The NewsHour with Jim Lehrer

MARGARET WARNER: Good evening. I'm Margaret Warner. Jim Lehrer is off today. On the NewsHour tonight: Our summary of the news; an around- the-country look at today's jobs report; new reaction to the so-far fruitless search for weapons of mass destruction in Iraq; the weekly analysis of Shields and Safire; some opposing perspectives on the California recall race; and a twist in the case of Zacarias Moussaoui.

NEWS SUMMARY

MARGARET WARNER: President Bush today strongly defended the Iraq War, despite the failure to find illegal weapons so far. The chief U.S. Inspector, David Kay, reported yesterday that his search had turned up no weapons of mass destruction. But he said he had found activities and equipment that could be weapons-related. Today, the president said the findings support his policy, and he quoted from the Kay report.

PRESIDENT GEORGE W. BUSH: Iraq's weapons of mass destruction program spanned more than two decades. That's what he said. You see, he is over there under difficult circumstances and reports back. He says that W.M.D. Program involved thousands of people, billions of dollars and was elaborately shielded by security and deception operations that continued even beyond the end of Operation Iraqi Freedom. In other words, he is saying Saddam Hussein was a threat, a serious danger.

MARGARET WARNER: Democrats sharply questioned the president's interpretation of the report. Senator Carl Levin of Michigan said there's nothing to suggest Iraq had banned weapons or was close to producing any.

SEN. CARL LEVIN: That at a minimum, the administration would hold off making continuing to make the kind of statements that it is making even recently, about Saddam Hussein's capabilities in this area. This isn't an issue about intentions or what the hopes were or what the plans were or what the programs were. What took us to war were statements about weapons of mass destruction in the possession of Saddam Hussein and the threat of their imminent use.

MARGARET WARNER: We'll have more on this story later in the program. White House staffers have been given a deadline to meet, in the probe into who leaked an undercover CIA officer's name. The president's counsel told staffers today to deliver to his office by 5:00 P.M. next Tuesday any documents, phone logs or emails relevant to the probe, including records indicating conversations with reporters on the matter. The material is for the Justice Department's criminal investigation. The CIA operative is married to former Ambassador Joseph Wilson. Days after he criticized the president's claims about Iraq's weapons program, her identity was disclosed in a newspaper column. U.S. Troops in Iraq arrested two former regime officials overnight west of Baghdad. One was allegedly an executioner for Saddam Hussein, and theother, a former general. Today, attackers threw a grenade at two U.S. Army vehicles in Baghdad. Five Iraqis were wounded, but no Americans were hurt. In all, 316 U.S. troops have died in Iraq from combat and other causes since the war began March 20. More than 1,700 have been injured. U.S. Authorities in Iraq say the supply of electricity there now tops the prewar level. They said the power system is generating 4,500 megawatts a day. It was 4,400 before the war. A U.S. Spokesman conceded that's still at least 2,000 megawatts below demand. There was better news on the jobs front today. The Labor Department reported unemployment held steady at 6.1 percent in September. And it said businesses added 57,000 jobs, the first increase in eight months. On Wall Street, the Dow Jones Industrial Average gained more than 84 points to close at 9572. The NASDAQ rose 44 points to close above 1880. For the week, the Dow gained nearly 3 percent . The NASDAQ rose nearly 5 percent . In the California recall race, Republican Arnold Schwarzenegger faced a new controversy today about alleged comments on Adolf Hitler. ABC News and "the New York Times" reported that in 1975, he told a documentary filmmaker, quote: Schwarzenegger grew up in Austria, and his father was a Nazi Party member. But late last night, responding to the reports, he said he can't recall ever saying anything good about Hitler.

ARNOLD SCHWARZENEGGER: I cannot imagine because from the time I was a kid on, I always disliked everything that his regime stood for. And when I came to America, it was the same thing, you know. I think that Hitler was a disgusting villain dictator and he has caused so much harm in the world, and we have to make sure that it never happens again.

MARGARET WARNER: The quotes come from an unpublished 1997 book proposal by filmmaker George Butler, which included a transcript of the 1975 interview. But the "Los Angeles Times" reported today that two months ago, butler denied to reporters that Schwarzenegger had ever made such statements. We'll have more on this story later in the program tonight. That's it for the news summary tonight. Now it's on to an upturn in hiring, reaction to the Kay report, shields and Safire, the California recall, and the Moussaoui case.

FOCUS - TURNAROUND?

MARGARET WARNER: New jobs numbers: Do they signal a turnaround? Ray Suarez has more.

RAY SUAREZ: September brought some better jobs news from the Labor Department. The jobless rate remained the same, rather than increasing as many economists had predicted it would, and business payrolls rose by 57,000. But the data showed significant problems remain. The number of people looking for work for more than six months grew to 2.1 million, and nearly five million people worked part- time jobs because they could not find full-time work.

For a closer look at the numbers and the employment picture in different parts of the country, I'm joined by Yolanda Kodrzycki, an assistant vice president at the Federal Reserve Bank of Boston; Donald Grimes of the University of Michigan's Institute of Labor and Industrial Relations. He joins us tonight from Tampa. And William Conerly, he runs his own economic consulting firm in Portland, Oregon.

And, William Conerly, let's start with you. When you sift the numbers, what stands out to you and what do you think it means?

WILLIAM CONERLY: Well, this is the first really good numbers we've seen on the national basis since January. We always caution people not to get too much caught up in one single month's number, but the fact is, this is the first single month's number that's looked good in nine months.

RAY SUAREZ: And they always call unemployment a lagging indicator; when we talk about how long it's lagging, what does this mean to have last month do well; that people started to see positive signs three to six months ago?

WILLIAM CONERLY: Well, what I'm really focusing on is the growth of jobs, and we haven't had a net gain in total employment since January. The unemployment rate is a little bit misleading and especially around turning points you get some people who have been discouraged coming back into the job market and that will artificially keep your unemployment rate up a little bit high. But the really good news here was that gain in employment.

RAY SUAREZ: Yolanda Kodrzycki, is a 57,000 job gain as happy an event as it is for the 57,000 job holders really significant in an employment pool of 132 million people?

YOLANDA KODRZYCKI: Well, it does represent a small uptick. The Commerce Department hasn't yet released its third quarter GDP figures, but we feel confident that there was substantial economic growth in the third quarter. If that can be sustained, then we might see a string of positive additions to the employment roles. Now, as I look at that number, though, I see employers still tentative. We had 66,000 temporary help jobs created. That indicates to me that employers are willing to add to their payrolls but not to the real permanent payrolls.

RAY SUAREZ: And Donald Grimes, what pops out from the numbers for you?

DONALD GRIMES: Well, I think one thing we have to keep in mind is that last fall there was also a significant improvement in the job picture between august and November we actually added 200,000 jobs in the United States. But then the economy slowed down as GDP fell off in the fall and winter, and then we went back into this negative growth period.

RAY SUAREZ: How many jobs, Mr. Grimes, does the economy have to produce in an average month just to handle the population increase, the people graduating from schools and entering the labor force, just to stay even?

DONALD GRIMES: Usually about a hundred and twenty-five to a hundred and fifty thousand jobs a month would roughly hold the unemployment rate constant or reduce it.

RAY SUAREZ: How are things looking in your part of the country, the Midwest?

DONALD GRIMES: I think the one thing you have to keep in mind about the Midwest is that it's the most industrial part of the country. And even in the September jobs report, the manufacturing sector lost 29,000 jobs. So since the Midwest is most dependent upon an improvement in the manufacturing sector, I still haven't seen quite the improvement in the manufacturing sector that would lead me to believe that the Midwest is going to turn around anytime soon.

RAY SUAREZ: That 29,000 loss is well down from earlier months losses, isn't it?

DONALD GRIMES: Oh yeah, between the end of the recession in November, 2001, and September, we were losing, on average, about 60,000 manufacturing jobs every month. So the manufacturing sector has been hemorrhaging jobs for a long time. And in fact, actually if you go back to 1979, that was our peak month for manufacturing employment in the United States, peak year. That was about 19.5 million. We currently employ about 14.5 million, so there's been a very steady decline in manufacturing and employment since 1979.

RAY SUAREZ: William Conerly, what does the picture look like in the Pacific Northwest?

WILLIAM CONERLY: Well, the Pacific Northwest is still the weakest part of the country. For most of the past two years, Oregon has had the highest unemployment rate in the nation. We're now tied with Alaska for the highest rate. Washington is regularly second or third in unemployment rankings. The problem this is part of the country is very dependent on business capital spending, business spending on new equipment or computer software. And that has been the weakest part of the national economy. Our second biggest concentration is exporting. We've been exporting since furs were sent to China in the 1800s, and that's the second worst part of the national economy. So we are just dependent on those parts of the economy, which are very weak. We don't have state data comparable to the national data that came out. We are going to have to wait a couple of weeks for that. But right now the jobs picture is flat. There is an improvement only in my forecast. I think in the next few months, it will be there, but there certainly is no evidence hard in the data right now that we're improving.

RAY SUAREZ: Oregon and Washington have been among the worst hit states in the union. What about California?

WILLIAM CONERLY: Yeah, California is more in line with the nation. But there's an interesting difference. The Bay area, the San Francisco Bay area has been losing jobs over the last year and southern California looks more like the nation, more or less flat in the last year, and that will make it interesting with that recall election. The more traditionally liberal area is hurting more economically while the area that's traditionally conservative is on a slightly better economic stance.

RAY SUAREZ: Yolanda Kodrzycki, the view from the Northeast?

YOLANDA KODRZYCKI: Well, there's some similarity between the Northeast and the West Coast. We are very reliant on technology in New England, so we live by technology and we die by technology. The New England region has lost 220,000 jobs since the beginning of 2001. The picture looks worse as you get closer to Boston. Massachusetts has had 150,000 job loss during that time period and in percentage terms, it's had the most severe job loss of any of the states. Now one bright side is that our unemployment rate remains lower than the national average. It's a full point lower. And we think that may be because during hard times, a lot of our technology folks start businesses of their own, so they're counted as self-employed rather than unemployed.

RAY SUAREZ: Earlier you mentioned the rise in temporary hiring. This month's numbers also brought up long-term unemployed and people who feel they are underemployed. They want to work more hours. How do all these different statistics tell us in a broad sense about what's going on in the labor market?

YOLANDA KODRZYCKI: Well, I think it's a very mixed picture. I'd like to say that my glass is half full, but it's half full of diet soda, not champagne. The people who have lost their jobs in this long downturn still aren't seeing a significant hiring going on. And that is why we get more and more reports of people who are out of work for a long period of time, or who can't work as many hours as they would like to work. It would take a sustained stronger economic recovery to turn that around. And the jury is still out.

RAY SUAREZ: Donald Grimes, can you see looking at the latest statistics on both manufacturing and employment that the economy got a shot from the tax rebates that were sent out to so many millions of families over the last several months?

DONALD GRIMES: Yeah, I think definitely if you look at actually the consumer spending reports for July and august, at an annualrate, I think they were up like 7.5 percent, which is really why you are going to see strong GDP growth numbers in the third and fourth quarter and then the question will be whether or not we can begin to get some business investment that will drive the entire economy at a much higher rate, say 4 percent or more, in 2004, and that will generate the jobs we need throughout the country.

RAY SUAREZ: Does that give a spur to manufacturing employment, or does it just mean that we buy more imported stuff?

DONALD GRIMES: Well, the problem with manufacturing as you identified, is imports - and one problem. But the bigger problem in terms of jobs in manufacturing is the productivity growth rate which is inevitably going to mean that we are going to lose jobs in manufacturing. If the economy grows really strongly, we may get a temporary bounce in employment and manufacturing, but over the long-term, all we can really hope for is a slow loss of jobs in manufacturing.

RAY SUAREZ: Donald Grimes, how many months do you need to see of small gains like this one before you feel like-- excuse me William Conerly, how many months do you want to see before you feel we are starting the long walk back?

WILLIAM CONERLY: Well, given that this is... that this increase is consistent with what I'm saying and everybody else is saying, just another couple of months would confirm it if we were getting evidence contrary to our prior beliefs, it may take me a little longer to come around. But here it is October. If in the report we get in early December, we have, we've seen a couple more months of steadily increasing employment, then I think we are going to breathe a big sigh of relief and say we've finally put an end to the recession.

RAY SUAREZ: Guests, thank you all.

MARGARET WARNER: Still to come on the NewsHour tonight, the latest reaction to the hunt for illegal weapons in Iraq, Shields and Safire, new revelations roil the California recall race, and an update on the Moussaoui trial.

FOCUS - WEAPONS SEARCH

MARGARET WARNER: Washington was still reacting today to CIA Inspector David Kay's report that his team has not yet found any weapons of mass destruction in Iraq. Kwame Holman reports.

KWAME HOLMAN: President Bush issued his first public comment on David Kay's findings this morning to reporters on the White House lawn.

PRESIDENT GEORGE W. BUSH: The report states that Saddam Hussein's regime had a clandestine network of biological laboratories, a live strain of deadly agent botulinum, sophisticated concealment efforts and advanced design work on prohibited longer-range missiles. Extensive work remains to be done on his biological, chemical, and nuclear weapons programs. But these findings already make clear that Saddam Hussein actively deceived the international community, that Saddam Hussein was in clear violation of United Nations Security Council Resolution 1441, and that Saddam Hussein was a danger to the world.

REPORTER: There's a poll out in which a lot of people today are wondering whether the war was really worth the cost. How do you respond to that, sir?

PRESIDENT GEORGE W. BUSH: Yeah. I don't make decisions based upon polls. I make decisions based upon what I think is important for the security of the American people. And I'm not going to forget the lessons of 9/11, September 2001. Sometimes the American people like the decisions I make, sometimes they don't. But they need to know I'll make tough decisions based upon what I think is right, given the intelligence I know in order to do my job, which is to the secure this countryand to bring peace. Thank you all.

KWAME HOLMAN: Meanwhile at the Capitol, Democrats focused on the fact that David Kay had yet to find any weapons. House Minority Leader Nancy Pelosi.

REP. NANCY PELOSI: I want to make one distinction, and that is the distinction between having a weapon and having a weapons program. I mean, weapon program is an aspiration to want to get a weapon. It's a big difference between that and actually achieving one. And I think what we're seeing in Iraq is a big difference between the aspirations and the capability to achieve that. If he needs more resources and more time, I think he should have them. But I think that there should be a time when a decision is made that we're not going to... we are or not going to find anything.

KWAME HOLMAN: And after hearing Kay's testimony before the Senate Armed Services Committee this morning, Massachusetts' Edward Kennedy said his doubts were confirmed.

SEN. EDWARD KENNEDY: All I can say is I didn't believe there was an imminent threat to the United States when we went to war, and I'm more convinced now listening to him that there never was a threat either.

KWAME HOLMAN: And Kennedy objects to giving Kay the $600 million he says he needs to finish the job.

SEN. EDWARD KENNEDY: I think they ought to take 300 million and look after Osama bin Laden and the other three to focus on the North Korean nuclear development, the development of the nuclear weapons in North Korea is really an important threat to American security, and we ought to be focused and giving that life and attention. It seems to me to be higher priorities.

KWAME HOLMAN: David Kay says he expects to issue a final report on his search for weapons of mass destruction in the next six to nine months.

FOCUS - SHIELDS & SAFIRE

MARGARET WARNER: That brings us to the analysis of Shields and Safire. Syndicated columnist Mark Shields and William Safire of the "New York Times." Well, reaction is building to the David Kay report. We heard both Democrats and Republicans saying how disappointed they were. Bill Safire and these polls also suggesting the public's wondering was the war worth it. What do you see as the political fallout from this?

WILLIAM SAFIRE: I think what we have seen is the missing word. There was one very short word missing in most of the coverage and certainly all the headlines of the Kay report. And the word was "yet." Nothing found yet. And as you saw with Senator Kennedy, they don't want to spend more money looking. They're happy with the headline, no weapons found. And yet, if the reports in the papers are true, and I think they are, we're talking about spending $600 million looking. There's another small item that 600,000 tons of explosives need to be gone through and exploded.

MARGARET WARNER: Kay said that on this program last night in an interview with Jim, that there's a lot...

WILLIAM SAFIRE: I should watch on Thursday.

MARGARET WARNER: You should watch on Thursday. There were a lot of things they haven't been able to go through.

WILLIAM SAFIRE: The question is... not the question. My conclusion is don't jump to could be collusions. We have plenty of time to find out. We see a scientist with a vial of botulinum toxin in his home, how many other scientists have it? And when will they start talking? Let's wait a while.

MARGARET WARNER: What's at least your premature conclusion, Mark?

MARK SHIELDS: My premature conclusion is that it is a blow to the administration and to the supporters of the president on his Iraq policy. There is no doubt - there is not a question of some day we'll find it when the president went to the U.N. Or the secretary of state went before the U.N.. we had pictures, we had aerial photographs, Margaret. And I think what we've got is we've got no smoking gun. We may have a smoking memo to listen to David Kay. There's the possibility that at some future point in time, he had substantial intent to return to nuclear weapons. This was after the national security advisor to the president warned the American people she didn't want this -- a mushroom cloud to be the warning that we got from Saddam Hussein. The capacity of Saddam Hussein to deliver lethal attack upon the United States which was alleged is certainly totally unproven, in the Scottish term....

WILLIAM SAFIRE: Very good Scottish term.

MARK SHIELDS: That's right. I just think when Pat Roberts, a very loyal Kansas Republican, the chairman of the Senate Intelligence Committee - a former marine, stands up there and says I'm not pleased by what I heard today, I think that was probably the most candid assessment with the least partisan garnishment.

MARGARET WARNER: And yet, Bill, the president took this report and essentially embraced it and said it proves what we were saying all along which was this guy, he is talking about intent and he's talking about capability. Is that the right tact for the president to take?

WILLIAM SAFIRE: Like with the bible or the Lincoln speech, you can read it and pick out what you want and make it work for you. Mark and I see the same report with different eyes. That's what makes horse races. I think what we'll see in the future is something different.

MARGARET WARNER: Mark, do you think there is any doubt -- one that the Congress will approve the money to continue the weapons search, and then more to the point, also, this great big supplemental spending request that the president has made for Iraq. There were a lot of grumbles on the hill this week about that.

MARK SHIELDS: The grumbling... I think the money will be approved for David Kay to pursue the search because thus politically there is no strong side in opposing it. But the $87 billion has really become a problem for the administration. It is not only the president's eroding support in the country, and support for the war itself -- but it's also, Margaret, the reluctance on Capitol Hill, especially on the part of Republicans, but on Democrats, if you split it, split that $87 billion into two parts; that is, $20 billion for rebuilding of Iraq and the $63 billion or so whatever, 65 billion, for American troops, the $65 billion for the troops sails through, big majorities. On the other side, there is great resistance, there's resistance all over the board on the amount of money for the specific line items, whether it's going to be a grant instead of a loan. Again, statements made by Rumsfeld, by Wolfowitz, on the eve of the war that the United States taxpayers won't have to pay anything about this. It is going to be self-financing for goodness sakes. These people have so much money, they're awash in money. And now we're told that it can't be a loan. If there were a way of splitting that, it would lose. I think the fight is going to be that the Republicans understanding their own members' skittishness on this will try to come up with a fig leaf loan program that the president at a later date certifies they can pay it back. The question is, can the Democrats organize to beat the bogus loan? I don't know. But this military part of it is absolutely lock sure.

MARGARET WARNER: How do you think it will unfold?

WILLIAM SAFIRE: Mark is right about the military part. A lot of us think, frankly, the $20 million in reconstruction should be a mortgage, and that we should have a way of getting that money back. I've been rooting for that for sometime. And quite frankly, I think, Mark, you'll see the administration doing more than a fig leaf, because politically, it would be terrible if the Russians were able to start getting money back from Iraq and Iraq's oil before we got our money back from our reconstruction fund.

MARGARET WARNER: All right. The other big story this week was over the CIA Leak, the investigation into the leak of the CIA operative's name. The poll suggests the public thinks it's serious, 80 percent in a "Washington Post"-ABC poll. How serious do you think this is? Does this thing have legs politically?

WILLIAM SAFIRE: Yes, it has legs. And the Democrats are eager to give it really powerful legs. And that's why you see the push for an independent counsel, or even....

MARGARET WARNER: Special counsel.

WILLIAM SAFIRE: An independent prosecutor frankly what is I've been for all along, Republicans, Democrats, whatever. But now the whole idea of appointing a special counsel is to string out the story for months and months. You have to... who will it be? You finally announce it and somebody objects it to and then there is a fuss about him or her. And then appointing the staff, and renting the offices and moving it. You can really go at this until next spring, which is about what they want to do.

MARGARET WARNER: So is that why you think so far the administration has not embraced that?

WILLIAM SAFIRE: Right. They'll resist it and then they'll have to cave in.

MARK SHIELDS: I'm against an independent counsel. There is a rare moment of consensus in this town in 1999 when the Democrats and Republicans came together and said this had become a partisan bludgeon, a political bludgeon.

WILLIAM SAFIRE: I wasn't part of that consensus.

MARK SHIELDS: You weren't. I'm sorry. I should have told you about the meeting. They voted to repeal it. And I think Antonin Scalia, the Justice of the Supreme Court argued for 20 years it was a bad idea and I think he was validated and vindicated. But I think what we have here, Margaret, is for the first time, a problem for the White House, the first time for an allegation of a scandal, first time the smearing of somebody who took another position, however you want to do it, exposing an agent. That's to be determined but this is... the president came to power and won the election in 2000, in my judgment in large part by saying look, these days are over. There won't be any more investigation. It is going to be integrity and decency and dignity --I think the president would do well to heed the advice of the editorial page of the "Washington Times" where the columnist and chief editorial writer said get on this immediately. Don't string it out. Don't let it be six or eight months. Mr. President, it's up to you. The president is now very passive about this. If anybody has information, let them come and put it in the suggestion box. There is only a couple dozen people who are eligible to have filled the role in this White House.

MARGARET WARNER: Today Howard Dean said the similar thing. He said -- the president should stand up and ask the people who did this to resign right now. Do you think the president should get more involved?

WILLIAM SAFIRE: No. I think there's a back story here that will develop later on, and that is the great division within the CIA and the intelligence community. And they are leaking and theleakers leak on the leakers.

MARGARET WARNER: The story wouldn't be out but for leakers.

WILLIAM SAFIRE: And they're fighting like elephants underneath this tarpaulin, and all we are seeing is the outward movement.

MARGARET WARNER: Is this really part of even the larger running battle between not only within the CIA, but between the CIA and the White House, particularly the vice president's office, over the whole question of intelligence about Iraqi weapons?

WILLIAM SAFIRE: You got it. That's exactly it. Don't you think so, Mark?

MARK SHIELDS: I think it is a major fight back and forth. I mean, there may have been an attempt to prove... why didn't you get somebody who came back with better information. The damn CIA. that's why Joe Wilson went. The CIA was involved. I think there might be - might be not. There may have been a neo-con explanation as to why we weren't being tougher in the white house.

MARGARET WARNER: I quick question for both of you as journalists, then I want to get back to bush. Should Bob Novak and the other journalists who were called, if this really was a crime, should they say or tell investigators who called them or who they talked to?

WILLIAM SAFIRE: First of all that's a big if. Second, you don't reveal your source. The freedom of the press is under girded by there semi privilege that we have.

MARK SHIELDS: I disagree with Bob Novak. He is a very good friend. I know him to be an absolute patriot. I don't think any circumstances he would divulge the name of somebody he thought was an agent and put at risk that individual or that individual's contacts. I don't think he should. The statutes specifically exempted journalists. The law itself was writ then in 1982. MARGARET WARNER:: Let's talk briefly about president bush and the "New York Times" poll. Today the poll said that even in what's been a strong suit since 9/11, foreign policy, his approval rating was the lowest its see ever been. Down to 44 percent . I think the disapproval was 45. Should the white house be trouble beside this?

WILLIAM SAFIRE: Take a look at that poll. In January '03, the approval rating was 45 percent . Now here it is eight months later with all the brouhaha and it's still 45.

MARGARET WARNER: 44, yeah.

WILLIAM SAFIRE: Call me a liar for 1 percent .

MARGARET WARNER: I acknowledge statistically it's insignificant.

WILLIAM SAFIRE: On the broader question, Clinton, in this part of his first term was what, way down. So was Reagan, and so was Nixon.

MARGARET WARNER: Sort of the third year blahs.

WILLIAM SAFIRE: Then they came on to a huge landslide victory.

MARK SHIELDS: You're not suggesting we go through another Nixon reelection campaign.

WILLIAM SAFIRE: No, no. I was thinking Reagan (laughing).

MARK SHIELDS: Bill's right, similar point. The problem is the trend lines. The trend lines for the president is not good. He has just been a through a successful war, a winning president in the war. His numbers jumped back up again; now he is back to where he was in his overall job rating, Margaret, on September 10, 2001. So all the restorative strength that he won with the electorate for his leadership after September 11 has been eroded.

MARGARET WARNER: We have to leave it there. Thank you both.

FOCUS - RECALL REVELATIONS

MARGARET WARNER: Now Terence Smith explores the latest twists in the California recall race.

TERENCE SMITH: Arnold Schwarzenegger's statewide bus tour, dubbed the "California Comeback Express," has hit some bumps in the road in the last 48 hours. On Thursday, the "Los Angeles Times" reported that during his long career as a bodybuilder and movie star, Schwarzenegger repeatedly groped or sexually harassed women. The candidate said the story was exaggerated, but apologized anyway.

ARNOLD SCHWARZENEGGER: Yes, I have behaved badly some times. Yes, it is true that I was on rowdy on movie sets and I have done things which were not right that I thought were playful, but now I recognize that I have offended people. And those people I have offended I want to say to them that I'm deeply sorry about that and I apologize.

TERENCE SMITH: One woman spoke publicly.

E. LAINE STOCKTON: Arnold was there and I remember him passing by me and groping my breast.

TERENCE SMITH: Maria Shriver, Schwarzenegger's wife, defended her husband.

MARIA SHRIVER: As I say to my children, it takes great courage to stand before anybody and apologize. I think that's what Arnold did today. And I think he handled it and I think his statement speaks for itself.

TERENCE SMITH: And today, ABC News and the "New York Times" reported that an unpublished 1997 book proposal quoted him as speaking positively of Adolf Hitler. "I admired Hitler, for instance," he is quoted as say, "because he came from being a little man with almost no formal education, up to power I admire him for being such a good public speaker and for what he did with it." Schwarzenegger said last night that he does not remember any such comments.

ARNOLD SCHWARZENEGGER: I always despised everything Hitler stood for. I hate the regime, the Third Reich and all of this Nazi philosophy. I've always fought against that.

TERENCE SMITH: There was swift reaction from embattled Governor Gray Davis on both the sexual misconduct and Hitler controversies.

GOV. GRAY DAVIS: This is a matter voters will take into account and decide how much weight to put on it when they vote for Arnold Schwarzenegger. We don't know what he admitted to, what he didn't admit to. His story seems to constantly change, I'm just going to let this all settle in. I don't see how anyone can admire Adolf Hitler. Any decent American has to be offended by that phrase.

TERENCE SMITH: Also today, moveon.Org, a web-based public interest group, launched a new television ad aimed at women voters.

TELEVISION AD: If you are a woman, or your mother is a woman, or your wife, or your sister, or your

daughter, or there is a woman where you work, you cannot vote for this man, because Arnold Schwarzenegger has a serious problem with women.

TERENCE SMITH: The latest polls, conducted prior to this week's controversies, gives Schwarzenegger with a strong lead in Tuesday recall election. Some 57 percent of those surveyed favored recalling Gray Davis.

TERENCE SMITH: Joining me now are Debra Saunders, syndicated columnist for the "San Francisco Chronicle." And Robert Scheer, syndicated columnist for the "Los Angeles Times." Welcome to you both. Welcome to you both. Debra Saunders, what do you think is the impact of these controversy that have dogged Arnold Schwarzenegger the last 48 hours?

DEBRA SAUNDERS: Well, I think that the "L.A. Times" story about the groping, in a way, discredits journalism more than Arnold Schwarzenegger. It has been pretty clear from other stories that he has a history of being rather crude. But then when you read the story with four people who don't want to be named and they have to go back to 1975, the 1980s, early 1990s to document most of their incidents, you know, I do care, by the way. I want to know that he is good at dealing with women. What the article tells me is that he didn't used to be but notthat he is a problem anymore. The Hitler story, I just can't imagine it sticking considering his association with the Simon Wiesenthal Center. I just don't see it.

TERENCE SMITH: He has contributed to that center as he explained on his campaign stops today. Bob Scheer, what is your view of that, and do you share the view that it's more an indictment of journalism than Arnold Schwarzenegger?

ROBERT SCHEER: No, I think Schwarzenegger has gotten a pretty easy ride. He was anointed as the front-runner as a celebrity. You live by the sword, you die by the sword. The only thing we know about Arnold Schwarzenegger is as a celebrity. As it turns out, we get a little peek behind the actor and we find he has been a misogynist or certainly a groper. He has admitted to that. But I think the real issue here is that the guy is only an important candidate because of his movie image and now the image has been tarnished. We know nothing about what this guy stands for and the state's conservative family value Republicans are backing a guy who is at best a libertine. A wild guy, an actor, one who disagree with them on key social issues but they're backing him for totally opportunistic reasons to defeat a conservative Democrat. I suggest this is payback to the Republicans and they're going to get more of it if the guy wins.

TERENCE SMITH: Debra Saunders, what is your view of the impact on this on voters there? It is coming very late in the campaign, just a few days before Tuesday's balloting. What is the impact on voters, particularly those, if there are some, who haven't made up their minds?

DEBRA SAUNDERS: Well, over a million people have already submitted their absentee ballots. So it can't have a huge impact, this story. I think there are people who... I mean there isn't a lot of new information in these stories, if you even call it information, so you know, there are family values Republicans who don't like Arnold Schwarzenegger. They have a problem with the way he's related to women and they weren't going to vote for him anyway and they're still not going to. I'm sure there are moderate Democrats and independents who have the same reservations. And then there are, you know, people like me, who agree with him on a number of fiscal issues and look at the field and think, Okay, Arnold Schwarzenegger at least has a chance of getting something done in Sacramento, and I don't believe that's the case for Lieutenant Governor Cruz Bustamante, the Democrat, or State Senator Tom McClintock, the Republican.

TERENCE SMITH: But you do support the idea of recalling Governor Davis?

DEBRA SAUNDERS: You know something, I have been against the recall from the start. I thought it looked like sour grapes. I don't believe in recalling someone unless there's been some new horrible scandal. And, you know, Gray Davis won the election square and fair. Then he signed a bill SB-60, which allows illegal immigrants to get driver's licenses. I feel betrayed by that signature. Why is he facing a recall? Because California voters feel he will sell them up the river for special interests to help his career out. What does he do when the recall happens? He signs a bill he vetoed before because it didn't have any safeguards and he said that absolutely was beneath him. Now all of a sudden it isn't. You want to know something, I don't know how I'm going to vote. I still haven't made up my mind. I'm so conflicted.

TERENCE SMITH: Bob Scheer, what impact do you think these latest disclosures might have on the voter's minds?

ROBERT SCHEER: I think Debra is right. I think Arnold may be saved by the bell. This is not a real campaign. There isn't time to examine the candidates, so this guy is going to squeak by. If this was a real campaign, he would collapse. He knows nothing about how the state works, what do you with water. We don't know his position on the coastal commission. We don't know whether he would increase property taxes or not. We don't know where he would get the money to pay for anything. So we really have no sense at all whether he is a fiscal conservative or anything else. But he's gotten to ride to his celebrity. I want to add one thing. I don't think it's unimportant that last July he told Entertainment Today that it was exciting to shove a woman into the toilet head first in Terminator 3 and he could get away with it because she was a robot. He even made a scatological reference about what would be in the toilet. He said we can't do that with real people because of the groups that complain. Well, the groups that complain about misogyny are not just feminist groups. They're also Christian women's groups. And for Debra to say family value conservatives, they're a small group. No, they claim to be the leadership of the Republican Party. And the leadership of the Republican Party has betrayed their conservative agenda. They've betrayed McClintock and they're backing a guy that they know is an embarrassment and they're doing it against a conservative Democrat because, I think, they just don't believe the two-party system and they just want to grab power.

TERENCE SMITH: Debra Saunders, how do you plead?

DEBRA SAUNDERS: First of all, Arnold Schwarzenegger's positions on a number of issues are known. And nobody knows how anybody is going to solve the state budget. I don't care even the people who say they have a plan, I don't know how they think they're going to get it past the legislature. Secondly, the Republican Party leadership didn't want to have anything to do with this recall. It started with grass roots people. Republican Congressman Darryl Isa hadn't come along with the money to fund it, it probably would have flopped. Now they're stuck saying they can't let Gray Davis win this thing. Arnold Schwarzenegger could bring a lot of vitality to the party. It's sort of... I feel like that character in the, like Harrison Ford in the last Indiana Jones movie where you have to take that leap of faith. There's than abyss and you have to sort of step on to it and see what is going to happen. I think that's the position the party is in right now. Not because it put itself there but because of some grass roots activists who pushed the recall, Democrats were angry about the car tax. They signed the recall petitions too and here we are.

TERENCE SMITH: What do you think of this recall effort, Lou Cannon, the long time political columnist had a column today on the web site stateline.Org in which he said this has revived interest, lagging interest among Californians in their politics, in their state's governance; and is therefore a good thing. Do you share that view?

ROBERT SCHEER: No, I disagree. I believe in electoral representative democracy. I believe in testing candidates, finding out what they think on issues. First of all, I don't think the state is experiencing any great problem. We have a lower unemployment rate than we did under Pete Wilson. During his high point he had 9 percent. Ronald Reagan and Pete Wilson raised taxes. Our economic problems are mostly due to the fact that we can't fairly tax corporate property because of Prop 13, another dumb initiative move. And I think most of our problems are national in nature. Gray Davis did not cause the economic meltdown. Gray Davis did not cause the energy problem. It was the FERC, the Federal Energy Regulatory Commission that wouldn't come to the aid of the state when George Bush's cronies in Texas were gaining the energy market. The Republicans used to believe in deregulation. It turned out to be a big disaster. Gray Davis prevented blackouts of the kind that you had on the East Coast by buying energy, admittedly at a high price. But I don't get the problem with Gray Davis for Republicans. He bailed out the private utilities -- a pro-prison guy, a pro-death penalty guy. If anybody should be unhappy with Gray Davis, it should be liberals. I can see lots of reasons to prefer a more liberal guy for governor, but I don't see what crime Gray Davis has committed that would require the extreme measure of a recall. And I would point out the hypocrisy in California where property value have zoomed in last few years. There are very few Republicans who are not far richer now than when Gray Davis came into office.

TERENCE SMITH: Is there any benefit, Debra Saunders, is there any benefit in your view to either Gray Davis or Lieutenant Governor Bustamante or anybody else, to the problems that Arnold Schwarzenegger may be encountering in the last few days of his campaign? Does it accrue to anybody else's benefit?

DEBRA SAUNDERS: Sure it could. I want to say one thing about what Bob said about blaming the energy crisis on George Bush's FERC. The blackout started in the summer 26 though before George Bush was elected. I don't know how he started it. Of course Gray Davis benefits because some people look at the field and say this is horrible. I can't vote for the recall. I've heard a lot of people saying that lately. Tom McClintock, the Republican also on the ballot benefits because there are Republicans who will say, I just... I don't trust Arnold Schwarzenegger. I'm going to vote with Tom McClintock. Other people do benefit and I think it hurts Arnold Schwarzenegger a little bit. I don't think it will hurt him much though. I think that the public will end up turning on us in the media and blaming us when they see stories like this, so it won't hurt him much.

TERENCE SMITH: We'll have to see, Debra Saunders and Robert Scheer thank you both very much.

UPDATE - THE MOUSSAOUI CASE

MARGARET WARNER: Finally, tonight an update on the prosecution of Zacarias Moussaoui.

JEFFREY BROWN: Today Justice Department officials considered their next move in the prosecution of Zaccarias Moussaoui. Yesterday, a federal judge in Virginia ruled the alleged terrorist would not be subject to the death penalty in the 9/11 conspiracy. The judge also barred any evidence tying him to the plot. The government has defied the court's order to let Moussaoui question three al-Qaida prisoners.

Joining us to sort through the latest developments in the case is Phil Shenon of the "New York Times." Phil, welcome back. Let's sort out the judge's rulings, if we could. First, she said the government cannot try to link Mr. Moussaoui to 9/11. What was behind that?

PHILIP SHENON: Well, for most of the last year, we've been stuck in a large debate in her courtroom over the question of whether or not Moussaoui can have access to captured al-Qaida terrorists, who might be able to provide evidence and testimony that would support his contention that he had nothing to do with September 11. The Justice Department, acting on behalf of the White House, refused to make any of those witnesses available. Judge Brinkema said it would be grossly unfair to try Moussaoui for involvement in September 11 if the government won't make available witnesses who might be able to show that Moussaoui had very little to do with September 11.

JEFFREY BROWN: So in other words she's saying if you won't let him defend himself against the charge, you can't try to link it himself?

PHILIP SHENON: Precisely, the sixth amendment of the Constitution gives the criminal defendant the right to seek out testimony from witnesses who can support your defense. In this case, the government is saying no, you can't have access to these witnesses even though they most certainly know if you were a participant in 9/11.

JEFFREY BROWN: The judge also said that the government cannot seek the death penalty. What's behind that ruling?

PHILIP SHENON: Pretty much the same reason. She is saying how can you consider executing a man for crimes for which he is not permitted to seek out testimony on his own behalf.

JEFFREY BROWN: The judge referred to Mr. Moussaoui as a remote or "minor participant."

PHILIP SHENON: That was the most startling part of her ruling yesterday, that she found, after nearly two years of reviewing this case, that Moussaoui appears to be a pretty small fish in the world of international terrorism; raising the question as to whether or not Moussaoui was overcharged and suggesting that perhaps it may have been unfair to consider the death penalty in such case.

JEFFREY BROWN: You said it was a surprise. You mean a surprise that she showed her hand that clearly?

PHILIP SHENON: I think so. It's rare that a judge, at this point in the case, would make her own declaration of what she thought the culpability of a defendant was.

JEFFREY BROWN: Now this was seen as a punishment by the judge, was it not?

PHILIP SHENON: It was absolutely a punishment. It was the sanction she imposed on the Justice Department because of the Justice Department's repeated refusal to make available these witnesses, she's suggested for an awfully long time that this is what she was going to do or perhaps even dismiss the case. She chose not to do that but has imposed harsh sanctions on the government.

JEFFREY BROWN: Right. There was some speculation she would dismiss the case. So this punishment caught some people by surprise, I gather.

PHILIP SHENON: I think it's fair to say it caught everybody by surprise. The Justice Department had actually gone so far last week as to say it was willing to have her dismiss the case because that way they could go to the appeals court with a very clear-cut question -- either reinstate all the charges or let Moussaoui go free.

JEFFREY BROWN: Where does this leave the case now?

PHILIP SHENON: In great confusion. The Justice Department as of an hour ago, late Friday afternoon, was saying it had no decision what its next step would be in this case. It won't even say if it intends to proceed with the case against Moussaoui, which seems to raise the question as to whether or not this case is headed for a military tribunal.

JEFFREY BROWN: Well, why don't you lay out the options that the government has now.

PHILIP SHENON: It can appeal this case to the Fourth Circuit Court of appeals in Richmond. And I think many people think that's the most likely route here, and ask the court to reinstate all the charges that Judge Brinkema knocked out yesterday and ask them to reinstate the death penalty. They could also, perhaps supercede an indictment, a new indictment against Moussaoui that would try to address some of the concerns that Judge Brinkema has raised. Itcould step up conversations with the Defense Department about moving to a military tribunal. They're saying at the Justice Department that everything really is on the table.

JEFFREY BROWN: Are there any signs of how they're leaning at this point?

PHILIP SHENON: I think if you had to ask around, people would say what is most likely finally is that they'll go to the appeals court and take their chances there. And this is an appeals court in the past has repeatedly shown that it is sympathetic to national security arguments from the executive branch.

JEFFREY BROWN: The judge did leave open the possibility of just proceeding on the broader conspiracy case, whatever that is, I guess.

PHILIP SHENON: And indeed that's the other option for the Justice Department, which is accepting what Judge Brinkema has done here and going forward with the trial on the more limited charges she will permit. And those are more general allegations of Moussaoui's ties to international terrorism. And the Justice Department could seek a life sentence on those charges.

JEFFREY BROWN: You said it's all on the table even late this afternoon. Are we expecting a quick decision from the government?

PHILIP SHENON: I think the Justice Department is playing with fire here and not making a decision quickly because I think they're making it clear to all of us that they really are uncertain what the future of this case is. They are suggesting though that they'll have some sort of decision early next week.

JEFFREY BROWN: Okay. Phil Shenon, thanks for joining us.

RECAP

MARGARET WARNER: Again, the other major developments of the day: President Bush strongly defended the Iraq war despite the failure to find illegal weapons so far. Leading Democrats said a new weapons report suggests the rush to war was premature. And U.S. unemployment held steady at 6.1 percent in September. Businesses added jobs for the first time in eight months. 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. Have a nice weekend. I'm Margaret Warner. Thanks for being with us. Good night.