[Leon Harris, Cnn Anchor:] We're going to begin on Capitol Hill, where numbers are being crunched right now and the Bush administration is feeling the squeeze. Democrats say President Bush must reassess his spending priorities. This, amid government reports that the federal surplus is evaporating. Let's get a closer look now at the issue of priorities and politics. We turn to our congressional correspondent Jonathan Karl, standing by now live on Capitol Hill hi, Jon.
[Jonathan Karl, Cnn Correspondent:] Well, Leon, we're going to be in for a very noisy, very contention fall season up here on Capitol Hill because since Congress went on its August recess, what's happened is that federal budget surplus has essentially started to evaporate. Dramatically lower estimates of what the surplus will be coming from both the budget office at the White House and up here on Capitol Hill, so Democrats are calling the president to account on this. The democratically controlled Budget Committee will be having a hearing this week, calling in the White House's budget director to ask him what has happened to this budget surplus and what is the plan? Democrats obviously say that what is primarily at fault here is that tax cut that Republicans, with some Democratic support, pushed through on Capitol Hill. But Republicans are saying that the overall reason up here that we have a dwindling surplus is because the economy is sputtering and they say the solution to an economic downturn is not to talk about scaling back a tax cut that's already passed, but to actually talk about passing additional tax cuts. So, Leon, as Congress tries to find the money to pass the 13 spending bills that fund everything the federal government does, look for Republicans to talk about the need possibly to push for further tax cuts to get the economy moving again.
[Harris:] All right, Jon, but you're talking now about Congress having to get its priorities together and moments ago you broke the story about one particular senator who may be rearranging his priorities. What's that one now?
[Karl:] Well, that's right. CNN's political unit learning that Phil Gramm, who, by the way, is more than almost anybody up here on Capitol Hill an advocate for Republicans of tax cuts, he has announced or is expected to announce at 2:30 today that he will not seek reelection when his term is up. His term is up in January of 2003. He'd be up for reelection next fall. He is going to announce, we are told. He has told his political associates back in Texas that he will not run for reelection. Phil Gramm has been a fixture up here on Capitol Hill. He was first elected back in 1978 as a Democrat, a conservative Democrat from Texas. He later switched parties in 1983, actually resigning from his seat at that point, running in a special election again as a Republican and then getting elected to the United States Senate back in 1984. Gramm had been expected to run again. As a matter of fact, we asked him about rumors that he may retire. Just before, the day that Congress left on its recess I sat with Phil Gramm for an interview on the congressional subway here on the Senate side of the Capitol building and asked him if he'd be retiring. This is what he said back then.
[Sen. Phil Gramm , Texas:] Some day I'm going to retire. The alternative is to eventually retire or die in office. I don't think I want to be around here when I can't do the job. But it's my plan right now to run again. I don't, I think I'm at the peak of my influence in the Senate and so I'd rather be in the majority than the minority.
[Karl:] Now, you notice, of course, that he said my plan at this time is to run again. Obviously his plans, if CNN sources are correct, have changed. Phil Gramm's office will only say that he is, indeed, holding a press conference at 2:30 up here on Capitol Hill and it is a press conference to announce his political future. Now, again, CNN has learned, CNN's political unit, having sources in Texas saying that Senator Phil Gramm is going to announce that he is not going to run for reelection.
[Harris:] All right, nice work, Jon. Jonathan Karl on Capitol Hill this morning.