The NewsHour with Jim Lehrer

I'm Jim Lara. Today's news, the Senate's energy bill, private equity firms, pros and cons, California Governor Schwarzenegger, Shields and Lowry, and memorializing the Charleston 9 all tonight on the news hour. Good evening, I'm Jim Lara, on the news hour tonight, the news of this Friday. Then a rundown

on what's in the energy bill, just passed by the Senate. A look at the big wealth-producing private equity firms, what they do and how they're taxed, a conversation with California Governor Arnold Schwarzenegger about bridging the political divide, the analysis of Mark Shields and Rich Lowry, substituting for David Brooks, and excerpts of the memorial service today for the nine firefighters who died in Charleston, South Carolina. Major funding for the news hour with Jim Lara is provided by. There's a company that builds more than a million vehicles a year in places called Indiana and Kentucky. One that has ten plants from the foothills of West Virginia to the Pacific coastline. What company

is this? Toyota, a company that along with its dealers and suppliers has helped create hundreds of thousands of US jobs, a company proud to do its small part, to add to the landscape of America. Somewhere in the heartland, a child who's sitting down to breakfast, which is why a farmer is rising for a 15-hour day, and a trucker is beginning a five-day journey, and 80m is turning corn and wheat, soy and cocoa beans into your favorite foods. Somewhere in the heartland, a child who's sitting down to breakfast, which is why so many work so long, and take their job to heart, 80m, resourceful by nature. And by Chevron, Pacific Life, the new AT&T, the Atlantic Philanthropies, the National Science Foundation, and with the ongoing support of these institutions and foundations. And this

program was made possible by the Corporation for Public Broadcasting, and by contributions to your PBS station from viewers like you. Thank you. Democrats in the US Senate celebrated the passage of an energy bill today at past late last night by a vote of 65 to 27. It boosts fuel efficiency standards to 35 miles per gallon in the next 13 years. It also increases yearly ethanol production to 36 billion gallons. Democrats lost a bid to include $29 billion in new taxes on oil companies. The house aimed to work on its version of the energy bill next week will have more on this story right after the news summary. In Afghanistan, 25 civilians were killed in a NATO air strike overnight. 30 insurgents also died. The attack happened in Helmand province in the South. NATO officials said the strike was in retaliation for Taliban attacks on two NATO outposts. A spokesman for

NATO forces said they thought the targets were militants. Our initial indications were that there were about 30 insurgent fighters in the compound that we fired upon. If there were any civilians in the compound, we regret the loss of life or injury, but we don't have a number of how many civilians there might be. And we are trying to assess how civilians may have been killed. So far this year, nearly 180 civilian deaths have been blamed on US or NATO-led operations. Afghan President Karzai said today the mounting civilian toll is becoming difficult for us to accept or understand. The US military said today 17 al-Qaeda militants were killed in a new helicopter, offensive, in Iraq. It happened near Bakuba as the militant strived to slip past an Iraqi checkpoint. American commanders said the fighting was fierce and door-to-door and that most of the upper level al-Qaeda leaders fled before US troops arrived. From Baghdad, Army Lieutenant General Ray Odierno briefed reporters at the Pentagon.

When the fight comes, they leave. They don't stay there with their recruits that they recruited in the al-Qaeda. What stays are the mid-level leaders and the fighters. But I guarantee you, we're going to track down those leaders. And we're in a process of doing that. We know who they are and we're coming after them and we're going to work that extremely hard. Odierno also predicted the US may be able to reduce combat troop levels in Iraq my next spring, but that's if Iraqi security forces continue to make headway. Also today the US military reported another American troop death. The Bush administration today reiterated its goal of closing the detainee facility at Guantanamo Bay Cuba, but would not say when. A White House spokeswoman said America does not have any intention of being the world's jailer. At the same time, the Pentagon announced it recently moved and alleged al-Qaeda detainee from Afghanistan to Guantanamo.

The resigns today North Korea was preparing to shut down its nuclear reactor. The top US nuclear envoy, Christopher Hill, reported that progress after two days of direct meetings with North Korean officials. He said North Korea indicated it would make good on pledges it made to disarm last February. He'll spoke from Seoul, South Korea, and he warned it won't happen overnight. I come away from this two day set of meetings, buoyed by the sense that we are going to be able to achieve our full objectives that is the complete denuclearization, but also burdened by the realization of the fact that we are going to have to spend a great deal of time, a great deal of effort, a lot of work in achieving these. Seoul's visit was the first by a senior American official in nearly five years. The trip was made possible after a financial dispute with the United States was resolved. The leader of Vietnam visited the White House today for the first time since the Vietnam

War. President Win Min Trit met with President Bush in the Oval Office, where Mr. Bush emphasized human rights and democracy. Outside the White House, demonstrators gathered in protest recent moves in Vietnam to repress political activists and religious leaders. Warners gathered in Charleston, South Carolina today for a firefighters memorial service, non-firmen, lost their lives in a furniture store blaze on Monday. It was the single largest loss of firefighters' lives since the 9-11 attacks. Before the memorial, a procession of 100 fire trucks, wound through the streets, 9,000 people packed in arena to pay their respects, including firefighters from around the country. We'll have experts from today's service at the end of the program tonight. The governor of Wyoming appointed a new U.S. senator for his state today. Republican State Senator John Barasso will serve in place of the late U.S. Senator Craig Thomas. He died on June 4 of leukemia. Barasso will hold the job until a special election in November.

The space shuttle Atlantis returned to Earth today. It ended a two-week mission to the International Space Station. It landed at the Edwards Air Force Base in California, bad weather in Florida, forced NASA to scrap plans to land at the Kennedy Space Center. The Blackstone Group, a private equity firm, made its debut today on the New York Stock Exchange. It was the largest American stock offering in five years. The firm is known for buying companies, turning them around, and selling them at the profit. At the end of trading today, the firm's market value stood at about $38 billion. We'll have more on this story later in the program. On Wall Street today, stocks were down sharply on concerns about losses in the high-risk mortgage sector. The Dow Jones Industrial Average lost 185 points to close at 13,360. The Nasdaq fell 28 points to close below 25.89. For the week, the Dow lost 2 percent. The Nasdaq fell almost 1.5 percent. And that's it for the news summary tonight.

Now, energy from the Senate. Big equity money. Governor Schwarzenegger, SHIELD's Ann Lowry, and the Charleston Firefighters Memorial. The U.S. Senate demands more miles per gallon among other energy things. New's our Congressional correspondent, Kwame Holman, reports. It's been more than 20 years since the federal government raised gasoline mileage standards for cars. Intense opposition from automakers squelved past legislative attempts, but that changed last evening on the floor of the Senate, North Dakota Democrat Byron Dorgon. This industry will succeed in my judgment if they are under the gun and under some pressure to produce more efficient vehicles. Other companies in other countries are doing it, and so should ours. As part of the energy bill passed yesterday, Senate Democrats and Republicans together approved increasing the combined average fuel efficiency for new cars and light trucks,

cafe standards as they're called to 35 miles per gallon by 2020. Idaho Republican Larry Craig said the nation's dependence on foreign oil and growing concerns about global warming caused him to rethink his previous opposition. He referenced a recent conversation with auto industry representatives. I said you haven't changed in 27 years, and I haven't changed in the 27 years I've been in Congress. I'm changing, and it's time for you to change. Environmentalists, such as Karen Wayland of the National Resources Defense Council, said the public's influence on the Senate should not be underestimated. When you see a big shift like this, what it means is that the senators have heard the public speak. They've also seen the evidence that the previous policies just aren't working and haven't been good for the country. On the other hand, oil and auto industry lobbyists who swarmed the Capitol all week hoping to fend off the change were disappointed. Riola Durer of the American Petroleum Institute said better mileage is just going to encourage people to drive more. If you make it

cheaper to drive, they actually drive more, so I'm not sure how much you end up saving in that regard or not. It's surprising to me, we have had record demand so far this year for gasoline, even in the face of the higher gasoline prices. Consumers have a lot of choices right now in terms of fuel-efficient vehicles, and I think they're going to them, and they're buying more and more all the time. So they've always had that choice, and I think Congress has to be careful and looking at what consumers want as well. The bill also has an ethanol proposal that calls for half of all new cars manufactured by 2015 to be able to run on 85% biodiesel fuel. Ethanol production using corn and prairie grass would rise to 36 billion gallons annually by 2022, a sevenfold increase over last year's production. The oil industry did win a key battle when Senate Republicans blocked an effort to pour $32 billion into alternative energy projects, almost all of it raised by taxing oil and gas companies. You Mexico Republicans beat the

energy. It makes absolutely no sense to advocate for independence from foreign oil and then turn right around and raise taxes on our domestic companies who are producing America's oil and natural gas. It will mean higher prices for consumers. Oregon Democrat Ron Weiden was on the losing end of the boat. The fact of the matter is, our people and our country have now experienced the results of past policies based on the idea that we ought to just send billions and billions of dollars of subsidies to the major companies. It's time to end those subsidies. It's time to stop the major oil companies from fleecing taxpayers. Action on the energy bill now moves to the house where debate could begin as early as next week. Now taking aim at the world of private equity and its profits, Jeffrey Brown has our story.

Today's public offering by the Blackstone Group, setting the market value of the company at some $38 billion, is just the latest big splash for an industry that has quickly become a major player in American finance, so-called private equity firms typically buy companies using large amounts of borrowed money, then resell them at a profit. They've been fantastically successful in recent years, earning vast sums for their executives, including Stephen Shorzman of Blackstone and for their investors. But they've also come under increasing fire from a growing number of lawmakers who worry about a lack of oversight and believe these companies should pay higher taxes. We look at the situation now with Douglas Lowenstein, President of the Private Equity Council, an industry trade and lobbying group, and Dan Petrati, who works on investment and corporate governance issues for the AFL-CIO, and welcome to both of you. Douglas Lowenstein, first remind us a little bit, tell us a little bit more about how these

companies operate and how they make their money. Sure. A private equity is really a form of ownership. We essentially have two forms of ownership in this country, private ownership, which in fact represents the vast majority of companies in the United States and public ownership, companies that are traded on public stock exchanges. What private equity firms do is organize funds. They raise money from investors, typically pension funds and university endowments. It's a large investment. Large investors typically high net worth individuals are part of that. And they deploy those funds by acquiring companies who might be public companies who are under performing companies that might have been struggling and not succeeding. They might acquire divisions of other companies where the parent company has decided that it's not a good fit and they can't really give it attention to it deserves. Where they might even acquire family owned businesses where the family owners are ready to liquidate their investment. The private equity firm comes in, invest in those companies, typically operate them, own them for three to

five years. With the goal of growing them, increasing their value, because the entire business model is predicated on buying the company at one price and hopefully selling it down the road at a profit. And the economic model is essentially that the private equity firms generate their money by selling these businesses at a profit. 80% of the return when they make a sale goes to the investors. 20% goes back to the private equity fund. Dan, before we look at specific tax proposals that are being put out there, the general principle, why do some lawmakers and yourself think that these companies should be taxed at higher rates? Sir, Jeff, we feel like these firms shouldn't be able to take advantage of a tax loophole, a, in fact, a subsidy to a handful of public private equity firms that would essentially enable them a competitive advantage over other firms in the capital markets. And we feel like especially the time of unprecedented needs that our nation's facing and Iraq, relocating homeless residents of New Orleans after Katrina,

that we should even out the tax code and make it more fair and equitable. One other problem here that we note, firms like Blackstone, when they go public, are trying to gain the system and have it both ways in that when they make the case that they should have a lower tax rate for their limited partnership that they engage in passive activities. But when they go to the Securities and Exchange Commission and say that they're not an investment company, they make the opposite argument, that they're an active manager. I'm sorry, you say, game the system, just to be clear, I mean, what they're doing is legal in their loopholes, you call it. There are loopholes that need to be closed, we think. And by going public by seeking investment and dollars from mom and pop investors, we think that they should abide by the same set of rules that other companies, other corporations do. That's on the corporate side. I think there's also an emerging moving Congress to address the carry on the individual side. Okay, so let's look at the first one on the corporate side. This is a bipartisan effort in the Senate from Senator's Boccas and Grassley that says that when these companies go public, they should pay at the corporate

income rate as opposed to the lower 15% rate. Now, why Douglas Lowenstein is that a bad idea, I guess. Well, I think there are several issues here. One is it's not accurate that no other corporations operate this way. There are Congress, in fact, in the 80s made a series of exemptions from the partnership tax rules that permit companies in certain forms, particularly in the energy and gas industry, to trade as the so-called publicly traded partnership. So this is not unique to private equity. We believe the private equity firms qualify under those rules to issue shares as publicly traded partnerships and qualified for the benefits there, too. The problem with changing the law, as it's been proposed, is that you're essentially deny private equity firms access to the capital markets and single them out amongst all other corporations to say, to say, we're going to treat you differently in terms

of your ability to access capital, and we don't think that's fair. And what a lot of this activity dry up, as a result? Well, certainly you won't have companies. I think it's highly unlikely that private equity firms will go public if the law has changed. I don't think private equity will cease to exist as a business. Obviously, we have companies operating today in private form and that'll continue. So the argument is they're acting like companies, they ought to pay corporate cream. That's right. That's right. And Blackstone, last year I would note, just as the most current example, didn't pay a cent in federal income taxes. By their own measure and their perspectives, they paid 1.4 percent as an effective tax rate. We think, again, as publicly traded firm, they should abide by the same set of rules, the same tax structure, the same regulatory regime that other companies are faced with. And to take advantage of a loophole in the law and in a sense, rip off taxpayers by capitalizing on that, we think that needs to be addressed. And I think you're seeing a growing movement in Congress, both on the

House and Senate side in a bipartisan fashion to say, all right, you're going to access the public markets. You need to do so in a fair and equitable, equitable way. I know the second proposal just came out of the house today. This is a little more complicated. It's called carried interests. But the idea is the partners and the firms earn fees on the deals they do. And the fees are currently considered capital gains and tax to 15 percent. So this would consider them as income. That's right. And why is there a good idea? We think that's a good idea because under the current regime, they're really trying to shove ordinary income into capital gains treatment. And what we're seeing is these individuals, these partners and these firms, are providing a service. It's essentially a fee that they're taking for the 20 percent. And just as a fair and equitable matter, again, we don't think that someone likes Steve Schwartzman should pay a lower tax than a firefighter does on his income. So I think there's, you know, there's an element of almost redistribution of income here in favor of the wealthy. And we think this balances it out by characterizing it and treating it in a different way.

And what's your response? Well, I think there's several issues that we have with that. First of all, partnerships, which is what we're talking about at like private equity firms, operate this way, have operated this way for decades under federal tax law. This is not something unique to private equity, small business partnerships, venture capital funds, real estate partnerships, oil and gas partnerships, all operate the same way. This isn't some sort of creative loophole that's been exploited by private equity. It's central to our partnership tax law. And that law says that people come together and they pool capital and labor. And if you take risk, if you take entrepreneur risk, try to build and grow something with that investment, we recognize that as something worthy of incentivizing and rewarding if you succeeded it. And that's exactly what's happening in a private equity structure. And it's quite worthy of capital gains treatment as current law products. I mean, you know that in the political atmosphere, right? I mean, these are fantastic sums we're talking about. Steve Schwartzman today is

stake in this was worth $8 billion I read. So do you expect the, do you see a political move here to try to go after the, well, here's where the money is and firms like that do this kind of thing, hedge funds and so on. Sure. Well, there's obviously as you refer to, there was a bill introduced in the house today that would change this particular tax treatment of carrot interest for not only private equity but venture capital, real estate partnerships and a number of other partnerships. So clearly there are those in Congress who are concerned and see this as an opportunity to generate revenue. I think it's going to have quite a harmful effect on investment and growth. And I think it's important to realize because we tend to focus a great deal on the Steve Schwartzman and these vast sums of money and nobody's suggested that people in private equity aren't making a lot of money but let's not lose sight of the fact that 80% of the profits generated by private equity firms when they succeed flow back to their investments. Those are pension funds. Those are union pension funds including some represented by the AFL

CIO. They're foundations. They're university endowments. This is not some sort of a process where a handful of people are enriching themselves at the expense of everyone else out there and that's I think an activity we don't want to discourage and disincentivize. He's got a point there. Some of that does go to your member's pension funds. It does go to our member's pension funds but our member's pension funds also have the expectation that when you go public you abide by a certain regime. You abide by certain transparency. You abide by corporate governance and what blacks and other firms are essentially saying is give us all your money and trust us and we think that there's got to be a more robust regulatory regime. On the competitiveness issue if I could just make a couple points. I think first of all you saw a recent report from Goldman Sachs that said the US capital markets are the most competitive in the world. IPOs are up 28%. So the idea that the markets would suffer from some necessary safeguards I think is just fundamentally wrong. In addition I think you know I think what's best for our markets are a fair tax system,

equitable tax base and strong securities laws. Okay Dan but try to get Douglas Lowenstein. Thank you both very much. Thank you. Next and interview with California Governor Arnold Schwarzenegger and how he has changed his approach to politics. Judy Woodruff begins with some background. Since before he ran for and won re-election in 2006 California Governor Arnold Schwarzenegger has changed his originally confrontational approach to politics. He's gained national attention for the issues he's pushing and for taking a more bipartisan approach. Near the top of his agenda reducing greenhouse gases in California. He pushed through state legislation to reduce carbon emissions 25% by the year 2020. If you're going to change the dynamic on greenhouse gas

and on carbon emissions we are taking actions ourselves. We are not waiting for the federal government. The governor has gone further battling the US environmental protection agency over whether the state should be allowed to implement tougher rules on auto emissions. Schwarzenegger has also grabbed headlines for his work on other issues, including his push for universal health care coverage in the state. We want to really reform the system and fix the broken system once and fall. He's also compromised more with his Democratic colleagues this second term. I caught up with Governor Schwarzenegger a couple of days ago along with other leading state and local politicians at a conference in Los Angeles on bridging the political divide. Governor Schwarzenegger thank you very much for talking with us. You are saying more and more lately that it's up to state and local governments to solve problems. That you can't wait for

the federal government. Why is that necessary? I think that the states have traditionally always been the ones in the grassroots operations and the ideas that come from the local government are really the ones that then spread and get to Washington and then finally Washington is responding to it. I think the same thing is the other way around I mean if Washington for instance has been talking about health care reform and immigration reform which are things that ought to be done from Washington but they haven't been able to do it. If we as a state can inspire them or we can show them the way and show that we can reference and reform health care and he is the way to do it then they can copy it so it makes it easier for them. So we're more than happy to provide that kind of leadership. In a state like California you're a Republican this state is mostly democratic. That means moving to compromise with the other side. You came into office not necessarily doing that. You didn't do that early on but you changed. Was that because the original method was failing. When it comes to working together with the other side I think as I've said earlier that

I have learned my lessons in 2005 and I've learned it the hard way because we had some great initiatives and we went out and went about the wrong way. It was not an inclusive approach. It was kind of like setting a deadline said if you don't work with us in two months from now we're going to go directly to the people and it became kind of us versus them and that's the wrong approach. The approach that we always have to take is to be inclusive and to you know to bring all the stakeholders in which we are doing for instance this year with health care. We bring all the stakeholders in and this is why there have been no fights, there have been no attacks or any sort no name calling or anything like this. So I think that I've learned from that and I'm a quick learner. I want to ask you about the environment. Traditionally the Republican, the business point of view has been anything you do to make standard stricter is going to hurt economic growth, business growth. You don't believe that? Why don't you believe it? When you make changes environmentally that will immediately create new technology in order to make

those caps. So if you set a certain cap and say you cannot release more greenhouse gases you know by this time then immediately everyone looks for the technology and how to change the engines of road vehicles in construction or how to make the engines of regular passenger vehicles SUVs and everything, airplanes, engines and so on. How do we make them more efficient? So there's all kinds of new industries that are created. This is the fastest booming business. As a matter of fact the Wall Street Journal called this the New Gold Rush because in California we have so many companies you know thousands and thousands of companies that are developing new products in order to comply with those kind of standards. So I think it is huge so we can prove and we have proven already that you can have you know taking care of the environment and taking care of the economy at the same time as a world is a way you don't have to choose one versus the other. You are going your own way and if you're challenging the EPA you and others like Mayor Bloomberg

are not waiting for the federal government but ultimately Governor Schwarzenegger is it really going to make a difference if a city here and a state there does something if you don't have the federal government going along and you don't have the federal government leading the way globally on this. The best scenario is if the federal government of each country goes along with it and signs a treaty and commits to roll back the greenhouse gases into fight global warming. That's the ideal situation but that is not reality. We can't always have exactly what is the ideal situation especially not in politics. So what we are doing is a state we're saying okay while the federal government is doing their studies for another two years. Let us go and show leadership so that's why we in California passed strict laws last year and said we're going to roll back our greenhouse gases to the 1990 level which is a reduction of 25 percent and then we made a commitment to roll it back another 80 percent per the year 2050 and so we form partnerships with other western states, with northeastern states, with other countries in Europe, with provinces

in Canada. I mean this is spreading like wildfire. It is amazing of how much people are interested in protecting the environment and fighting global warming. One other side of the coin governor is that pointed out that you support these so-called carbon offsets where people pay some money if they do use carbon. In the end are you sort of letting people off the hook if they're not really cutting carbon consumption? No this is kind of if you have to think of it as a tax incentive. It should inspire companies and people that are leading businesses to go and do it actually faster. So if I know that I can trade with someone that cannot make it then I will make sure that my factory and my business it comes down with the greenhouse gas emissions as quickly as possible because now I'm below the standards where they ask me to be and now I can trade with someone and I can make money. So it's actually a way of inspiring businesses to act faster and to make the changes quicker. Well speaking of inspiration and setting an example you don't make no

secret you still fly that you're jet. You would have how many hummors and I guess a couple of them have been converted to biofuels. In some ways are you trying to have your cake and eat it too? I mean I've read some commentary here in California that you could be you yourself could be setting a better example. Oh I'm setting a good example that's why it is very important when you lead in this that you set an example and that's why we have changed for instance the hummors. It's a method we have now three hummors that have changed over to being really very very efficient and the one we're working on right now we have a reduction of greenhouse gases by 80 percent. I mean this is all new technology developed here in California also the hydrogen hummors and so on a biofuel hummors. So that is what we're working on and we are inspiring everyone and there's all kinds of incredible things that are coming out. Two years ago at the car show in Los Angeles there were three vehicles with alternative fuel. The last car show there were 17 vehicles. This year there will be 30 or 40 different companies that will be displaying so it is going like this. We are very happy how quickly the world is moving forward and fighting

global warming. Governor on a range of issues from from immigration stem cell research climate change you are out of sync with the with the principal contenders for the Republican nomination for President John McCain probably the exception. Are you troubled by the direction the Republican party nationally is going in? Well I hope that both of the parties come more to the center and it is not their fault. May I remind you it's not the Republicans fault it's not the Democrats fault our redistricting is horrible it's a fixed system it's not competitive and this is why we're working very hard in California to redo it to have redistricting done by the people that are independent of the legislature rather than the legislators doing it because the way it is right now I mean look at this in the last two election cycles in California it was almost like 500 seats that were for grabs only four so changed the seats. I mean this is a bigger turnover in a Habsburg monarchy than it was here with the we did systems I mean it's crazy. But do you feel at home in the

Republican this Republican party when you hear the leaders of your party taking the positions they take? We have the Democrats take positions that disagree with the Republicans take certain decisions that make decisions that I disagree with. I feel very comfortable in a Republican tent it's a big tent because all the way from the right all the way crossing the center line and that's exactly where I want to be. This is the more we cross over to the center line the more we can go and open up and solve bigger problems. I'm all four working with everyone together and we have been very very successful in California by bringing both of the parties together. Governor I subscribed all the news bulletins that come out of your office I get the emails every day and it seems to me that several times a day I see a statement on the death of a California soldier or marine in Iraq. What are you thinking right now about the war? I think no matter what war it is I always hate to see anyone die or anyone getting injured. I mean it is really sad especially many visitors

hospitals. I go to the Walter Reed in the Bethesda hospital and visit hospitals here in California up in down the state to visit our men and women and to see those injuries and to then walk out and think about their lives that they're going to lead from then on and the impacted has and their families and others. We need to lose someone that it's horrible but that does not mean that one's opinion of why we are in the war should change because we know we are fighting terrorism we know that we don't have terrorism come over here and follow us over here. I think that this is a very very good cause and this is why I was for the idea of giving it all this year going all out and then have a deadline and a certain time a timeline that when we should bring our troops back we should not make it an open-ended situation but I think that we have to bring this to an end we owe this to the American people because then we can go and use this money finally

for things that we need in this country because we need to rebuild this country we need to redo our education system our infrastructure there's so many things healthcare there's so many issues that we need to address right now a lot of this money is going outside the country. Governor Schwarzenegger thank you very much we appreciate it. Thank you. And to the analysis of Shields and Lowry syndicated columnist Mark Shields and national review editor Rich Lowry David Brooks is off tonight Mark the energy bill has the Senate done something important it's done something quite important Jim first of all in Kwame's piece tonight he featured one of the Senate's most loyal and committed conservatives Larry Craig of Colorado member of the board of the National Rifle Association a true blue red conservative and he said something that you haven't heard a conservative say in a generation several generations

we cannot produce ourselves out of this crisis and that the growing dependence upon foreign oil and the area that that foreign oil comes from and the growing awareness of the problem of global warming contributed to the reality that forced the Senate finally to ignore the big three of Detroit were no longer as big as they were don't have as much clout but it was a was history in the making history in the making rich certainly it's a sign of a big shift on the politics of this issue global warming has something to do with it high gas prices and also the issue of energy independence have a lot to do with it i think these higher cafe standards have just become a symbol of a good government measure to fight global warming i'm not sure if the public actually knew more about it and if they knew that the senate just voted to make their cars lighter and smaller and or more expensive in the future i'm not sure it'd be quite as popular

as it is now there also some doubts about how much it'll actually do to reduce greenhouse emissions because they're all sorts of strange incentives where you if you make cars if you make basically make it more efficient to drive cars people will drive more and the horn of the dilemma of energy politics is what really drives concern about this energy in this country at the gut level for most people is high gas prices and if you really want to fight global warming and try to reduce our carbon emissions the cleanest easiest most rational way to do it would to make the price of gas even higher through very stiff gas prices and of course that's what no one is willing to contemplate or talk about what are they what are the the politics of this now mark do you think it's gonna is it gonna go to go to the house and pass and be signed by the president uh it could just say one thing to rich i mean the one time Jim we haven't done anything on this really in twenty in twenty two years and between nineteen seventy five and nineteen eighty five we did the average mile per gallon an american car was from fourteen miles per

gallon nineteen seventy five to twenty seven and a half miles per gallon in in nineteen eighty five that was a mandate uh and uh that was a federal mandate and uh cars did not become prohibitively expensive or anything of the sort and i i really i do think that that that has to be born in mind as we look at this and we just sold our one millionth Prius the Toyota car which is a hybrid that gets fifty miles to the gallon so the market is telling us an awful lot about this it's going to be a lot trickier in the house because you how you saw a basically united democratic party in the senate uh with the exception obviously of the of the auto company states of michigan in particular uh car eleven but you think it will pass or not but in the house it's going to be more tricky because uh there's this there's more moving parts to it and i think it's i think it will pass i think there's a momentum to it but it's going to be tougher how do you any reduce from this point on rich is it going to be made law well i i think that well if my preference would be no no okay um but do you think it's going to happen i think it yeah i think

it's hard uh makes it harder for president bush to veto it the kind of republican support you had for it in the senate he dislikes it he said things pouring some cold water on it but uh i kind of doubt he's going to veto it okay rich another subject uh what do you make of the internal administration debate over closing Guantanamo well i think they're moving inexorably towards wanting to close it and trying to close it the problem Jim is it's uh a really nettlesome question about how you do that because if you bring the detainees from gittmo here in the united states the status of their their legal rights is very much up in the air and what the administration fears is if they get the all the standard constitutional protections and legal protections and trial rights that american citizens get and our civil court system which seems quite possible you're going to have a hard time making a case against a lot of these guys who probably are dangerous but you know the information uh demonstrating is either foreign intelligence you can't use

or it's uh products of confessions you're not going to be able to use in the domestic court so then you get into the problem of either having to release them or having to deport them and deporting them might not be that easy because a lot of the home countries don't want to take them so the tide is moving towards wanting to close gittmo but they're really having a hard time figuring out how to do it mark what do you think uh i think one town of mojim has been synonymous with the staining of american values and and american legal tradition uh i i think the fact that you have people such as colan powell uh bob gates the secretary of defense john mckane he's been public about gates has said let's close it john mckane said it'd be his first act as president as states con delisa rice secretary say in the president of the states uh want to close it and i mean the very techniques that were developed at uh of torture call it which you will at uh at go and turn them over then exported to abogrob and it's led to a loss of a confidence in

and belief in the united states values of legal system and i just think that that we have to respond to this you agree we have to respond you think it's it's a values issue now rich well i think the administration realizes it's now on sustainable given the amount of criticism that's been focused on gittmo and also just on the practical level you want to have some system for dealing with these uh enemy combatants these terror terrorists that other countries buy into because you want them when they catch these suspects be willing to hand them over to us in a system that they have confidence in and are willing to buy into at the moment that's not the case mark uh another new subject mike bloomberg what you up to uh mike bloomberg has has figured out a way for a term limited lame duck mayor of a major city uh to put himself uh right in the middle of the mix and to create media buzz like uh nobody imagined i mean uh he is he is now uh set the entire political world uh on its ear uh both parties are are concerned and nervous about a potential

entry uh i i i think one thing about and it came through in his interviews with judy this week i think one thing about mike bloomberg unlike rosparo who did change the dynamic of american politics in nineteen eight two by raising an issue neither party wanted to address that of the virgining budget deficits forced the winning party the democrats in this case in the next eight years to deal with the deficit he's not going to run as john keode on an issue gym he's not going to run uh to make a cause or change the debate the only way he would run is if he sees a clear path to victory and right now i think that is unlikely scenario how do you see it rich i i think that's absolutely right but he he dumped his republican registration because he wasn't really republican in the first place and if you are a republican with only a marginal marginal commitment to the party this is a pretty good time to be uh to be uh dumping your republican registration plus as mark points out and this is just great for him he knows

exactly what it's doing it's fueling this speculation it's keeping him from being truly a lame duck mayor of new york city and i think you'll only do it if he sees the opening it's possible of the opening will be there say if you have an uh a john edwards versus mit romney race it's a kind of race where you can imagine a bloomberg maybe you can see a way to victory but it seems very unlikely so i tend to think he's not going to run at the end of the day all right speaking of presidential politics we have a question here gentlemen it's about this online campaign video featuring the Clintons at spoof the final scene of the hbos series the sopranos anything with good we have some great choices i ordered for the table

no i need rings i'm looking out for you where's josey parallel parking oh how's the campaign going we'll like you always say focus on the good times so what's the winning song you'll see my money's on smash mouth everybody in america wants to know how it's going to end ready for the record senator clinton shows for her current bank for her

campaign a song by french canadian singer saline dion originally written for an air canada advertisement what do you make of that mark she outsoiced to canada the campaign song uh... jim josey bush one two elections in a row against opponents who are seen by voters in both cases more experienced and more knowledgeable than he was uh... and uh... but he was seen he wanted on the strength of his personal values he was seen as strong he was seen as likable and uh... hillary clinton is seen right now as intelligent as competent as experienced but her likability quotient has been in question i think this is directed at that and i think it works it didn't i think it i think it makes her a more likable and uh... there's a human dimension tour yeah what do you think that you've read

well i think are acting to use a little work but i i do think it was uh... a good thing to do if you look at her uh... on the debate stage with these other candidates she is just head and shoulders above them in terms of seasoning and seriousness experience she really seems the adult on that stage but marks right it's the like ability that's the gap so anything they can do to to show a lighter side to show a sense of humor benefits her so you and you think it's working i think they have a ways to go i and i don't think this video alone is going to do it but i i think it's certain it shows they know the problem and they're working to address it okay final question the word is today or there has been the last couple of days that president bush wants tony blair to be a middle east non-boy is that makes sense to you mark uh... i think it does make sense uh... i think tony blair is uh... it brings to its special gifts and special legitimacy but i think it only works if the president himself uh... redoubles his own personal commitment they just can't this isn't something you can subcontract you think it should be done rich as a makes sense to you

you know he's a very talented guy he might be good at it i really doubt he's going to do it it seems like a step down for the former prime minister also it's just especially in these current circumstances going to be such a thankless job and so likely to show any dividends or success whatsoever i really doubt he'll take it up but does he have the right uh... approach to get this done other words is he have the right credentials to bring the palestines and these Israelis together from your point of view well i mean he's certainly he's it's always been a passion of his it's always something he's been uh... pushing president bush to address more downsides you know has a reputation for not necessarily being a details guy and then also there's his support of the iraq war which doesn't make him a beloved figure among the Arabs and then finally it just looking at his political reputation you know the charge against him i think largely unfair was that he was bush's poodle so i'm not sure that he wants to take on this particular job and sort of being president bush is an effect guy in the middle east and a word you know do you think you agree with rich and you probably won't take it anyhow

i honestly don't know but i mean i think he brings special credibility because he has pushed george bush since night and in 2002 to get involved and secondly he's seen his pro Israeli but he has been far more open to the palestinians than has this administration okay mark rich thank you both very much thank you very much finally tonight excerpt from today's memorial service honoring those nine charleston south carolina fireman who died on monday i'm proud to be a fourth generation firefighter serving in the department for thirty one years and the chief of fifteen in the city of charleston fire department you just don't have a bad number we don't have bad numbers in the city of charleston

fire department everybody knows everybody and i know everybody monday june to 18th is the day that all city will never forget never we lost nine of the bravest men doing what they love to do best fight fire those guys were the best this is how rusty tombs is going to remember each one of these guys cow might make it can make he knew his job and performed it well all the time trained as people all the time was a go-getter when there was a fire after twenty nine years on the job capbilly hutchison he did something that a lot of people don't even dream about he retired from the city of charleston fire department and returned captain louis mok what a guy the Somerville town and community will lose a great great person engineer gravade

now let me tell you about this guy this guy would go to work on the twenty four-hour period and wouldn't say ten words and if he did say something you had to say rat would just speak up a little bit I can't hear what you're saying mark kelsy you know that little inner jobs are bunny that little pink bunny that's mark kelsy all mark kelsy one to do was fight fire assistant engineer michael french when he came to the office to get a job he didn't want to know about the pay he didn't want to know about the insurance he could care less he just he was his question hey chief when do I get one of them badges meldman champagne meldman came to the office i mean he was decked out he had on a i guess you call a leathe hat with a feather sticking out of it

and he sat down and he this is what he wanted to know hey chief man i just want to help him i just want to help somebody Earl Drake now i promise you this is a true story nineteen seventy seven we get a call like three o'clock in the morning for a house fire at St. Philip and Mars to hike you around and I crank the truck up and he's hollow rusty get this thing going and i said what's the problem i'm going to find he said that's my house Brandon Thompson the other night his dad would not leave the scene and he told me that until he brought Brandon out it's the chief i'm not leaving it until you find him and you bring him out and i respect that that's the kind of memories and that's the kind of relationship i have with every single one of these guys and every single one of those guys back there to belong to me

and again the other major development for this day twenty five civilians were killed in a nato air strike overnight in afghanistan nato believe the strikes were targeting militants and the bush administration reiterated its goal of closing the detaining facility at Guantanamo but would not save when washington we can be seen later this evening on most pbs stations we'll see you online and again here Monday evening have an ice weekend i'm jim lara thank

you and good night major funding for the news hour with jim lara is provided by in navigating towards retirement there are many courses you can take and pacific life can help you reach your goals with over 135 years of experience pacific life offers a wide range of financial solutions approach the future with confidence pacific life the power to help you succeed some say that by 2020 we'll have used up half the world's oil some say we already have making the other half last longer we'll take innovation conservation and collaboration will you join us

and by the archer Daniels Midland company the new AT&T Toyota the Atlantic philanthropies the National Science Foundation and with the ongoing support of these institutions and foundations and this program was made possible by the corporation for public broadcasting and by contributions to your pbs station from viewers like you thank you to purchase video cassettes of the news hour with jim lara call 1 866 678 news

we are pbs we are

Good evening, I'm Jim Lara, on the NewsHour tonight, the news of this Friday. Then a rundown on what's in the energy bill just passed by the Senate. A look at the big wealth-producing private equity firms, what they do and how they're taxed, a conversation with California Governor Arnold Schwarzenegger about bridging the political divide, the analysis of Mark Shields and Rich Lowry, substituting for David Brooks, and excerpts of the Memorial Service today for the nine firefighters who died in Charleston, South Carolina. Major funding for the NewsHour with Jim Lara is provided by.

There's a company that builds more than a million vehicles a year in places called Indiana and Kentucky, one that has 10 plants from the foothills of West Virginia to the Pacific coastline. What company is this? Toyota, a company that along with its dealers and suppliers has helped create hundreds of thousands of US jobs, a company proud to do its small part to head to the landscape of America. Somewhere in the heartland, a child is sitting down to breakfast, which is why a farmer is rising for a 15-hour day, and a trucker is beginning a five-day journey, and 8 a.m. is turning corn and wheat.