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U.S. SENATOR TOM DASCHLE (D-SD): I'm not inclined to be supportive of anything that comes to the floor without appropriate offsets.

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U.S. SENATOR TRENT LOTT (R-MS): When you talk about offsets in the tax area, you're talking about a tax increase.

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TONY SNOW, HOST: Democrats may control the U.S. Senate, but who controls the political agenda, Senate Majority Leader Tom Daschle or President Bush? Here with the Republican view is Senate Minority Leader Trent Lott.

Also here, Fred Barnes, who starts the questioning.

BARNES: I've been surprised, Senator, that Republicans have not criticized Gary Condit for his lack of cooperation in the investigation of the disappearance of Chandra Levy. Why is it that at least Republicans haven't criticized him? I mean, he is a Democrat who votes often with Republicans.

LOTT: Well, some Republicans have criticized him. I think the only hesitancy by Republicans or Democrats is to not jump out there and start criticizing or saying things, making demands until you know what the facts are, what the truth is.

There's no question that there are several tragedies involved here. Number one, just this epidemic of missing persons in Washington, D.C., and other cities around this country. Something's got to be done about that. And obviously, the Chandra Levy matter, it's a tragedy for the family and for all that are involved.

And then the Condit situation just seems to get worse and worse. Infidelity is always unacceptable, but particularly when you have an elected official involved in a position of trust with a young girl, an intern. If these allegations are true, obviously he should resign. And if he doesn't, the people of his district probably will not re- elect him.

BARNES: Are you satisfied with the way Condit has handled the investigation?

LOTT: Again, I don't know all the details of what's really going on here. But a quick, direct answer is it doesn't look like it's wise at all, and it raises additional suspicions. And now these things of additional affairs that are being alleged, this is unacceptable conduct by anybody.

SNOW: Senator, you're aware of the charge, though. A lot of people think...

LOTT: But I want to add one thing: All members of Congress don't do it. And when some people in the media infer that we all are doing this sort of thing, let me just tell all that are listening, that is not the case.

BARNES: Isn't it the case, though, that people do not come out and make public statements against this kind of thing, there isn't the kind of peer pressure against it that there used to be?

LOTT: Look, I went to law school. I was a public defender for a while. You don't come out and, you know, convict people until you know what the facts are. Just because you read it in The Washington Post or heard it on one of the other networks, you know, you don't assume it's true. Now, when it's Fox, we know it's fair and accurate, and I weigh that much more carefully.

(LAUGHTER)

SNOW: All right, you've kissed up to us.

Let's talk a little bit about taxes. There's a big dispute now. The surplus is not going to be as large as the administration predicted. Now Democrats are saying that what's going to happen is George W. Bush, in violation of his campaign pledge, is going to be dipping into the Medicare trust fund.

LOTT: Look, the truth of the matter is they didn't like it. Most of them voted against tax relief for working Americans, although it was a bipartisan package in the House and the Senate.

What do they propose to do? That we stop sending out tax relief checks that are going to American families right now?

(LAUGHTER)

$600 checks for American families are in the mail. $300 for individuals, $500 for a working mom. They don't like that? They don't think that the timing of this with the economy is good? As a matter of fact, it's perfect.

But here's the truth. What they really want is tax increases. That's what Democrats really want. They've said, "Oh, balanced budgets have been good and the fact that we've had surpluses." And they're already hinting we may have to look at tax increases.

As a matter of fact, tax relief is fair, it's justified, it's good for the economy. For instance, if we would cut capital gains to 15 percent just for two years it would produce $5 billion more in revenue.

SNOW: So are you going to push your colleagues to do that?

LOTT: We're going to push our colleagues, number one, to make the tax relief permanent. Number two, when we are given an opportunity to provide opportunity or a situation where people can get more help to get health insurance like tax deduction for their health insurance costs or capital gains as a part of minimum wage, perhaps, so that we can spur the economy, we will do that.

SNOW: Are you going to attach that then to minimum wage legislation?

LOTT: We're going to consider doing that.

SNOW: You're willing to make the bargain that you'll raise the minimum wage if you get the capital gains cut?

LOTT: I think minimum wage is going to be raised. But I think we've got to have some tax relief for small businesses, some things that will help the economy as a part of the process.

SNOW: Going to get Democrats to go along? You got the votes?

LOTT: We're going to see if they are for small business men and women and for creation of jobs in the economy or not.

SNOW: Is that a yes or no?

LOTT: That's a yes.

SNOW: OK.

BARNES: Will Republicans, led by you, impede Senate business if necessary to get Bush nominees on the Senate floor for a vote? Senator Kyl has already done this.

LOTT: Well, surely, Senator Kyl and Senator Larry Craig, both. Senator Craig was particularly focusing on Interior Department nominees. We had one person there.

BARNES: I'm referring to judicial nominees.

LOTT: For judicial nominations, yes, we'll do that. You know, the Democrats did that when they were in the minority during the Clinton administration. I hope it doesn't come to that.

Just this past week because of the efforts of John Kyl of Arizona and Larry Craig of Idaho, and the resulting cooperation from the Democrats when they saw that we were going to hold up the Interior appropriations bill or the energy and water appropriations bill, we confirmed 54 nominees last week. So that does work. That's fair. You know, to move forward on the bill, it takes unanimous consent.

SNOW: What about the case of Miguel Estrada, who's been nominated for judgeship here in Washington, D.C., in the First U.S. Circuit Court of Appeals?

SNOW: There seems to be some hesitancy about bringing his name forward.

LOTT: I don't know the specifics of that case, but I've looked at the nominees that President Bush has sent up and they look extraordinarily well qualified. They're young, they're well educated, they've got great experience. And I presume that one should -- is this the one from Maryland?

BARNES: He's from D.C. He's a Latino immigrant who is from Honduras, 39 years old, a conservative.

LOTT: I'd have to get into -- well, you know, he's conservative. I'm sure the Democrats won't like that, but he's sounds outstanding to me.

SNOW: Well, let me ask you this. There was this long negotiation to get some sort deal with Patrick Leahy, who's chairman of the Senate Judiciary Committee. Are you satisfied that the president's nominees will make it through the Judiciary Committee and there won't have to be a fight?

LOTT: I'm concerned about it because of some of the comments from Senator Leahy and Senator Schumer and others. They're talking about a litmus test now based on ideology. That is a real concern. We didn't have that same kind of litmus test when we were in the majority. I mean, I voted for Justice Ginsburg even though I knew clearly she would be, you know, extremely liberal in Supreme Court. Lo and behold she has been, but she was qualified otherwise.

So I'm worried about it, yes, but we're going to work aggressively to get these nominees confirmed.

BARNES: Campaign finance reform: Some of its supporters say they will try to attach, meaning the McCain-Feingold bill, to other pieces of legislation. Will that work, or is campaign finance reform dead, at least for this year?

LOTT: Well, that's the kind of attitude that got the proponents in the situation that they found there in the House. They could have worked that out where the rule wouldn't have failed, but they were hard-headed about it.

And, you know, you actually could have some legitimate campaign finance reform that would even affect soft money in a constitutional way. But their attitude is, you do it our way or else we're going to ram it through. If they try to do that, all they're going to do is to tie up the Senate in very difficult ways.

And by the way, in this case, it will make life more miserable for Daschle this time, not for me.

(LAUGHTER)

Because I'll be having a lot more fun making actually making sure that they don't try to do that on every bill that rolls along.

Look, you know, it's time that we move onto, really, issues that -- when I go home, people want to talk about the quality of education, the need for prescription drugs, crime in the streets. They're concerned about energy. You know, when are we going to get a major energy bill in this country that will provide more energy resources? That effects gasoline, diesel prices, small business men and women, people's electricity bills. That's what people want us to work on.

SNOW: OK, let's move onto another topic. In today's newspapers the president is proposing to grant permanent resident status to 3 million Mexicans who have come over into the United States illegally. Good idea, bad idea?

LOTT: Well, I think we need to take a careful look at that. There is a situation where we can have legal immigrants come in here. There is a bill that would have a work program. I think that there are some immigrants that we should have a process where they can have a legal residency. But just to summarily grant legal status to 3 million people, many of them that got here illegally and have violated the law while they're here -- I'd want to make sure we do this carefully.

If you read the New York Times story, what they seem to project is not what the administration is actually proposing. They want to do this in the right way and do it carefully but make it a fair process, and I think we should do that.

SNOW: Senator John McCain has said that he understands why some people in the party may have problems with him. Do you?

LOTT: You know, I don't agree with a lot of the things that John does. He seems to be developing a propensity to really, you know, get close to the most very liberal Democrat he can find, you know, Ted Kennedy. Usually, you know better than to do that.

But then on other areas, John is, you know, a very strong ally. When it comes to the needs of defense, he's going to be very aggressive in that area.

It's my job as the Republican leader to stay close to John, and John and I have a history that goes back 20 years, actually goes back generations. And so I'm always hoping we can pull him back to our side.

SNOW: So do you plan to go to Arizona and to resist an attempt to recall him?

LOTT: No, and I don't guess he would go to Mississippi and resist that kind of effort on me, either.

BARNES: Senator, embryonic stem cell research, the president has a tough decision on that. Now Senator Hatch says that it's all right to destroy these embryonic stem cells because life doesn't begin in their case until they're implanted and not at conception. What do you think?

LOTT: Well, I don't know that that's what he said, and if that's what he said, I don't agree with it.

BARNES: He said it. He said life doesn't begin in a refrigerator.

LOTT: Well, look, we've been debating when life begins probably for generations, and I remember going through that when I was a law student. You get into legal questions, but there are also ethical and moral questions here.

And I think to -- what I've been seeing developing here lately in Virginia, where they're creating these embryos to kill them and take the stem cells, that is unacceptable. I'm opposed to that. And this question of cloning is a very serious question.

I mean, I've been talking to Bill Frist and everybody that's involved in this. There are some hopeful things that could come out of stem cell research, but we can do it with adult stem cells or umbilical cord stem cells.

I think we should look at this at the things that are positive that could come out of it, but also, let's don't start harvesting, farming embryos to kill them to perhaps get some benefit from them.

SNOW: So you sould support a ban on federal funding for embryonic stem cell research?

LOTT: I would.

SNOW: OK. Final question, missile defense. There was a test last night. It worked. What's going to happen with missile defense in the Senate?

LOTT: They hit a bullet with a bullet, and it does work. We can develop that capability.

I want to say up front that we should commmunicate how this would work and why we want to do it in terms of missile defense with our allies in Europe. And also, to talk to the Russians about it.

But there is a threat. It's real, it's here, it's now. We need to move beyond the old way of thinking. We need a new strategic alliance on how we have missile defense and not just base it on offensive weapon destruction.

SNOW: So the president's right to fight this political battle?

LOTT: Absolutely he's right. He's going to do it, we're going to do it. And that's the kind of thing that's going to allow him to continue to dominate the agenda.

And we're not going to stop pressing that point, because you're talking about security here of my grandchildren, and I feel very strongly about this issue. We should put this right at the top of the agenda, not allowed to be pushed aside by Democrats who really don't want to put the money into defense that's needed for the future security of our children.

SNOW: All right, Senate Minority Leader Trent Lott, thanks for joining us.

LOTT: Thank you very much, Tony.

SNOW: Up next, is the Bush administration's missile defense plan a shot in the dark?