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ANNOUNCER: You're watching NOW with Bill Moyers. With contributions from NPR news. This week on NOW...

This financial leader was a top pick to lead the government fight against corporate abuses. Until big business said no.

COMMISSIONER HARVEY GOLDSCHMID, SECURITIES AND EXCHANGE COMMISSION (S.E.C.): It is simply a tragedy that the oversight board which had so much potential to restore investor trust will begin life under so dark and ugly a cloud.

ANNOUNCER: A Bill Moyers interview with John Biggs on the move to hijack corporate reform.

And on the eve of our national elections, fresh ideas about fixing our democracy.

RUBEN NAVARRETTE JR.: There is almost this conspiracy. I don't run away from that word. Between the major parties saying we have a common interest.

Our common interest is I'll see you back here next November so we can both get re-elected.

ANNOUNCER: And one state's radical grassroots solution to help politicians kick their addiction to fundraising.

MOYERS: Welcome to NOW.

Next Tuesday, voters will speak nationwide for the first time since the terror attacks on 9/11. War, peace, our stumbling economy, they're all on the table.

But what's not being talked about may tell us even more about our democracy right now. While the country has been worrying about war with Iraq and the sniper siege, powerful forces in Washington have conspired to undercut important reforms in our financial world.

Just this week, more than 200 grassroots groups called on our elected officials to get corporate accountability back on the agenda. They are asking the question: "Has democracy been hijacked?"

The answer can be found at the Securities and Exchange Commission and its response to the wave of corporate scandals.

Record bankruptcies.

Worldcom: more than $100 billion of stock value lost.

Enron: more than $60 billion.

Even Arthur Andersen, one of the accounting industry's big five, shut down.

Tens of thousands out of work, investors and retirees wiped out.

Congress responded to these scandals, in spite of stiff opposition from the accounting industry and their political allies, by creating the Accounting Oversight Board.

Its mission: to police the industry and go after companies that cook the corporate books. But that was months ago; now reform is being derailed.

COMMISSIONER HARVEY GOLDSCHMID, SECURITIES AND EXCHANGE COMMISSION (S.E.C.): It is simply a tragedy that the oversight board which had so much potential to restore investor trust will begin life under so dark and ugly a cloud.

MOYERS: A sharply divided S.E.C., under the leadership of Chairman Harvey Pitt, buckled to industry pressure last week in selecting the head of the new oversight board.

COMMISSIONER ROEL CAMPOS, S.E.C.: The perception of this commission being influenced by the very industry that we seek to regulate through the oversight board is real and rational, based on events that have occurred.

MOYERS: Here's what happened.

Harvey Pitt, a former accounting industry lawyer and now the S.E.C. Chairman, withdrew his support for John Biggs, an early favorite to lead the oversight board.

Biggs is the head of one of the country's largest pension funds and a vocal advocate of reform. His candidacy had widespread support from Wall Street to Washington.

But former S.E.C. official Nancy Smith says the accounting industry — the same people who helped conceal millions in corporate fraud — wanted someone less reform-minded.

NANCY SMITH, FORMER S.E.CC OFFICIAL: I think the accounting industry got their way. At the end of the day, they did not want John Biggs heading up this board, because they knew that he could get the job done and they know that he would have made life very difficult for them.

And that would have been, quite frankly, good for investors.

MOYERS: S.E.C. Chairman Harvey Pitt withdrew his support for Biggs soon after meeting with Congressman Michael Oxley, the top recipient of accounting industry money in the House of Representatives.

THE WASHINGTON POST asked of that meeting, "Are we to believe that they discussed the weather?" Pitt defended the alternative choice of William Webster, former director of the F.B.I. and C.I.A., to head up the oversight board. And he said, no one influenced his decision.

HARVEY PITT, CHAIRMAN, S.E.C.: I am fiercely independent. I am beholden to no one.

MOYERS: But just this week, a new bombshell.

It turns out Harvey Pitt knew that Webster had headed the audit committee of a company facing the same kind of fraud accusations that the oversight board was created to police.

Amazingly, Pitt did not tell the other commissioners what he knew before they voted. Now there's a clamor for Pitt's resignation.

THE NEW YORK TIMES and even the staunchly Republican WALL STREET JOURNAL have suggested he should go.

The same from Capitol Hill. Conservative John McCain joining with Democrats Tom Daschle, Dick Gephardt, and most recently Paul Sarbanes.

SEN. PAUL SARBANES (D- MD): Chairman Pitt has in effect appeared to be bending to industry and political pressure,

MOYERS: Joining me now is the man just about everyone wanted to be the new public watchdog, the man to keep an eye on the books. Everyone, that is, except the industry's friends in Washington.

John Biggs earned a Ph.D. in economics from Washington University in St. Louis, and began his career in the financial industry in 1958.

For nearly a decade he's been the chairman and CEO of one of the company's leading providers of financial services, TIAA CREF, the pension system for more than two and a half million people primarily in the education field. He and his colleagues manage $250 billion of investments in retirement funds. Welcome to NOW.

MOYERS: What does it say to you, John Biggs, that the chairman of the SEC withheld from the other four commissioners information about the former director of the CIA and FBI, who both of us know, that this former director of the FBI and CIA had been head of an audit committee of a company that is being investigated for fraud, and that the outside auditors came to his audit committee, told him there's a problem and they dismissed the outside auditors. They didn't want to know the truth.

JOHN BIGGS: Well, first off, the sequence of things, if the story we now understand it, was that the audit committee of which he chaired then agreed to fire the auditor, that really sends a terrible message to the serious professionals out in the field. We are telling them all you've got to say no, you've got to be tough...

MOYERS: You've got to tell the truth.

JOHN BIGGS: And tell the truth. Do the right thing and...

MOYERS: But if you tell the truth you get fired.

JOHN BIGGS: And if you tell the truth at least the audit committee ought to protect you. And in this case it didn't. And that seems to be the bare facts of the story.

What I would have thought if I had been chairman of that audit committee is these guys are telling me the financial records are in chaotic condition. I hope I would have been a little uneasy about the CEO who turns out to have quite a record, apparently, and there are real questions about fraud in this case.

But to know, okay, I have a heavy burden on me, I'm going to have to go after my people that I'm friendly with. But I've got to do the investigation. I've got to go find out what's going on. And they didn't do that. It appears from what we read so far.

I think Bill Webster knew that was a very serious issue, and he did the right thing in disclosing it...

MOYERS: To Chairman Pitt.

JOHN BIGGS: To Chairman Pitt and to Bob Herdman the chief accountant.

MOYERS: Should Chairman Pitt have told the other commissioners that he knew?

JOHN BIGGS: I think without question he had.... For him to say that this is not a problem, for Bob Herdman, the Chief Accountant, to say this is not a problem - amazes me. I mean, I just don't understand how they could possibly have come to that conclusion other than they were under so much pressure to make this appointment they were just dismissing...

MOYERS: Where do you think the impression -- Where do you think that pressure came from to make this appointment?

JOHN BIGGS: Well, I think it may not have been directly on the SEC commissioner's, on Harvey Pitt in particular. But it certainly came on him in some indirect sense.

I think the accounting lobbyists had read my testimony favoring stock option expensing and more independence, rules for independence. And they thought that was going to be a problem for the accounting profession.

And I think they used all their political chips.

MOYERS: Having withheld this vital information from the other commissioners, having told you that he supported you and then he didn't support you, being so clearly the representative of the industry at the SEC, can Harvey Pitt survive?

JOHN BIGGS: Well, it seems extraordinary that he can. We don't know the full story of who actually called him, but I would have guessed that he met with the chairman of the House Financial Services Committee, where the ...

MOYERS: Congressman Oxley who is...

JOHN BIGGS: Who is very much influenced by the accounting profession.

MOYERS: Yes, he's one of the biggest recipients of money from the accounting industry. I mean, you can't escape the impression.

JOHN BIGGS: No. Well, I've talked to people, senior people in the accounting industry, and they've sort of shame-facedly said to me, yes, we did oppose you, and we did it, and we're sorry about that, but we don't want the independent standards that you have at TIAA CREF spreading to the whole industry.

MOYERS: They do not want you being as concerned for the investor as for the accounting firm.

JOHN BIGGS: I'd really love to get the accounting...the leadership of the accounting profession to say the first step in any policy decision is what's best for the investors.

They tend to be focused more on their own profession and on the preparers of statements. That is, the companies that are issuing them.

They pay the bills, so it's a natural conflict. So I think that says something, well, we need public regulation to make sure that they put the investors first.

MOYERS: You're a circumspect man, a principled man ... What has happened?

JOHN BIGGS:Well, I think the accounting industry won, let's call it a Pyrrhic victory. They won this battle, but the war they should have their eye on is reestablishing their reputation. The principal asset they have as firms is their reputation.

I mean, don't they get the message at seeing Arthur Andersen absolutely destroyed by people who did not do the right thing down in Houston? People in their firm didn't do the right thing.

I mean, in Houston at least the audit committee was kept in the dark by the auditor. The auditors never came to the audit committee and said we've got the financial records are in chaotic, or we have this terrific problem with these special purpose entities.

In the case of this company, the auditor...dealing with Judge Webster, the auditors did the right thing. They came to the audit committee and said, hey, we can't audit the statements because the internal controls are so bad.

MOYERS: What is the right thing for Harvey Pitt to do now?

JOHN BIGGS: Well, you know, I don't want to join the chorus, everyone feeling he should resign. In many ways it seems like it's a political issue. But I think he has lost the confidence of his commission and I think he's lost the confidence of the American public. And I think at this point probably he should certainly be considering resignation.

And I don't know an investment person in the country that I've talked with, and I've talked with a lot, who doesn't feel that he shouldn't resign.

MOYERS: It is a tragedy because you can go to Washington today and want to do well and yet you run right into the stranglehold that big money has over the political process, over the regulatory agencies. I mean, don't you think we've reached some kind of crisis in democratic governance when money has the power to do what it's doing now?

JOHN BIGGS: You know, I've been reading about it in the newspaper and hearing about it, this is my first real experience with it, and it's appalling.

MOYERS: This is not the first time the accounting industry has refused to put the public interest first. I mean, there were major accounting scandals back in the early seventies, as you may remember. But industry convinced congress to back off on self regulation.

We had the savings and loan scandals in the 1980s costing taxpayers billions of dollars, but the industry got off virtually free. I mean, how do the big accounting firms get away with it?

JOHN BIGGS:Well, they have a lot of money to spend on the congressional races, and that's one way. Let me say my own personal view of what's happened and my observation on the accounting industry.

I was first chief financial officer of a major company back in the early seventies. And the accounting profession was held in enormously high repute. The senior partners were people in any town in America that you really admired and respected. They have gone on a growth binge since then expanding into huge financial conglomerates, 110,000 employees...

MOYERS: At one firm?

JOHN BIGGS:At one firm, professional employees. How do you manage that kind of a business? And most of them don't do accounting work. Most of them don't do auditing work. They're in employee benefit advisory work, there was a broker/dealer set up by one firm.

Anything that's financial services they saw as part of their business. They've done that over the last 20 years. The status in our society of the professional auditor has declined steadily during that period, and yet they keep arguing that they have to do all this in order to attract good people to the field.

They can attract good people to the field if they really make it clear that they honor and respect the ethical auditor who is doing the right thing, is a professional, may not be a great business getter, he may not be good at joining country clubs and bringing in clients. But he knows auditing, knows accounting, and does the job and does it with real pride.

MOYERS: Even if Harvey Pitt resigns, we've seen the stranglehold that the industry has on Michael Oxley, the chairman of the finances committee in the house and the system in Washington. How can the little guy out there have any hope, even if Harvey Pitt resigns?

JOHN BIGGS: The real way that the investor, small investor, can play a role, is to vote and to challenge their local congressman and to care about these issues.

I think we've got their attention because so many of them saw huge losses in their 401K plans. I mean, I am just sick when I look at what's happened to our participants at TIAA CREF. We've done well, we urged them to diversify, but many did not, because they were carried away like most Americans with the boom of the nineties which turned out to be partially at least fraudulent. So they've simply got to express themselves, they can express themselves in voting, they can speak up, they can squawk. And I think maybe now they have an incentive to do it. If I had to work two more years just because of this which many people will probably have to do, I'd be mad as hell.

MOYERS: Thank you for being here, thank you for speaking up.

JOHN BIGGS: Thank you, Bill.

MOYERS: The experience of John Biggs opens yet another window on who wins and who loses in Washington. Understanding what's wrong with our system — and what's right-- — is especially important now, with war in the air and the economy reeling.

So I asked some people I know to talk about our democracy. They're not your usual suspects, and I think you'll be surprised by some of their thoughts on where we are now and where we're headed. Here's our conversation.

MOYERS: A few days from now we'll have a new Congress. What's at stake?

KEVIN PHILLIPS: The big dynamic is the war dynamic. Nobody knows exactly what it will be. If the president is really Machiavellian he might end up getting the benefit of the war dynamic in the election, getting a very small Republican majority but a Republican majority nonetheless and then backing down somewhat and accepting a much less drastic scenario, but if he does go the war route or circumstances take us into the war route, then I think the next dynamic in Congress is how people react to the war.

That's likely to make some real difference in terms of partisan numbers won't matter as much then.

MANNING MARABLE: I think that the debate about the war is central in the political discourse for this November.

The reality is that the majority of American people feel a disconnect both from the Democrats and from the Republicans that real issues that affect people's lives in terms of the cost of groceries, employment, issues of shelter, certainly health care and prescription drugs, those are driving the concerns that American people feel and yet we're not getting very much of that from the discourse of the party candidates of both major parties.

KEVIN PHILLIPS: Well, the economic issues which people really haven't dwelt on will probably come to the fore especially if there's any truth to the suggestions that the war will have negative effects on the economy.

Now, I think that's probably the key for the party divisions to start reemerging again in a major way, if you have a war, if you have an economy that's being affected by the war, that probably forces them in ways they can relate to.

I agree the Democrats and the Republicans, given their druthers, would just rather take checks from the people they spend so much time buttering up. But forced to confront either the economy or the war, the two big things that we're likely to confront, I think they have to.

RUBEN NAVARRETTE JR.: Voters are concerned about the economy, that's true but they're not holding anybody liable for a bad economy. That's interesting.

That favors the Republicans because people are saying I'm worried about the economy but I don't really blame Bush- onomics for it. There's no name for it. And I wasn't prepared for that.

It seems to me Democrats only have a winning issue if two things happen. One, people say, "Oh, the economy is sour," and two, "The Republicans are to blame." They're saying the first but not the second.

MOYERS: What do you make of the fact that despite the closeness of the race in the year 2000, only 55 percent of all eligible adult voters voted compared to 70 percent in 1960?

And get this: there were 100 million fewer people in 1960, but more of them watched the Nixon/Kennedy debates than watched the Gore/Bush debates in the year 2000.

What's going on here?

RUBEN NAVARRETTE JR.: Anybody, say, 40 and younger now came up at a time where they didn't see government work. I tell people all the time, I grew up and I got my first civics lesson when I was about seven years old during the Watergate hearings.

I'm sitting there six years old trying to watch cartoons and here comes Nixon interrupting my cartoon hour very rudely. Another cartoon.

My whole generation, that whole Generation X, for lack of a better phrase, figured out politics doesn't work, doesn't work for me. Your question is interesting. It says people don't believe in it anymore. I would ask you to divide the whole pie demographically. Anybody 40 and less it's not a question anymore. We never believed that government was the arm through which you correct social ills. If I see homeless people I don't go call my Congressman. Are you kidding me?

JEAN BETHKE ELSHTAIN: Get your church to do something.

RUBEN NAVARRETTE JR.: You go to your church, roll up your sleeves. Get them a sandwich. I'm not going to call my Congressman.

MANNING MARABLE: I think that the problem within American politics is a kind of sickness within the political process. Where millions of Americans feel disconnected from the major issues that are being debated.

I think that part of the problem is the structure of the democratic process itself that mitigates against voices, whether they're from the right or the left, having a real say-so in the national discussion.

RICHARD BROOKHISER: It could be that we're at the end of a particular era of a two-party system. You know, we've had Democrats and Republicans for a long time. Kevin, you've written about this, how the Civil War gave this a great boost to that system. It kind of set it in concrete and it has gone for longer than a century.

MICHAEL LIND: One thing that's happening is gerrymandering. With each successive census there are fewer and fewer competitive seats where you don't have a safe one-party seat. There are only about a dozen Congressional seats that are really in play this year.

We have a system — it's seldom discussed in public, the media don't pay attention to it — the state legislatures draw most Congressional districts, mostly sometimes along racial lines primarily along partisan lines so that you have a 100% safe Democratic district, 100% Republican district.

Now this means in much of the United States it makes no sense to vote.

MOYERS: Here are the facts. Three quarters of the House of Representatives win re-election by a landslide every two years.

One out of seven don't even have a major party challenger while more than 40% of the state legislative candidates run without serious opposition.

MICHAEL LIND: Why vote if you have an unopposed candidate.

KEVIN PHILLIPS: Really what this is, this is the permanent corruption. I was in a panel in Mexico City on the Mexican party system, and somebody asked one of the press people routinely, well, we had a real election in Mexico and in the United States the Supreme Court picked the candidate.

Now I think what we've got when I say the permanent corruption is that we do have something in which you now have an artificial two-party system. They contend with each other but only on a very limited terrain.

And to think of it as a duopoly is not wrong, and the debate has been narrowed so much that the Democrats can't really challenge the Republicans on Republican-onomics so to speak because they have the president who collaborated with Wall Street and beat his chest while a bubble was being blown up saying how great Wall Street thinks I am.

So how are they going to indict them? But there's this incredibly narrow debate coming out of this incredibly duopolistic system.

And, who knows in a couple of years? Because the secret to the malfunction of all of these things is m-o-n-e-y because the cost of running for everything have gone up in the last 20 years that you put the money together with the mechanisms and you've got the mess.

MOYERS: THE WASHINGTON POST just this morning carried the story that the Bush administration has been holding meetings with corporate executives to find out what they want when the new Congress convenes and an official of the Heritage Foundation, which is a foundation funded by corporations and wealthy individuals, says business lobbyists in Washington are "salivating" at the prospect of what comes after January.

So the real politics is follow the money, see who gives and gets it.

KEVIN PHILLIPS: Both parties. The Republicans do it basically with private interest and business and upper-bracket people and the democrats do it with labor, with.... Teachers unions, with the entertainment business which wants a lot.

MOYERS: Just 100 donors over the last decade gave over a billion dollars to federal candidates and the national parties. Some of the biggest donors were labor unions but business out gave labor 15-1. So both sides play the money game.

You don't think that's new or a problem, Richard?

RICHARD BROOKHISER: No, I don't think it's new. I think there's more money involved because we're a richer society than we were 200 years ago or a hundred years ago.

We also have... We're a big country. So it costs a lot of money to run national elections. It costs a lot of money to run some state elections.

You know, your home state, my home state, California, these are as big as European countries. It is not cheap... It's not Israel. It's not some little geographically little country where you can drive from one end of it to the other in virtually a day.

MOYERS: I was just reading that in Texas, my home state, that the two candidates for governor will spend $100 million in the major media markets for this election. I mean that's just in one state.

RUBEN NAVARRETTE JR.: You're asking that question to a representative from a major media company. Just so you know.

I'll say in Texas, for instance, one of those candidates, Tony Sanchez is spending $60 million. He's got 60% of that pie already in terms of his own personal wealth. He's an enormously wealthy... He's worth $600 million and he's spending $60 million of it. Yeah it's a big game. It's a very big game.

MOYERS: Tony Sanchez is the Democratic candidate for governor of Texas right now. When George W. Bush ran for president he gave $300,000 Tony Sanchez did.

RUBEN NAVARRETTE JR.: He's a very Republican- friendly Democrat. I'll tell you something, voters are not objecting to that.

This is not sort of a Steve Forbes phenomenon where people are saying he's trying to buy the election.

He has made a very persuasive argument that says I'm running against a career politician. He's been getting free headlines from you people in the press for 25 years and he's been cashing government checks. Give me a chance to catch up with name I.D. It seems to have neutralized the debate.

MOYERS: But you couldn't have done that.

RUBEN NAVARRETTE JR.: If I had $60 million, I'd want to spend it differently.

MICHAEL LIND: This is the point, Bill. People get the idea of money and politics wrong in my opinion.

Money does not affect the outcome of most races in which the primary determinants are race, ethnicity, income, religion, and factors like that. If you look at the blue and the red areas on the map....

MOYERS: Blue areas for Gore.

MICHAEL LIND: And red for Bush. Norman Lear and People for the American Way can spend $100 million in some right-wing white county in Mississippi and it won't work. They won't elect the liberal Democrat.

However, money does affect who gets to be the right wing Republican....


MICHAEL LIND: Or the liberal Democrat.

KEVIN PHILLIPS: Part of the debate on money here just ignores collateral effects because, you know, I'm willing to agree it's not going to change the outcome in a certain place in Mississippi if the Democrats pump in a whole lot of money in other places.

But we all know-- and the data is there to prove it-- that the marginal swing districts tend to go with the money.

Now because that's the case, I've heard lots of people in both parties say, you know, I wish I didn't have to take all this money, but because I do I've learned how to speak out of both sides of my mouth and on a lot of votes where it doesn't really involve my district.

I'm going to vote with the banks, with the insurance companies or whatever. So what we wind up with instead of what Arthur Schlesinger called a vital center we have the venal center.

This is right there in the middle collecting money, influencing thought processes. That is right at the core of the problem.

JEAN BETHKE ELSHTAIN: In general the phenomenon that we're discussing has to do with a kind of demobilization of voters, and the weakness of the parties is part of that.

Parties used to be very effective at getting out the vote and at bringing young people up. You know, you had Democratic families and Republican families and people got socialized into a party the way they inherited a religious belief and so on.

There were other institutions that gave people a political identity and made sure they got out to vote. When the unions were strong they did that in a particular direction and so on.

During the Civil Rights era when the whole focus was on gaining the franchise for disenfranchised African Americans, that issue, again people organized around that, they had a base for organizing in the black Baptist churches in the South and so on. So you need institutions.

It's not just, you know, you've got a whole bunch of individuals out there who ought to care about this but they don't. I mean, what institutions...

KEVIN PHILLIPS: Churches. Churches. Churches.


KEVIN PHILLIPS: The First Fundamentalist Church of Greater Houston with 20,000 members who votes 92% Republican.

JEAN BETHKE ELSHTAIN: Churches are about the only ones doing it right now.

EMILY LEVINE: But I find something so much deeper here wrong, and that is I don't think... And I think both parties have been so complicit in creating this situation where people don't believe in government, they don't believe in the government as an institution that's going to make their lives better, that's going to create the kinds of changes, address the kinds of issues that they have.

I think in the bubble of the late 1990s and 2000, suddenly everybody was encouraged to believe in the economy, that if you bought into this new economy and you bought into... Yes, the economy was going to address all these problems.

And then suddenly the economy bottomed out, and now we're left as a country not even knowing what to believe in, as that.

RUBEN NAVARRETTE JR.: There must have been an interesting time in America where the Democrats had all the ideas. The Republicans had nothing. Now it's reversed.


Ruben Navarrette Jr.: Now the Republicans have the ideas objectionable though they maybe in some cases. Democrats have been reduced to saying me too.

MOYERS: I know you as a writer who takes ideas and turns them into compelling one-woman shows.

EMILY LEVINE: I have to tell you recently in developing the material I'm working on now I was pulling out some articles that were written in 1998, and I was not a big Bill Clinton fan.

But I'm reading these articles and the lead article of each of the lead paragraph of each of these articles says something like, "the Clinton administration is grappling with the idea that such-and-such might affect the way we think about..." And you know, it was every one of them was an idea, and I felt such a sense of loss...

MICHAEL LIND: George W. Bush is the most idea driven conviction politician, to use Margaret Thatcher's phrase, since Reagan.

To his credit, I think he campaigned on the issue of Social Security privatization. Everybody said that was the third rail, you could never talk about that. Whether you agree with it or not, I thought it took a certain amount of courage to raise that.

If you look at the foreign policy, you know, this proposed unilateral American grand strategy... This is the most creative, dynamic, possibly erroneous and harmful, but we can debate about this. But this administration, I think, has got lots of ideas.

EMILY LEVINE: Excuse me, I think there's a difference between ideas and ideology, and the actual facts don't change...

JEAN BETHKE ELSHTAIN: The national security document, which you've read it, I'm sure, I've read it. It's a very interesting document.

MOYERS: That is the new...

JEAN BETHKE ELSHTAIN: Yes, the new national security strategy...

MOYERS: The new vision for America and for the world.

JEAN BETHKE ELSHTAIN: And it's an attempt, at least after years of drift as far as foreign policy is concerned, the post Cold War years, to trying to think of what ideas should guide American foreign policy in a vastly changed world since 1989.

And it's not a narrow ideology at all. I mean, you know, the strategy should be in favor of freedom. But the freedom has to do with the importance of constitutional democracy and so on.

EMILY LEVINE: I think it's about the freedom to make money. I think that's what the word freedom has come to mean.

JEAN BETHKE ELSHTAIN: I don't think that's fair. I mean, you really do have some very interesting people like Condoleeza Rice, who has, as you know, a Ph.D. In international relations, and others who are idea driven. Again, you may disagree with the ideas, but it's not about money and...

KEVIN PHILLIPS: I just don't know how you define freedom.

EMILY LEVINE: How do you build a coalition around a document that says it doesn't believe in coalitions.

JEAN BETHKE ELSHTAIN: It doesn't say that.

MOYERS: He knows what he wants to do.

RUBEN NAVARRETTE JR.: I think both camps are right. You can live in a congressional district in middle America where you look around and say, gee, there's no ideas. And the reason is simple: ideas are dangerous.

Ideas are dangerous because ideas might offend people, and offended voters might not vote for me. So I have no interest in putting ideas on the table.

Now, that's fair enough, but Michael's also right about George Bush, because having the benefit of a 60%-65% approval rating means you can throw out ideas, up into and including-- catch this one-- amnesty for illegal immigrants.

It's not just the radical Latino left who's talking about that, it's George Bush who's talking about it, and didn't stop talking about it even after 9/11.

MICHAEL LIND: I should point out that another one of the ideas of this conviction politician is channeling government funds to faith-based institutions which is a massive welfare program of taxpayer revenues channeled to particular churches.

MOYERS: The first 500,000 with Pat Robertson's operation in Virginia.

KEVIN PHILLIPS: Are we surprised?

MICHAEL LIND: What I'm hearing is there haven't been any liberal dynamic liberal ideas for 20 or 30 years. I can list four or five dynamic conservative ideas: vouchers, faith-based choice, unilateral global strategy. So it seems to me that we can't complain about an absence of ideas. There's an absence of centrist and left ideas. There are lots of right wing ideas out there.

EMILY LEVINE: I'll go out on a limb here because that's where I'm most comfortable. Without talking about class, I mean, Republicans and Democrats alike in government tend to belong to a certain economic class.

And defending the interests of those classes... Of that class comes before anything else.

MOYERS: You know, do you think it really matters... Do you think it really matters to our democracy that the 13,000 richest Americans have almost as much income as the 20 million poorest?

EMILY LEVINE: Yes. Sorry if I seem to be in the minority, but I think it makes an enormous difference, because when you have all the money you also own the media, for instance.

MOYERS: In WEALTH AND DEMOCRACY, Kevin Phillips has written that we are the most polarized and unequal society of any of the major industrial nations.

Would that explain this? The minimum wage is lower adjusted for inflation than it was in 1979. Middle class is shrinking. Wealth at the top is soaring. It seems to me that some party, some candidates could mobilize all the disenfranchised voters that you're talking about. Why aren't they?

KEVIN PHILLIPS: The big reason I think at the present time is that you have two parties that represent different branches and layers of American money. But you have the Republicans represent a lot of defense, agribusiness, old line manufacturing, the sort of physical production crowd.

You have Democrats really are the pre-dominant party among the people in the entertainment business, the media, a lot of high tech. And for people who think the Republicans really have all the money, if you went back in early 2000 and looked at the capitalization, market capital of the different industries, it was Democratic money.

And it was a Democratic president in there whose bubble was breaking. So this should be confused at this point. The problem is the American people are paying for the confusion.

MOYERS: There is no third party, no candidate in either party or outside the party who can mobilize this great discontent that you're talking about.

RICHARD BROOKHISER: When has this not been so? I mean, come on, you used to have tenant farmers of wealthy landowners who told them how to vote.

I mean, one description, Robert Livingston, drove his tenants to the polls like sheep.

And these were not slaves; these were free, but they were tenant farmers. You know, the word came down from the manor house. You know, it's happened one way or another throughout our history. I don't see that this is news. Maybe it's bad, but it's not news.

MANNING MARABLE: This is before universal education, this is before mass media. So we're in a very different time.

I think that one of the reasons that it's so difficult is that again, the electoral system does not encourage a multiplicity of political voices.

Another reason is because of widespread disfranchisement. Now, perhaps it's because I'm an we're talking about millions and millions of working class and low income people regardless of race who have been relegated to the political side lines in part because of things like felony restriction. Another reason is because they feel that the plutocracy does not speak to them.

MOYERS: What do you think about the statement that we have an illegitimate system right now in which a minority of wealthy people can determine not only who wins but who runs. How can you call that a legitimate system?

MICHAEL LIND: There is a crisis of legitimacy in our democracy. If you look from the 1960s until the present, the number of people who call themselves Independents, who don't like the Democrats, don't like the Republicans, has risen from effectively zero to about one-third of the population.

Some polls in one 2000 poll 50% said they were not Democrats or Republicans.

Now what is the difference between 1960 and the present? The parties have become much more polarized and ideologically homogeneous.

Right now the leaders of the parties by the time the people who are selected to lead the parties tend to be the most liberal liberals and the most conservative conservatives.

I think that's one of the problems that people are looking for some alternative to teacher union, plaintiffs attorneys, environmental movement liberalism on the one hand and religious right conservatism on another.

There used to be alternatives within the Republican and Democratic parties. There are not now.

JEAN BETHKE ELSHTAIN: It is a very interesting fact that people, when asked about the overall system, do fret about the kind of corruption you've been talking about. Do they like their own local representative, their own congress person? Most of the time they do. They think they're doing a pretty good job.

They think, you know, that's kind of fine. This perhaps is an exception, but we sort of like this guy or this gal. We think they're doing okay. It's not just one, you know, this is a multi-layered, very, very complicated system.

I think that the term illegitimate is a very powerful term and must be used with a bit of caution.

MANNING MARABLE: I think that there really is a crisis of legitimacy in the way one can measure it is along the lines of who feels that... Who participates within the electoral political process? I can tell you that if in 1984 blacks, Hispanics, low-income people and blue-collar workers had voted in commensurate numbers with people who earned over $50,000 a year, Walter Mondale would have been elected.

Some people would say that's a bad thing. Maybe it was a good thing. But we have to figure out a way to make democracy healthy again. We have to build structures of accountability, of reciprocity within a vibrant civil society. The real way to change American politics probably is not at the top down but the bottom up.

We have to figure out a way to do two things: build citizenship, build notions of civic engagement at the grass roots level. That's going to be independent of both political parties largely.

The second thing that we have to do is find ways to change the rules of the electoral game. This is not pie in the sky. You're already beginning to see this happen at the grass roots level.

MICHAEL LIND: But, no, the changing the electoral system has to be a top down because one of the reasons the two parties have this duopoly is 50 state legislatures control who gets a district drawn for the U.S. House of Representatives.

Under the U.S. Constitution Congress has the residual power to take redistricting out of the hands of the 50 states, the Democratic or Republican majority, to do it along some more less non-partisan way.

I think we ought to nationalize these electoral rules. We ought to break down all of these residency requirements, the 50 different regimes for who can vote in a presidential election, have a single national standard.

MANNING MARABLE: I would agree with that except that I think that in getting democratic change, people have to see tangible results around and Saul Alinsky learned this a long time ago.

MOYERS: The organizer.

MANNING MARABLE: That's right. First thing you have to do as an organizer is put the stop sign on the corner where the kids cross the street. You've got to win reforms one brick at a time.

JEAN BETHKE ELSHTAIN: The slogan is don't do for people what they can do for themselves. You're back to the civil society model. That's the slogan of that organizer.

MICHAEL LIND: The civil rights revolution in this country was not won one city one state at a time. It was federal power.

RUBEN NAVARRETTE JR.: If you want to take Saul Alinsky. The modern manifestation is occurring right now in 20 or 30 different American cities through things like Victory Outreach that are targeting the Hispanic community.

JEAN BETHKE ELSHTAIN: Texas Inter-faith Coalition.

RUBEN NAVARRETTE JR.: Texas Inter-faith Coalition. The immigrant community. One quick example. People got fed up with teachers unions controlling the public education discourse. They didn't go to the normal P.T.A. meetings because P.T.A. was saying we can't get enough minorities. PTA is a mostly white group. They can't get minorities.

What happens? It comes from the ground rises from the ground in places like Phoenix and Dallas Latino immigrant PTAs, immigrant PTAs. So there's this whole game going on.

If I read the NEW YORK TIMES everyday and I do and if I read the WASHINGTON POST and watch all these other networks and I watch PBS there's still part of the game I'm missing.

What's going on out there that we're not always hearing about is happening at the grass roots level.

JEAN BETHKE ELSHTAIN: That's exactly right.

RUBEN NAVARRETTE JR.: In this case because of immigrant PTAs that are popping up and challenging the educational system.

I refer to it as a Clinton paradigm because Bill Clinton was in one respect the most racially progressive president we had in a while and on the other hand one of the most backward presidents.

Every television he ever sat in was black and white. That's his paradigm. The problem with that is that obviously with the growth in the Asian community, the growth in the Hispanic population across the country that no longer applies. That will make the game a lot more interesting.

I'm of the opinion that the immigration... Immigration has been typically a very good thing because it revitalizes the American spirit.

People all of a sudden have respect for the law, they send their kid to school and pay taxes and they aspire to something better.

EMILY LEVINE: We're in an either/or thing here. The fact is it needs to be from the bottom up and the top down. You don't reject out of hand any attempt to have it happen from whichever direction it's coming.

MOYERS: The story goes on but our time does not. I want to thank each of you for being here. This has been a very enlightening and interesting discussion to me. I hope to see you at the polls next Tuesday.

MOYERS: Over and over again the refrain. Democracy carries a price tag that only the wealthy can afford.

I reported this story so often as a journalist that I was beginning to be as cynical as the insiders I was covering, beginning to think that maybe nothing could be done.

But journalists are also citizens and I wanted to do something about the decline of democracy instead of just report it.

With the Florence and John Schuman Foundation I've supported efforts to create a more level playing field including the public funding of campaigns.

At least four states have now become laboratories for the novel idea that if anyone should own the politicians, the people should. This idea is a work in progress.

And with the disclaimer that I want to see it succeed here's a report produced by NOW's Greg Henry on how it's playing out in one Western state.

MOYERS: Arizona. Over the last 14 years this state has seen the impeachment of one governor..the resignation of a second on counts of bank and wire fraud... and the indictment of 20 state legislators and lobbyists on bribery charges. So it's no wonder the people in the Grand Canyon State got fed up with money in politics.

CECILIA MARTINEZ: Arizona has been laden with political scandals and impeached governors and governors resigning. Legislative scandals with briberies. So the political climate was really ready for some reform. For some real reform.

MOYERS: That reform came in a statewide vote four years ago when Arizona's voters approved the Citizens Clean Elections Act.

The act provides qualifying candidates with public funding for their campaigns. One of those candidates is Republican Marc Spitzer. At first, he opposed the reform

MARC SPITZER: It was on the ballot in 1998, November. And I voted no. And I thought to myself, you know, what they're trying to do is take--politics out of politics and that just doesn't work. It's like trying to take the--the bubbles out of champagne.

MOYERS: But two years later, Spitzer changed his mind. He was running for Arizona's powerful Corporation Commission which oversees all utilities for the state.

MARC SPITZER: I'm running for an office that is very powerful in the state, that regulates the utilities. Does it make sense for me to go hat in hand to those utility companies to ask for campaign contributions and then if I win the election turn around and--and vote on their rate cases. Most people thought that --that didn't make sense.

MOYERS: Spitzer had served four terms in the state Senate. And learned what it takes to raise money from special interests.

MARC SPITZER: Typical campaigns you spend an awful lot of time dialing for dollars. You're on the phone, you're calling people and you're asking for money.

MOYERS: Public funding changes all that.

MARC SPITZER Under Clean Elections once you raise the requisite number of five-dollar contributions, the fundraising is over. And you can spend all your time communicating with the people.

MOYERS: Here's how it works. Candidates must first get the usual signatures for a nominating petition. Then they must show they have support from citizens who will give five dollar donations to the campaign. Two hundred five dollar donations for a local race. Four thousand if it's a race for governor.

In return, if the candidate agrees to strict spending limits and agrees to take part in public debates the remaining cost of the campaign comes from the Clean Election Fund.

Candidates for the state legislature get about twenty-five thousand dollars. Candidates for governor, about one million.

CECILIA MARTINEZ It's money that's not tied to special interest and it's not tied to a political action committee.

MOYERS: Cecilia Martinez runs The Clean Elections Institute in Phoenix.

CECILIA MARTINEZ: We ask the question who should own our government officials? Who should own our politicians? The folks with big bucks, the special interest groups that want to run the show at the state legislature or the people?

MOYERS: The money now comes from the initial five dollar contributions, from citizens who voluntarily give through their tax returns and a 10 percent surcharge on criminal fines and traffic tickets.

MARC SPITZER: Under Clean Elections you've got five million people that can participate. And I mean I raised in my little race with the Corporation Commission over 2300 five-dollar campaign contributions from ordinary citizens, many of whom had never been involved in politics before, the majority of whom had never--contributed to campaigns. And they found it exciting and--exhilarating that all of a sudden it was no longer the s--the small closed group of folks who were involved.

MOYERS: Candidates don't have to take public funding. If they don't, they can raise and spend as much as they want. But their clean elections opponent will get matching funds up to a point to keep the race competitive.

CECILIA MARTINEZ: What we're seeing in Arizona is the decline of the big money candidate. In 1998, overwhelming majority of the races, in fact 80 percent of the races, were won by the big money candidate. The candidate with the big bucks won their race. In our primary in 2002 we found that that was the case in only three percent of the races.

MOYERS: And that has a lot of the old guard scared. Public funding was controversial to begin with. While advocates circulated petitions to get the initiative on the ballot, business groups fought it. And it barely passed at the polls — 51-49.

The Clean Election Act's been under attack ever since from people like Republican Steve May.

STEVE MAY: I think it is wrong for an individual running for public office to take money from the government to express their viewpoint. I think we have a long tradition in America that if you want to express your viewpoint, you do so with your own money or the money from those who support you. And not through compelled funds that who taken from people who don't know who you are or who outright oppose your ideas.

MOYERS: Two years ago, May won his race for the state legislature raising money the old fashioned way. This year in his race for re-election, he finished third in the primaries behind one candidate who was publicly funded and one who wasn't.

But it was a parking ticket he got in 1999 that really galled Steve May. He didn't like that 10 percent surcharge that went to the Clean Election Fund. When he filed suit to challenge it he had some powerful legal support from one of the top conservative lawyers in the country.

CLINT BOLICK: The architects of this program were very clever, and they called it the Clean Elections Act. But in my view the least clean type of election is an election in which the candidates are running with money that's taken from people against their will.

MOYERS: Clint Bolick heads the Institute for Justice, a Libertarian public interest law firm based in Washington, DC. It's well known for advocating school voucher programs, for opposing affirmative action and for taking conservative challenges to government all the way to the Supreme Court.

Arguing that the 10 percent surcharge on fines is government coercion and unconstitutional, Bolick has mounted a sustained assault on the Clean Elections Act.

CLINT BOLICK: Our argument is that it violates the individual's First Amendment rights, the right to either speak or to not speak, to force people to contribute to political candidates against their will.

MOYERS: This summer, a state appeals court unanimously found in Bolick's favor. The decision came down at the same time the supporters of public funding came up with a heavyweight advocate of their own...Arizona Senator John McCain.

With the help of the liberal Brennan Center for Justice, the case was appealed to the Arizona Supreme Court. Last month, in a unanimous 5-0 decision, the court upheld The Clean Elections Act.

Clint Bolick has vowed to appeal all the way to the U.S. Supreme Court.

CLINT BOLICK: Once you introduce the government into funding candidates, then the government decides who gets the funding and how much. And that to me is a very, very scary power for government to have.

MOYERS: Meanwhile, it's estimated that more than 90,000 Arizonans have made five dollar contributions to help their candidates qualify for public funding.

Over half of the 247 candidates for state and local offices are running with clean elections money. Clint Bolick says many of them don't belong there.

CLINT BOLICK: The marketplace ought to decide who the viable candidates are, rather than the government. And right now the government is subsidizing all sorts of people who will never win an election because they're so extreme.

CECILIA MARTINEZ: Four thousand five-dollar forms are not easy to acquire in this state. So the candidates that have qualified for the Clean Elections money did so because they had grassroots support. People had to put them on the ballot.

MARC SPITZER: Clean Elections is not a panacea. It will not cure cancer. It will not transform the Arizona legislature into 90 Winston Churchills.

MOYERS: But, says Marc Spitzer, it will reduce the influence of money over public policy.

MARC SPITZER: There will always be lobbyists, and there should be lobbyists, because in the best sense what lobbyists do is provide information to elected officials.

I just think lobbyists can provide that information to elected officials without raising thousands of dollars for political campaigns.

MOYERS: This Tuesday, Arizona could be the first state to elect publicly funded candidates to all of its statewide offices.

CECILIA MARTINEZ: Arizona will make history, national history this year by electing a statewide Secretary of State -- a clean money Secretary of State, a clean money Attorney General, a clean money State Treasurer, a clean money Mine Inspector and Corporation Commission.

MOYERS: But for opponents, the fight isn't over.

CLINT BOLICK: This program will not be around in a few years, in my view. It will either be struck down by the U.S. Supreme Court where we are seeking to take this case right now, or it will be repealed by the voters in an initiative.

MARC SPITZER: Clean Elections gives a challenger that the lobbyist will not support a chance to mount a campaign, to get out a message, whether it's a Republican or a Democrat, and run for office. And to me that's--that's as American as apple pie, having voters have a choice.

ANNOUNCER: Next week on NOW: is the nation's largest private employer cheating its workers?

WORKER: A lot of times they would come in and just erase your hours.

ANNOUNCER: THE NEW YORK TIMES and NOW investigate allegations against Wal-Mart.

Coming up on NPR radio....

STEVE INSKEEP: I'm Steve Inskeep. Join me on the radio for my first weekend on NPR's All Things Considered.

Also the hard rock music of ACDC as played by a bluegrass band. Picking up a fiddle on the highway to hell.

Find your public radio station on our web site,

MOYERS: That's it for this week.

You can find out more about what's happening with election reform in Arizona and other states, as well as the pros and cons of publicly funded campaigns on

You'll also find plenty of other things to consider before next week's elections.

For NOW, I'm Bill Moyers.

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