start complaining that we have no compassion.

RANGEL: First of all, you again say that the payroll tax is not a tax.

And the second thing that you're talking about -- you said, "Charlie would be the first one to protect Social Security," and you can include Medicare, and you can improve assistance in education, and you can include prescription drug relief.

But I tell you, Dick Armey, you are one of the most honest Republicans that we have in the House of Representatives, and you're an economist so you don't have to deal with rhetoric. You know in the bottom of your heart that you could care less about Social Security, Medicare and having the federal government involved in education. And you have said it over and over and over.

So, I truly believe that you can do better without a budget, because it's impossible to get this tax cut when you take in consideration the -- you keep saying that it's the people's money. We have a $3.4 trillion debt. That belongs to the people, too, and we have to reduce that. You can't do all of these things with this dramatic tax cut that you're supporting.

ARMEY: And we have paid off over $6.5 billion in debt in just the last three years. No debt was paid off in the United States since 1830 until we Republicans took the majority, and we will pay the debt off now at such a rate that it is a large question about how to manage that.

So, we're way ahead of you on the debt-reduction game, too, Charlie.

RANGEL: Well, it was the Clinton-Gore administration that brought this expanded economy.

But I tell you, if you go to your economists, you would see the quickest way to get rid of Social Security and Medicare is certainly not by increasing taxes, is certainly not by allocation of money. It's going to be by not having the money there. And under the Bush tax cut, we don't have money to do all of those things.

BLITZER: Congressman Rangel, as far as the Bush tax code is concerned, I want to show you our CNN-USA Today gallup poll numbers before and after President Bush's speech before Congress. Look at this, so far as whether you favor or oppose the Bush tax cut proposals: Before the speech, 68 percent said they favor it, 79 percent said they favor it after the speech. So far as opposing, it went from 24 percent say they oppose it down to 19 after the speech.

The point is this: At least according to this poll, the president seemed to have scored points in generating public support for his tax cut proposals as a result of his speech.

Did he win over Democrats who were listening?

RANGEL: You bet your life. President Bush was the candy man. There was not a Democratic proposal that we have had in the last Congress that Dick Armey was fighting that President Bush wasn't out there saying it was his idea in the first place.

Each time he came up with a proposal, he would find another trillion dollars. He sucked the money to pay down the debt. It's in Social Security, but he's going to use it to privatize it. And then at the last minute he came up with a $1 trillion slush fund.

That's why we need a budget. If you give away as much as Bush did, in terms of paying for the programs and still giving a tax cut, who could be against it except an economist?

BLITZER: What about that?

ARMEY: Well, I'm just looking forward to the joy Charlie's going to experience in seeing what you can accomplish when you have good management at the top.

So, the fact of the matter is, the president has thought this budget through. He understands what he wants to accomplish. He knows where the resources will come to accomplish that. We will, in fact, pass his budget through the House and the Senate.

Within that framework, we will complete his work on the taxes, expand education and improve it for our children, which is where the heart really lies in that process. It is not a question of spending more money, it is spending it more effectively on behalf of the children.

BLITZER: Congressmen, stand by. We have to take quick break.

We have a lot more to talk about, including this: Should former President Clinton explain his pardon reasoning to Congress? We'll ask both representatives about the ongoing pardon probe when LATE EDITION returns.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. I'm joined again by House Majority Leader Dick Armey of Texas and the Democratic congressman from New York, Charlie Rangel.

Congressman Armey, there was a fascinating editorial in the Wall Street Journal on Friday on the whole tax cut proposal, the Bush budget plan. I want to read except from that editorial to you. We will put it up on our screen. "Democrats are still scrambling to fill out their own tax plan. Why bother? Just leave Republicans sitting at the bargaining table by themselves and they will eventually bring forth something so tepid and distorted, it will please even Charlie Rangel." The Wall Street Journal editorial page not having much faith in the Republicans in holding the line on these tax cuts.

RANGEL: Well, I was surprised that...

BLITZER: Charlie Rangel, let's let Dick Armey answer that first.

For example, the House Ways and Means Committee, the editorial page of "The Wall Street Journal" suggesting it didn't really do much, it was a really modest, little cut that they came up with the other day, at least in the first year of that tax cut.

ARMEY: Well, again, you have to remember, that the final outline of the tax will be put together by the House, the Senate and the White House on a bipartisan basis at the time of budget reconciliation.

What we are doing now with this initial bill is saying to the American people, "We are serious about it. We are going to cut taxes across the board. Here is the first evidence that you can count on that it is coming, and it will be done as soon as we can get the process done."

So, I would caution the Wall Street Journal and everyone else: Hold your fire until you see the final product that goes to the president.

BLITZER: In the same editorial, the Wall Street Journal, Congressman Rangel, had this to say about keeping some of that money here in Washington. Let me read to you this excerpt. It said, "As federal surpluses have ballooned, Congress has gone on a bipartisan spending binge that threatens to swallow up federal surpluses even before they are allowed to appear. If taxes are not cut, the result will be much bigger government."

The point being, Congressman Rangel, if you keep that money in Washington and don't return it to taxpayers, the federal government will just get bigger and bigger and it will spend that money.

RANGEL: I'm surprised that this isn't answered by the Republicans. They seem to forget that their fear of spending all of the money -- they have Republican leadership now and they should be able to stop it.

What we are saying on the Democratic side, that if the surplus truly would be there, then we should have a tax cut commensurate to it. But, you know, when you have a $3 trillion (ph) indebtedness, it is hard to believe that it is really a surplus. It is really a favorable cash flow.

But I hear Dick Armey talking about bipartisanship. We don't have that in the House, and we certainly didn't have it in the Ways and Means Committee. We had no hearings. We have an unfair proposal. By all the economic projections, the top 1 percent get 43 percent of the tax cut when you include the repeal of the estate tax. And 60 percent of it goes to the top 10 percent. You can't do that unless you are going to put into jeopardy the Social Security system, the Medicare system, the money for education and for the military. And so why not have a budget so that we can see how it all fits in?

BLITZER: Congressman Armey?

ARMEY: Again, let me just remind you, we have a budget. The president's budget calls for $1.6 trillion in tax reduction. We have just passed a bill out of committee that is under $1 trillion. That leaves over $600 billion for other aspects of tax reduction. Again, all within the president's budget. So, again, we are crying wolf without good reason to do so.

BLITZER: Congressman Armey...

(CROSSTALK)

RANGEL: Dick Armey, you know I'm talking about the House of Representatives. We are the ones supposed to have the budget. You know, the president just gives us his proposal, but we have the responsibility to have a budget of our own. You can't disregard that.

ARMEY: And we will have a budget. The Senate will have a budget before we ever get to that reconciliation where the final tax package is completed.

RANGEL: You keep talking about the Senate.

ARMEY: Charlie, we're just getting started on the process.

RANGEL: The Constitution requires that the tax bill starts in the House and starts in the Ways and Means Committee, and we don't have a budget in the House. How can you say -- we don't have a budget. We have to waive the rules.

BLITZER: Congressman Armey, we only have a few seconds before we have to take another commercial break.

But on the point that Congressman Rangel, many Democrats are concerned about, that tax cut was passed by the House Ways and Means Committee strictly along party lines. No Democrats supported it. And there were no hearings. Is that the way you want to start off the kind of bipartisan cooperation you have been talking about?

ARMEY: The fact of the matter is we have been working on this a long time. The chairman of the committee has reached out to the Democrats. There are some Democrats that would like to work on this even more than they are.

But, you know, bipartisan has to cut both ways. We can't be reaching out and having the Democrat leadership telling their folks, "Don't work with them," as we have gone through for the last two years.

When we get the final package on the floor, there will be plenty of Democrats voting for it.

BLITZER: All right, congressmen.

RANGEL: You are hilarious.

BLITZER: Congressman Rangel, stand by, Congressman Armey. We're going to take a quick break. We have a lot more to talk about.

For our international viewers, World News is next. For our North American audience, stay tuned for the second hour of LATE EDITION. We'll check the hour's top stories and continue our conversation with Congressmen Armey and Rangel.

Plus, we'll get perspective on how the Bush administration is doing from former vice presidential candidate Jack Kemp and former White House adviser David Gergen.

Plus, our LATE EDITION roundtable and Bruce Morton's Last Word. It's all ahead when LATE EDITION continues.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: Do we spend it?

CROWD: No.

BUSH: Or do we remember whose money it is in the first place?

CROWD: Yes.

(END VIDEO CLIP)

BLITZER: Welcome back to LATE EDITION.

We'll get back to conversation with the Majority Leader Dick Armey, and Charlie Rangel in just a moment.

(NEWSBREAK)

BLITZER: I'm joined once again by the House Majority Leader Dick Armey of Texas and Democratic Congressman Charlie Rangel of New York.

We are going to take phone calls. We have one phone call already, congressmen, from Senator Patty Murray of Washington state. She's calling in to complain about something that Vice President Dick Cheney said earlier about that program to eliminate funding for FEMA to prepare earthquake-prone areas for earthquakes. Pacific Northwest suffering an earthquake earlier this week, of course.

Senator Murray, are you there?

Sen. PATTY MURRAY (D), WASHINGTON: I am here, Wolf. Good morning. BLITZER: You heard Vice President Cheney say that that program simply didn't work. That's why the Bush administration wants it eliminated.

MURRAY: Well, I was sitting here listening to that, I was really shocked and offended that he said that it was ineffective. I have been out on the ground here in Pacific Northwest for the last three days and have surveyed incredible damage to businesses and homes, to buildings, to roads. But what I have really been impressed by is in the communities that have had Project Impact funds, that have been retrofitting and done prevention work by use of those funds, the damage has been minimal. It is really a stark contrast between those communities that have had those funds and those that have not.

That program has been extremely effective, and I think the Washington state experience really shows us that.

BLITZER: All right.

What about that, Congressman Armey? Have you had a chance to look at that $25 billion program?

ARMEY: First, to Senator Patty Murray and to all the people in Washington, I hate to see your state have to be proving ground for that program, but this -- I think, our next move should be to go out there and take a look at the evidence, just as the senator's proposed that it is there, and get a better measure of it.

It's a tragic thing that we have to go through an incident like they had in Seattle. Those things, of course, are out of our hands, they are inevitable.

So let's now go take look and see what evidence we can have that the program is working, can it be made to work more effectively? I think we should see this as a chance to go out there and set it right if it needs to be or enhance it if it's possible.

BLITZER: All right.

That sounds reasonable, Congressman Rangel. You can't criticize Congressman Armey for that.

RANGEL: No, let's wait for a national crisis, and then we'll determine whether we're going to provide assistance. That's why we need a budget. You know, that's why we have to see how he feels about Social Security.

You leave it up to Armey, and faith-based organizations will take care of all of these problems, you know. And the federal government, according to him, would have no responsibility.

Give us a budget, and give the Democrats an opportunity to give an alternative. Why don't you find some compassion with your conservativism?

ARMEY: Charlie, I just don't really feel like you are reaching out to me.

RANGEL: I'm trying hard.

(LAUGHTER)

You know, the president talks about it. Just promise that we'll have an opportunity to present a Democratic alternative on the floor, and that would be truly bipartisanship.

BLITZER: I want to thank Senator Patty Murray for calling in.

We have another caller from Georgia who has a question for the two of you.

Please go ahead with your question.

CALLER: Yes. Majority Leader Armey, what do you think the impact will be of Senator Miller of Georgia, a Democrat senator, attacking his own Senate leadership, Daschle and Representative Gephardt, about using class warfare to oppose the Bush tax cut?

ARMEY: I believe the senator will be re-elected in Georgia.

(LAUGHTER)

RANGEL: Every time we try to stop the rich from getting unfair tax advantages, they call it "class warfare." If protecting middle- income people and low-income people is class warfare, then put me down as being for it. It's so unfair to call it that.

ARMEY: Charlie, I actually have had you down for being for class warfare for some time now.

So, that's what it is. It is a political strategy. It has worked well for you in the past. I think your concern is that it may not continue to work in the future, and Georgia represents a threat to you all, that your time-worn strategy just won't hold up in the future.

RANGEL: Well, how about the two...

BLITZER: Let's take another caller from West Palm Beach in Florida who has a question.

Please go ahead.

CALLER: My husband and I are both notch babies. We live on our Social Security income.

Now, we keep hearing all this talk about surplus funds. Why not give some of the senior citizens who are notch babies a settlement and increase their earnings by the $100 per month that was taken away from them and that they haven't received in years?

BLITZER: What about that, Congressman Rangel? RANGEL: I think that they should be getting some relief, but, if you listen to Dick Armey, he didn't believe we should have a Social Security system in the first place. And he certainly's not trying to get any protection for it with this tax cut, with 43 percent of the money -- class warfare -- goes to the top 1 percent of the taxpayers.

ARMEY: Let me just say very quickly. Senator Moynihan from New York and Claude Pepper correctly identified years ago an aberration in the way the cost of living adjustments were made. They created a five-year correction for it. That's what the notch is all about, and the notch babies should not be encouraged to believe, one, that they got a bad deal out of that correction or, two, that they have any adjustment coming.

One of the things you never hear from notch babies is "I'm getting more money than the guy born a year later than me." You only hear about, "I'm getting less money than the guy born a year earlier than me." It was correction that was necessary at the time. It will now be, I think, pretty well finally completed. And I think the notch babies don't have a complaint, and I think it's terribly, terribly low politics to continue to go out and aggravate those folks into believing that they were mistreated and have a claim against the government.

RANGEL: Well, what about the baby-boomers, the ones that are going to become eligible for Social Security and Medicare? Do you think it's unfair to protect the trust funds so that when they become eligible...

ARMEY: Absolutely not. That's why...

RANGEL: ... that the monies will be there?

ARMEY: That's why we Republicans stopped your raid on the Social Security trust funds. We're not spending that money on new risky social spending schemes like you did for 40 years, Charlie.

RANGEL: But you are trying privatize the system now to get federal government out of it.

BLITZER: Unfortunately, congressmen, we are all out of time for this segment. I want to thank both of you for joining us. We learned a lot about the differences between the Republican and the Democratic parties in the House of Representatives. Thank you so much. We'll have you back soon.

RANGEL: Thank you.

ARMEY: Thank you.

BLITZER: And just ahead, we will review President Bush's first weeks in Congress with the former vice presidential nominee for the Republican Party, Jack Kemp, and the former presidential adviser David Gergen. LATE EDITION will be right back.

(COMMERCIAL BREAK) BLITZER: Welcome back. Joining us now with perspective on how President Bush is handling his first weeks in office are two men very familiar with what it takes to get things done here in Washington.

Jack Kemp is a former Republican vice presidential nominee, and he is a former congressman. He also served as housing secretary in former President Bush's administration. He is now co-director of the organization Empower America.

And in Boston, David Gergen. He served as an adviser to presidents Nixon, Ford, Reagan and Clinton. He's now an editor at large at U.S. News and World Report.

Gentlemen, always great to have both of you on LATE EDITION. I want to get to how President Bush is doing in a second.

But very briefly, Jack Kemp, President Clinton and the pardon controversies. Is this a major, major problem that the media is overblowing? Or is it just something we should be moving on from? What's your take on the Marc Rich pardons and the whole uproar that has been generated as a result of if?

JACK KEMP, CO-DIRECTOR, EMPOWER AMERICA: Well, Wolf, I have a great deal of respect for former President Jimmy Carter, and he said the Marc Rich pardon was a disgrace. It was disgraceful. I think most people feel that way. But it has yet to be played out, and we will just have to wait and see.

BLITZER: Should it be played out?

KEMP: But I think we're making too much of it. And I think trying to move on is a little bit too early before we've actually looked into what happened, were there any quid pro quos?

BLITZER: What about that, David Gergen? Are we making too much out of it, or should we be -- we, meaning the news media -- be making more out of it?

DAVID GERGEN, FORMER PRESIDENTIAL ADVISER: I thought early on the news media overexaggerated. But I do agree with Jack Kemp. I don't think there's anyway you can explain the pardon in a good light. It was a terrible mistake on the president's part.

I'm glad you are focusing today on President Bush's agenda, because I think that is far more important to the country.

But having said that, I think this is not going to go away until Bill Clinton comes before the press and answers questions exhaustively. And then after he has done that, he is going to go off to Europe, and I think he then ought to take a low profile and let the game go on in Washington. He'll have to leave the stage. But I do think before he does that, he owes it to the country to have a very, very executive conversation with the press and answer all the questions.

BLITZER: Is that a good idea as far as you think, Jack Kemp? KEMP: Yes, I think that is a good idea. But a low profile for Bill Clinton is an oxymoron. There is just no such thing. He cannot leave the stage. With all due respect to Dave Gergen, he can't leave the stage. And he will be on stage in Europe, wherever he is.

But I think that is a good idea to have the president hold a press conference, answer the questions, and then maybe we can move on, but not until.

BLITZER: David Gergen, I remember when you were brought into the Clinton White House to help the president bring some semblance of organization during those early months of the Clinton administration. You know this president. You know the officials who surrounded him.

How do you explain the fact that three of his top advisers, including the White House Chief of Staff John Podesta, his close aide Bruce Lindsey, the White House Counsel Beth Nolan, they all opposed the pardon of Marc Rich and Pincus Green, yet he went ahead and overruled them and said, go for it, do the pardon? How do you explain that?

GERGEN: I can only explain it on the basis that we don't know all the facts yet. I don't think the full story is out. We have investigations underway now in New York from a federal prosecutor, and perhaps those would bring forward the true stories.

Clearly, in overriding his entire staff and not consulting with the Justice Department and not consulting with his National Security Advisor, Bill Clinton had reasons that were very singular to him, and we don't fully know those reasons.

The New York Times piece that he wrote a couple of weeks ago did not clarify in ways, I think, are satisfactory to people exactly what was going on here. And until we know the facts, I think we're all going to be mystified.

And this e-mail that came forward this past week from a Marc Rich confidant in Europe over to one his lawyers in New York back in March, saying, you know, "We're running into road blocks everywhere. Let's send D.R.," Denise Rich, on a quote, "personal mission to Number One," Bill Clinton, "with a well-prepared script." Now what was that all about? What happened thereafter? We know she pledged more money. What else happened? What was going on here? I think until we unravel that mystery, we're not really going to know what really happened here. And I think the country's going to feel this was terribly, terribly wrong-headed and perhaps unethical -- we don't know that for certain -- decision.

BLITZER: Jack Kemp, you spent many years as a congressman from western New York, my home town area. You know New York very well. You know the state of New York. How is this playing on the new junior senator from New York state, Hillary Rodham Clinton?

KEMP: You know, I noticed the other day, Wolf, that she introduced an economic package designed to help upstate New York and particularly the Buffalo area and other parts of upstate that have been hard hit by the economy. And not every question but most of the questions were about the pardon.

So I think it's diverting her attention and the New York press' attention from the business of her being a U.S. senator from New York.

That's, I'm sure, disappointing to her, notwithstanding the questions that Dave says have yet to be answered.

BLITZER: Is this a major problem for Senator Clinton, David Gergen?

GERGEN: I think most people in politics now believe that whatever chance she had to get the Democratic nomination for president in 2004 have evaporated in these past few weeks. I do think it's a major problem for her as a senator. She's having hard time getting started.

It's a larger problem for the Democratic Party. Up until very recently, many, many Democrats who have wanted to come on to your show and to other shows to talk about President Bush's new agenda have been very reluctant to do so because they thought they would be grilled about the pardons. And they just don't want to get involved with it. They don't know what's there. They don't know, you know, where the trail leads. So, I think it's been a major problem for the Democratic Party.

BLITZER: We heard the vice president say earlier, Jack Kemp, that he didn't think it was a big problem for the president and the vice president getting their agenda across, their tax-cutting agenda across. They're not overly concerned about being overshadowed by Bill Clinton.

KEMP: Well, I think Dick Cheney is right. I think, clearly, Bush has had a first very good two or three weeks.

Of course, the tax cut is going to be controversial. I see today in the New York Times almost an apoplectic fashion, they said that the Bush tax cut is "an assault on government." It's just unbelievable to me how lowering the rates under John F. Kennedy and then lowering them under Ronald Reagan are somehow good, and then cutting them under George Bush even less -- it's a smaller cut than either Kennedy or Reagan did -- is somehow "an assault on government." That is just nonsense.

BLITZER: All right, we're going to take a quick break. We have a lot more to talk about. We're just getting started on the Bush agenda, the tax cuts.

When we come back, in addition to all of that, your phone calls for Jack Kemp and David Gergen. LATE EDITION will continue right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We're continuing our conversation with former GOP vice presidential nominee Jack Kemp and former presidential adviser David Gergen. David, I want to start off with what Tom Shales, the TV critic for The Washington Post, wrote this week in his review of President Bush's address before a joint session of Congress. Among other things, he wrote this. He said: "A camera caught one shot of a group of Democrats sitting there grumpily and refusing to applaud. That made them look like party-poopers. No, worse than that, they looked like yesterday. Bush was giving the audience tomorrow."

That's pretty strong praise from Tom Shales for President Bush.

GERGEN: It is indeed. I think that President Bush gave a first- rate address to the nation on Tuesday night when he went before the Congress. I think he's been crisp in his presidency, he's been well- managed, he's focused. I think he's gotten off to a very strong start.

I would put some cautionary notes on there. He did not draw a large audience for that speech Tuesday night. As you know, it was well below expectations, somewhere around 40 million, 40 percent below what Bill Clinton got eight years ago.

So that he still has a challenge, Wolf, and that is, even as he makes progress inside the Beltway -- and I think he's made a great deal of progress inside the Beltway -- President Bush still needs to work on galvanizing the country, to rally the country behind his program.

As Jack Kemp remembers from the early Reagan days, one of the keys to Reagan's success was the way he seized the bully pulpit and rallied the country behind his program. President Bush has yet to do that.

BLITZER: How does he do that?

KEMP: Well, I wanted to say one other thing that David Gergen commented on. It's a mystery to me, watching that speech, why the Democratic Party, sitting on the floor of the U.S. House, were standing and applauding every spending program, and then, as Tom Shales pointed out in the Post, sitting on their hands when he said, "We've got to lower the tax burden."

The American people, whether it's labor or capital, or savers or investors or workers, are overtaxed. And they sat, as Tom Shales said, in a grumpy way and put themselves in the position of saying that the American people are undertaxed, when most people think they're overtaxed. So it is a mystery to me.

How's Bush doing? I think he's going to do well. I think, as Dave pointed out, he has to grab the bully pulpit. And I'll tell you how to do it.

This economy is slowing far more than anybody anticipated, certainly more than Alan Greenspan anticipated, when he suggested that we had to slow down the economy to get a soft landing. We're having a very hard landing in technology, in manufacturing. Auto sales have not yet dropped, but consumer confidence is at a six-year low. The Nasdaq, which is a predictor of future economic activity, is off 60 percent from its high. Now, you can say the high was too high, I'll grant you that. But it's way too low. It's dangerous.

And the bully pulpit can be grabbed if he combines cutting tax rates with lowering interest rates and easing up on Fed monetary policy. He ought to have a sharp talk with Chairman Greenspan of the Federal Reserve Board.

BLITZER: You know, David Gergen, I want to read to you something else that another writer wrote, a former Republican speechwriter at the White House, Peggy Noonan, writing in Thursday's Wall Street Journal, on the editorial page. She wrote this. She said, "He gave everyone something to cheer for, and Mr. Bush's real message, `I'm the least radical guy who ever walked down the block,' came through loud and clear. For a stupid man, he sure is smart." She was writing tongue-in-cheek.

(LAUGHTER)

BLITZER: But this notion of George W. Bush not being that intelligent, not being up to the job, is that a serious problem he has to worry about?

GERGEN: I think he is gradually putting that issue to rest. He has -- so far he's handled himself in a very dignified and professional manner. The few mistakes they've made they've cleaned up instantaneously. They've got very, very good damage control.

You know, I'm impressed that this is the first MBA who's come to the White House, and he seems to be showing a lot of the kind of professional management skills that a lot of MBAs have. So in that sense, I think he's doing very, very well.

I do think there are some significant differences between George W. Bush and Ronald Reagan, one about the use of the bully pulpit. Secondly, there's a sense in which Reagan talked more right and governed closer to the center, especially when he went through his negotiations. And Bush talks much more to the center and governs much more to the right. I mean, his agenda is very conservative.

BLITZER: Let's take a quick caller from Fairbanks, Alaska. Please go ahead with your question.

CALLER: Yes, I'm wondering why people could not look at the budget surplus as a basis for forward funding and eliminate all the concerns about what might happen in the future?

BLITZER: What about that, Jack Kemp?

KEMP: Well, the surplus is, what, $5.6 trillion, underestimated by another $1.5 trillion at least. So we've got close to a $7.5 trillion surplus.

BLITZER: Why do you say it's underestimated?

KEMP: Because they lowballed... BLITZER: Some people think that's a very optimistic number.

KEMP: Well, they lowballed the growth. If growth is a 2.7 for the next 10 years, you get a 5.8. If it's anywhere near 3 or a 3.2 percent gross domestic product, it'll be closer to 7.

So, the real question is, a, we can afford it. B, it won't work, however, unless it is combined with an ease in monetary policy. There's the bully pulpit for George Bush, getting a talk with Chairman Greenspan and getting the Congress to make the tax-rate reductions retroactive and cut the capital gain tax to get some real oomph or jump-start back into this economy.

KEMP: Because just cutting the rate a little bit will not work, in my opinion.

BLITZER: A subject close to your heart, a subject you love to talk about, Jack Kemp, unfortunately we are all out of time.

David Gergen, I want to thank you for joining us, as well. First MBA in the White House. That's very interesting.

Jack, there's never been a former quarterback in the White House. Is that correct?

KEMP: There is a lot coming along, though.

BLITZER: OK, Jack Kemp and David, thank you.

KEMP: Nice to speak to you.

BLITZER: Just ahead, now that President Bush laid out his agenda to Congress and he country, can he follow up with legislative victories? We'll go around the table with Roberts, Page and Brooks when LATE EDITION returns. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Time now for our LATE EDITION roundtable. Joining me: Susan Page, Washington bureau chief for USA Today, Steve Roberts, contributing editor for U.S. News and World Report, and David Brooks, senior editor for the Weekly Standard.

All right, we heard the president's speech before a joint session of Congress. How did he do?

STEVE ROBERTS, CNN COMMENTATOR: I think he did pretty well. You know, I think he surprised a lot of people, including a lot of Democrats. There is a comfort level. The suit of the presidency fits him. And I think a lot of Democrats underestimated that. The transition has been very smooth, he seems much more decisive, much more in command, much more at ease with himself than I think a lot of Democrats thought.

On the other hand, a lot of his positions are pretty hard-edged conservative. And Democrats are saying, wait, the real George Bush is the guy who is refusing to negotiate on taxes, not the guy how is reaching out his hand, rhetorically. So, I think there are two George Bushes there.

But by and large, I think Democrats are reeling a little bit. I think they're finding he is more comfortable and more effective than they thought.

BLITZER: You know, David, the response by the Democratic leadership, Gephardt and Daschle, I thought was pretty forceful in trying to make the case that the Bush numbers, as far as tax cuts are concerned, simply don't add up.

DAVID BROOKS, CNN COMMENTATOR: I was really stunned by their response. I, frankly, thought it was shrill and partisan and not effective. None of those responses are ever good, but they could have held out a hand a little more.

But I think it says to what Bush really accomplished with that speech, which was to redefine the center. You know, he started out sounding like Bill Clinton, we've got to but the debates between big government and small government behind us. Then he sounded like Hubert Humphrey, we've got to spend more on education, record levels of spending on education.

He said something called the Federal Compassion Fund. We should have a Federal Courage Fund, you know tax credits for extremely polite behavior. It sounded like big government liberalism.

But then he comes in with a very traditional Republican tax cut. And it's this marriage which is the new center of American politics.

BLITZER: And, Susan, you know, he did reach out to Democrats repeatedly in the course of that speech. Some Democrats suggest it was just lip service. But I want to run this clip and get your thoughts on how effective he is going to be in really working with Democrats when all is said and done. Listen to this.

(BEGIN VIDEO CLIP)

BUSH: Let us agree to bridge old divides. Let us also agree that our goodwill must be dedicated to great goals. Bipartisanship is more than minding our matters, it is doing our duty.

(END VIDEO CLIP)

SUSAN PAGE, CNN COMMENTATOR: Well, you know, that's very nice language, and I thought he struck a very nice tone in his speech. But then you look at what the House Ways and Means Committee did two days later, passing the heart of his tax bill on a straight party-line vote. And I think it does raise the question about whether that tone is going to be any more than rhetorical.

The Democratic response sounded pretty shrill. On the other hand, the Democrats have come up with a tax cut that gets closer and closer to what President Bush is proposing, up to $900 billion now. You know, the gap between $900 billion and $1.7 trillion may not be unbridgeable.

BLITZER: And if you remember, this time a year ago, it was about $250 billion for Democrats, so they are moving up.

ROBERTS: As David says, George Bush has redefined not only the where center is, he's redefined what's an acceptable tax bill. It's not a question of is there going to be tax bill, it's what's the bill and what are the numbers going to be.

But I do think that the Democrats still have a reasonable argument that his numbers don't add up. The polls continue to show, even though there has been shift as you pointed out -- ABC poll on the eve of his speech, only 22 percent of Americans favored his tax plan as the best use of the surplus. 77 percent said use it for other things -- boost domestic spending, shore up Social Security, pay down the deficit. So he has not sold his priorities to the American public yet, I don't think.

BLITZER: He's being very shrewd in traveling this past week, this coming week, going to states mostly where there are Democratic senators, states that he carried in the presidential contest trying to squeeze them this way. For example, this coming week he's going to be in the Dakotas, the home of Tom Daschle himself. Both of those Dakotas voted strongly for George W. Bush.

BROOKS: Right, I think there are nine senators, Democratic senators from Republican states mostly in the South. They are going to feel the heat. And I think you know he has been very effective at it.

I think one of the things he's going to get is something close to the size of his budget. Because, you know, the Democrats were not protesting about where is the money going to be when they were increasing spending 8 percent a (ph) year. Then, you know, it was "party on" when they're increasing spending. Suddenly they turn into Laura Schlessinger, when you talk about giving the tax money back.

So, I think the size of the tax cut is going to be close to what Bush offers. The distribution, I think, may change. When you hear the arguments on shows like this one, you feel Republicans really don't have a strong explanation for why the top income should get the bulk. And it think that's where they're going to get it.

BLITZER: Well, their explanation is: They pay the bulk, why not give them back the bulk?

BROOKS: It's true, it's true. I just wonder if, you know, measuring the compellingness of those arguments, I think that's their weakest case.

BLITZER: Is that a politically strong argument, though?

PAGE: Before we leave, though, the logistics of these trips that President Bush is taking, it's very interesting. He's spending a lot of time on the road, leaving Dick Cheney here to kind of run the government. And where is he going? As you say, he's going to Louisiana this week, where there are two Democratic senators whose votes they hope to pick up for the tax bill. He's also gone to Tennessee, Gore's home state, which he carried. He's going to go to Arkansas, Clinton's home state, which he carried. He's gone to Iowa, where the first caucuses are. Next week I expect him back in New Hampshire, you know. He's preparing for the 2004 primaries.

(LAUGHTER)

ROBERTS: But there is a problem here, a political problem. You can argue all you want that, well, people who pay the most taxes should get the biggest breaks.

But when you point out that people who make $1 million are going to get a $47,000 tax break, you can't possibly argue that it's because they need it to pay the bills. So you've got to argue on another basis.

One of your best arguments is eliminate it, because for the lower brackets, they say, "All right, $1,600, that can pay the -- you know, tuition or the school or whatever." You can see where this could matter to a family. But you can't make that argument.

I think that that's where the Democrats are going to force compromises. That top rate is not going to come down as much as they would like, and I think he's going to have to make big compromises on the estate tax, because that's almost entirely for the wealthy.

BLITZER: David, as far as the impression that the country has of George W. Bush, how important was that speech this past week?

We heard David Gergen say the ratings were not great. As far as the audience, viewership was much smaller than the number of viewers who watched President Clinton make a similar speech in '93.

BROOKS: It seems to take seven or eight events to hammer one essential message home, at least to the media.

George Bush is not a moron. We treat him like a moron. Then he behaves like he's not a moron, and we're all surprised. "Oh, he surpassed expectations." George Bush can do this. He did this at the convention. He did it at the inauguration. He did it at this speech. It was a very good speech. You know, it was sort of like a dual pep rally, these sort of events. You know, they stand up and applaud, they stand up. Bush is good at that. He's very playful, he's very modest, and he really handled that and filled out the presidency very well.

BLITZER: Susan, in the new issue of Newsweek, in the Periscope, conventional wisdom, they have for George W. Bush an up arrow. It says, "Strong speech, small audience, still basking in the," quote, "soft bigotry of low expectations."

(LAUGHTER)

BLITZER: We're going to take a quick break.

A lot more to talk about. The roundtable will weigh in some of the other big projects of the week, including the pardons controversy. Stay with us.

BLITZER: Welcome back to the roundtable.

David, we ask this question every week, and there is no reason why we shouldn't ask it again this week. The Clinton pardons controversy, will this story ever go away?

BROOKS: You know, when you stop asking that question, I will have no hair left on my head, everyone will be gray and tottering with no teeth.

(LAUGHTER)

ROBERTS: You already have gray hair.

BRROKS: It's because of these damn pardons.

No, I don't think it is going away. We've got a series of new pardons that have raised concerns. And we've got the prosecutor operating in New York. We haven't even begun to hear from that investigation. So, this will dribble, dribble, dribble.

BLITZER: And Susan, Senator Specter of the Judiciary Committee, Republican from Pennsylvania, he was on TV earlier today on ABC's This Week, and he suggested there is a way that he would like to propose for former President Clinton to explain, in great detail, what he was thinking. Listen to this.

(BEGIN VIDEO CLIP)

SEN. ARLEN SPECTER (R), PENNSYLVANIA: After conferring with Senator Lot and Senator Hatch and other members of the committee, and showing the letter to one of the Democrats to get other inputs on it, is to suggest to the president that there be a very professional questioning by me with another Democrat, if the president chooses, in office, his office if he'd like.

(END VIDEO CLIP)

BLITZER: You know President Clinton. Is that an offer he will accept?

PAGE: I would say no. I would say that he has had experience in testifying, and he did not find it that pleasant. Now, that doesn't mean I don't think he'll try to get into a situation where he's answering some questions and making his case. But I think it's more likely to be a journalist than with a Republican senator.

ROBERTS: You know, there's lot of talk around town on whether this is good cop, bad cop. But I know that there are people in the Bush administration who are not pleased with these congressional investigations. They feel that if detracts from the message. We talk about it every week instead of talking about their program.

And you heard, you know, Arlen Specter, he was being candid saying, I am going to question him. Well, you know, he gets on television because of this. And Dan Burton, the Republican in the House gets on television. And I do know that people close to President Bush have said, "I wish they would stop doing this because it does not work for them."

BROOKS: Well, then there's a split in opinion. Because there are some close to Bush who say, "Let's not over-think this. Our opponents are committing suicide. We're supposed to upset about this?" No, they like it.

PAGE: You know, the best thing it may do for them is not that it detracts attention from Bush's agenda, but that it keeps Democrats from talking about anything else. It keeps the opposition totally consumed with an issue irrelevant to President Bush.

ROBERTS: Well, I think there is some truth to that. And I also think that, you know, apropos with what we were talking about earlier, some of the Republican criticisms of George Bush are not getting through either.

BLITZER: But on that point, David, how concerned should Republicans be of a potential backlash? Dan Burton is the chairman of the House Government Reform Committee. Democrats say that he's not exactly the best spokesman for the Republicans on this kind of issue.

BROOKS: The problem is he is joined -- you know, Bob Herbert, the very liberal columnist in the New York Times said the Democratic Party has been soiled by Clinton. He's being joined by so many liberals and so many Democrats. It is not the same as the other investigations which really were Republican verses Democrat. This is the world v. Clinton.

BLITZER: Susan, as far as the former first lady Hillary Rodham Clinton is concerned, she's coming under enormous criticism, herself. There's an editorial in the New York Observer. Let me read to you this excerpt from this weekly newspaper in New York.

"So the Clintons are playing New Yorkers for fools. It is clear now that we have made a terrible mistake, for Hillary Rodham Clinton is unfit for elective office. Had she any shame, she would resign."

PAGE: You know, very harsh words and especially from a publication that supported her election and a publication that's been friendly.

But one thing you'll say about Hillary Clinton, she's got six years in office. Six years is a long time. Five years from now will we still be talking about the pardons and Hillary Clinton? Or will we be talking her record as a senator from New York? She's got a long time to recover from this difficult start.

BROOKS: But it's also true that one of the things that has happened is a lot of Democrats who defended Clinton when he was in the White House, partly because their self-interest dictated it, partly because Clinton's always been lucky in his enemies.

I think it's striking to how few people are rallying to his defense. When you saw his former supporters, his former aids this week testifying saying we tried to kill this, we thought we had gotten it killed, it kept coming back. That's more damaging than Republican criticisms, because these are the people who were his strongest defenders all through impeachment.

BLITZER: We only have a few seconds.

David, there was a major earthquake in the Pacific northwest this week. When Bill Clinton was president and there were these tragedies, he was very good at dealing with these kinds of emergencies. How did President Bush do in dealing with this earthquake up in Seattle and the Pacific Northwest?

BROOKS: His word is discipline. He was on taxes this week. He was going to stay off taxes. California could have fallen into the sea, he was going to stay off taxes.

ROBERTS: But that could be a big mistake because a very important part of the job is that sort of national chaplain job. Bill Clinton grew into that, and he was very effective at going out and reaching out to people. He can make a mistake if he's too disciplined and not show that Washington cares.

BLITZER: He was feeling everyone's pain. Steve Roberts, David Brooks, Susan Page, thank you very much.

Just ahead, Bruce Morton's Last Word.

(BEGIN VIDEO CLIP)

BRUCE MORTON: Sixteen states now have what abortion rights groups call targeted regulation of abortion providers -- TRAP, for short.

(END VIDEO CLIP)

BLITZER: Have opponents of abortion fired a new salvo in the battle over Roe v. Wade? Bruce takes a look at that question right after the break.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Time now for Bruce Morton's last word on legalized abortion and a possible new weapon for its opponents.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): A new chapter in America's long, anguished battle over abortion? Well, maybe.

The Supreme Court, this past week, upheld without comment the state of South Carolina's regulations governing abortion clinics. No one, of course, wants unsafe clinics, but critics say these regulations, which cover more than 30 pages, treat early-term abortions differently than other low-risk medical procedures and are aimed at forcing clinics out of business.

Law mandates for clinics that perform five or more first- trimester abortions a month that corridors be at least four feet wide, doors at least three feet. It sets air flow standards for various rooms. It requires that patients be tested for sexually transmitted diseases whether or not there is a medical reason for such tests. And the law allows state agencies to copy and remove patient records, a violation, critics say, of doctor-patient confidentiality.

Bonnie Scott Jones of the Center for Reproductive Law and Policy, an abortion rights organization, says, "The Supreme Court has given a green light to regulate abortion out of existence."

South Carolina Attorney General Charlie Condon, who is anti- abortion, called the courts decision a "victory for the right of South Carolina to protect women's health and public safety."

Hard to know who is right. Sixteen states now have what abortion rights groups call targeted regulation of abortion providers -- TRAP, for short. A parallel might be the literacy test Southern states used half a century ago to deny blacks the vote. You had to interpret sections of the Constitution sometimes -- stuff a law professor could have flunked. They never tested white voters, of course, only black ones.

If TRAP regulations catch on, Roe v. Wade, the decision legalizing abortion, woudl exist but as a legal relic, and we'd really be back where we were before it, with individual states deciding the issue. Socially conservative states like South Carolina might well draw up rules that would make it impossible for clinics to do business. States with a lot of abortion-rights backers, New York, say, probably wouldn't. And the right to an abortion would depend on where you lived and whether you could afford to travel.

We are not there yet. The Supreme Court upheld South Carolina's regulation. It could still decide to look at some other states and lay down standards for what is fair and what is not. But it will be interesting to see how many clinics are in business in South Carolina under the new law in, say, a year or two.

I'm Bruce Morton.

(END VIDEOTAPE)

BLITZER: Thanks, Bruce.

And now it's your turn to have the last word. Reba (ph) from Brooklyn writes this: "Bush lost the popular vote and needed his brother Jeb Bush to steal the electoral votes of Florida for him. Americans want a president they can be proud of, not someone who speaks English with the polish of a third-grader."

James from Laguna Beach, California, says: "President Bush's occasional gaffes at English pronunciation are far out-weighed by the honestly and sincerity expressed in his public speeches, a nice relief from the glib, blandishments of his predecessor."

Bill from Missouri asks: "Why not investigate all politicians, their connection to donations and the way they vote on a particular matter? Why not waster more taxpayers' money on investigations? How much will this current witch hunt cost us? Bill Clinton's affair cost taxpayers over $50 million. Was it worth it? The Republicans will say yes."

And finally, Steve in Chevy Chase, Maryland, says: "President Clinton judged these cases on their merits. Let us not forget that this is the same person who was famous for arguing the definition of "is." I guess it all depends on what you consider the definition of "merits" to be. Not only could he use a good lesson in morality, but a dictionary and logical reasoning as well."

Remember, I always welcome your comments. You can write to me at lateedition@cnn.com. And you can sign up to receive my free e-mail previewing Late Edtition every weekend at cnn.com/email.

When we return, we will reveal what is the on the cover of this week's major news magazines.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Let's take a look at what is on the cover of this week's major news magazines.

Newsweek looks at the slow, deadly spread of mad cow disease and how it could become an epidemic, with a sad-looking cow on the cover.

Time magazine examines the SATs: Why some colleges are junking them, and how some famous folks did, on the cover.

And on the cover of U.S. News and World Report, the adoption maze: More couples are chasing fewer babies. The experience can be difficult, dangerous and heart-breaking.

And that is your LATE EDITION for Sunday, March 4. Be sure to join us again next Sunday and every Sunday at noon Eastern for the last word in Sunday talk.

And if you missed any of our program today, you can tune in tonight 7:00 p.m. Eastern for a one-hour replay of LATE EDITION.

I'll see you tomorrow night on Wolf Blitzer Reports. That's at 8:00 p.m. Eastern. Until then, thanks very much for watching. Enjoy the rest of your weekend.

I'm Wolf Blitzer in Washington.

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