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CNN Capital Gang

Location: Washington, DC


HEADLINE: North Korea Expels Nuclear Weapons Experts; Bush to Announce Economic Plan; Edwards Announces Run for Presidency

GUESTS: Lindsey Graham, Miguel Diaz, Fred Thompson

BYLINE: Mark Shields, Al Hunt, Robert Novak, Margaret Carlson

North Korea's expulsion of international nuclear inspectors produced widely different reactions in Pyongyang and Washington. Then, President Bush will go to the country Tuesday with his economic growth plan, including a reduction in taxation on dividend income. Finally, Senator John Edwards of North Carolina became the third Democrat to virtually announce for the presidential nomination by filing an exploratory committee.

ANNOUNCER: Live from Washington, THE CAPITAL GANG.


I'm Mark Shields, with Al Hunt, Robert Novak, and in Los Angeles, Margaret Carlson.

Joining us is the successor to Strom Thurmond of South Carolina, Republican Senator Lindsey Graham.

Thanks for coming in, Lindsey.


SHIELDS: Good to have you here.

North Korea's expulsion of international nuclear inspectors produced widely different reactions in Pyongyang and Washington.


CHOE JIN SU, NORTH KOREAN AMBASSADOR TO CHINA (through translator): It is clear as daylight that the outbreak of nuclear crisis on the Korean peninsula is due to the U.S. hostile stance towards the DPRK.

COLIN POWELL, SECRETARY OF STATE: I don't think we have a crisis in North Korea. We have a very serious situation.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I view the North Korean situation as one that can be resolved peacefully through diplomacy.


SHIELDS: Speaking to U.S. troops in Texas, President Bush drew a distinction between North Korea and Iraq.


BUSH: The case of North Korea, the world must continue to speak with one voice to turn that regime from its nuclear ambitions. In the case of Iraq, the world has already spoken with one voice.


SHIELDS: Al Hunt, is the president saying that if a rogue nation has nuclear weapons, the United States won't mess with it?

AL HUNT, CAPITAL GANG: Mark, I think a pretty good case can be made for intervention in Iraq and diplomacy in Korea. In Iraq, we are enforcing 11-year-old United Nations resolution, and there are not strong buffer—other buffer states in the Middle East like China and Japan and even South Korea in northern Asia.

But I think George Bush has done a really dreadful job of explaining these distinctions, and I think there's no question, therefore, that the Korean situation has complicated his war plans in Iraq. When the president talked a little over a year ago, about a year ago, about the axis of evil, he didn't say, You're less evil if you have nuclear weapons.

So I think there's a crying need for more clarity.

SHIELDS: Bob Novak, North Korea, big army, nuclear weapons, hostile aggressor, threatens the Korean peninsula. Iraq, contained, limited army, no nuclear weapons. Explain it to me.

ROBERT NOVAK, CAPITAL GANG: It's very hard to explain, and the chickens have come home to roost on the axis of evil. If I—is that mixing a metaphor?

SHIELDS: Yes, in fact.

HUNT: I like it, though.

NOVAK: Well, and because obviously we are not considering them of equal problem for us. The United States is not so considering it. We're not going to do anything about North Korea. In fact, actually nothing is going to happen to North Korea. They're not going to attack anybody.

We are certainly not going to attack North Korea and start a second Korean War. We're not capable—we're barely capable of running a war against Iraq, not capable of a two-front war.

And let me tell you something else. The big problem we have today is with South Korea. They got this left-wing president in who wants to mediate between the United States and South Korea. That's the real problem. I mean...


NOVAK: Between the United States and North Korea, that's the real problem we have.

SHIELDS: Lindsey Graham...

GRAHAM: Yes, sir.

SHIELDS: ... Bob Novak makes a compelling point here, 2.1 million fewer people in the United States military today than there were at the time of Vietnam. I mean, we don't have the wherewithal for a two-front war.

GRAHAM: Well, there's, what, 36,000, 37,000 troops over in Korea?


GRAHAM: And I want to make sure I'm on the right show. He's pretty much sympathetic to the president's position. He's very much against it. But somewhere in the middle is probably the answer.

Here's where the two come together, in my opinion. The same reason you wouldn't want Saddam Hussein to have a nuclear weapon, I think, exists in Korea. And if they have two, and they have five or 10 ever how many, I think, is a very bad situation. And I'm not so sure that diplomacy will work, but there's hope there. The only hope I see in Iraq is for the Arab world to convince Saddam Hussein to leave town and go into exile.

But generally speaking, the Chinese and the Russians have a real interest in helping us. And if you wanted to look for a solution, the one player that could bring it about is China. China has a connection to North Korea unlike anybody in the whole mix, and I have been pretty down on China because I think they cheat on trade, they're a communist dictatorship. And if they want to be part of the world community in a serious way, step up to the plate and get the North Koreans to abandon a very dangerous road they're on.

SHIELDS: OK. Margaret Carlson, out there in—you're in the Pacific Rim, tell us from California how it looks.

MARGARET CARLSON, CAPITAL GANG: Well, I wanted to tell Senator Graham I sometimes wonder if I'm on the right show. But what you have to remember is that Bob Novak is a dove. He doesn't want to fight a war with anybody currently.

President-elect Roh has come back a bit from his own brink this week and wants to be a peacemaker, at least somebody who gets the stalk—the talk started. You know, what separates the United States and South Korea is much less than what separates North and South Korea. And this left-wing president-elect, as Bob calls him, I think, has exercised about as much distancing from the United States as he's going to exercise.

And there's a huge difference between war with Iraq and war with North Korea. While the United States would annihilate North Korea in the end, they could do a lot of damage to Seoul, South Korea, and to America's troops which are there. So it calls for what President Bush is now doing, which is talks and diplomacy.

Bush's mistake was to say that of the leader of North Korea, quote, "I loathe him," and then to put them in the axis of evil and to kind of excite them to this brinkmanship which they so like in North Korea.

SHIELDS: Let me just understand this. What we're counting on is China, a despotic communist nation, to deal with North Korea, a despotic communist nation...

GRAHAM: No, I'm not saying we're counting on them...


GRAHAM: ... I'm saying they could rise to the occasion...

SHIELDS: They can rise to the occasion...


SHIELDS: And we have—we—to alleviate this situation, we can't call it a crisis, it's not a crisis...

NOVAK: It isn't a crisis.

SHIELDS: No, it's not a crisis...

NOVAK: It's not.

SHIELDS: ... if they do the worst thing possible, I mean, as opposed to Iraq doing the worst thing possible, I mean, let's be very blunt about it, 37,000 American troops in Korea would be overrun in a matter of hours.

NOVAK: Can I make a (UNINTELLIGIBLE), can I make a suggestion? First place, I think it's outrageous that this government is acting—is trying to make itself equidistant, the South Korean government, between North Korea and us, when our blood, American blood, saved their country a half a century ago.

What I think we ought to do, let them deal with the North Koreans. They think they can. Let's pull those troops out...


NOVAK: ... (UNINTELLIGIBLE) -- let's pull those troops out, and it might even, it might even be a—something that North Korea likes. Let's pull them out, with—they're not doing any good there.

HUNT: I would have a real problem with pulling them out, because I think it's not only important for the Korean peninsula, it's important for our presence in Asia.

But, you know, I think the broader question that we came—we were sort of skirting around, remember the West Point speech of last year? The president, a new doctrine, doctrine of preemptive or preventative action.

NOVAK: That's a bad doctrine.

HUNT: What—exactly. What is it? What is that doctrine? And if that doctrine really applies, if they really were serious about it, it would appear to apply to North Korea. It would be a cataclysm, I agree.

It seems to me that that was a political doctrine.

SHIELDS: Lindsey?

GRAHAM: Well, Colin Powell said something I do disagree with a bit. If they have two nuclear weapons, that's certainly bad. If they have 10, that's far worse. North Korea is a threat to us, Bob. It's not only a threat to 37,000 troops. You can move them. But North Korea has shown a propensity to sell technology to people who have us. So I think we—this is, in my book, a crisis growing.

SHIELDS: Last word, Lindsey Graham.

We'll be back with the great tax cut debate.


SHIELDS: Welcome back.

President Bush will go to the country Tuesday with his economic growth plan, including a reduction in taxation on dividend income.


BUSH: I am concerned about those who are looking for work and can't find work. And so next week when I talk about an economic stimulus package, I will talk about how to create jobs.

REP. NANCY PELOSI (D-CA), MINORITY LEADER: The speculation that I see doesn't indicate that there's much stimulus in the package. I think what you see is the administration perhaps using the term "stimulus" as a Trojan horse to wheel in some favorite tax breaks for the high end that they're so fond of.



SEN. TOM DASCHLE (D-SD), MINORITY LEADER: The tax break the president is said to be proposing is the wrong idea at the wrong time to help the wrong people.


SHIELDS: Bob Novak, you know those wrong people. Can President Bush seriously describe a cut in taxes and dividends as a jobs creation program?

NOVAK: No. And he shouldn't. It isn't a jobs creation program. He makes a mistake when he calls it a stimulus package. His own economic advisers will tell him you shouldn't use that. It's a Keynesian term.

What this—what this package should be is something to promote economic growth in the long term, promote investment. But the problem is that he is very sensitive, or at least his political people seem—I guess he is sensitive, to this class struggle demagoguery by Nancy Pelosi and Tom Daschle, giving tax cuts to the wrong people. They're already negotiating with themselves. They've cut down the size of the dividend tax cut. They're not going to speed up the tax cuts over a period (UNINTELLIGIBLE) past.

It's very disappointing. The one thing is it not, it is a growth program, not a stimulus package. And I wish the president would stop calling it that.

SHIELDS: Al Hunt, is Bob Novak right?

HUNT: I wish the White House had Bob Novak's integrity, and I really mean that. I mean, Bob, you are dead wrong, but you have complete integrity on this. You really believe, I think honestly, that investment bankers and CEOs are more productive people than school teachers or cops. And that's a point of view, and you express it quite eloquently, if wrongly.

The White House is looking for these fig leaves to cover up what I think is a dangerous giveaway of American tax dollars.

It's bad policy for several reasons, Bob. Number one, it is not stimulus. Bob is right on that. Congressional Research Service said this is one of the least effective ways to short-term stimulate the economy if that's what you want to do.

Number two, the idea of double taxation's a misnomer. I mean, a lot of these, there's no taxes paid in the first place. You know, the National Bureau of Economic Research says that corporations report $80 billion more to shareholders in profits than they do to the IRS. That's $80 billion that's escaping.

If they want to have single taxation, fine, let's do away with these shelters.

And thirdly, Mark, what really is, I think, the most galling is, we are about to go to war, we're talking about a long-term war against terrorism that's going to be expensive. And what is this president's answer when it comes to sacrifice? Big tax cuts for the wealthiest Americans. Outrageous.

SHIELDS: Margaret Carlson in California, what about this? Is it job creation?

CARLSON: No, Bob is right in that it's not a stimulus package. But the reason Bob's one of the wrong people is that whether you tax his dividends or not, he's not going to go buy a refrigerator. He's not going to stimulate the economy in any way. It just goes into the pocket of those people who don't really need to spend the money they get, as opposed to, say, a cut in payroll taxes, where those people would actually spend the money and stimulate the economy.

Even economists friendly to Bush and to tax cuts say this is not going to do anything in the short run, and Bob says maybe in the long run it will do something...

NOVAK: I didn't say maybe.

CARLSON: ... (UNINTELLIGIBLE) long run as...

NOVAK: I didn't say maybe.

CARLSON: ... as—as Keynes said, We're all dead in the long run.

NOVAK: Don't mis—don't misquote me.

HUNT: We're all dead in the long run.

CARLSON: Unemployment is at 6 percent. The states are in deficit, and God knows some of them may go bankrupt. That's why Bush is putting some of—some help to the unemployed and to the states to try to make his package look like it's going to help normal people. But it's not.

And this bugaboo about dividends is something that's been in his craw for a long time. And now he's going to try to get that nontaxation of dividends and with the fig leaf of, it's a stimulus package.

SHIELDS: Lindsey Graham, just a statistic that jumped out this week. Under eight years of Bill Clinton, 230,000 jobs a month were created on the average, 230,000 new jobs a month. Under George Bush, 69,000 jobs a month have been lost since he's been in the White House, on the average.

I mean, is there—this isn't job creation. Something seriously ought to be done about jobs, because that's the measure. It isn't dividends, it isn't whether the stock market is up, it's whether people have jobs, isn't it?

GRAHAM: Let me give you another number, if you want to blame somebody. When the Democrats...

SHIELDS: Not blaming, just (UNINTELLIGIBLE)...

GRAHAM: Well, when the Democrats took over the Senate, the stock market was at 10,000, unemployment was about a third less than it is now. You can look at the time they took over and stopped a lot of the things this president tried to do. But we're all in it together. Now, I bought a refrigerator about two months ago.

SHIELDS: It's about time, Lindsey.

GRAHAM: Well, let me tell you, now, I don't...


GRAHAM: No, Margaret, I don't know if I'm a regular guy or a wrong person. I don't know what adjective is going to come out next from the Democratic Party to describe Americans.

But one thing that this show has in common, that we all probably talking here tonight on stock, it will help the economy long term if you stop taxing dividends. It will allow corporations to raise more money. Now they get a benefit for having debt, because they can write it off. It's a good move. It's a good move to pay unemployment dividends retroactively. I hope he'll do that. It's a good move to speed up the tax cuts so there'll be more money for consumers.

So I like the way he's going, and I think it will help over time.

NOVAK: You know, what Margaret was saying was very painful to me. It was horribly painful. But what Tom Daschle and Nancy Pelosi...


NOVAK: ... and Al Hunt and Margaret Carlson, what is really sad is, they haven't learned anything from what's gone on in this country for the last 70 years. Roosevelt never understood it one bit. He kept throwing out money to the people, throwing out money for public works, and it never works. The only way you can get an economy really humming is to have investment.

This tax system impedes this...

GRAHAM: Are you saying...

NOVAK: ... economy.

GRAHAM: ... Nancy Pelosi's...


GRAHAM: ... not a job creator, is that what you're trying to say?

NOVAK: Well, they don't understand, they think you can take an airplane filled with money, throw it out, and that's going to be...

HUNT: Mark?

NOVAK: ... and that's going to really help.

HUNT: Can I just say this? We had...

CARLSON: Hey, Mark...

HUNT: ... this tax system during the 1990s, and we had the greatest economic growth of your...


HUNT: ... lifetime, Bob.

NOVAK: ... garbage.

HUNT: (UNINTELLIGIBLE) it's true, isn't it, Bob?

SHIELDS: Bob, time is out, but I have to say three words to you, GI Bill. Nothing changed America more dramatically...

NOVAK: You just...


NOVAK: ... let me tell you, anything...

SHIELDS: (UNINTELLIGIBLE) better, and you...

NOVAK: ... you like, anything...


NOVAK: ... anything (UNINTELLIGIBLE) government, you love.


NOVAK: Anything that's government spending, taking money from the productive people...

SHIELDS: I am, I'm...

NOVAK: ... giving it to the unproductive people...


SHIELDS: ... I'm grateful, I'm grateful as a Marine Corps and FBI and a...

HUNT: Nice try.

SHIELDS: ... and a Centers for Disease Control, and I hope you are too.

Next on CAPITAL GANG, president candidate—presidential candidate John Edwards.


SHIELDS: Welcome back.

Senator John Edwards of North Carolina became the third Democrat to virtually announce for the presidential nomination by filing an exploratory committee.


SEN. JOHN EDWARDS (D), NORTH CAROLINA: I'll run for president to be champion, to be a champion for the same people I fought for all my life, regular folks. I think these people are entitled to a champion in the White House, somebody who goes to work every day, seeing things through their eyes, and who provides real ideas about how to make their lives better.

We need to cut some of the federal bureaucracy. We need to cut some unnecessary federal spending. And we need to have tax cuts for the kind of folks that I want to champion, for regular folks, middle- and low-income people, and not tax cuts for the top 1 percent of America.


SHIELDS: Congressman Richard Gephardt of Missouri and Reverend Al Sharpton separately have signaled that they also will be filing.

Margaret Carlson, does John Edwards look to you like a credible candidate?

CARLSON: Well, there are a lot of them, and they're all credible at the moment. We'll find out if there's such a thing as too fresh a face with John Edwards. He's only—he's in his first term in the Senate.

He's got a good theme, not one that worked for Al Gore, but I think will be good this time around, which is, I'm for the outsiders, not the insiders. Because on domestic affairs, George Bush is definitely for the insiders. He's been surefooted since September 11 on foreign policy, but he's assailable on domestic policy.

And Edwards is going to have the money. He's got the tort lawyers lined up with him. And being a tort lawyer is good for being for the outsiders in that that's what, that's who tort lawyers represent.

So I think he's got a good theme going forward. Gephardt looks like an old Democrat, and Edwards at the moment looks like the new Democrat.

SHIELDS: Lindsey Graham, your take on John Edwards.

GRAHAM: John Edwards is a nice fellow, and we were born in the same hospital two years apart. He's got all the things that you need to have, I guess, to look good and sound good on television. But his message is not going to resonate.

One reason the Democratic Party has lost so many seats since I've been in government is, they try to put us all in different groups, regular guys, wrong people. We're really all in it together. And I found his whole opening salvo patronizing, that they're all out there to get you, but I'm going to stand up for you when nobody else will.

And the thing I like most about President Bush, whether you agree with his policies or not, I think he's trying to be genuine. I think he is trying to create economic opportunity for everybody. And the Republican Party's got plenty of faults, but I don't go around labeling people regular guys because of their income. Some of the most extraordinary people I've met in my life are middle- or low- income people.

SHIELDS: I don't think he was patronizing regular people. Go ahead, Bob Novak.

NOVAK: Well, the Democrats have been doing that, Lindsey, since Andrew Jackson's...

GRAHAM: Well, it's not working.

NOVAK: ... time, and, you know, that's...

GRAHAM: Strom knew him, I didn't.

NOVAK: ... that's, that's what they invented, that's what they invented the party for was to attack the really creative and accomplished people in the country.

But the interesting thing with the—that I found was a little bit different that I really enjoy was John Edwards, this filthy rich multimillionaire...

GRAHAM: Well, there you go.

NOVAK: ... trial lawyer...

GRAHAM: There you go.

NOVAK: I know, but I...


NOVAK: ... yes, but I don't, I don't share your niceness.

But this filthy rich trial lawyer, who has gotten all this money by hurting the American economy, saying he's for the regular guy. Now, as one of the irregulars, I resent that.


HUNT: I just don't know why Bob registers as a Democrat, then, if it was...

NOVAK: I'll explain it to you sometime.

HUNT: ... (UNINTELLIGIBLE) something you will.

Look, I think John Edwards is a very attractive candidate. He's got a lot of potential. The Democratic Party has not won a presidential election, Mark, without a Southerner on the ticket since the 1940s. That's something that's very instructive. I think he's got to overcome 9/11, whether he has national security credentials or not.

And as for the trial lawyer rap, whether it's Lindsey Graham or whether it's John Edwards, I just challenge you, Robert Novak, to not engage in ad hominems but take each case, and you decide whether you think that case, whether you think...

GRAHAM: I agree with that.

HUNT: ... whether you think the swimming pool manufacturer is right, or the little girl who was hurt. And if you can make the case that—that—and on the particular cases, any case you want, that it hurts the economy...

NOVAK: Just...

HUNT: ... then I invite you to do it.

NOVAK: (UNINTELLIGIBLE) just briefly, that—I'm not going to take them on an individual case, I'm going to take them as a blanket, and they (UNINTELLIGIBLE) as a blanket, as a group, they have been devastating to the economy.

SHIELDS: Well, let me just say, let me just say one thing. He has represented the less powerful against the more powerful.


SHIELDS: He has, he has, and I have never heard Bob Novak call any right-wing investment banker filthy rich. Filthy rich, and that, that's an ugly pejorative.

GRAHAM: Well, you know, I used to be a trial lawyer, and I thought my cases had...

SHIELDS: And a good one too.

GRAHAM: ... (UNINTELLIGIBLE). Well, time will tell about whether I was good or bad in any part of my life. But here's what the key to this business is. No president like President Bush is going to get beat unless there's some major breakdown here, if the war goes bad and economic collapse, because people trust him. People feel comfortable with him, they believe he's honest, so all these guys have got mountains to climb.

SHIELDS: That certainly cemented your relations with the White House, and (UNINTELLIGIBLE) if you lose 69,000 jobs a month, it—people are going to lose trust.

HUNT: The youngest senator in his state's history in 33 years.

SHIELDS: OK, that's a giant sucking sound.


SHIELDS: But we'll be back with THE CAPITAL GANG Classic, speculating on whether Ronald Reagan would attack Libya in his last days as president.


SHIELDS: Welcome back.

Thirteen years ago this week, as Ronald Reagan was leaving the presidency, two U.S. F-14 fighter planes shot down two Libyan MIG jets. Libyan dictator Moammar Gadhafi asked for direct negotiations over his poison gas factory.

THE CAPITAL GANG discussed this on January 7, 1989. Our guest then was then-Democratic Congressman Stephen Solarz of New York.

(BEGIN VIDEO CLIP, January 7, 1989)

PAT BUCHANAN, CAPITAL GANG: What are the chances the U.S. is going to take out that plant before Reagan goes home, Steve Solarz?

REP. STEPHEN SOLARZ (D), NEW YORK: I wouldn't preclude the possibility, Pat, although I don't think it's very likely. My sense is that the administration is more likely to make a diplomatic effort to persuade our European allies to withdraw their technicians they have at the plant.

HUNT: Pat, this is Ronald Reagan's last movie. He's leaving town for good on January the 20th, and I can't imagine an ending whereby he leaves town getting bested by Gadhafi.

SHIELDS: I would bet against it, Pat. I think that Ronald Reagan has done everything else for George Bush up to this point, including the budget. But I don't think that this is on the agenda for the Bush people.

NOVAK: Pat, it's three to one, hunch you're the odd man out once again. It's not going to be taken out because, like most of George Schulz's war on terrorism, it's mostly huff and puff.

BUCHANAN: I tend to agree. I don't think he's going to do it. I think Margaret Thatcher has talked him out of it. The allies are all against it.


SHIELDS: Bob Novak, President Reagan did not attack Libya, but nobody talks about Colonel Gadhafi much any more. Why?

NOVAK: Well, because if you—that's what you got to do is ignore these people. They're not going to attack us, they're too weak. If we follow Al Hunt's recommendations, we'd have wars all over the globe, bombing here, bombing there. Let's ignore some of these rogue tinhorn dictators.


HUNT: Well, I was not only the odd man out, I was the wrong man out, no question on that. But Gadhafi sort of reminds me of the French Revolution, you know, circa 1988, he was a real menace. But he's been bypassed by Saddam Hussein and al Qaeda and Hezbollah.

SHIELDS: To say nothing of North Korea.

Margaret Carlson in Los Angeles.

CARLSON: Well, some evildoers do fade away, but ones like Hussein and Kim in North Korea, they don't, because they have the goods.

SHIELDS: Lindsey Graham.

GRAHAM: There's a lot we can't ignore after September 11, and I—we live in tough and difficult times, and we're going to be going, Bob, all over the world with strange-sounding names for years to come. It's going to take a lot of money and sacrifice. And there's no easy solution to winning the war on terrorism.

NOVAK: (UNINTELLIGIBLE) have to have a little restraint? Don't you think we have to have a little restraint?

GRAHAM: Yes, but not with North Korea having nuclear weapons. I don't think we need to be restrained about that.

SHIELDS: I'll tell you this, it's going to take a draft too, Lindsey. And nobody...

GRAHAM: It may, it-...

SHIELDS: ... wants to talk about it, (UNINTELLIGIBLE)...

GRAHAM: People—people ask me all the time, What's winning? And I can't really tell you what winning is, but I know this, that we're in it for the long haul, and the cold war is probably your best model.

We need to replace the regime in Iraq, and we need to rebuild that country, and maybe Iran will react better if they have a decent neighbor. Who knows?

SHIELDS: Lindsey Graham, thank you very much for being with us.

GRAHAM: Thank you. God bless.

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