The NewsHour with Jim Lehrer

MARGARET WARNER: Good evening. I'm Margaret Warner. Jim Lehrer's away. On the NewsHour tonight, a summary of the news; analysis of today's shakeup in the Bush economic team; a report from Baghdad on pre-deadline tension in Iraq; a look at the surprisingly close Louisiana Senate race; and our Friday night regulars, Mark Shields and David Brooks.

NEWS SUMMARY

MARGARET WARNER: The Bush administration's economic policy team got a major shakeup today. First, Treasury Secretary Paul O'Neill announced he'd step down. An hour later, Larry Lindsey announced he'd resign as head of the National Economic Council. It was widely reported they were forced out. White House spokesman Ari Fleischer would not confirm that. He said O'Neill and Lindsey made "important contributions." The shakeup came as the Labor Department reported unemployment hit 6% in November, its highest level since April. We'll have more on all this in just a moment. On Wall Street today, stocks fell on the unemployment news, but recovered on word of the O'Neill and Lindsey resignations. The Dow Jones Industrial Average ended with a gain of 22 points to close at more than 8645. The NASDAQ added more than 11 points to close at 1422. For the week, the Dow was down nearly 3%, after eight straight weeks of gains. The NASDAQ was down nearly 4% for the week. United Airlines stock fell below a dollar a share today, amid reports the company would file for bankruptcy this weekend. United CEO Glenn Tilton, in a message to employees, said bankruptcy was now "more likely." The government this week rejected United's request for a $1.8 billion loan guarantee. The United board meets tomorrow. Iraq's long awaited weapons declaration will not immediately be made public. The UN Security Council decided that today. The member states also decided they will not see the document right away. Instead UN inspectors will analyze it to see if any portions to contribute to further weapons proliferation and thus require secrecy. Iraq is expected to turn over the document in Baghdad tomorrow. Chief inspector Hans Blix said he expects it will run some 10,000 pages, with a good part in Arabic, and deciphering it will be a huge job.

HANS BLIX: We have a translator standing by, we have people standing by. We will also then take a first look is there what would be from the point of view of proliferation. And we are asked by the Council -- I'm asked by the Council to come to the President and to see the Council early next week and to tell them what is our reaction, what is our advice on the further mechanical handling.

MARGARET WARNER: Blix would not say when the declaration might be made public. In Washington today, the White House spokesman said the U.S. won't take the document's size to mean Iraq has complied.

ARI FLEISCHER: Sometimes one of the best ways to hide or deceive is to come out with such a voluminous document that it makes people miss the things that aren't in there. Another way to put that is just because the Iraq turns over a phone book to the United Nations doesn't mean that nobody inside Iraq doesn't have a unlisted number. We want to find out whether or not Iraq left information out of here.

MARGARET WARNER: We'll have a report from Baghdad later in the program. U.S. Customs agents raided a Boston-area software company late Thursday. News accounts said investigators were looking for evidence that a Saudi businessman, Yasin al-Qadi, was part owner of the firm P-Tech. He also heads a foundation that the U.S. Treasury says funnels money to al-Qaida. A P-Tech executive said the Saudi has no ties to the company now. P-Tech sells financial and budgeting software to numerous government agencies, including the FBI. The military and the FAA Israeli forces killed at least ten Palestinians today in a raid on a refugee camp in the Gaza Strip. We have a report from Jonathan Rugman of Independent Television News.

JONATHAN RUGMAN: Thousands of Palestinians mourning their dead in the Gaza Strip today; gunmen firing into the air as the funeral cortege winds its way through the Burreij refugee camp. Israel says its operation was to root out terrorists with soldiers and tanks backed up by helicopters. One tank shell hit a Palestinian home, wounding five people. Another house was blown up. The Israelis said it was the home of a militant blamed for last week's suicide attack on a patrol boat, which wounded four soldiers. Israel's operation provoked fierce exchanges with Palestinian gunmen. Doctors confirmed at least ten people died, including two Palestinians working for a UN relief agency, and six others were injured, but the death toll could rise. Israel regularly targets the Gaza Strip in the hunt for Palestinian suicide bombers, but yesterday Prime Minister Ariel Sharon claimed Osama bin Laden's al-Qaida network was also active in the area.

MARGARET WARNER: The Palestinians said most of those killed today were civilians. The Israelis said most were gunmen. Venezuela halted all oil exports today, as a five-day-old general strike paralyzed the country's oil industry. The strike is aimed at forcing President Hugo Chavez from power. Venezuela is the world's fifth largest oil exporter. The threat to that vital industry and growing fears of violence prompted the government today to offer to restart talks with the opposition. The Carolinas were under a state of emergency today in the wake of this week's powerful winter storm. Icy tree limbs downed power lines, leaving nearly 1.8 million homes and businesses still in the dark today. The storm also dumped heavy snow across the plains and much of the East and was blamed for at least 24 deaths. That's it for the News Summary tonight. Now it's on to the economic team shakeup in Washington, the approaching deadline in Iraq, a political battle in Louisiana, and Shields and Brooks.

FOCUS SHAKEUP

MARGARET WARNER: Two major players leave the Bush economic team. Ray Suarez looks at the shakeup.

RAY SUAREZ: The resignations today of Treasury Secretary Paul O'Neill and senior economic adviser Larry Lindsey mark the first major personnel shift in the Bush White House. Here to help us sort through today's developments are Robert Hormats, managing director of Goldman Sachs, an investment bank; Diane Swonk, chief economist at Bank One Corporation, a commercial bank; and David Sanger, White House correspondent for the "New York Times."

David let's start with you. How were these departures handled and what brought them about?

DAVID SANGER: Well, Ray, the only world for how they were handled was rather brutally and forcefully. It was quite a remarkable day. Remember, this is the President who really came to office with a reputation of not liking to conduct any firings and that's exactly what this was. It wasn't a resignation, it was a firing. Take a look at how they did it. The White House issued a very bland statement thanking both men for their service but really saying nothing terribly complimentary about what they accomplished. Throughout the day they made no effort particularly to hide the fact that senior administration officials led by Vice President Cheney had actually pushed them out the door. That was some what remarkable, Ray, because of course it was Vice President Cheney who brought Paul O'Neill in when the President back during the transition in November and December of 2000 really didn't like the initial choices he had been given. So it was an effort as one administration official said to me to really show that they were turning over a new leaf, that they wanted the day focused, get the markets focused on the fact they were ousting this group of advisors and I think probably as soon as next week you'll see the replacements announced. And that'll be a focus on them.

RAY SUAREZ: Any word coming from inside the administration on why now? Did they want to get past the elections? Did they want to get past certain bad numbers that were coming out on the economy?

DAVID SANGER: Well, Ray, they certainly wanted to get past the elections, because to do this before the elections would have been an acknowledgment that the path that they have been following is not considered successful not only on Wall Street but within Republican ranks. They wanted it done early so whatever the new team decides upon they have time to enact well before the 2004 campaign gets going. And I think most importantly out of this, they wanted to make a clean declaration that they recognized the problem they have been facing. Now this is a difficult thing for any administration to do. For months as criticism of Secretary O'Neill in particular mounted, you would get the ritualistic statements from the administration as you get from any administration about how the Presidents had full confidence in his team. I went in about a month or two ago and sat down with Secretary O'Neill and he said quite explicitly at that time that he had receive no indication that there was a loss of confidence in him and he would serve as long as the President wanted him there. And I think he fully expected to stay on.

RAY SUAREZ: Robert Hormats, what do you make of Paul O'Neill's departure at this time?

ROBERT HORMATS: I think, as David pointed out, they went fresh people to develop a fresh policy. The economy is very weak; these unemployment numbers were very disturbing. And they need to do something to demonstrate that George W. Bush is going to play a more proactive role in the economy than his father because this President is quite aware that his father lost the election largely because he seemed to be neglecting the economy. Now they want to be proactive of new people, and I think they will come up with new policies relatively soon, which will include a tax stimulus of some sort that will help a variety of people, one perhaps boosting investment but two perhaps accelerating the tax cuts that were planned for 2004 that they might choose to implement in 2003 at least for lower income people, things like that that will demonstrate a hands-on approach to the economy, a proactive approach to the economy.

RAY SUAREZ: Would you say at the time of his departure that we could look back and say Paul O'Neill was a good Treasury Secretary?

ROBERT HORMATS: I think Paul O'Neill came to the job as a very unfortunate point in time. The market was in the process of crashing, the economy was weakening. Corporate scandals took place shortly after his arrival. Those things cannot be blamed on Paul O'Neill, and it was unfair, I think, that people did blame him for some of this. On the other hand, he did not prove to be particularly effective at forging a coherent new set of policies to deal with a new set of challenges for the economy, and one of the problems is that there was a great deal of infighting among various people: The supply-siders on one hand what wanted tax cuts to help corporate investment, the demand siders who wanted perhaps more stimulus to help consumption. There never was a consensus on this. And also one of the roles of the Treasury Secretary is to be the chief economic advisor to the President and to demonstrate that he is the person who has the President's ear. The markets tended to doubt that after a period of time. His second role is to be a clear spokesman to Wall Street, to Main Street, to the business community, for the administration to be acknowledged as someone who could speak for the President and the administration. And after a period of time it became clear that O'Neill could not play that role. He wasn't clear in describing policies, and he wasn't particularly credible to a wide range of communities.

RAY SUAREZ: Diane Swonk, your assessment of his time with Treasury?

DIANE SWONK: Robert really hit the nail on the head in terms of how he did come into office at a very difficult time and the comparisons to Bob Rubin and the dream team, as they had it during the Clinton administration, although many of the problems that we saw were actually happening and seeded in the economy before the Bush administration took office. I think Paul also -- he's an extraordinary person. Anyone who has met him knows he is a thoughtful person who has his heart in the right place. But he may not have been well suited for this job. I think there was a message problem. He was oftentimes in conflict with the administration; often times in sync with his own good friend Alan Greenspan who has also sort of talked about being more fiscally hawkish than I think the administration would like to beat this stage of the game. So I think really this was a weak link. And the administration -- their economic team was seen in disarray. They want to come out with their guns blazing as they get their new congressional team in place in the start of the new year with an economic team. And I think the other issues that were raised, it is the economy, stupid. It's really important. This is sort of a -- a son wanting to correct the sins of the father and not make the same mistakes. A lot of these people were in the former Bush administration. They learned that lesson well. My concern is what we get out of this is much more fiscal stimulus than we perhaps even need. We have a lot inform pipeline already in terms of monetary stimulus. And at some point in time we're going to have monetary and fiscal policy in competition with the Fed raising rates even as tax cuts are coming through. And that's just not a good place to be. So I'm a little bit concerned that the problems that ail the economy are not necessarily ones that this administration can solve and, in fact, they may solve themselves on their own over time. Bit certainly in 2004 there's no question in my mind that this administration will get a lot more credit for it especially with the shakeup.

RAY SUAREZ: David Sanger, we shouldn't forget about Lawrence Lindsey, who is credited as one of the architects of the Bush tax cut. Early after the President began his term and won that battle in Congress, Lawrence Lindsey was widely credited for that victory. What happened after that?

DAVID SANGER: Well, it's very interesting because Mr. Lindsey was an extraordinarily influential advisor throughout the campaign, and of course Secretary O'Neill was running ALCOA still at that time, so we thought when he came in, that the National Economic Council, which he ran and is supposed to coordinate economic policy, would become a powerhouse within the White House. In fact, quite the opposite happened. Mr. Lindsey had a very difficult time dealing with Congress. He seemed not to be in complete accord with either Secretary O'Neill or with the Council on Economic Advisors. And over time it seemed that he was more and more isolated. Something else strange happened in this, Ray. I used to cover the Treasury in the 90s before I moved over to covering the White House. At that time one had the sense that the Treasury was very much at the center not only domestic policy but of foreign policy. The big issues were questions of globalization. Management of China and Japan policy, for example, took place at the Treasury and at the National Economic Council. That all changed the minute that George Bush came in. And suddenly both these men seemed to lose a good deal of their portfolio. And I think over time they became marginalized in the debate. And of course much power in Washington is derived from whether you are sitting at the table when big issues are decided. These men were not.

RAY SUAREZ: Diane Swonk will whoever takes the place both of Larry Lindsey and Paul O'Neill be expected to be part of that shift of priorities away from the war on terrorism and an international focus that the administration has had to a more domestic one in the run up to 2004?

DIANE SWONK, I think absolutely. I think the issue is there's a real scare out there that we're on the eve of yet another war with Iraq. I think it's very highly likely we'll be at war with Iraq. And there's a little deja vu going on here. They want to get things more focused on; we care about the domestic front as well; we're not just focusing on foreign issues. I think that's a very, very important issue. The other issue is Glenn Hubbard in all this. Glenn is eloquent; he is very highly thought of on tax policy; he's a very sharp knife in the drawer and with the administration has come out looking very good. And I think there will probably be -- if he wants to stick around a very large role for him coordinating the agenda with regard to the new economic team that we get put together. I think there will be -- he's been much more effective on Capitol Hill and much more effective in speaking the message of the economy than Lindsey or Paul were. And I think that's very important. So we have one player that is still there and whether he stays or not is still up for grabs but he certainly would a very strong player for the administration to have especially given the agenda they want to push a fiscal stimulus going forward. This guys has got a lot of credibility going forward on tax codes and taxation issues. And I think he would certainly lend that credibility to the administration, whether or not I agree they should be done now.

RAY SUAREZ: Bob Hormats some quick final thoughts on the new secretary, whoever that may be, has to do right out of the box?

ROBERT HORMATS: Well, he has to do several thinks: One, figure out whether we need a stimulus, how much of a stimulus and what kind and to get it to the economy quickly. Two, they have got to figure out how to help state and local governments. State and local governments are suffering; they are contracting at the time the federal government is trying to expand the economy. State and local governments have more of a burden for homeland defense. Tax revenues have declined. They've got a problem. Three: how do you finance this war? We're financing the war plus increased domestic spending -- plus a tax cut. That's the way we financed the Vietnam War. We've got to begin to make some spending priority decisions very quickly so we don't get big budget deficits not just this year, which is not a problem, because they need the stimulus, but three, four, five years down the road by military spending, domestic spending, and tax cuts. That's a big problem -- out year fiscal responsibility over the course of this decade. And then we've got the last issue, which is the international issue. We have a growing trade deficit, a growing current account deficit at historic levels. We have got to figure out how to deal with them and a dollar that many people think is too high and is weakening the competitiveness of a lot of American manufacturers.

RAY SUAREZ: Bob Hormats, guests, thank you all.

UPDATE INSPECTING IRAQ

MARGARET WARNER: Now an update from Baghdad on the eve of UN deadline for it to declare its weapons programs. Terrence Smith has the story.

TERENCE SMITH: Iraq is expected to turn the required report over to the United Nations representatives in Baghdad tomorrow. For an update from Baghdad we go to John Burns, senior foreign correspondent for the "New York Times."

John, tomorrow apparently is the big day, what did you expect?

JOHN BURNS: Well, it looks like the first people to get a sight of these documents are going to be western reporters here. We have been summoned to the information ministry at 12 noon, that's 4:00 AM Saturday in New York -- downstairs in the building on the roof of which I'm standing on now. And as we understand it we're going to get a sight of something like 7,000 to 8,000 pages -- so it's rumored -- of documents and CD ROMs, which will then be handed over formally sometime later tomorrow afternoon our time,. around noon your time, to the United Nations here, and will be put on a United Nations aircraft that will fly them to Cyprus where they will be divided and flown onwards to Vienna, the headquarters of the International Atomic Energy Agency, on the one hand and to New York for the Security Council and the new United Nations weapons upon monitoring team UNMOVIC on the other.

TERENCE SMITH: What would be the Iraqi strategy in releasing the documents publicly first?

JOHN BURNS: Well, I think we're not going to see anything that's in the documents; indeed, we may not see the documents themselves. I think the Iraqis keep changing their mind about this. But I think one thing that is clear is they see themselves as having a clear beat on this in the sense that they will release documents. We know what the covering document will say it ill say because we've been told this repeatedly, that Iraq has no weapons of mass destruction. The rest is all detail. I think they know it's going to sometime before President Bush or anybody else is able to go through those documents and come up with a countervailing word. And so they want as much time as possible, if you will, to put their own spin on it.

TERENCE SMITH: So is the notion of such a voluminous document basically a delay tactic?

JOHN BURNS: Well, I think the Iraqis have been denied the bluntest means of meeting the West pressures, that is to say the new weapons inspection mandate doesn't allow them any longer to deny inspectors access to plants or to hold them at the gates while they spirit documents and people out of the back. All that's gone. It's much too tough, this new document under American pressures. So I think they are shifting to new means, and I say that without knowing any better than you do whether they have weapons of mass destruction or not. But I think what they intend to do in a way is to drown the United Nations process with sheer volume, to send a blizzard of documents and, in effect, to invite the United Nations up every blind valley that there may be. You have to understand that the one key factor in all of this is the dual-use concept. That's to say that they are required to declare any civilian activity in processes, which could also be used to make weapons. So to give you a ridiculous example, they could send the inspectors to every toothpaste plant in Iraq.

TERENCE SMITH: And what is the atmosphere there now on the eve of what is obviously an important moment?

JOHN BURNS: Well, as you know, Saddam Hussein spoke out yesterday for the first time in one of his palaces, meeting with his fellow Iraqi leaders. And he said, even at the risk of seeming to be weaklings and cowards, we're going to cooperate with this process. He did not, however, say, and this is very significant, he did not say anything about the declaration. The final word on this is always with Saddam Hussein and nothing we have heard from any other Iraqi official will matter until we've heard it from him or from these official documents. As for the mood, there is of course considerable tension amongst the elite here, the ruling elite, the military and others who understand that this process could lead to war. But amongst the people who have been through so many crises, not to mention eight previous full, final, complete declarations of Iraq, complete holdings of banned secret weapons, there's a kind of shrug. They are busy celebrating this two-day Muslim holiday, the Eid al-Fitr holiday, and they are attending to private family business. And when you ask them, for example, at the cemeteries of Baghdad,to which many of them went today, some of them to see kin who died in the Iran-Iraq War, about 500,000 Iraqis, when you met them coming and going today, what they said was "we have stared down the barrel of this gun before. We have been through endless crises for the last 20 years." I think they're pretty hardened against this kind of thing.

TERENCE SMITH: So there's no sense of imminent military action or imminent danger?

JOHN BURNS: That's very hard to say. The Iraqi state-controlled media have of course carefully spoon- fed the people of Iraq about this entire process. One thing they understand is that there is a threat of an American attack. But Iraqis have a wonderful way of finding out the truth. And I think they understand that even by the schedule of the most hawkish people in Washington, it's some time before we can expect to see any bombs falling.

TERENCE SMITH: And finally, the UN inspectors, are they supposed to take this report tomorrow and use it as a road map for further inspections?

JOHN BURNS: I'm sure that's the case. We've been told that up to now they have been going almost exclusively in the 20 sites that they have inspected to sites which were established sites, that is to say sites that were discovered, inspected and controlled between 91 and 98, during the last weapons inspections process. They are waiting to see this document before they go to the next stage, which is to go to sites, which, as they say, the Iraqis don't know we know about. When that process begins, and that could begin as early as tomorrow in effect, this process is going to become very much more tense.

TERENCE SMITH: All right. We'll stay tuned. John Burns, thank you very much.

JOHN BURNS: It's my pleasure.

MARGARET WARNER: Still to come on the NewsHour tonight, Louisiana politics, and Shields and Brooks.

FOCUS BAYOU BATTLE

MARGARET WARNER: Now, the final battle of campaign 2002. Kwame Holman reports.

KWAME HOLMAN: Mary Landrieu says the last few weeks have felt like an out-of-body experience. On Election Day, the Louisiana Democrat easily outpolled eight other candidates challenging for her seat in the United States Senate. Now, one month later, the freshman Senator is running for her political life.

SEN. MARY LANDRIEU: I know that this election is going to be very close because the national, you know, party, operatives in Washington have spent $15 million lying about my record, distorting my record, attacking, you know, my faith, my family in a very personal way.

Now the scheme to manipulate-- out of Washington-- to manipulate the race in Louisiana seems to maybe is going to work, but it's not, because the people of Louisiana are going to say "no!"

KWAME HOLMAN: The scheme, as Landrieu describes it, is an attempt by the national Republican Party to manipulate Louisiana election law. That law requires a candidate to capture 50% of the vote. Last month, Mary Landrieu totaled 46%. She and fellow democrats charge the Republican Party flooded the ballot with candidates simply to dilute Landrieu's support, forcing a runoff with the second highest vote-getter. That's Suzanne Terrell.

SUZANNE TERRELL: Vote on Saturday, thank you.

KWAME HOLMAN: Suzanne Terrell is the state election commissioner and served on the New Orleans city council. She was relatively unknown politically when she entered the Senate race last summer and on Election Day captured 27% of the vote.

SPOKESPERSON: The President of the United States, George W. Bush. ( Cheers and applause )

KWAME HOLMAN: On Tuesday, President Bush traveled to Louisiana to campaign on Terrell's behalf, one day after George Bush senior had. State Republican Chairman Pat Brister says Terrell has had the advantage of bringing top political figures to the state on her behalf.

PAT BRISTER: We are very proud to have the President come, the Vice President come, because they know Louisiana values. Mary is not so proud about the company she keeps in Washington. She doesn't want Hillary Clinton or Al Gore or President Clinton down here. And I think that's a very telling tale that she likes them in Washington and she votes with them in Washington, but she doesn't want them beside her here in Louisiana.

PRESIDENT GEORGE W. BUSH: For the good of Louisiana, for the good of everybody in Louisiana, Suzie Terrell needs to be the next United States Senator! (Cheers and applause)

KWAME HOLMAN: Terrell is a longtime friend of the President's. She ran his successful statewide campaign here two years ago. Now, running a campaign of her own, Terrell promises her loyal support to the President.

SUZANNE TERRELL: And I know you want a Senator who will bend your ear about what's important to Louisiana, and you know I will. (Laughter) But I will also stand with you to move our country forward. I will not be a roadblock to your leadership. (Cheers and applause)

SUZANNE TERRELL: But when I disagree with the President, we can have that dialogue. Unfortunately for Louisiana now, we don't have a Senator that can disagree with the President and have the dialogue. We have the Senator that is going to disagree with the President and make it a political statement. We have a Senator who admitted in the "Washington Post" that she's barely on speaking terms with Trent Lott. This doesn't bode well for our state. We need someone who can work across party lines and within Congress.

KWAME HOLMAN: But Mary Landrieu also has been a supporter of the President. Her voting record in the Senate shows she has sided with him 74% of the time, including votes in favor of the President's tax cut package, homeland security legislation, and his use of force resolution against Iraq. Landrieu anxiously played up her support for the President prior to the November 5th election. In hindsight, some believe that was a mistake.

REP. WILLIAM JEFFERSON: It was the wrong kind of campaign to run. I think that it was horribly run.

KWAME HOLMAN: William Jefferson is a New Orleans Democrat about to enter his seventh term in the House of Representatives. He says during the first campaign, Mary Landrieu failed to distinguish herself from Suzanne Terrell, and as a result, didn't trigger a strong enough Democratic turnout to avoid a runoff.

REP. WILLIAM JEFFERSON: It dulls the senses because you have both people saying the same thing. They were both for the President, both supported the President, so what's the... what's the point there? You have to obviously make a case that you'd do something different from the other person. But in Landrieu's case, she's the incumbent, and she's not presenting a resume of what she might do and what her paper qualifications are. She actually has a case to make of what she has done.

KWAME HOLMAN: But that's what she has tried to do in this second campaign. Touring the state with Louisiana's senior Senator, John Breaux, Landrieu has been stressing her resume, reminding voters in this state with many pockets of poverty what she has done and can do as a member of the Senate Appropriations, Defense, Small Business, and Energy Committees.

SEN. MARY LANDRIEU: We have people from Washington and all outside of Louisiana askingthe people of Louisiana to give up these seats of power, to give up this seniority, to give up this effective and independent voice, for what, for what, so that they can have a rubber stamp for policies that put our people out of work?

KWAME HOLMAN: And this time around, Landrieu has been highlighting her differences with the President.

SEN. MARY LANDRIEU: The President is in town politicking for my opponent. But I'm telling you the same time that he's politicking for my opponent, the policies, some of his policies are harmful to Louisiana. And we need a Senator, two Senators that can say, "Yes, Mr. President we'll be with you when you're right for Louisiana, but when your policies are harmful to our state, like dumping cheap sugar into out state or undermining our oil and gas industry by closing the Gulf when we want to keep that Gulf open, that provides jobs and opportunity for this state, or when you try to put taxes on steel that shut down our ports and have our dock workers and our port employees losing their jobs, then no, we're going to stand up for Louisiana."

KWAME HOLMAN: Polls taken over the last few days show that the runoff election between the Democratic incumbent, Mary Landrieu, and her Republican challenger, Suzanne Terrell, appears too close to call.

KWAME HOLMAN: So how can it be that a sitting U.S. Senator can be facing a virtual unknown and it's a dead heat?

WAYNE PARENT: Well, the President of the United States has a lot to do with that.

KWAME HOLMAN: Wayne Parent is a professor of political science at Louisiana State University.

WAYNE PARENT: The South and Louisiana in particular, is very sort of pro- military, pro-patriotic. And we saw George Bush Senior saying, "this is not about Democrat and Republicans; this is about supporting the President. 9/11, we're at a time of war, this is about getting behind your country." And that would have been a tough thing to perceive because we haven't seen anything like that in 50 years. So I think the aura of this President in this time of crisis is helping the outsider, you know, move to a really tight race and hurt the incumbent in ways that no one would ever have expected a year ago.

KWAME HOLMAN: Because of the national attention this race has attracted, voter turnout tomorrow is expected to be even higher than the 45% turnout on Election Day. State Senator and Former Congressman Cleo Fields says Landrieu's chances will be determined by the nearly one- third of the voting population who are African Americans and usually vote reliably Democratic.

STATE SEN. CLEO FIELDS: They're the umpires in this race. They decide if she's safe or if she's out. If they get up Saturday morning and go vote, she's safe. If they don't, she's out.

KWAME HOLMAN: A win by Suzanne Terrell would strengthen the Republicans' slim hold on control of the Senate and add momentum to the President's legislative agenda. A win by Landrieu would give Democrats a cherished victory after their dismal showing in the midterm elections, and provide a morale boost as they build toward 2004.

FOCUS SHIELDS & BROOKS

MARGARET WARNER: That brings us to our weekly analysis from Shields and Brooks, syndicated columnist Mark Shields and David Brooks of the "Weekly Standard."

So David, what would you add to the earlier discussion about the O'Neill/Lindsey purge, first of all no doubts that they were fired?

DAVID BROOKS: Absolutely no doubt. They wouldn't take a hint. I guess what I would add, I would emphasize the policy differences between Paul O'Neill and the rest of administration. He really was sort of the monk at the bachelor party. They really wanted much more stimulative activity. He was one arguing that the economy is not in that terrible shape. Maybe what we have got in the pipeline will already work and we don't need anything knew. And he was never one comfortable championing the tax cuts the President wants. And in the administration there's this fascinating debate over what sort of tax cuts should come out over the next several months. Some people want cuts in the taxes on dividends, raising the levels of write-offs on capital losses, things that would really boost investor confidence. And some other people say the problem is over supply; and you have got to build up the demand side. So there's this debate on which kind of tax policy, which is a nuts and bolts debate, a debate about the shape of the economy. Paul O'Neill is out there in left field talking about getting rid of the income tax and putting in a consumption tax. He was just odd man out.

MARGARET WARNER: So policy-driven decision?

MARK SHIELDS: I don't think policy-driven, Margaret. First of all, on a personal level I found it astounding. There was no value in the Bush family hierarchy of values more important than loyalty. There has been nobody more loyal to him than Larry Lindsey, and not to allow him to leave with dignity and with his own self-respect publicly I thought was just callous and cruel beyond measure. I do not understand it. I have seen this happen in the Nixon administration, the Carter administration, in the Ford administration. It never works out. When you wholesale change of personnel -- this is not -- all they are trying to do is change the salesmen. They are not trying to change the product. There's not a question here about the product being wrong. They are saying we're going into war, Larry Lindsey committed a cardinal sin; he admitted it was going to cost something. This was supposed to be a war that's not going to cost anything in blood or treasure or dollars, and so Larry Lindsey put a price tag on it. My God almighty for committing the ugly truth he was frozen out.

MARGARET WARNER: He said $200 billion.

MARK SHIELDS: He said $200 billion and he was frozen out. So I think in that sense it spoke volumes about something that always happens in politics. I'll make this prediction unequivocally, and that is victory breeds arrogance, arrogance breeds acts like we saw today. I mean, the idea that you can dismiss somebody out of hand and with absolutely no care -- the message that sent to the rest of administration and to the people working is not a good message.

DAVID BROOKS: I agree with a lot of that. I think the trashing and the background trashing that's gone on, especially Larry Lindsey today is unseemly.

MARGARET WARNER: For months.

DAVID BROOKS: And for months. I don't think it's arrogance, though. I think they see it as loyalty. Remember Linda Chavez -- the almost labor secretary -- when they decided to cut her, they trashed her, too. That's we've got to protect the President. That's not so much the President's personality; it's the underlings saying we have got to protect the President so they cut somebody.

MARGARET WARNER: Now what about Mark's belief or point that this is really not about changing policy, it's just changing the public face?

DAVID BROOKS: We've got two resignations here or two firings, and I think it's different for each one. I think the Paul O'Neill thing was just policy. He just wasn't comfortable with the Bush policy, so he's always off with Bono somewhere. The Larry Lindsey thing I think is not policy. I think he was always comfortable with the Bush policy. Here is a guy who was at Harvard; he was with the Fed; he was at the American Enterprise Institute, academic, a very good economist. You come into this job; it's not about academics; it's not about even economic substance so much; it's about running the process. And you have got a guy totally unprepared for the job and he doesn't do that great of work.

MARGARET WARNER: What do they need and what are you hearing about possible replacements?

MARK SHIELDS: There's a laundry list a mile wide -- from Phil Gramm, the former Senator from Texas. His loyalty is a key -- he is probably disqualified from the outset there. He and President Bush have never been close -- from Texas; to Charles Schwab, the sort of

MARGARET WARNER: Discount broker.

MARK SHIELDS: -- buccaneer, discount broker. Trying to reassure Wall Street is he the right guy I guess at one level, Margaret, what this hit me they get 6% unemployment figure this morning. They are not into the weekend with that being the dominant story. They don't want that to be this on Sunday. So what you do is you behead these people as callously as you can on Friday so that becomes the story that they are gone. This is movement. Personnel is policy or something of the sort and then Iraq takes over after that. And I think what they are looking for is they are looking for Robert Rubin. The great character actor, Hershel Bernardi once said there are three stages in an actor's career, who is Hershel Bernardi, and the second is get me Hershel Bernardi, and the third is get me a Hershel Bernardi type and the final stage is who is Hershel Bernardi. They are looking for a Robert Rubin. They are not going to find him. He was an enormously respected, successful and able Secretary of the Treasury.

MARGARET WARNER: So in other words they need somebody very good inside and very good outside.

DAVID BROOKS: They are looking for somebody who agrees with the President and they are looking for somebody with political experience which I think rules out Charles Schwab. Ken Lay available but I had to make that joke before Mark did.

MARGARET WARNER: Let's switch to Iraq. This is the final build up to the big declaration coming up this weekend. You've got a week plus of these early inspections. How well do you think the White House has handled this so far?

DAVID BROOKS: I think quite well. I think Saddam Hussein has handled it well for them. If they stick to their story that they have no weapons of mass destruction, that just makes life easy for the Bush administration. They could have come out and said we have this and this but not nukes or not that. That would have made it tough. But if you come out and say we have nothing that makes it easy to say this is a material breach of the UN Resolution . The UN resolution says no omissions, that's in Article IV; in Article III, the UN Resolution is very fastidious about what you have to list, and if this 8000 page document doesn't list the stuff and does have omissions, it becomes easy for the Bush administration to say next week or two weeks later it's a material breach and win some support around the world for that position.

MARK SHIELDS: I think that the President made it obvious this week where he stood on it that Saddam long before the report was due, that he is not interested in complying.

MARGARET WARNER: Always a liar, still a liar.

MARK SHIELDS: Always a liar, still a liar; doesn't want to take yes for an answer. I think that's at work. I think that the consensus that emerges in the administration is it that if Iraq wants to avoid a war, it better actively cooperate in its own disarming. I think that's the message in spite of the rifts the fissures that seem to be Powell, Rumsfeld, wherever -- I think that's the consensus that has emerged from this administration. There won't be immediately military action because we're not ready for it. I think that's an important element in this.

DAVID BROOKS: I do want to mention our magazine is reporting next week based on documents given to the Turkish government that they are just looking for sites to have bases to launch and they'll do that till January 15th, then begin construction on January 15th, so we're really still looking at February or something far away.

MARGARET WARNER: And they are still mired in this UN process. I mean now they're talking about not being made public, the U.S. may never get its hands on this document for another week or more. They have to play this string out for a while.

DAVID BROOKS: And they have made commitments to the people who are on board that they will let this thing play out for a while. But it should be said there has been tremendous progress over the past couple of months getting NATO allies on board, getting Saudi Arabia and Turkey somewhat on board. So there's been this backstage process of building alliances even outside of the U.S.

MARGARET WARNER: What do you make, Mark, in the administration being pretty clear in conveying that they lack confidence in the inspections process?

MARK SHIELDS: You know, Margaret, I guess if I were an inspector and part of that process, I would feel a little bit dissed by that.

MARGARET WARNER: No to mention Hans Blix.

MARK SHIELDS: And the United States is sitting there with all this intelligence that has enabled official after official to say we're absolutely sure, and you're an inspector and you don't have access to it. And I assume they're going to make this public after what David calls the material breach. I would point out the agreement on the part of Turkey does not come just voluntarily. I mean, Turkey has exacted its own price --

MARGARET WARNER: You mean the agreement --.

MARK SHIELDS: Major dollars and forgiveness of debt and as well all out U.S. support for its admission into the European Union, something that Greece has historically, our longtime ally, has opposed. And Saudi Arabia I think is probably trying to compensate for what has been a flurry of bad stories about Saudi Arabia and its support, direct indirect, call it what you want, of Osama bin Laden.

DAVID BROOKS: I do think Bush should give a shout out to Hans Blix so he doesn't feel dissed anymore.

MARK SHIELDS: I think the inspectors now they're going to be up to 100 coming this week.

MARGARET WARNER: Before we go the Louisiana race, Mark? Do you have a prediction? How do you see it playing out?

MARK SHIELDS: I mean, what is fascinating about this race as Kwame reported so well in the piece is the Republicans want to nationalize the race and Mary Landrieu, the Democrat running for reelection is running on local issues, issues where the administration, Bush administration has been unhelpful to Louisiana workers or Louisiana industries. What -- they talk about one third of the electorate being African American also Catholic -- this is the most Catholic state outside the Midwest and the Northeast. Susie Terrell is running as the most pro life candidate in the history of I think politics. She is not only against abortion, which is a pro life position; she is against contraception of any sort, and she accused Mary Landrieu I mean, that includes condoms, diaphragms, prescription drugs and she also accuses Mary Landrieu of having left the Catholic Church, and so I don't t know how that plays out because these are not these are French Catholics these are not necessarily ones who take their direction from the Vatican.

MARGARET WARNER: Your final thought, David.

DAVID BROOKS: Just that it's the democratic strategy. The Democratic dilemma in short form -- do you go for the base or do you try to widen the base.

MARGARET WARNER: We'll leave it there. We'll know next week. Thank you both.

RECAP

MARGARET WARNER: Again, the major developments of today: Treasury Secretary Paul O'Neill and the head of the National Economic Council, Larry Lindsey, resigned. Unemployment in November rose to 6%, the highest since April. And the UN Security Council decided that Iraq's declaration of its dangerous weapons programs will not immediately be made public. A reminder, that "Washington Week" can be seen on most PBS stations later this evening. We'll see you online and again here Monday evening. I'm Margaret Warner. Thanks for being with us. Good night.