June 20, 2003

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

GWEN IFILL, host: Iran, Iraq, politics and the economy: they have more in common than you might think. Is Iran secretly developing nuclear weapons? They say no, but the US issues a stern warning as internal opposition within Iran builds.

Iraq: What's going on behind closed doors at the Senate Intelligence Committee? Are we any closer to discovering who really knew what about weapons programs before the war?

At home, the president is busy with re-election plans, raising millions of dollars and refining signature domestic issues, including Medicare and tax cuts.

But will the economy hurt or help? Interest rate cuts are expected next week, even as the so-called jobless recovery stutters.

Covering these stories this week: Doyle McManus of the Los Angeles Times, Michael Duffy of Time magazine, John Harwood of The Wall Street Journal and Jeffrey Birnbaum of Fortune magazine.

Announcer: Here again is moderator Gwen Ifill.

IFILL: Good evening.

Analysis: Possible future US action in Iran

GWEN IFILL, host: America's discomfort with Iran goes back more than two decades, back to the days of the hostage crisis and the 1979 revolution that overthrew the shah. Iran now also occupies a special place in American foreign policy. It is one-third of President Bush's declared axis of evil, and like North Korea, the US strongly suspects Iran is developing nuclear weapons. President Bush said this week he won't stand for it.

President GEORGE W. BUSH: (From Wednesday) Well, the international community must come together to make it very clear to Iran that we will not tolerate the construction of a nuclear weapon. Iran could be dangerous if they had a nuclear weapon.

IFILL: But why the concerns now, and what do they mean for future US action there? For that, we turn to Doyle McManus.

Mr. DOYLE McMANUS (Los Angeles Times): Gwen, the phrase that President Bush used, `We will not tolerate,' was a tough phrase, it was an escalation and it was deliberately chosen to send a signal not only to the Iranians but to the other allies that the United States wants to put more pressure on Iran.

What is going on is mounting evidence that the Iranians do have a nuclear program. This fits into the administration's pattern in the axis of evil of trying to figure out a way to head off all three of those countries--Iraq, Iran, North Korea--from developing weapons of mass destruction. But at the same time, it's worth noting that--what the administration isn't doing. They say very clearly they are not planning a military action against Iraq, that a mi--against Iran, that a military action against Iran is unwarranted and--and impractical, and that, despite this tough tone, you've got relatively mild action.

The other half of the president's phrase was the international community has to pick this up. And so far, what the United States has done is focused on getting, in fact, the United Nations, through the International Atomic Energy Agency which is the UN body that--that handles this kind of thing, to try and put more pressure on Iran. And that, in fact, is what happened this week. The IAEA condemned what Iran has done and asked Iran to allow more inspections. Unfortunately, the Iranians came back and said, `No more inspections. We're not going to go beyond the minimum.' So this thing is escalating.

IFILL: The timing seems odd. The IAEA, as you mentioned, was also the same agency that the United States brushed aside in Iraq when it said it wasn't so certain that there was anything going on there. And it seems at a time when the United States has its plate full in Afghanistan still and plate full in Iraq still, and still keeping an eye on North Korea, it seems an odd time to be talking tough to Iran, too.

Mr. McMANUS: Well--and that's one more reason that the focus is on diplomacy rather than force. The other thing that's going on here is that, in fact, the administration has a stronger hand in the UN, a stronger hand in the international community than it had on Iraq because the evidence of Iran's nuclear program has been so strong and so consistent over the last 10 years.

I mean, look, Iran has the third biggest oil and gas reserves in the Middle East. Oil and gas are basically free for Iran. It is the last country on earth, except maybe Saudi Arabia, that needs to be getting any of its electricity from nuclear power plants. They are doing things. They are--have imported parts and built plants that are the kind of things you do if you are building a nuclear weapons program, and they haven't hidden those. They've acknowledged that.

And, finally, there is even a kind of strategic logic for Iran to want nuclear weapons. This isn't a--a kind of an illogical act on their part. If you look at where they are on the map, they have Pakistan to the east, a nuclear power, Russia to the north, a nuclear power, and the United States Army and Israel to their west, both nuclear powers. They're in a nasty nuclear neighborhood.

Mr. JOHN HARWOOD (The Wall Street Journal): T...

Mr. McMANUS: So, in fact, the--the consensus is they are building nuclear--building a nuclear weapons program and that it is something the UN should deal with.

Mr. HARWOOD: In other words, the case is so strong that the credibility issues that have arisen surrounding the search for weapons of mass destruction in Iraq isn't a problem for the United States.

Mr. McMANUS: It is--it is much far less of a problem. In fact, the question is not whether this looks like a nuclear weapons program; it--it clearly does. But what's the right thing to do about it? Should we be engaging with the Iranians in a traditional diplomacy to try and get them to deal with the IAEA in the traditional way, more inspections, more talk back and forth, or should it be tougher? And on this, there's kind of a two-track thing. Yeah.

Mr. JEFFREY BIRNBAUM (Fortune Magazine): Could you just talk about that for a second. I know it's very unusual for this administration or anyone to be split on what to do, but I--I--th--this one is. What are the divisions?

Mr. McMANUS: Yeah. No, this is the classic split. It's, in fact, the same split we saw on Iraq several years ago, and that is that the majority opinion in the State Department is, `Let's keep engaging. Let's work through the allies. Thi--these are people we can deal with. That's a better way to get there.' And the majority opinion among the followers of Vice President Cheney and Secretary of Defense Rumsfeld is the classic, `What we need here is regime change,' that the solution here is to have a different government in power.

Mr. MICHAEL DUFFY (Time Magazine): Did the--did the increased intensity of what Bush said this week have anything to do with what's going on in Iran? There have been a number of demonstrations by students. That's how the Iranian revolution started...

Mr. McMANUS: Right.

Mr. DUFFY: ...20-some years ago. What's going on? And what is it--is it connected?

Mr. McMANUS: Not--not directly. In fact, in some ways, you could almost see it as a complicating factor because the United States is trying to get the UN and its allies to focus on the bargaining on one level and on the other side is trying to encourage that opposition. But there very clearly is a--an interest in the Bush administration in seeing Democratic forces work. There just is not a consensus in the administration on how on earth to do that.

GWEN IFILL, host: Now we talked about Iran. We've alluded to North Korea. The third member of the axis of evil, of course, is Iraq, where US forces continue the puzzling search for weapons of mass destruction, while some in Congress try to get to the bottom of the unanswered questions. Senior administration officials have now gone from strong assertion to more attentive assumption about the existence of those weapons. Listen to what Defense Secretary Donald Rumsfeld had to say this week about the prewar intelligence provided by the United States and Britain.

Secretary DONALD RUMSFELD (Defense Department): (Wednesday) My personal view is that the in--that their intelligence has been, I'm sure, imperfect, but I--but--but good. In other words, I think the intelligence was--was correct in general and that you always will find out precisely what it--what it was once you get on the ground and have a chance to talk to people and--and explore it.

IFILL: And the president, for his part, is now saying that those asking these questions are engaging in what he calls revisionist history.

Who does the president think is doing the revising, Michael?

Mr. MICHAEL DUFFY (Time Magazine): Well, it's always good to accuse someone else of revising when you're busy doing it yourself. As you know, the president used to talk about the weapons Saddam Hussein had. Now he talks about the weapons program, but the Democrats have also been doing some maneuvering on this issue as well.

The important thing to know here is that while the hunt for weapons of mass destruction in Iraq goes on, the hunt for the intelligence behind the hunt for the weapons of mass destruction is now over. The CIA has sent boxes--seven or eight boxes, drawers full of documents, to Capitol Hill so that senators and their staffs can go up and review them. At the--at the core of this question that is being discussed behind closed doors is, you know, `Did we go to war on evidence, on some sort of forced assumptions or on a hunch?' That's kind of what they're trying to decide, and they spent a lot of time wrangling behind the scenes about how to be--to make this probe, what to call it, who ha--who to call, whether to open it, whether to close it.

And I talked to a bunch of people this week who are working on both sides of the aisle, both in th--on the Hill and in the agency, and there are basically three questions they want to get at, and they're all really important. The first is when the CIA briefed the administration, did they--you know, where they completely transparent about the caveats, the uncertainties about the intelligence, where the stuff come from and how good is it? Most people say if you get down into the bottom of these documents, you--you'll find those caveats.

Second question is: Did the administration itself, the consumers of this stuff, of the--of the data, of the intelligence, did they put it through the metal detector? Did they cross-examine the sources and the analysts? Did they really try to say, `Is this really true?' That's a really important question as we go forward and one the panel has to get at.

And the third question is really the $64 one, and that is what the CIA told the administration. How does that differ from what the administration told the world, the gap between what the CIA may have briefed on and what the administration, the Rumsfelds and the Bushes and the Cheneys, told us about what Saddam had? Is there a gap there? How big is it? And did the CIA, if there was one, stand up and say, `Hey, wait a minute. You can't go that far. This game of telephone has gotten out of control.' Those are the things that are on the table in this program. So far, it's been behind closed doors, and we don't know yet exactly what they've found.

Mr. JEFFREY BIRNBAUM (Fortune Magazine): Michael, what is it exactly in--in these file drawers? What are the...

Mr. DUFFY: What are they...

Mr. BIRNBAUM: ....probers looking at?

Mr. DUFFY: What are they wrestling for?

Mr. BIRNBAUM: Yeah.

Mr. DUFFY: I've never seen a CIA intelligence estimate, which is what they call it, but I've had them described to me. It's--it's basically a big memo. Sometimes it'll be 20, 30, 60, 80 pages long about, say, Saddam's chemical weapons program, for example. At the top of it is a two- or three-age summary. It's called the `Key Judgments.' And CIA officials say, `If you're lucky, if you're really lucky, the policy-maker or the politician will read it, the two pages, if you're lucky.' Mostly you'll get their staffs to read it, and they probably are responsible for digesting it into a couple of bite-size bullets. And as this--one official told me today, nuance tends to get lost as it marches up the chain of command. That's one of the issues at the table. The CIA may have put all of the data and the uncertainties about what they actually knew as opposed to what they thought on the table. Whether it was heard or whether it was ignored really is the question that's coming at us.

Mr. DOYLE McMANUS (Los Angeles Times): The question I want to add to your three, Michael, is: In a sense, will it matter? The administration seems to be trying to say, `Hey, you know, yeah, the--the in--intelligence is always murky and people always disagree, but it doesn't matter anymore because it was a good idea to take over Iraq and--and let's look toward the future, not toward the past.'

Mr. DUFFY: Yeah, Saddam was a bad guy, and we found a lot of mass graves and it's clear that this was not a good place to be. It matters for a couple of reasons. First of all, we have to know when we go to war, why, but also this administration is thinking, as you just pointed out, about potentially doing it again in some other places. And the public and the people who we ask to make the laws have to have confidence in the process.

I think the administration says that, but they're also concerned. They're sensitive about this. The president's giving his radio address tomorrow in which he's going to essentially restate that they--he--they are confident they will find these things. They know they have some issues. He came out and defended Tony Blair's own reasoning about this this week. They know this is a serious issue internationally as well as at home.

Mr. JOHN HARWOOD (The Wall Street Journal): Michael, Democrats before the war were a bit divided over what posture to take on this war. Most of the major candidates running for president ended up supporting the decision to use force in Iraq. Now you have some splits on how hard to go after this intelligence issue. John Kerry went at the president pretty directly this week. Is that a risky move to make and do you expect other Democrats to join Kerry, Bob Graham in making this case?

Mr. DUFFY: Right. We're seeing a new fault line. Before it was, `I'm with him or I'm--I'm not with him.' This week it was, `I'm--I'm not just concerned about the quality in intelligence, p--Kerry and his paint-pealing comment about President Bush, he said, you know, `He lied to me and he lied to all of us'--that was quite striking--seems to draw--distinguish between what the intelligence community said and how the administration interpreted that stuff. So he's--he's taken it up and I--that's unusual before we see the evidence. A lot of the officials who are Democrats who are calling for this probe saw all this evidence in advance of the war, too. And so you have to wonder how much they left or--to--to conclusions or were comfortable with it. That's also still un--unclear.

IFILL: How many of them relied on bullet points and how many of them were actually really reading all the information?

Mr. DUFFY: That's part of the odd, you know, sort of Kabuki quality of this behind-closed-doors probe as we go forward.

Analysis: Issues facing the home front

GWEN IFILL, host: We'll be talking about it some more because for--foreign policy will most certainly be a big part of the 2004 president election. But what about the home front? This week, President Bush raised millions of re-election dollars in DEC--in DC and Georgia and is slated to rake in some more next week at another fund-raiser in New York City. At the same time, the president is leaning on Congress to take some action on his domestic agenda, especially tax cuts and Medicare.

So is he making any progress on that, John?

Mr. JOHN HARWOOD (The Wall Street Journal): He is making progress, Gwen. He may be struggling with intelligence and finding weapons of mass destruction, what to do about Iran. On the home front, he had a pretty good week. Congress is moving closer to passing a prescription drug benefit under Medicare. You add that with tax cuts, education reform, that's not a bad portfolio to take to the people next year.

Now the bill as it's now constructed in the Senate doesn't do a whole lot about that long-term financing problem facing Medicare, which is scheduled to go broke, but that would be for somebody else's election. In 2004, that's not going to be a problem for George Bush. It'd be a big plus if he can get that bill through.

He is raising a lot of money. His--the campaign finance law has been changed so you can raise up to $2,000 per person, not $1,000, as it was. They're going to raise a lot more than the $100 million-plus that they did in 2000.

IFILL: Do you need $200 million, which he's on track to raise now, to run unopposed in a general election and...

Mr. HARWOOD: Right.

IFILL: ...and convince people you care about domestic issues?

Mr. HARWOOD: You know, I--I was talking to one of the senior strategists for his campaign the other day who sa--reminded me, `We needed every dollar of that $100 million-plus in 2000.' They're counting on a close election. They think they're going to need the money they're raising now.

IFILL: They're counting on a close election?

Mr. HARWOOD: Absolutely. And I'm counting on a close election. I think it's going to be.

IFILL: Oh, we're all counting on a close election.

Mr. HARWOOD: No, it's--this is a--a very polarizing president. His popularity is--he's going to have some difficulty. The third thing he's doing this week in addition to raising money, he's getting his re-election team in place. Eddie Gillespie, somebody that all of us know, high-spirited advocate for the Republican point of view, is taking over the Republican National Committee. Mark Racicot is moving from there over to the Bush campaign. So he's getting his team in place, he's getting his money and his policy arguments in place, too.

Mr. MICHAEL DUFFY (Time Magazine): Talk to us a little about this--about the money for a minute. I think I read somewhere this week that he's raising $20 million this month. Now just put that in perspective because that's as much as I think some of these Democratic candidates will raise all year.

Mr. HARWOOD: He's, over the next month, going to raise as much money as all the Democrats have raised so far in the campaign.

IFILL: All nine of them.

Mr. HARWOOD: Exactly. You know, the leading money raisers on the Democratic side, each raised $7 million in the first three months of the year. He's going way over that just in--in the matter of a couple of days. It's--it's easy money for a president. You know, he doesn't even have to work that hard for it. Democrats are spending right now--in the countdown up to the end of this quarter when they want to hav--post a big number when they file to the FEC--they're spending day and night on the phone, at fund-raisers. The president can do it quite easily and efficiently.

Mr. DOYLE McMANUS (Los Angeles Times): So, John, what makes you think that we are on track and have anything resembling a close election? If the president is winning his battles in Congress, his popularity is high, he's got more money than God...

Mr. HARWOOD: And I forgot to mention on thing. The stock market's up.

Mr. McMANUS: And the stock market's up.

Mr. HARWOOD: That's very good for him. Well, look, they've lost over two million jobs since he's been president. The economy is still soft, and whatever is happening on the Democratic side--and there are splits. They--they don't agree on--on what to do--that's going to be an issue. And this is a president, remember, as popular as he is in his own base, he's that unpopular on the Democratic side. And presidential politics is more and more about mobilizing your base, less about swing voters, because there are fewer of them.

Mr. JEFFREY BIRNBAUM (Fortune Magazine): John, one of the big issues that he's working on this week and may really make a lot of progress with is Medicare, which is usually a signature issue of the Democrats. Is it--if he does sign a Medicare prescription drug bill, is that an unalloyed victory politically for the president?

Mr. HARWOOD: I think politically it's a home run for George Bush. One out of four votes in the 2000 election was cast by people 60 or over. He didn't do all that badly. Al Gore carried that group, but George Bush was--was pretty close to them; 51-47, I think, was what the exit polls showed. If he can...

IFILL: What happens...

Mr. HARWOOD: ...make some progress there...

IFILL: But--but--but...

Mr. HARWOOD: ...that's a big step toward...

IFILL: But what happens if that group discovers this is not a--this is not the kind of prescription care benefit that they've been led to believe, it's not 100 percent coverage. It's--for a lot of people, it's no coverage at all, no additional coverage at all. And they begin to realize--add it up on the back of an envelope and say, `This isn't what I--I thought.' Is there backlash?

Mr. HARWOOD: Well, that's a good point, but the--the implementation of this is not going to come until after 2004.

IFILL: Ah.

Mr. HARWOOD: This--by this July Fourth, people are going to be getting their $400 tax-cut rebate checks, but they're not going to be dealing with that prescription drug program until after he's re-elected--if he is re-elected.

IFILL: The other thing that's hanging fi--which could have some sort of an effect is the tax credit bill. Now that's s--that--that's something which seemed like it was flying, too. Then it came to a halt because the House has a drastically different vision of what thi--than what the Senate has about child tax credits. Is there--is--the president is s--clearly signaling he wants this to be worked out. Is there any movement on that?

Mr. HARWOOD: Well, that's really the question: Does he mean what he says? The House doesn't want to do this. They--they don't--remember, the House Republicans don't care if this happens or not.

IFILL: Right.

Mr. HARWOOD: If George W. Bush wants it, he's going to have to make it happen and make the House compromise with the Senate.

IFILL: OK. Well, thank you. And we're going to be holding you to those predictions. Ooh.

Analysis: US economy

GWEN IFILL, host: The president and his likely Democratic opponents are all keeping an eye on the complicated US economy as John was talking about. Alan Greenspan's Federal Reserve is expected to cut interest rates next week.

But will that be enough of a jolt, Jeffrey?

Mr. JEFFREY BIRNBAUM (Fortune Magazine): Well, it could well be. I know it doesn't feel that way, but the economy is already showing signs of life, and certainly next week, if as is widely expected, the Federal Reserve Board does cut interest rates, probably by midweek, that ought to be another kick in the pants for the economy and really get it going.

IFILL: Half point? Qu--half point? Quarter point?

Mr. BIRNBAUM: That's the question. I--I think everyone expects it's at least a quarter-point, but it could be as much as half a point which is a very big change. And I think that could really spur the economy which has--as I say, is already showing some signs of life. This week, for example, the index of leading economic indicators was up in May one percentage point, which was more than some analysts expected.

There are also some signs of--of growth in other ways. The stock market was--is up. Consumer confidence is up. It's a little bit of a mixed picture, however. Capital spending, which is business spending, is a little weak, not as strong; and, of course, unemployment continues to be very high, over 6 percent. So it's not a real zooming sort of economy, but most analysts do expect that the further we get in this year, the stronger the growth of the economy will be sort of getting out of this--these--these long, terrible doldrums that we've been in for quite a long time.

Mr. MICHAEL DUFFY (Time Magazine): Deficits are up, too, Jeff.

Mr. BIRNBAUM: Yes.

Mr. DUFFY: And no one seems to be talking about that, at least in Washington. Is that because they--we've decided that's the--the--the price we pay for getting everything else out of the--out of the cellar?

Mr. BIRNBAUM: We--we learned, in fact, just in the last two weeks that we're about to have record-high deficits, at least nominally, $400 billion deficits for the couple--next couple of years. And if this Medicare bill passes, the one John was talking about, it could get up to $500 billion.

Now that's real money, but is it a real problem? And one of the reasons why--there are two reasons why we don't hear a lot about it. One is that, as we've learned--as Republicans in particular have learned in the past, the deficit is kind of an abstract issue. It's not a real political issue. It doesn't affect people's pocketbooks directly, and so it doesn't bite. In addition, I think economists are not--are divided about how seriously we should worry about deficits; the reason being, that the economy is much larger than it was the last time we worried about deficits back 10 years ago; and $400 billion is only 4 percent of the full Gross Domestic Product, which is really not all that much when you think about it. And that is the percentage that really matters. And so deficits, even these large deficits, don't matter as much economically as that number, $400 billion, implies.

Mr. JOHN HARWOOD (The Wall Street Journal): Jeffrey, I want to go back to the stock market.

Mr. BIRNBAUM: Yeah.

Mr. HARWOOD: You know, we know that the Bush White House watches this very closely. They're very locked into this idea of the investor class is an important group of voters. Do we know why it's going up? You'll remember one of the arguments for that dividend tax cut was that it was going to raise share prices. Is this a--a cause and effect? Do we know why?

Mr. BIRNBAUM: No, we don't know exactly why, but we do know that the stock market anticipates the future, and what the market going up indicates, I think, is that there's growing optimism about economic growth, that the economists are predicting a slow increase in economic expansion. And--and you have to remember that the recent bull market ca--started right after the end of the war in Iraq. And the uncertainty, which the stock markets hate, of that war, once that was lifted, that sort of gave a boost to the stock market.

Mr. HARWOOD: Maybe not the prospect of dividend taxes are going down.

Mr. BIRNBAUM: I think that that helps, but I--I don't think that's the major factor, no.

Mr. DOYLE McMANUS (Los Angeles Times): John works for The Wall Street Journal, so he asked about the stock market.

Mr. BIRNBAUM: Yes.

Mr. McMANUS: I'll ask about jobs.

Mr. BIRNBAUM: Right.

Mr. McMANUS: One of the strange things about this--these signs of recovery is that they don't seem to have come with a lot of--of job creation. If you have a recovery with a wonderful stock market but not a lot of jobs, what h--what's the political effect of that?

Mr. BIRNBAUM: First, job creation is a lagging indicator when there's a recovery. In other words, the return of lower unemployment is something that comes after the economy has come out of a recession. So it's usual that it's lagging like this. But I think there are two important political indicators. One is employment. The higher the unemployment, the more difficult it is for an incumbent to get re-elected. But second, you keep--should keep your eye on another indicator, which is disposable income, the amount of money in people's pockets. If net disposable income begins to go up, then there's a chance that George Bush--a very good chance that George Bush will return to the White House in 2004.

IFILL: So are--so let's get this right. The Democrats are--are praying for people to have less--less money in their pockets and to--to lose their jobs because that's the only way that they have a chance?

Mr. BIRNBAUM: Sadly, w--if you look at the economy as an issue, that's what a lot of Democrats are hoping for, though they don't say so. So gloom is good news for Democrats in the next election.

IFILL: And gloom is bad news for us because we've had nothing but rain in Washington. So we're hoping for happy, sunny times.

Thank you, gentlemen. Gentlemen, all of you, thank you.

GWEN IFILL, host: We'll have to leave it there for tonight. Thanks, everybody. If you want a little more, join me for my monthly Web chat. You can log on at noon Thursday on pbs.org. Be kind. Keep up with daily developments on "The NewsHour with Jim Lehrer" and we'll see you again right here next week on WASHINGTON WEEK. Good night.