December 17, 2004

From our nation's capital, this is " Washington Week." And now here's moderator Gwen Ifill.

Gwen Ifill, moderator: Taxes, health care, the Kerik controversy, and good old-fashioned politics, Iraqi-style.

No to lawsuits, yes to private retirement accounts, no to a weak dollar.

Vice President Cheney (on tape): We are committed to keeping those tax cuts in place.

Gwen Ifill, moderator: That's what president Bush and the economists who agree with him want. We take a look at the president's economic summit.

Also on the domestic front, the Department of Health Human services may have a new leader, former environment chief and Utah governor Mike Leavitt. What does this tell us about the president's health care priorities?

This week's Washington tale, how did Bernard Kerik's murky history escape the notice of the White House?

President Bush (on tape): Bernie Kerik is one of the most accomplished and effective leaders of law enforcement in America.

Gwen Ifill, moderator: But Kerik's homeland security nomination imploded in a plot worthy of Tony Soprano.

White House Spokesman Scott McClellan (on tape): This matter has been now put to rest.

Gwen Ifill, moderator: but has it?

And democracy takes its first halting steps in Iraq, with an election campaign, trials on the way, and a lawyer for Saddam. Covering these stories this week, Alan Murray of "The Wall Street Journal," Ceci Connolly of "The Washington Post," Michael Duffy of "Time" magazine, and Barbara Slavin of "USA Today."

Gwen Ifill, moderator: Good evening. A sure sign that a president has big things in mind is when he calls for a summit. Summits used to be held when people, usually foreign leaders, had weighty matters to work out. But now, especially in a domestic sense, they are just as likely to be a gathering of like minds. That's what happened this week at the Ronald Reagan building here in Washington, an appropriate venue, it turned out, for an "economic summit" that showcased the second-term priorities of the re-elected president -- reshaping Social Security and health care, cutting and simplifying taxes, and putting limits on big lawsuits.

President Bush (on tape): But I didn't come up here to Washington. I know a lot of people in my cabinet didn't agree to serve to pass problems on. I like to confront problems. I like to -- I like to work with people so that we can say we left behind a better America after it's all said and done. And I don't have that much time here in Washington.

Gwen Ifill, moderator: I guess he means he only has four years left. That's as much time as a lot of people ever get. That aside, Alan, when the president says he means to confront big problems, what does he mean?

Alan Murray, The Wall Street Journal: He laid it out. The most remarkable thing was the speech that the president gave at the end of it, 40 minutes long, sounded to me like a state of the union address delivered a month early and without the 535 members of congress which is probably all right by him. But he did -- this is a guy who is in a rush to get some big things done and he laid it out pretty clearly in that speech.

First of all, first up on the list is to curb class- action lawsuits. This is the one that is loaded in the gun, ready to fire. They wrote the bill earlier this year. He's got a fair amount of democratic support. I think they're going to try and get that done quickly to show that the president has some juice and can make some things happen. He talked about health care. He talked about making the tax cuts permanent. He talked about tax reform although that's probably going to be kicked down the road. But the big thing that he talked about and clearly his first big push which he's eager to start right away is overhauling the social security system.

Getting rid of that $10 trillion -- that's a t, Texas -- $10 trillion funding gap that the program has right now and he said in that speech three things. One, current retirees won't suffer and people who are near retirement won't suffer, two, he's not going to allow them to raise the payroll tax but, three, he wants to reform the system to create these private accounts where you have some ownership over a piece of your retirement. And that's where he got into trouble. I just point out quickly the same day the AFL-CIO, the NAACP, the National Organization of Women held a big press conference and said "we're not going to have anything to do with any social security plan that creates private accounts".

Gwen Ifill, moderator: It's not like this is the first time we've talked about Social Security reform around the table.

Alan Murray, The Wall Street Journal: Oh, you've done this before? I'm redundant!

Gwen Ifill, moderator: We're all redundant on some level. It's always considered to be the third rail that thing you cannot touch. What's different this time?

Alan Murray, The Wall Street Journal: It's been changing over a period of time. The president himself pointed out that Bill Clinton actually started to talk about this a little bit in the mid 1990's. The president ran on it. You now have several members of the Senate who have successfully run campaigns talking about it relentlessly. Elizabeth dole, John Sununu, Lindsey Graham. So it's become more politically acceptable. That said, I don't know of any Democrats right now who are willing to join the president on this, and he has to have a few Democrats to get it through the Senate.

Barbara Slavin, USA Today: Are there any specifics he's put out there and what does he mean by people nearing retirement, says she who might be nearing retirement.

Alan Murray, The Wall Street Journal: are you safe?

Barbara Slavin, USA Today: Where would the cutoff be and who would be affected? Do we know that yet?

Alan Murray, The Wall Street Journal: That's the kind of detail we don't yet know. Other plans have said if you're over 50 you stay in the traditional -- in the traditional plan. But that's actually the interesting thing about social security is the devil is completely in the details. The devil is in the details but you have all of these groups without -- before they've ever seen any details saying we're not going to play. We're not going to talk about it at all. It's going to be a tough sell but what you heard from the president this week is that, you know, he just won an election. He does have some political capital and this is where he's going to put it. He's going to start pushing it, start pushing it right away.

Ceci Connolly, The Washington Post: We heard words like "crisis" and "I'm here to fix problems". You mentioned the $10 trillion gap. That's over quite a long period of time. Is Social Security really that pressing a problem in crisis? I think about the Medicare trust fund. That's supposed to run out of money much sooner than the Social Security account.

Alan Murray, The Wall Street Journal: $10 trillion is a lot of money, but it's not as much as the $40 trillion or $50 trillion gap that occurs in Medicare. They took a run at this and didn't do much to deal with the funding problem. They created this new prescription drug benefit. People used to talk about the prescription drug benefit the way they talk about private accounts. That it was going to be the candy that you gave in order to get the long-term budget cuts. Well, they didn't do that with Medicare. They just gave out the candy but they never took the medicine. If they do the same thing with social security we'll have a problem on our hands.

Michael Duffy, TIME magazine: In the economic summit this week, did the president talk about the deficit? And are his still emerging plans for social security suggest that they will do anything about the deficit?

Alan Murray, The Wall Street Journal: It's a good question. It gets to what were just talking about -- the difference between long term and the short term. What the White House is talking about doing is borrowing a lot of money, maybe a trillion dollars, maybe two trillion dollars to fund the transition to private accounts. Now the way that works is you take a bunch of money out of the market but you put it right back in these private accounts. What Wall Street people will tell you is that's ok if you deal with this long-term problem, if you get rid of the $10 trillion funding problem. We're willing to tolerate some borrowing in the short term. But if you haven't done anything to deal with the long-term problem you have a mess.

Gwen Ifill, moderator: You're talking about long-term and short-term problems. Another priority for this president falls under the purview of the massive Department of Health and Human Services. The president's nominee to succeed Tommy Thompson as secretary is mike Leavitt, outgoing administrator of the environmental protection agency and former governor of Utah. High on Leavitt's to-do list will likely be the issue of drug safety, highlighted again today with even more new questions about a popular prescription medication, Celebrex. How is the administration handling this, Ceci?

Ceci Connolly, The Washington Post: They're really reeling over at the FDA. The news that came out on Celebrex is that now it appears like Vioxx, one of its sister medications, to really raise the risk of things like heart attack, stroke, other types of heart disease. Vioxx, of course, was pulled off of the market September 30. They didn't say so today but there are a lot of very serious questions about why or how long Celebrex can stay on the market now and there's a third one of these anti-inflammatory drugs called Bextra that could be headed down the same path. The FDA right now is a mess. They are leaderless. They've had an acting commissioner for most of Bush's first term in office. They've lost other top personnel. They've been accused of intimidating, a highly respected staffer over there by the name of Graham who has been raising the red flags about a number of these drugs. They've been questioned about how much they knew about the flu vaccine problems with that manufacturer, when they got warnings. That's just at the FDA, Gwen.

Gwen Ifill, moderator: And that's how much of the total -- we say massive department of Health and Human Services; Mike Leavitt has Medicare, Medicaid on his plate. He has a lot going on.

Ceci Connolly, The Washington Post: Yes. Absolutely. The good news for him on Medicare, and we were talking about the prescription drug benefit which is due to kick in 2006, is that Mark McClellan who runs the Medicare and Medicaid problems, a lot of people thought he would get the secretary position, is actually going to stay run that go Medicare program. That's probably good news for Leavitt.

Alan Murray, The Wall Street Journal: Is that why Mark Mcclellan didn't get the top job? Because he's more important at the lower job?

Ceci Connolly, The Washington Post: I think this is one of those rare moments in Washington where what was said was actually pretty accurate, that it is such an enormous responsibility and McClellan is so smart that they want him to stay there. I had Senator Hatch say to me that McClellan is a young man. He'll get his turn, so there's some thinking that in a couple of years he could get a secretary job.

Michael Duffy, TIME magazine: What happened on the flu vaccine we were told there wasn't enough. The president said people like us shouldn't even ask for it. This is something that is now apparently much more widely available partially, as a consequence of people holding back. Is there some new development?

Ceci Connolly, The Washington Post: There is. All within the purview of HHS this now is the Centers for Disease Control and Prevention Down in Atlanta came out on Friday and said, you know what? People 50 to 65, we're now encouraging you to go get the flu vaccine because so many people were scared off by the reports of shortages or they saw the lines or whatever. They were trying to be patriotic, good, generous people. So now you have this terrible embarrassment after telling people don't do it, now there could be extra vaccine and that can't be used the following year.

Alan Murray, The Wall Street Journal: But knock on wood it appears to be a tame flu season.

Ceci Connolly, The Washington Post: It certainly does. But as doctors point out to you, we got through February and March. It could still hit.

Barbara Slavin, USA Today: What do we know about Governor Leavitt and health care? What's his expertise in the area?

Ceci Connolly, The Washington Post: Very similar to the president on his predecessor Tommy Thompson. Their main experience is Medicaid. That's really his main expertise in this whole broad arena that he's now going to cover and what we learned in Utah in Medicaid was that he was one of the first governors to try to alter that program by basically trimming back the benefits to a very small scale in order to get more people into the program. That's a very hot controversy in public policy circles. It's something president Bush has been eager to push forward with and I think that Leavitt could be a person -- could be a person to do that.

Gwen Ifill, moderator: The president talked at this economic summit about health care savings accounts as another kind of privatizing, if you will, a word I swore I'd never use on the air, of private investment opportunity for people to pay for health insurance. Is that something which is part of his vision for trying to get some sort of handle on Medicare or Medicaid?

Ceci Connolly, The Washington Post: Well, it probably wouldn't help with something like Medicaid because that's mainly a low-income program.

Gwen Ifill, moderator: Nothing to save.

Ceci Connolly, The Washington Post: You're not going to have those individuals doing it. It might help a little bit with the ranks of the uninsured because there are a certain number of people who don't have health insurance for a variety of reasons and they might be attracted to these accounts because they may be more affordable. The argument always against them is you don't really get the sort of coverage that you need. Interesting little footnote to this week's summit, the president mentioned that he bought himself a health savings account. Now I'm a little puzzled as to why because he has free health coverage as president. It's a good gesture on his part.

Gwen Ifill, moderator: He's got to make a point. He's the president. One of the week's most bizarre and fascinating unfolding stories involved the dramatic collapse of President Bush's nominee to head the Department of Homeland Security. Bernard Kerik seemed perfect for the job -- tough guy, 9/11 experience, stamp of approval from old boss Rudy Giuliani. But there was also the matter of an illegal nanny, soap-opera-style infidelity, and curious connections to shady New York characters. Kerik tried to take the fall.

Bernard Kerik, former New York police commissioner (on tape): This is my responsibility. It was my mistake. It wasn't a mistake made by the White House. I think during their vetting process this was something that they had looked at, but in a deeper, closer look by me it was something that I felt was just something I couldn't move forward on.

Gwen Ifill, moderator: Appears to be a security guy behind his back. Only in New York does a failed cabinet nominee need a security guard. What happened? How did this slip through, Michael?

Michael Duffy, TIME magazine: If you were going to reverse-engineer the story, you'd take sort of a character from a Patricia Cornwell novel, add election year you bruss, and get out of town for the holidays and that's the Bernie Kerik story. New York police commissioners always have star quality. Kerik had more than his share. He was blunt. He was popular. He was controversial. Bush really liked him. He fell into favor with the White House after 9/11. The White House sent him to Iraq to help train Iraqi troops. He came back and campaigned for the president. The president really liked him. So when Tom Ridge stepped down about a month ago, Bush tapped him for the job as one White House official told me tonight it seemed like a good idea at the time. We know now that the vetting process was more or less nonexistent because they really wanted this guy. They missed the illegal nanny which is tricky because he was going to be in charge of immigration affairs. They missed the cash payments from -- it was a business man who had ties to a company that had alleged links to organized crime. They missed --

Gwen Ifill, moderator: A lot of "alleged" in there.

Michael Duffy, TIME magazine: I included the right amount, though. They missed the simultaneous affairs and the arrest warrant in the civil case.

Alan Murray, The Wall Street Journal: You can understand missing any one of those but missing them all?

Michael Duffy, TIME magazine: Within hours of Kerik stepping down the White House leaked the fact there had been hours of grilling sessions and you sort of wondered if you missed this stuff what were you grilling him about? The amazing thing wasn't that Kerik was tripped up but he thought he could get this far with all of this going on. He lived a highly compartmented life and kept a lot of it in compartments from the White House.

Gwen Ifill, moderator: But he had gotten this far. He had been police commissioner. He had been to Iraq. He spoke at the Republican National Convention. So it wasn't crazy.

Michael Duffy, TIME magazine: This was someone the president really wanted. The vetting process was run by Alberto Gonzalez who, himself, is subject to hearings in just a few weeks as the next attorney general. And so he is trying to do this at the same time. The Clinton administration had often outsourced its vetting and had lawyers in town do it because they had other things to do. It's a busy job to work in the White House.

Barbara Slavin, USA Today: Is it and issue of New York versus Washington? Are there things New Yorkers do that they don't think are that terrible that are looked at differently in Washington?

Michael Duffy, TIME magazine: It sure looks different. No one in Washington would imagine any one of these things could get by a Senate confirmation much less all five. They are different cities with different cultures and different worlds. This is a piece of bad judgment no matter where you live.

Alan Murray, The Wall Street Journal: Barbara's question gets to the Rudy Giuliani issue. The president didn't know all of this history but surely Giuliani had heard some of it.

Michael Duffy, TIME magazine: And Giuliani had some of the same problems in his past so he may not have been as sensitive to them politically. He managed to be mayor of New York while he had a complicated personal life going on and they were close. 9/11 probably obscured a lot of personal issues for people not just in New York but here and all over the country about what matters and what it takes to get the job done. We had more important things in our personal frailties. They get obscured in terms of crisis.

Gwen Ifill, moderator: If you take aside the personal frailties--

Michael Duffy, TIME magazine: This may be too weak a word: "frailties"--

Gwen Ifill, moderator: Well, yeah.

Michael Duffy, TIME magazine: Need a much stronger word.

Gwen Ifill, moderator: Let's assume that it was only the nanny problem. There is plenty of history of nominations being derailed for only that.

Michael Duffy, TIME magazine: Oh, yeah. And it's interesting the nanny has not yet emerged which makes you wonder whether the nanny is the diversion. They came up with the nanny explanation in order to cover what were far more serious problems. The nanny is the politically acceptable reason after, I think, Kimba Wood and Zoe Baird and a few others and lots of others who couldn't pass the nanny test.

Ceci Connolly, The Washington Post: I was just going to say we just survived a campaign where we were told over and over again it was terrorism that we needed to focus on. That was the big priority. So now we don't have a homeland security director. Any hints who it could be and how is that department operating right now?

Michael Duffy, TIME magazine: This is a story all its own. DHA. is just a hodgepodge of old -- the border patrol, the customs department and the TSA, the people who check our bags at the airport. Running this job, running this department is a huge task, getting different people to talk to each other and play with each other and get the computers talking together. So internally it's a huge management job and externally it's impossible job of talking to the public about safety which they're not good at. We had the duct tape and plastic sheeting incident. We had the elevated level thing. And this week the department of homeland security put out its Christmas gift list: "Disaster ready gifts can save lives and are a wonderful way of making 2005 -"

Gwen Ifill, moderator: disaster ready gifts?

Michael Duffy, TIME magazine: "--- foldable ladders, disaster kits for your home, disaster kits for your pet, a camp stove. A camp stove with extra fuel." The point is they are still trying to figure out how to talk to the public with this very complicated responsibility which is to basically make us worried but not too worried.

Gwen Ifill, moderator: ok. Well, I'm going out -- I don't have a pet. What am I talking about?

Alan Murray, The Wall Street Journal: Camp stove. Do you have a camp stove?

Gwen Ifill, moderator: Thanks, Alan. I'll be looking at it under the tree. Finally, to Iraq. A lot is percolating, but not much is clear. 44 days of campaigning are officially underway, with as many as 6,000 candidates in the hunt for seats in a new assembly. Three associates of Saddam Hussein are now scheduled for preliminary trials. Even Saddam has finally met with a lawyer.

But with bombings, assassinations, and kidnappings still a part of daily life in Iraq, it sounds like the elections will be complicated at best? Barbara?

Barbara Slavin, USA Today: That's an understatement. I mean just today there were more rocket propelled grenades hitting the green zone in Baghdad, in Mosul in the north four people were dragged out of their car and killed. One of them was beheaded. So a lot of violence obviously. But despite that fact 6,000 Iraqis have put their names forward, most of them are on electoral lists and Iraqis will get a chance to vote. The way it works is that you will vote and say a list gets 10% of the votes nationwide, then 10% of the people on that list would enter the national assembly and this participation is very good news but there's still a lot of questions. Mainly can the elections be held throughout the entire country or are we going to see voting mostly in the Shiite south and in the Kurdish north? Will Sunni Muslims participate? Will they boycott? If the Shiites win as looks likely, which Shiites will they be, secular people like the caretaker prime minister Ayad Allawi or people on the list that was literally blessed by Ali Sistani. There are a lot of concerns about the list he has put forward. It's headed by a guy named al-Hakim who heads the Islamic Revolution in Iraq. The name speaks for itself. This is an organization set up in the 1980's in Iran. Their vision of Iraq perhaps a bit different from what the Bush administration had in mind. Not necessarily a theocracy. They say clerks will not rule but islamic law will be important and relations will be a lot closer.

Ceci Connolly, The Washington Post: I have a very basic question which is how do you campaign in Iraq right now?

Barbara Slavin, USA Today: That is a good question. Some people say this is helpful to the caretaker prime minister Allawi because he has access to state-controlled television and television will be very important. Posters will be very important. The Shiites in particular put up posters everywhere. But there was one party, the Iraqi communist party had a rally in Baghdad today and 2,000 people showed up. So who knows? I guess it might be possible.

Michael Duffy, TIME magazine: Would it be the worst thing in the world if the Islamic revolutionary party wins? Don't we let them elect whomever they want to elect?

Barbara Slavin, USA Today: We believe in democracy, you know, but, again, the vision of the Bush administration when the decision was made to invade Iraq was that this was going to be a secular country, that it was going to have relations with Israel. I mean, the neoconservatives in particular had some rather wacky notions of what a country smack in the middle of the Arab world could turn out to be. I think this will be a rude awakening for some people.

Alan Murray, The Wall Street Journal: What's going on in the trial of saddam hussein?

Barbara Slavin, USA Today: Well, Saddam will go last. The announcement was made by Allawi this week that the trials will begin next week, actually won't be the trials. It will be some pretrial investigation. And there's a group, the dirty dozen they're called, 12 very prominent people Saddam and 11 others. The first one who will be interrogated will be a cousin of Saddam, known as Chemical Ali. He's the one who is accused of having ordered the poison gas attack on a town on the Iranian border, Kurdish town, in 1988.

Alan Murray, The Wall Street Journal: I was talking to somebody last week who was just back from Iraq and said Saddam Hussein is going to become the Marion Barry of Iraq which to those of us who live in Washington know what that means. Marion Barry was accused of -- was convicted of cocaine use but came back.

Barbara Slavin, USA Today: Very popular.

Alan Murray, The Wall Street Journal: Could Saddam Hussein escape conviction and end up part of this political game at some point?

Barbara Slavin, USA Today: Well, that is a good question. Allawi announced this and the thought was that it would boost his election fortunes. It might cause a backlash in the Sunni lands where Saddam is popular.

Gwen Ifill, moderator: Can I ask you about Donald Rumsfeld? There has been this slightly building chorus of Republican senators and other Republican observers saying, you know, I'm not really crazy with the way Donald Rumsfeld is prosecuting this war on Iraq. Suddenly now that the election is over people have found their voices on this. Is there anything significant happening on that really?

Barbara Slavin, USA Today: I think it was his remarks last week when he made light of the fact that our soldiers there do not have adequate armor for their vehicles and we've seen now four Republican senators have come out and questioned and this week Trent Lott said he should resign.

Gwen Ifill, moderator: We'll be watching for that and we'll be watching everything else, too. Thanks, everybody.

Before we go tonight, I'd like to wish a fond broadcast farewell to my Friday night cohort Bill Moyers. After 33 years on public television, bill plans to step aside, not away from the studio, and concentrate on book-writing. It's been a pleasure to share even a small piece of this real estate with him, and we wish only the best for Bill and his wife, Judith. You can catch his farewell program on "now with Bill Moyers" later tonight on most PBS stations. Next week, David Brancaccio takes over.

And we'll still be here, yes, on Christmas Eve, next week on " Washington Week." Good night.