December 27, 2002

Announcer: From our nation's capital, this is WASHINGTON WEEK, and now here's moderator Gwen Ifill.

GWEN IFILL, host:

The year in review: politics, foreign policy, law and the economy; 12 months that put America on a new course.

In foreign affairs, the president faces war and rumors of war in Saddam Hussein's Iraq, in Kim Jong Il's North Korea and in the continuing war on terrorism.

The economy--corporate scandals shake our faith in big business. While more people lose jobs, entire industries struggle and holiday spending slows.

On the legal front, new powers for the FBI and the CIA, but what rights are we giving up?

And on politics, the Republicans triumph in the midterm elections, but stumble over the Trent Lott affair. Will Democrats regain their footing in time for 2004?

We take a look at a remarkable year with the reporters who've been covering it: Michael Duffy of Time magazine, Jeanne Cummings of The Wall Street Journal, Richard Berke of The New York Times and Joan Biskupic of USA Today.

(Announcements)

Announcer: Here again is moderator Gwen Ifill.

IFILL: Good evening.

Analysis: Year in review on US foreign policy

When we started thinking about this year-end show a couple of weeks ago, we quickly realized we ha--we'd have a lot more to say than time to say it in. So we tried to boil down the events of a remarkable year into four major areas: foreign policy, the economy, domestic politics and the law. Perhaps the most daunting challenges occurred on the foreign policy front. In Iraq, UN weapons inspections are once again under way, but deadlines loom.

On the Korean Peninsula, nuclear saber-rattling has reached a new pitch.

And in Afghanistan, the hunt for Osama bin Laden continues.

And lest we forget, US policy is now this: We should be prepared to strike first.

President GEORGE W. BUSH: (From June 1) We must take the battle to the enemy, disrupt his plans and confront the worst threats before they emerge.

Mr. MICHAEL DUFFY (Time Magazine): Well, you would think that Korea would be an ideal place to test out a doctrine that said, you know, `We're going to pre-emptively go after places that are creating weapons of mass destruction.'

IFILL: Which is what the president was just saying there.

Mr. DUFFY: Exactly what seems to be happening in North Korea, since it's decided to refuel its nuclear reactors, has thrown out the weapons inspectors and has actually torn the cameras that were doing some of the monitoring off the wall. That's all happened in the last four or five days. But I think if you--a close reading of President Bush's policy of pre-emption has a little star next to it, and the star--if you look down at the bottom, it says, `Except in cases where it's on a peninsula with 20 million people who are our allies and there are 37,000 Americans stationed there as well.'

Korea--North Korea is not a place at the moment where the president is willing to test his doctrine of--of pre-emptive strikes against rogue states or other forces that are trying to create, you know, weapons of mass destruction. He's doing it elsewhere in the globe, but not this moment on Korea, and--and there are a couple of reasons why.

First of all, the--the Koreans have done this before--North Korea has done this before. This is a--an isolated regime. It's--it's--it's starving. They--they have a time-tested technique of--of s--of--of doing things to try and take--move things right to the edge of a crisis, and it's happening right when South Korea has elected a new government; it's lame duck. Their new president doesn't have any foreign policy experience, and George Bush is about to go to war 10,000 miles away. So this is their way of saying, sort of like Glenn Close in "Fatal Attraction," `I will not be ignored.'

The--the White House's reaction, for the first time, was to pretty much--two--two steps. First off, Donald Rumsfeld came out and said, `Don't think we can't wage two wars at once, North Korea.'

IFILL: Which I thought was a remarkable thing to say.

Mr. DUFFY: He ha--I--I don't think they could let Korea--North Korea, you know, say, `We're going to create the--the nuclear fuel for five or six bombs,' and just say, `OK, fine.' We had to say something. But just because Rumsfeld says it doesn't mean that's our--now our new strategic posture. Today I talked to some officials who said, `Look, we're not trying to do anything more to create a crisis out of this.' And most people who have worked with the North Koreans before will say we've got to get back to a place where we can have some kind of negotiation with them, even though it's very important that we not call it a negotiation, since they don't want to, as Bush says over and over, `reward bad behavior.'

IFILL: Mm-hmm.

Ms. JEANNE CUMMINGS (The Wall Street Journal): Michael, what's striking is that the White House seems to--is--it--they seem to be framing this as, you know, it's a--our allies vs. North Korea, and so China, Japan, South Korea, Russia, you know, all of these other nations will come bring pressure to bear. Which one of them really can, and which one of them might step up to the plate right now?

Mr. DUFFY: It's a great question. When North Korea first announced a couple of months ago that they had abrogated the 1994 accord, the administration said, `We're not going to deal with this militarily. We're going to use our allies, we're going to get together.' And, of course, over the last couple of weeks, not much of that has happened. That's apparently because we have a real disagreement with those allies about how to engage North Korea. South Korea in particular, but also Japan and, to some extent, China feel that the best way to do this is like--they think you should pre-emptively build bridges to this country; that this is not someone you can sort of bully back into good behavior; that the more you kick them, the harder the North Koreans kick back. So they have not agreed with the Bush accords, which is to simply, as if you were parenting a child, you know, `Send him to his room, and--and don't come out until you've reformed.'

IFILL: Tough love.

Mr. DUFFY: So there's a real disagreement about how to deal with this, and I'm not sure those two parties will ever come to--to--to--to a consensus on it.

Ms. JOAN BISKUPIC (USA Today): Well, and, Michael, it comes at a time when we've also got the inspections going on in Iraq over the nuclear weapons. And where are we at with that? 'Cause aren't we at--midway through that and that should be culminating?

Mr. DUFFY: Today.

Ms. BISKUPIC: Yeah.

Mr. DUFFY: Today is the midway point; it's--the 27th of November's when they started, and the 27th of January is when we have the real first progress report. So today is the midpoint. And you can see two things are going on. On the one hand, the UN is--is running its inspections. They seem to be going cooperatively, but nobody really knows whether we're getting anything like the real story. The documents that the Iraqis handed over were far from compl--incom--far from complete.

And you can also see the United States, basically, mounting a regime of its own. Even as the UN thing goes forward, you have seen, over the last couple of weeks, United States create a second sort of track, which is all about scientists. It's all about whether the people who were running the Iraqi nuclear program will be able to come out of the country, maybe come out forever, maybe come out with their families, and actually spill the beans on what's going on. Today, for the first time, the Iraqis said, `Yes, you may have access to them. In fact, they may leave the country. But we really don't think they should.'

So all of--if you were going to pay attention in the final--or second 30 days here, and I think these are going to matter a lot, you have to keep your eye on how the--the sort of hunt for the scientists goes, 'cause that's where the US is going to make its stand in--in--at--at the end of January.

Mr. RICHARD BERKE (The New York Times): Michael, o--on Korea, how much of a crisis is Korea right now in your--in your view? And, also, what happened to Afghanistan and the terror war, and where does that all fit into this?

Mr. DUFFY: I think--I think it's--I think since we're summing up a little bit, we should think of Korea as a challenge, not a crisis, and--and--and they will work through this toward negotiations i--in some form, as soon as they can find a face-saving way for both the hard-liners on our side and their side to get it.

On Afghanistan, a year and a half after our first--you know, our first action there, the country is divided into many factions. We have moved into active nation-building. But Osama bin Laden is still at large.

IFILL: Which has gone largely unremarked upon, oddly enough.

Analysis: Year in review on the US economy

Well, bad news hit our pockets--our pocketbooks this year, too. People we'd never heard of, from corporations we'd never paid attention to, were led away in handcuffs. The economy and the stock market continued to slide. And in a sure sign that the worrying went all the way to the top, the president fired his economic team: Treasury Secretary Paul O'Neill, economic adviser Larry Lindsey and Securities and Exchange Chief Harvey Pitt.

They're taking all this very seriously at the White House, aren't they, Jeanne?

Ms. JEANNE CUMMINGS (The Wall Street Journal): They certainly are, and the reason for it is simple. This is now Bush's economy. And for the last two years, they blamed Clinton for a while, then they blamed 9/11 for a while and then corporate greed. But they know now, as they move to the 2004 re-election, that the voters in two years are either going to credit or blame this president for the state of the economy.

Now the big story this year, when it comes to the economy--one of the biggest ones--was, really, the corporate governance issue because the summer of scandal really changed the way retirees, workers, investors and the government all view big business and how they interact. And these are permanent changes that will affect our economy in years to come: legislation that the auditing community have fought forever passed through Congress; a--a White House that was anti-regulation, pro-free market embraced the most aggressive government-driven reforms. So that had a big, lasting impact on the economy.

As the White House looks forward now, they have two competing priorities that aren't necessarily compatible. First, they want a robust, sustainable economic recovery. Secondly, they may go to war. These two things don't work. Right now, the economic indicators suggest that major corporations aren't investing as greatly as they would, in part, because they don't know if we're going to war again. So that--they have to find a way to balance those two things, and it's a terrific challenge.

IFILL: Do the corporate scandals that--do you--it was the summer of scandal we were preoccupied with. Did it obscure, to the White House's benefit in many ways, the depth to which the economy had sunk?

Ms. CUMMINGS: It certainly did. It--what it did--the economy has been sort of weak and murky and soft and up and down all through the year, but this whole notion of corporate greed--'cause, sort of, it was easy for people to capture--to capture their attention, for them to get their heads around, `Oh, well, it's these bad guys, and that's why I'm suffering.' And it did give the White House some breathing room right through the midterm elections. No polls showed that the voters blamed the White House for what was going on with the economy; they blamed the war and corporate greed. And that's why you saw the White House, after the midterm elections, move as quick as they could to try to start putting some new solutions in place.

Mr. RICHARD BERKE (The New York Times): Could you...

Ms. JOAN BISKUPIC (USA Today): Can the White House--can the White House do anything for the states at this point? We've become much more aware of how bad the state budgets are. You know, you've got several states out West, including Oregon, going to four-day school weeks. You've got plants closing throughout Illinois. I've--it--we seem to be in a real low out there, with s--state governments having so little money, and yet more unfunded mo--mandates from Washington. Is Bush going to do anything to sort of reassure the states at this time?

Ms. CUMMINGS: Well, there's a lot of debate, and this tension between the states and the White House is something that we should definitely keep an eye on as we move through the year. And here's a good example. The White House is very concerned about the fact that today or in the next week or so, a lot of people are going to lose their unemployment benefits because the White--Congress failed to extend them before they left. So this would create a gap where people, for the next month or two, would have no money, and, you know, these people live paycheck to paycheck. And the compassionate White House is not real pleased with this. This doesn't work into their game plan. They're asking the states to, `Go ahead and pick up the dime, and we'll pay you back later.' And, you know, the response of many states is, `Yeah, right.'

IFILL: `If we had the dimes...'

Ms. CUMMINGS: `OK. We don't have it.' Right, right.

IFILL: `...we wouldn't be having this discussion.'

Mr. BERKE: Jeanne, we're hearing different details about pu--about the Bush economic plan like cutting the tax on dividends and so forth. Little pieces of it are coming out. How is it shaping up, number one? And, also, how is this turnover, with O'Neill gone, slowing things down, or is it slowing things down?

Ms. CUMMINGS: It's--right. The turnover is not slowing anything down. They changed personalities; they didn't change policies. If you look at John Snow, the CSX CEO, and you look at Paul O'Neill, people say the big difference between them is John Shnow--John Snow is better on a leash than Paul O'Neill ever was. He's a good communicator; he'll stay on message.

In terms of the policies, it's interesting because even in this case, the influence of the war is having an effect. The White House wants to get this through quickly before there is a war, if there's going to be a war. That means they've got to s--they may have to scale back their original plans to develop a package that's more acceptable to some Democrats because they want to get it either passed or moving through Congress very quickly in the year. So right now, for example, they--they may--they've talked about accelerating tax-rate reductions; they'll do it for the lower- and moderate-level brackets, not the high-income brackets because the Dems will never go along with that.

Mr. MICHAEL DUFFY (Time Magazine): Isn't it possible the White House could see a way to bridge the war and the economy? If--if there's a quick war, one that happens very quickly and that the US is successful in, it could not only boost confidence generally in the country, but also, in this case since it's with Iraq, result in a lowering of the price of oil? I mean, it--there--this has happened before; that there--this can--this can work to the economy's benefit. And, of course, it's a big st--stimulus.

Ms. CUMMINGS: Well, certainly, the biggest benefit of hav--either having this war or doing it quickly and succeeding is that it would remove the shadow, and then the economy could then either chug along or, you know, head off and recover with more sustainable--we could have a more sustainable recovery because that no longer is an issue.

IFILL: Which, of course, is an issue in politics.

Analysis: Year in review on US politics

GWEN IFILL, host: Of course, politics--what a political year it was. The Republicans regained control of the Senate, solidified their grip on the House and passed politically important homeland security legislation. But then a stumble: Trent Lott tripped up over a racially insensitive remark and tossed overboard by his colleagues, even as presidential--Democratic presidential hopefuls begin competing to take on a popular president in thu--2004. Now speaking of that popular president, Rick Berke, he had a pretty good year, all in all.

Mr. RICHARD BERKE (The New York Times): Gwen, he had a great year. He had such a good year that I would be nervous if--if I worked in the White House right now because things don't get this good and they don't stay this good for a long time.

IFILL: Yeah.

Mr. BERKE: And because of what we were talking about with the war and the economy, these things loom out in the--in--in the not-so-distant future, and there's real problems, po--potentially ahead. But let's go over what happened this year and how--how, really, the president has--has ended the year in, really, a commanding political position.

First, he swept the elections; won back the Senate, number one. Number two, he's in a quite commanding, impressive po--position in the polls. And presidents usually don't get that kind of high altitude for a long time. Notwithstanding the Lott situation, he--he managed--Bush managed to get out of it in a clean way and quietly engineered the--the replacement of his friend--of Lott with his friend, Bill Frist, who is much closer to the president than--than Lott ever was. And don't think this all happened by accident.

IFILL: That's what I was going to ask.

Mr. BERKE: I mean...

IFILL: Is this a grand design, or was...

Mr. BERKE: I mean...

IFILL: ...he just a lucky guy?

Mr. BERKE: A lot--it's kind of a mixture, but I have to--I think you have to give the White House and the president a lot of credit. Around this time a year ago, Karl Rove, the president's chief political adviser, was helping plot out a strategy for how they would approach the midterm elections, and part of that strategy was to really be on the offensive more than any other president we've seen, even more than Bill Clinton, and inject himself in these primaries, pick certain candidates they wanted for the--to run in Senate races and in House races, recruiting candidates. That was all done very carefully. And some Republicans had warned the White House, `Don't overreach. You'd better be careful.' But they did it, and the--the plan worked.

Another thing that was very successful with this president, they put out a lot of brush fires. Let me--let's think back to a year ago. When you talk about the corporate scandals, think about Enron. Last January, people were saying--I looked at a poll from a year ago that said, you know, `This could threaten the Republican Party and the president. It's a real problem in the midterm elections.' And look what happened. The president proposed his own--his own corporate responsibility legislation to sort of get tough with the--the corporations, and that issue kind of faded away, and it hasn't loomed at all. Who--do you even remember Enron now, at this point? It seems like such a long time ago.

Now the other thing that happened around the same time a year ago was Karl Rove, in Austin, spoke at a Republican Party convention and said, `We're going to make the--you know, the war could be a winning issue for us in November.' And Republicans said, `Oh, my gosh, he shouldn't have gone out on a limb and politicized the war on terror.' And Democrats were condemning him for saying that. But that's just what happened. That was just their strategy, and it paid dividends in November.

Ms. JOAN BISKUPIC (USA Today): Well, now, Rick, can the Democrats do the same thing with the war? I've noticed the Democratic candidates for president in 2004, the potential Democratic candidates, are all talking about national security issues, they're talking--they're starting to be much more aggressive about what they think about a potential war with Iraq. Are the Democrats doing some catch-up here with an eye toward 2004, given how popular Bush has been with these stands?

Mr. BERKE: Well, I think they see a real opportunity. We have several presidential candidates in the next few weeks coming out and beginning to announce or--or signal their intentions to run for president, and they're not shy about raising the war on terror and all that because they see that as an opening, a vulnerability of this president. Number one, anything could happen on all these fronts that you talked about, and they see if there's some kind of disaster, they can just seize right on it, they can make the point that, `No, Osama is still running--running around somewhere.' We haven't--we have t--officials in this administration who've admitted that--that Americans are really no safer than they were a year or so ago. So there's--there's a--there is a real sense of vulnerability.

Mr. MICHAEL DUFFY (Time Magazine): We've seen Bush be aggressive in the first cycle, and we know that he is not going to repeat his father's mistake of sitting on his lead and doing nothing, the way th--that did his father in. What can we expect, particularly with re--vis-a-vis Congress from Bush in this second half of the first--well, of this term?

Mr. BERKE: Well--well, I think...

Mr. DUFFY: What can we expect?

Mr. BERKE: ...the--the beauty of the Frist situation is here he has a friend now running the Senate. And Lott--he and Lott were not very close. The trouble with this, though, is no matter how close he is to the new Senate leader, that the majori--the margins are so thin that--that no one can really hold sway over Congress. And he's going to have to work closely with Congress, and the Lott situation does complicate things for the president because it exposed questions about the Republicans' civil rights record. And the president is going to have to be careful to reach out to minorities, while satisfying the right wing that he needs in the re-election campaign.

IFILL: Time for a quick question and answer, if you've got one.

Ms. JEANNE CUMMINGS (The Wall Street Journal): Well, that was my question. I wondered if there'd be lingering problems with Lott--the whole Lott fiasco.

Mr. BERKE: I don't think that's going to go. I--they handled it beautifully, given the situation, but I don't think that's going to go away.

IFILL: OK.

Analysis: Year in review on civil liberties

GWEN IFILL, host: Finally, we revisit one of those stories that's been building gradually, as Americans come to grips with what it means to sacrifice liberty for security. Suspects are held in detention for months. Even some US citizens are denied access to legal counsel. And the courts begin to question what all this might do to the Constitution. It all began with the passage of a--of what was called the USA Patriot Act.

Remind us again, Joan, what the USA Patriot Act was.

Ms. JOAN BISKUPIC (USA Today): Sure, Gwen. It was passed virtually unanimously in October of 2001, and it's basically how the government can get lots more personal information on all of us. And the truth is it's not those of us at this table that the government is interested in, it's people, mostly of Middle Eastern descent, who are out in the United States where they can now go and have easier access to get wiretaps, to get into computer hard drives, to get into library records, university records. And then once they find a suspect, makes--the Patriot Act makes it easier to detain somebody, to keep somebody without charges.

So in a lot of different ways, it's an information-gathering law that's been on the books, and Congress has, you know--Congress passed it with great enthusiasm right after September 11th, and only in the middle of this year have there--we've seen some misgivings, where we've seen that, actually, the bad guys aren't getting caught; it isn't doing the trick the way the public is--is, you know, seeing some results. But at the same time, we're seeing, you know--about 1,200 people were detained after September 11th and kind of--and held in secret deportation hearings and then--then forced to leave the country. We've had lots of people who've, you know, wondered just where the wiretaps are being used, and we don't know because these things are done in secret. The ACLU and other civil libertarians have filed suit, trying to get information. You know, is the government actually using library records now more?

IFILL: Other than the ACLU and--and groups whose jobs it is...

Ms. BISKUPIC: Right.

IFILL: ...to--to keep an eye on this, isn't there any sign that Americans are particularly worried about this?

Ms. BISKUPIC: Well, there were two signs middle--in the middle of the year, and things changed a little bit around election time, especially with the talk of war with Iraq. We took a poll at the beg--in January, a year ago, that basically showed people saying, `Do whatever you need to do to secure this country. We don't care if it encroaches on civil liberties.' More Americans were saying that.

But then by the time you got to August and September, more people were saying, `Wait a minute, wait a minute,' because I think that, first of all, we hadn't had another incident, there was no proof that these things were actually paying off in a way that would sort of show why you needed to take these kinds of drastic steps, and a majority of Americans were saying, `Wait. Don't do these kinds of measures if they encroach on civil liberties.' At the same time, people in Congress were starting to say, `We need to have more oversight.' But then in October, as the focus became more, again, on war with Iraq and there was more talk about going to--increasing the code level of security in the country, attention kind of fell back.

Now you have had a movement out in some of the cities, where cities are ask--actually passing resolutions against the USA Patriot Act, and that's...

Ms. JEANNE CUMMINGS (The Wall Street Journal): Well, Joan, is there any evidence that the Supreme Court might become more aggressive in terms of--in terms of checking the government action?

Ms. BISKUPIC: Jeanne, right now, cases are working their way toward the Supreme Court. We've had several lower court actions. And one big deal came last August when a federal appeals court, the first federal appeals court to actually act on the administration's plan, actually struck down the--the blanket secret deportation hearings. And one of the judges writing in that case said, you know, `Secrecy is against the core principles of our democracy.' And these things are slowly working to the Supreme Court, which is narrowly--narrowly divided on a lot of these issues. Chief Justice Rehnquist has actually written about civil liberties, and he says during these kinds of times, civil liberties necessarily are viewed through another lens.

Mr. MICHAEL DUFFY (Time Magazine): Now we've had arrests in Buffalo and Detroit and Chicago and in Portland, cells--or, you know, what may be protocells or what may even be sleeper cells. It's--it's still not clear. But is there--is there evidence or is there no evidence that these new powers have made law enforcement better? I mean, what is--is it--is it possible to say that this has helped? Is it possible to say that it--do we know if it hasn't helped? Because I think most Americans might trade...

Ms. BISKUPIC: That's right, because it's always...

Mr. DUFFY: ...you know, might trade off if they see the arrests...

Ms. BISKUPIC: That's right. It--they're always tied together. These two values of civil liberties and freedom are al--are really always tied with national security, and we don't know. Law--the Bush administration, the Justice Department, is saying, `Yes, they have helped,' but we actually don't know for sure because this is not the kind of thing that it--they can make public in a lot of ways.

IFILL: It is--it is a matter of pre-emption, not only of foreign policy, but also Amer--on civil liberties. And with that little bow, we're going to have to tie it all up.

Sign-off: Washington Week

GWEN IFILL, host: It's been a full year. Thank you all for joining us. And we'll be covering most of these stories in the year ahead as well. We hope you'll keep joining us on Friday nights as we bring you the best reporting and analysis Washington has to offer. See you next year on WASHINGTON WEEK. From all of our staff and all of our panelists, we wish you a happy new year. Good night.

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