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This is a rush transcript provided for the information and convenience of the press. Accuracy is not guaranteed.

MR. TIM RUSSERT: Our issues this Sunday: Iraq. Two hundred and eight-seven Americans dead, nearly 1,200 injured and wounded since the war began. How? When? Who can help bring stability to that country? With us: the man trying to recruit more international troops for Iraq, the secretary of state, Colin Powell. Then: the California recall, just four weeks away. The Democratic presidential candidates square off:

(Videotape):

REP. DICK GEPHARDT, (D-MO): This president is a miserable failure.

SEN. JOSEPH LIEBERMAN, (D-CT): The Bush recession would be followed by the Dean depression.

(End videotape)

MR. RUSSERT: Spin and predictions from the chairmen of both major political parties: Republican Ed Gillespie, Democrat Terry McAuliffe. Gillespie and McAuliffe in their first joint Sunday morning interview.

But first: This man, Mahmoud Abbas, has resigned as Palestinian prime minister. And this man, the president of the United States, will address the nation tonight about the war in Iraq. And here to talk about both those events and more is the secretary of state, Colin Powell. Welcome.

SEC’Y COLIN POWELL: Good morning, Tim.

MR. RUSSERT: Mahmoud Abbas has resigned. Did Yasser Arafat do him in?

SEC’Y POWELL: I think a number of things caused Prime Minister Abbas to offer his resignation. He wasn’t getting the support he needed from other leaders in the Palestinian community to put all of the security forces of the Palestinian Authority under his control so he could go after terrorism. The problem here is Hamas, Palestinian Islamic Jihad and other terrorist organizations who do not want to see a Palestinian state living side by side with Israel. They want to destroy Israel, and terror is their weapon. And that has to be dealt with. And whoever the new Palestinian prime minister is, if there is going to be a process to peace, if the road map is going to continue to unfold—and I believe it can continue to unfold— then there has to be a concerted effort against Hamas and other terrorist organizations and terror activity.

And I hope that, as the Palestinian Legislative Council considers this issue over the next several days, they will give the new prime minister the political power he needs, the political authority he needs and the resources that he needs to go after Hamas. I’m encouraged that over the weekend the European Union came together and made a political decision that Hamas has to be seen as a terrorist organization and not a militant wing and a political wing and a social wing, that the whole thing is a terrorist organization. Let there be no doubt that it is Hamas and PIJ that is causing this difficulty on the way down the road map.

MR. RUSSERT: Do we support Israel’s policy of assassinating Hamas leadership?

SEC’Y POWELL: We don’t support that policy. It has never been our policy to support that kind of action. Israel feels its necessary to take those actions. We are always saying to our Israeli colleagues, “You have to consider the long-term consequences of such actions. And are you creating more Hamas killers in the future by actions such as this, which injures innocent people?” as well as going after somebody that they believe is guilty.

MR. RUSSERT: The resignation of Abbas clearly puts some major obstacles on the road map to peace.

SEC’Y POWELL: Yes, it does, but the road map is still there. I mean, what is the alternative to the road map? The road map is there. Both sides had obligations. And in the first few weeks after Aqaba, the Aqaba summit where the road map was blessed by all the parties, we saw progress. Gaza and Bethlehem were turned over to the Palestinians. The Israelis had started to remove some of the unauthorized outposts. So we had some halting but nevertheless steady steps forward. We were making some small progress. And you could even sense it in the streets of Israel as the violence ended and there was less concern about a terrorist attack. And then Hamas started striking again and terrorism returned. And now they have caused us to have to stop and pause once again while the Palestinian Legislative Council and Palestinian leadership decide what they’re going to do. They have to decide on a cause of peace. They have to decide that, once and for all, all weapons inside the Palestinian Authority, any form of power inside the Palestinian Authority, has to be under legal control. You cannot be a responsible government if you have terrorist organizations operating within your areas of responsibility that go after innocent people and, frankly, destroy the dreams of your own people.

MR. RUSSERT: Some Israelis are now suggesting now is the time to put Yasser Arafat into permanent exile.

SEC’Y POWELL: I don’t know that that would accomplish much to put him on the world stage as opposed to the stage he’s currently occupying. I know that the foreign minister of Israel has suggested that this morning and I will wait and see what reaction that gets inside the Israeli Cabinet and from the prime minister.

MR. RUSSERT: Would you support it?

SEC’Y POWELL: I would not support it at this time.

MR. RUSSERT: Will you negotiate with Yasser Arafat?

SEC’Y POWELL: No.

MR. RUSSERT: Period?

SEC’Y POWELL: Period. He is not an interlocutor for peace. He’s demonstrated that over the years. He’s demonstrated it to me personally over a period of a year and a half, until we stopped dealing with him last summer. And he certainly demonstrated that as well to the previous administrations.

MR. RUSSERT: So who do we negotiate with?

SEC’Y POWELL: We negotiate with the prime minister of the Palestinian people. It was the Palestinian Legislative Council that created this position. It was Mr. Arafat who nominated Prime Minister Abbas to the position. And now it is up to the Palestinian Legislative Council to come up with a new prime minister, and I don’t know who that person might be. But that person will run into the same problems Mr. Abbas ran into unless that person has the political authority to get the job done and is given the resources, especially the security resources and the financial resources, available to the Palestinian Authority. It has to be under the prime minister. And we hope that that individual, whoever that individual is, is someone who is committed to peace, committed to the road map, committed to going after terror with all the resources at his disposal. That’ll be somebody we can work with and somebody the Israelis can work with.

MR. RUSSERT: Before we turn to Iraq, on Afghanistan, al-Qaeda has released a new tape this morning saying that there will be more attacks inside and outside of the United States but also that they shot down two helicopters, killing 38 passengers and that American casualties in Afghanistan over the last few weeks have been quite severe but not reported.

SEC’Y POWELL: No, I don’t pay any attention to that kind of reporting. We report our casualties, report incidents in an honest and open and candid way. This is the usual propaganda.

MR. RUSSERT: But it seems that the Taliban, al-Qaeda, have reconstituted in Afghanistan and are posing a serious threat.

SEC’Y POWELL: There are still Taliban and al-Qaeda elements operating in Afghanistan and going across the border between Pakistan and Afghanistan. We’re working closely with the Pakistani authorities to try to seal that very, very rugged, difficult border to seal. And there have been successes in recent weeks as we have taken the fight to them, and they have sustained quite a few losses. We have also sustained losses. This is a continuing conflict. It is not over. But while we look at the conflict that is continuing in Afghanistan and in Iraq, let’s not overlook the good things that have happened in Afghanistan and Iraq. And I’m sure you will ask me a question that will allow me to expand upon that.

MR. RUSSERT: Let’s turn to the subject of Iraq. The president will address the nation tonight. What can we expect?

SEC’Y POWELL: I think you will hear the president reflect on our two-year campaign against terror. He will make sure there’s no doubt in the minds of the American people or people around the world that we are totally committed to this campaign, that terror must be eliminated. He will take note of the successes that we have had in Iraq and Afghanistan. People talk about casualties, and we regret them, but let’s also talk about the fact that a rotten regime is no longer in power in Baghdad or in Kabul; that in both of those places we see the emergence of new political leaders and new forms of government that are democratically based. In Iraq, the schools are open, the hospitals are open, there is a free press. The utilities are coming back on, the infrastructure is being repaired. There are no more mass graves being created. This is all to the good. And we have created a governing council of 25 individuals, who have now appointed 25 Cabinet ministers and who are also now about to start a constitutional writing process.

So we are doing what everybody wants us to do and what we said we would do. We have started the process of creating a representative form of government in a country that has never had it before. And it’s going to be a difficult task, but the task is under way. And that’s why the president is very thankful of all the nations who’ve joined us in this effort so far. Standing alongside us in Iraq today with troops are some 28, 29 nations with over 20,000 troops, two multinational divisions, one led by the British, one led by the Pols, Spaniards, Czechs. All sorts of nations are there.

And we hope with this new resolution, once we get it worked out with the Security Council, that more nations will see fit to join that effort but, beyond just military presence, will join the reconstruction effort and will give us the international political support that we need to carry this process forward. It is in the interest of the world and it is certainly the goal of the United States to turn sovereignty back to the Iraqi people for their country and for their destiny as quickly as possible. The president has said this all along; he will reaffirm that tonight. Tonight he will say, “We are going after terrorists. We’re going to create the security needed in Iraq. But would encourage more nations to join us in this effort.” And he will also say that there are challenges ahead, and there will be fiscal requirements. And he will talk about the need for supplemental funding.

MR. RUSSERT: I want to talk about the U.N. resolution, the need for international troops, but one point on the rationale for the war, the president said repeatedly, “We must disarm Saddam Hussein of weapons of mass destruction.” You went to the United Nations, told the country and the world that Saddam Hussein had sizable quantities of weapons of mass destruction, we would find them. Where are they? Will we ever find them?

SEC’Y POWELL: We put forward to the world, and in my presentation on the 5th of February, the best intelligence information that we had, that he had weapons and that he had programs. David Kaye is in charge of our effort now with some 1,500 inspectors and analyst and experts. He will provide an interim report later this month, and I’m confident when people see what David Kaye puts forward, they will see that there was no question that such weapons exist, existed, and so did the programs to develop more.

MR. RUSSERT: Was our intelligence overstated? Did we miss this?

SEC’Y POWELL: I don’t think so, Tim. And I don’t think that charge is an accurate one. I can tell you that I sat for a period of four days with the analysts, and there was no blowing up or overdoing what they were telling me. We did not hype it. I did not put forward a presentation on the 5th of February before the world at the United Nations Security Council that wasn’t solidly supported by the best analysis that we were able to bring to the effort. If there was anything that looked the least bit, you know, not supportable, we didn’t use it. And these are the most dedicated people in the intelligence community who put that presentation together. So we did not try to hype it or blow it out of proportion.

MR. RUSSERT: Let me turn to the resolution that we’ll summit to the United Nations. This has been the response of two key countries: France and Germany. “The leaders of France and Germany rejected as insufficient the Bush administration’s proposal to give the United Nations a greater role in Iraq’s security and reconstruction... [They] said a proposed U.S. resolution failed to meet their primary concerns—that political authority in Iraq be transferred to Iraqis as quickly as possible, and that the United Nations, not the United States, take over the main role in rebuilding Iraq.”

Would we allow the U.N. to take over the main role in rebuilding Iraq in order to satisfy the Russians, the Germans, the French?

SEC’Y POWELL: No, look, there is enough work here for everyone, but the lead role has to be played by the United States. We are the ones who are there now. We are the ones who took over the country. We have governing responsibility. And we believe that there is no need for a contest over this. The president has always said that the United Nations should play a vital role. Sergio de Mello, who lost his life tragically, hoping to play that vital role, was filling that vital role function. He was working closely with Ambassador Bremer.

We were making it clear what the U.N. could do and should do with respect to electoral reform, with respect to reconstruction activities, with respect to working with Ambassador Bremer in the creation of a political entity that the Iraqi people could be proud of, a governing council. And so we have a good cooperative effort. But to think that somehow you could suddenly bring in the U.N. and say, “It’s all yours,” and expect them to be able to do the job under the current set of circumstances is not appropriate.

Now, the other part of the statement that you just read, or the press report you just read, said that we want to move to sovereignty as quickly as possible. So do we. But to think that somehow you could tomorrow wake up and say, “OK. Fine. Give sovereignty back to the Iraqi people,” before you have a constitution, before you’ve had elections, before you’ve had the institutions of democracy put in place is not a reasonable statement to make.

I have been in touch with my French and German colleagues as well as a number of my other colleagues around the world and I’ve asked them for specific suggestions they might have with respect to the resolution as opposed to broad statements. They should study it a little longer and come forward with specific ideas before giving it a grade.

MR. RUSSERT: Here’s the problem. This is how the Congressional Budget Office warned the Congress and the country: “The Congressional Budget Office warned that the Army lacks sufficient active-duty forces to maintain its current level of nearly 150,000 troops in Iraq beyond next spring. In a report that underscores the stress being placed on the military by the occupation of Iraq, the CBO said the Army’s goals of keeping the same number of troops in Iraq and limiting tours of duty there to a year while maintaining its current presence elsewhere in the world were impossible to sustain without activating more National Guard or Reserve units. ‘The Army does not have enough active-duty component forces to simultaneously maintain the occupation at its current size, limit deployments to one year, and sustain all of its other commitments,’ the CBO said in the first detailed analysis of the likely future cost of the Iraqi occupation.”

The Europeans know that. Don’t they have us over a barrel? The French, the Germans can say, “You called us Old Europe. You dissed us. And now you’re asking for our help. Well, then you have to turn this over to the U.N. or we’re not sending troops and you can stay there as long as you want but you can’t afford to.”

SEC’Y POWELL: I’m not sure the French and the Germans are prepared to send troops under any set of circumstances. The Germans have sort of made that rather clear and the French are rather stressed.

With respect to how many troops are going to be required a year from now, that’s a judgment that will have to be made by the Pentagon, and will be a function of how the situation’s changed. We are not expecting this new resolution to cause a large number of additional troops to be added from the international community. I would guess that perhaps there are 10,000 to 15,000 more who might be made available. There are a lot of demands on the international community, in the Congo, in Liberia, in Bosnia, in Kosovo, many other places.

What we’re really interested in in this resolution, though, is to get the international community to come together and participate in the political reconstruction of Iraq. But we’ve got a plan. Ambassador Bremer has a plan and you have to have a single leader, and that single leader right now is Ambassador Bremer.

And the U.N. has a vital role to play, and we can work out arrangements where the U.N. is more than represented and plays those roles that it is best able to play without in any way causing any confusion between the responsibilities of the governing council or Ambassador Bremer, as the coalition provisional authority leader. We will be able to work all of these out, I’m quite sure, and I want to hear specific suggestions from our Security Council colleagues as to how we might do this.

MR. RUSSERT: Mr. Secretary, as you know, before the war, you warned about the difficulties of winning the peace. Brent Scowcroft, the former national security advisor to President Bush, said that you couldn’t obtain it in a reasonable period of time. Anthony Zinni, a Marine general, a man that you know and respect, had this to say: “A former U.S. commander for the Middle East who still consults for the State Department blasted the Bush administration’s handling of postwar Iraq, saying it lacked a coherent strategy, a serious plan and sufficient resources. ‘There is no strategy or mechanism for putting the pieces together,’ said retired Marine Gen. Anthony C. Zinni, and so, he said, ‘we’re in danger of failing.’ ...Zinni invoked the U.S. involvement in the Vietnam War in the 1960s and ’70s. ‘My contemporaries, our feelings and sensitivities were forged on the battlefields of Vietnam, where we heard the garbage and the lies, and we saw the sacrifice,’ said Zinni...‘I ask you, is it happening again?’”

SEC’Y POWELL: Well, we have many consultants in the State Department. General Zinni was a consultant and still does some important work for the Institute of Peace with respect to Indonesia. I don’t think it’s happening again. We have very, very competent commanders who are also officers who served in Vietnam, people like Lieutenant General Rick Sanchez on the ground, John Abizaid, or Dave Petreyes, the commander of the 101st Airborne Division up in the north, who’s doing a brilliant job, and you’ve been reading about in the papers, of bringing stability to the northern part of Iraq in a way where the governing councils of the various towns are able to take more responsibility.

We do have a strategy, and Ambassador Bremer on Friday laid that strategy out to the Iraqi people, and it goes from establishing security and increasingly giving the security responsibilities over to Iraqis as the national army is trained, as police are trained, as border patrols are trained, and then slowly but surely, giving more and more authority to the governing council, to the new Cabinet ministers and then putting in place a constitution that will lead to free elections, and those elections will result in a government of Iraq, and at that point, it will be transferred to Iraq.

And so while we find lots of things to criticize—yes, we’re taking casualties, we regret every one, and I wish there were no casualties but sometimes that’s what conflict requires. Most often that’s what conflict requires. Let’s not overlook the successes that we have had. Let’s not overlook the new sense of hope that we are giving to the Iraqi people, with schools open, a free press, all the other things that we take for granted, but which were never seen in Iraq before. All that is now happening. The president will talk to this tonight and let the American people know that they can be proud of what we accomplished, proud of what our youngsters are doing, but it is still a war we have to fight and it’s a war we will win.

MR. RUSSERT: General Zinni had one other comment and that was questioning the Bush administration’s decision in January to have the Pentagon oversee postwar efforts in Iraq. ”[Gen. Zinni] also questioned the Bush administration’s decision in January to have the Pentagon oversee postwar efforts in Iraq. ‘Why the hell would the Department of Defense be the organization in our government that deals with the reconstruction of Iraq?’ he asked. ‘Doesn’t make sense.’”

SEC’Y POWELL: Yes, it does, and there’s quite a bit of precedent for it. I mean, General Douglas MacArthur, who was not a State Department or Department of Commerce official, in Japan, and when you are looking at a problem like this, a mission like this, and you are about to take over a country of 25 million people through the use of military force, and in the aftermath of that conflict, you have to establish security throughout the country, then the military is uniquely suited for this.

MR. RUSSERT: Would we be willing to say to the...

SEC’Y POWELL: But it’s not just the Pentagon. I mean, I have a considerable number of State Department officers who are working for Ambassador Bremer. Ambassador Bremer is a former foreign service officer of great distinction doing a great job. And we’re all now working this as a team effort.

MR. RUSSERT: Would the United States be willing to say to the United Nations, to the French and the Germans and others, “All right, the Pentagon will not be the lead organization in the reconstruction. It will be shifted to the State Department, if that will help encourage you to join us in this effort”?

SEC’Y POWELL: Neither the French nor the Germans have questioned the manner in which the United States organizes. It is now being run by an interagency group but there has to be a lead, and the lead, appropriately, is the Pentagon, because of the resources and assets that the Pentagon can bring to bear on the problem. And all of the other institutions of government, all of the other ministries of our government, are supporting and assisting the Pentagon.

MR. RUSSERT: Madeleine Albright, one of your predecessors as secretary of state, was on the “Today” program the other day, talking about terrorism and Iraq and had this to say. Let’s watch:

(Videotape, “Today,” August 21):

MS. MADELEINE ALBRIGHT: I do think that what has happened is that whereas the link with al- Qaeda was very tenuous at best when proposed by the Bush administration, now, in fact, Iraq is going to become a breeding ground for terrorism, or a gathering ground, as Afghanistan had.

(End videotape)

MR. RUSSERT: A breeding ground.

SEC’Y POWELL: I think it is, certainly for the moment, starting to look like it. There are terrorists who are being drawn to Baghdad. I’m not sure how large these numbers are, how significant the threat is. But we will deal with it in Iraq. And two-thirds of al-Qaeda’s senior leadership has been destroyed over the last two years since the war on terror began right after 9/11, and we are concerned about the fact that some al-Qaeda elements or terrorists may be heading toward Iraq, and they will be dealt with there. And they’ll be dealt with not just by the U.S. forces but by the coalition forces, and increasingly, I think, will be dealt with by Iraq indigenous security forces that are being raised and created right now.

MR. RUSSERT: How are we going to know we’ve won in Iraq?

SEC’Y POWELL: We’ll know we have won when the security situation is under control, when the political process is well under way and a constitution is in place, elections are taking place and we’re preparing for the turnover of the government to the Iraqi people, and they have put in place the institutions of government so that we can leave, if that’s what they wish us to do, and we will see a responsible government that will live in peace with its neighbors, not abuse its people and not develop weapons of mass destruction.

MR. RUSSERT: That’ll be years.

SEC’Y POWELL: I don’t know how long it’ll take, but the process has begun.

MR. RUSSERT: Let me turn to North Korea. One of your staff members, an undersecretary of state, John Bolton, gave a speech, and this is how it was reported: that “Kim Jong Il and his grip on the nation. The speech, titled ‘A Dictatorship at the Crossroads,’ described life in North Korea as ‘a hellish nightmare’ and called Kim a ‘tyrannical rogue.’”

Was that helpful?

SEC’Y POWELL: It’s accurate. And John’s speech was cleared within the department so there was nothing that was inconsistent with policy. John happened to give it in Seoul at a time when we were undergoing some delicate discussions with our friends, and it got a great deal of attention. And it got a great deal of attention especially from the North Koreans. But notwithstanding all of the attention it got, the North Koreans and all of our other neighbors in that part of the world came together in Beijing a few days after the speech to begin a six-party discussion about this problem.

MR. RUSSERT: Also this from The New York Times, however: “In an interview last year with The New York Times, [John Bolton] was asked about conflicting signals from the administration on North Korea. He strode over to a bookshelf, pulled off a volume and slapped it on the table. It was called ‘The End of North Korea,’ by an American Enterprise Institute colleague. ‘That,’ he said, ‘is our policy.’”

Is that our policy?

SEC’Y POWELL: Our policy is the denuclearization of the Korean Peninsula. It’s also the policy of all of those participating in the six-party talks. But if you think that I am any more of a fan of the North Korean regime than John Bolton is, that’s wrong. We know this regime. We know the kind of regime it is. We know about the prison camps it keeps. We know about its trafficking in drugs, its trafficking in counterfeit currency. This is not a regime to be admired in any way. But our policy right now is not to invade it or to overthrow it. But right now, our policy is the denuclearization of the peninsula.

And then there are many other issues we have that we want to engage our friends on with respect to North Korea: these criminal activities that it participates in, as well as the large army it maintains at the expense of taking care of its people, and its proliferation of missiles and other technologies that can be used to develop weapons of mass destruction. So there’s quite an agenda we have with the North Korean regime. And I think the success that we have had in recent months is making it not just an agenda between us and the North Koreans, but between us, the Russians, the Chinese, the South Koreans, the Japanese, and the North Koreans; six parties, not just two.

MR. RUSSERT: The cover of Time magazine tomorrow, headlined, The Saudis: Whose Side Are They On in the War on Terror? — in this release from Vanity Fair magazine, “Former White House counterterrorism czar Richard Clarke tells Vanity Fair that the Bush administration decided to allow a group of Saudis to fly out of the U.S. just after September 11 — at a time when access to U.S. airspace was still restricted and required special government approval. According to other sources at least four flights with about 140 Saudis, including roughly two dozen members of the bin Laden family, flew to Saudi Arabia that week — without even being interviewed or interrogated by the F.B.I.”

Why was that allowed?

SEC’Y POWELL: Well, I don’t know that that’s accurate. I don’t know the details of what happened. But my understanding is that there was no sneaking out of the country; that the flights were well-known, and it was coordinated within the government. But I don’t have the details about what the FBI’s role in it might or might not have been.

MR. RUSSERT: How about the Saudis? Do you believe they are on our side in the war on terror?

SEC’Y POWELL: Yes, I do. And if you see what the Saudis have done, look at what they have done, you know, in recent months in terms of going after terrorists within the kingdom, they have become far more active since the bombings that took place in the kingdom in May. And the level of cooperation has gone up. I think the Saudis have a clear understanding that they have a major role, more of a role than they’ve been playing in the past, and they have been aggressively pursuing terrorists. They have pulled up a number of cells, found a lot of explosives and other devices within Saudi Arabia. And we’re going to continue to encourage them to do that.

We’re encouraging them to cut off all funding for any organization that might have a terrorist connection anywhere in the world, including places like Hamas. And we’re getting good reception from them. And we have sent teams over to talk to Crown Prince Abdullah on all of the issues that we think we need to be focusing on. And we have found a new spirit of cooperation.

MR. RUSSERT: Colin Powell, we thank you for sharing your views.

SEC’Y POWELL: Thank you, Tim.

MR. RUSSERT: Coming next: the chairman of the Republican Party, Ed Gillespie; the chairman of the Democratic Party, Terry McAuliffe. They square off on the California recall and the 2004 presidential race. All coming up right here on MEET THE PRESS.

(Announcements)

MR. RUSSERT: The national party chairs in the race for the White House and the California Statehouse after this brief station break.

(Announcements)

MR. RUSSERT: And we are back joined by the new chairman of the Republican Party, Ed Gillespie, the chairman of the Democratic Party, Terry McAuliffe. Welcome both.

MR. TERRY McAULIFFE: Great to be back.

MR. RUSSERT: Ed Gillespie, who will be the next governor of California?

MR. ED GILLESPIE: You know, I don’t know. I’m like most other Americans, Tim, as RNC chairman, I’m limited in my role, in fact, proscribed from doing anything. So I just throw my popcorn in the microwave and watch it on television like everyone else, but it’s fascinating to watch but I couldn’t predict right now.

MR. RUSSERT: You’d like to see Governor Davis recalled?

MR. GILLESPIE: We are neutral on that. That is something for the voters of California to decide. We’ve not taken a position on the recall and we don’t have a process here that allows for a Republican nominee to emerge and so we’re not in support of any one candidate. And, like I say, the campaign finance laws, by the way, don’t allow me to raise money even if we did have a role. So there’s not much I could do even if I wanted to or were able to do as RNC chairman but I’m not.

MR. RUSSERT: Chairman McAuliffe.

MR. McAULIFFE: Gray Davis was the duly elected governor eight months ago. Eight million people voted for Gray Davis. We’re going to win on question one, the no question. And also Cruz Bustamante is going to get the most votes on question two. So it’s going to be a great night for the Democratic Party on October 7 no matter what happens.

MR. RUSSERT: So no recall and Bustamante will lead the field, although he will not become governor.

MR. McAULIFFE: Well, listen, I think the folks in California understand what’s going on here. I mean, Gray Davis is the duly elected governor of the great state of California. He got eight million people to vote for him. What you have in this situation is you had a right-wing conservative put up about $2 million of his own money to go out and get this recall on the ballot. I think it’s wrong. I think it’s wrong for democracy.

I was just in Nevada on Wednesday where they’re trying to recall the Republican governor. I said that’s wrong. You don’t want our governors in these 17 other states—all of a sudden, they have to make very tough, difficult decisions about how they’re going to deal with the fiscal issues in their state having to worry every day about a recall. I think it’s wrong for democracy. I don’t like to see it. You know, it is a pattern that’s developing. You see what’s going on in Texas today with Tom DeLay trying to disenfranchise minority voters in Texas with the redistricting plan. It’s got to stop. We have enough elections in America.

MR. RUSSERT: What do you think of Cruz Bustamante as lieutenant governor accepting a $2 million campaign contribution from Indian tribes, putting it into an old campaign committee from 2002 and then transferring it to be used for his election as governor?

MR. McAULIFFE: It is legal. It is disclosed. I remind you it’s Arnold Schwarzenegger who is the candidate out there who said he would take no special interest money and has now taken special interest money. This is a very short campaign. It’s basically about 50 days. You have to reach millions upon millions of voters out there, but it is perfectly legal for him to do it and nothing wrong with him doing it. It’s Arnold, you know, that big Republican pro-choice, pro-gay rights, pro-gun control Republican Arnold Schwarzenegger who is the one who said he wouldn’t take any special interest money.

MR. RUSSERT: It is ironic because tomorrow, before the Supreme Court, they’re arguing the campaign finance...

MR. McAULIFFE: Yeah.

MR. RUSSERT: ...reform bill and arguing against it is the general counsel of your Democratic Party.

MR. McAULIFFE: He’s representing the California Democratic Party. He has joined with the Republican National Committee. But Joe Sandler, who is our counsel at the DNC, represents many state parties and he happens to be representing the California Democratic Party who is a plaintiff in the suit.

MR. RUSSERT: Why would you allow that?

MR. McAULIFFE: I can’t tell. He doesn’t work for the DNC. We are one of his many clients. I cannot tell someone whom they represent and who they don’t. He’s entitled as a lawyer to have whatever clients he wants.

MR. RUSSERT: Mr. Gillespie, let me turn to the campaign of 2004. What will be the most important issue in that campaign?

MR. GILLESPIE: This is going to be a campaign, I believe, that’ll be about a number of issues. The issue of the economy and jobs is critically important, the issue of national security and winning the war against terror is critically important, and the issue of securing our homeland against the potential threat of future terrorist attack is also important. And on all three of those issue areas, our party is stronger. President Bush has demonstrated strong and principled leadership, and I think that’s why he’ll be re-elected in 2004.

MR. RUSSERT: Let’s take the economy first. If a CEO of a company came to you and said, “We have a $500 billion deficit, we’ve lost three million jobs and the unemployment rate is over 6 percent,” why should they be rehired?

MR. GILLESPIE: The fact is, it’s looking forward. What are we trying to do to fix this? Remember, when President Bush took office, half of the Nasdaq had already evaporated. The bubble had burst, Tim. The economy had slowed from 5 percent growth in the second quarter of 2000 to less than 1 percent growth in the third and fourth quarters, on its way to negative growth in the second quarter of 2001. We inherited this bad economy. It was compounded by the attacks of September 11. It was compounded by the corporate scandals. The president has taken action. In fact, if the president had not acted in the way he had, unemployment would be 1.6 percentage points higher than it is today, three million more Americans would be out of work than there are today; economic growth would be negative, not positive and on its way trending upward, according to all positive signs. The Democrat approach is to raise taxes. I think that’s a mistake. That is going to hurt the economy. It won’t create a single job. And the fact is, the president has a positive agenda of going forward, and that’s why he’s going to be re-elected.

MR. RUSSERT: What will be the most important issue of 2004?

MR. McAULIFFE: This election’s going to come down to jobs. It’s going to come down to the economic issues that confront ordinary Americans every single day. George Bush has been a miserable failure in dealing with the domestic issues that relate to education, health care, job creation. This is the first president, as you know, Tim, since Herbert Hoover who has lost jobs on a net basis every single month since he’s been president. This is the third Republican chairman that I have sat with in three years, and each chairman says, “With the tax cuts we’re get the economy going.” Well, 3.2 million Americans have lost their job. In the month of August—and George Bush just went out and gave a great speech, said the economy is recovering—93,000 Americans just lost their job in the month of August. We are for tax cuts; let’s be perfectly clear. We’re for tax cuts for ordinary Americans who work hard, that is fiscally balanced. George Bush has created a gigantic budget surplus—deficit in this country. We had a Bill Clinton who created a surplus in this country. George Bush inherited a $5.6 trillion surplus; has now turned that into a $2.3 trillion deficit. So there isn’t money for education today; 49 of 50 states today have raised their college tuition. I was just in Arizona the other day. It’s up 39 percent.

People need help. They’re looking to the Democrats. We proved we could do it. Bill Clinton proved we could do it. From 1992 to 2000, the longest sustained economic growth in the history of our country; 22 million new jobs. Bill Clinton did not blame former President George Bush. Bill Clinton, when he took office with Al Gore, inherited a recession. He didn’t blame anybody else. You know what? They got to work. They got this economy working together. They got more money for education, they got more money for health care. This president has not been able to do it. The tax cuts for the rich do not work. We need to get the money into the hands of the people who need it most. You get a tax cut, you get a tax cut, I get a tax cut. There are 500,000 kids who’ve just lost their after-school program. There’s not money for our firefighters.

MR. GILLESPIE: Tim, let’s be clear about something. A family of four with an income of $40,000 saw their tax burden go down from about $2,000 to $45 under the president’s tax-relief package. The fact is, the tax burden under President Bush has shifted to the wealthy. If you look at those who make $30,000 to $40,000 a year, since President Bush took office, their share of the income tax burden has gone down from 2.1 percent to 1.9 percent, while those who make over $200,000 a year saw their share of the income tax burden go up from 44.8 percent to 45.4 percent. That’s 6/10ths of a percent increase in the tax burden. Terry is inaccurate when he says this.

MR. McAULIFFE: Tim, we just want—50 percent of Americans today are getting back less than $100—50 percent of the Americans today. Well, at the same time George Bush is sending you a check for $100, guess what? Your state taxes are going up, your property taxes are going up, you’re seeing afterschool funding—you’re seeing cuts in Pell Grants and in Perkins loans—people who need money the most.

You’re seeing—actually costing you more money because all your taxes are going up at the local basis and you’re getting back $100 from George Bush. They say, “Enough’s enough.”

MR. RUSSERT: Here’s the problem. Here’s the headline that greets people across the country. “Federal work force largest since 1990.”

Mr. Gillespie, you went up to New Hampshire and caused quite a stir. This is how the Manchester Union Leader, a conservative newspaper, described your visit: “Had there been any doubts about the direction the Republican Party is headed, they vanished last week when Republican National Committee Chairman Ed Gillespie visited New Hampshire. ...No longer does the Republican Party stand for shrinking the federal government, for scaling back its encroachment into the lives of Americans, or for carrying the banner of federalism into the political battles of the day.”

You called the Union Leader; you sent them letters. They stand by your comments, and this is their second editorial: “We wanted to take this opportunity to assure Rush [Limbaugh] and everyone else that the editorial was and is 100 percent true. Over the course of an hour-long meeting with Ed Gillespie, the chairman of the Republican National Committee, we took great care to give him every opportunity to explain himself fully so that nothing could be misunderstood. The result was a surprisingly frank admission that the Republican Party defines ‘fiscal responsibility’ as increasing the federal budget at ‘a slower rate of growth’ than the Democrats (his words). We asked him three times to explain why President Bush and the Republican Congress have increased discretionary non-defense spending at such an alarming rate, and why the party has embraced the expansion of the federal government’s roles in education, agriculture and Great Society-era entitlement programs. ‘Those questions have been decided,’ he said. The public wants an expanded federal role in those areas, and the Republican Party at the highest levels has decided to give the pubic what it wants.’”

MR. GILLESPIE: Well, there’s a little...

MR. RUSSERT: Tax cuts across the board, increased spending across the board, defense—8 percent increases in non-defense spending. How can we have it all? And that’s why you have deficits of $500 billion.

MR. GILLESPIE: Tim, first of all, I don’t where you got your statistic on 8 percent increase in nondefense discretionary spending. It is not. The fact is, when President Bush took office, Bill Clinton’s last budget called for a 15 percent increase in non-defense discretionary spending. In the president’s first budget, he brought it down to 6 percent, in the second budget down to 5 percent, and this year, in this budget, it is down to 2 percent. Overall growth is limited to 4 percent, which is what an average family’s growth in expenditures is, and we have to accommodate the need for the war against terror. We have to win this war against terror, and that does require an increase in spending. Fifty percent of the deficit is due to the slow economic growth that is now starting to turn around thanks to the president’s policies. The fact is, the president is—my party is the party of fiscal responsibility. We are the party of Ronald Reagan still today. We are the party of lower taxes, less government, less federal spending, fewer regulations and strong national security.

MR. RUSSERT: We’re at a $2.2 trillion budget and it grew by 7.9 percent under a Republican president and a Republican Congress.

MR. GILLESPIE: You have to slow this rate, as I said, with—under President Clinton it was 15 percent non-defense discretionary spending; that is down to 2 percent. That is fiscal restraint, and the fact is that the Union Leader was wrong in mischaracterizing my comments. What I said was—they asked me about the Department of Education, the elimination of the Department of Education. My point was, I was there. I charged that Hill harder than anybody, with Newt Gingrich and Dick Armey. We lost. We have to keep moving forward and apply conservative principles to a federal role in education. I think Terry’s party and his candidates are often backwards-looking. They’re refighting the debates of the ’90s and the ’80s and the ’70s, and that that’s a mistake, that we have to move forward.

MR. RUSSERT: The Democrats...

MR. McAULIFFE: I’ve love to refight the ’90s. You know, record surpluses, 22 million new jobs created, more money, 100,000 new cops on the street, more teachers in the classroom. I would love to renegotiate the ’90s. You know what? America wants it back.

MR. RUSSERT: But, Mr. McAuliffe, when you listen to the Democratic candidates for president, all you hear is roll back the Bush tax cut, which would increase taxes, and new spending for prescription drugs, new spending for universal health care, new spending for education, new spending for environment. Nobody is saying, “Wait a minute, we have a $500 billion deficit,” and specifically tell the country how we’re going to get there without smoke and mirrors.

MR. McAULIFFE: Well, I disagree. I’ve been traveling with our nine candidates. They all have economic plans on the table. I remind you that we went through this in 1992 when Bill Clinton became president, with Al Gore as vice president, inherited record deficits from George Bush I. We were in a recession. We got to work. As you know, we put economic plans that they took to the Congress. Not one single Republican, Tim, I remind, you, voted for the economic recovery acts that President Clinton put on the table in early 1993, not a single one. And Dick Armey and others, you know, promised us economic Armageddon. You know what? It was the greatest economic expansion in the history of our country. People were very happy with the ’90s. Surpluses, job creation. That’s why we need a Democratic president back in in 2004 elected on November 2nd, because we can’t continue to lose jobs. We are losing jobs every single month, and his simple answer, George Bush’s answer to everything is tax cuts for the rich. You know what?

The tax cuts for the rich, the rich are not going to go out and employ people. You get a tax cut today—the wealthy today buy everything that they want. We need to get money into the hands of ordinary Americans to get this economy moving again. His economic record is a miserable failure.

MR. RUSSERT: We’re going to take a quick break and continue our conversation and some latest poll numbers on President Bush and the Democratic race for the White House right after this.

(Announcements)

MR. RUSSERT: And we are back. John Zogby has a new poll coming out tomorrow, and here’s what it’s going to show: the job performance of the president; positive now 45, negative 54. One year ago it was 64-36. And the president’s re-elect numbers, “President George W. Bush Deserves To Be Re- Elected?”: 40; “No, someone new,” 52. That’s a generic number. People always look better in those settings. But nonetheless, Ed Gillespie, that’s a serious decline in George Bush’s political polling.

MR. GILLESPIE: Tim, it’s the exact decline that we predicted would happen back in April when Matthew Dowd, the RNC’s pollster, said and counseled Republicans, “Don’t kid yourself, these numbers are going to come down by virtue of gravity.” They have. They’re still higher than where former President Clinton was at this time in his presidency. Former President Reagan’s—they’re higher than those at this time in his presidency. They went on to fairly significant wins the next year, and I think we will, too, because the American people want a president who is forward-looking and positive. If you saw the debate the other night with the nine Democratic presidential candidates, I think history will show that this field has taken presidential discourse to a new low. The kind of rhetoric you hear from these folks when—you know, on neither side of the aisle, Ronald Reagan never said that Jimmy Carter couldn’t find countries in his own hemisphere. Walter Mondale never said that President Reagan was a “miserable failure.” When Bill Clinton ran against President Bush, he didn’t compare him to Saddam Hussein or the Taliban. And when Bob Dole ran against President Clinton, he didn’t say that he was an absolute phony or a liar.

The kind of words we’re hearing now from the Democratic candidates go beyond political debate. This is political hate speech. And I think that the American people will reject that approach. They appreciate the president’s strong and principled leadership and the fact that he has a positive agenda, and they have, frankly, nothing but negativity and pessimism and protest to offer.

MR. RUSSERT: Despite the decline...

MR. McAULIFFE: Clearly, Tim, I’ve got to argue with that for a minute. It’s laughable to think that the Republican Party can call the Democratic Party negative. You know, I remind you that this is the party of Tom DeLay. I remind you that, you know, several years ago when George Bush’s father was running for office, he’s the one that ran the Willie Horton ad. I remind you that four years ago when this President Bush was running against John McCain, a war hero, in South Carolina, the Bush campaign went out and attacked John McCain, they attacked his wife, they attacked his children, they attacked his mental sanity, they attacked his patriotism.

MR. GILLESPIE: Tim. Wait a second, Tim. Tim...

MR. McAULIFFE: Wait a minute. And Max Cleland ran for the United States Senate—10 months ago Max Cleland...

MR. GILLESPIE: That’s patently false.

MR. McAULIFFE: ...a triple amputee who left three limbs on the battlefield of Vietnam, they had the audacity to call Max Cleland unpatriotic.

MR. GILLESPIE: Tim, let me say something. I’m sorry, what I just said is factually accurate.

MR. McAULIFFE: We have 27 positive speeches on the ground against one against George Bush.

MR. GILLESPIE: What Terry is saying right now is factually inaccurate. The quotes I just cited I have chapter and verse for, and anybody who tuned into the debate saw them. Terry McAuliffe cannot find one instance where this president in his campaign said anything about John McCain’s mental health or his wife’s.

MR. McAULIFFE: His campaign did. I disagree. Absolutely. I’ll get it for you.

MR. GILLESPIE: He can’t find one—no, you’re wrong. Terry, I was on his campaign, and that is flat-out wrong.

MR. McAULIFFE: I’ll get you the details.

MR. GILLESPIE: Yeah, you do that, and you make them public because you’re wrong.

MR. McAULIFFE: And let me tell you right now...

MR. RUSSERT: Let me go back to the issue...

MR. McAULIFFE: ...guess how many positive speeches our Democratic candidates have given to date?

MR. RUSSERT: Let me go back to the issue...

MR. McAULIFFE: Twenty-seven.

MR. RUSSERT: Let me go back to the issue of...

MR. McAULIFFE: How many has George Bush given at this time? One.

MR. RUSSERT: ...the issue at hand: Despite the president’s decline in polling numbers, head-to-head against all the Democrats, he’s still beating them. Zell Miller, a Democratic senator from Georgia, issued this warning: “Once upon a time, the most successful Democratic leader of them all, FDR, looked south and said, ‘I see one-third of a nation ill-housed, ill-clad, ill-nourished.’ Today our national Democratic leaders look south and say, ‘I see one-third of a nation and it can go to hell.’”

And if you look at the 2000 election, Mr. McAuliffe—here’s the map. The red are Republican states; the blue, Democratic states. Look at the South: solid red, solid Republican. How can you elect a president of the United States in 2004 without winning a Southern state?

MR. McAULIFFE: Oh, we are going to win Southern states in 2004. I would make the argument they’ve actually won Florida on that map, but we won’t go through that again today. But we are targeted, the national party. I have already sent resources, I have already sent personnel down to the Southern states to build our Southern strategy for 2004. We are going to be there. We’re going to be competitive. The last election, if you look at that map, Tim—very close. Just a handful of electoral votes made the difference. I am very excited where we are today. You had the Zogby poll up. I’ll give you six other polls in the last two months that have George Bush’s re-elect number in the low 40s. The reason why it’s in the low 40s is he has been a disaster on the economic front. His one idea of tax cuts for the rich don’t work. And they are now questioning this man’s foreign affairs dealings, dealings in foreign affairs.

MR. RUSSERT: Would you be comfortable with Howard Dean as Democratic nominee...

MR. McAULIFFE: Absolutely.

MR. RUSSERT: ...and his position on national security and on Iraq?

MR. McAULIFFE: Well, I, again, cannot take sides as it relates to we have nine candidates running for president. I have to be total neutral, and I will stay neutral through that. But I would be very comfortable with any of the nine running.

MR. RUSSERT: Terry McAuliffe predictions from 2002 on MEET THE PRESS: “I think we’re going to win the House back.” The Democrats last six seats. “We’re going to net seats in the Senate.” The Democrats lost two seats.

MR. McAULIFFE: Yeah.

MR. RUSSERT: And “We are going to win Florida [Governorship]...which is going to set up very nicely for 2004.”

MR. McAULIFFE: Yeah.

MR. RUSSERT: Jeb Bush is gone.

MR. McAULIFFE: Yeah.

MR. RUSSERT: One, two, three, all wrong.

MR. McAULIFFE: And I had to write $2,000 or $3,000 to The Boys and Girls Club of Washington. But, Tim, I am the national party chairman. I am not going to go on television, you know, three days before an election and say, “Oh, no, Tim. No, Mr. Russert, we’re not going to win these elections.” My job is the chief cheerleader of the party. We’re going to win everything. That’s my job. My other job is also to raise an awful lot of money. My main responsibility is to make sure the nominee of the Democratic Party is able to compete against what’s going to be three-quarters of a billion dollars against us. And we’re in the best shape our party has ever been in.

MR. GILLESPIE: My job is to make sure that Terry’s predictive powers remain consistent going into 2004, and I’m confident that that’ll be the case.

MR. RUSSERT: And the one thing we can base on fact is yesterday the St. Albans Bulldogs, 25; the Gonzaga Eagles, 20. Yesterday God was not purple. He was wearing Bulldog blue. Congratulations, Bulldogs. To make it a perfect weekend: Go, Bills. Beat the Patriots.

We’ll come right back and remember September 11 two years ago.

(Announcements)

MR. RUSSERT: And we are back. This Thursday, the second anniversary of the horror and agony of September 11. Three thousand sixteen die at the World Trade Center in New York, the Pentagon and a field in Shanksville, Pennsylvania. In our minds, it seems so long ago. Yet, in our hearts, it feels like just yesterday. May the faith and hope and strength of those who lost their lives and their families always be remembered and guide our nation.

Copyright© 2003, National Broadcasting Company, Inc. All Rights Reserved.

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