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GLORIA BORGER, U.S. News & World Report and CBS News: Today on Face the Nation, the stem cell research dilemma and the Bush agenda.

Three weeks ago when President Bush announced his decision to limit federal funding for stem cell research to existing lines, his administration said there were 60 available. Now reports indicate there may be a lot less. Are there enough for significant research? We'll ask Secretary of Health and Human Services Tommy Thompson.

Should President Bush change his policy if the numbers have changed? We'll ask Senator Arlen Specter, Republican of Pennsylvania, and Dr. John Gearhart of John Hopkins University.

Then we'll turn to the Bush agenda for the fall and talk foreign policy with Tom Friedman of the New York Times and domestic politics with Dan Balz of The Washington Post.

But first, HHS Secretary Tommy Thompson on Face the Nation.

ANNOUNCER: Face the Nation, with Chief Washington Correspondent Bob Schieffer. And now, from Washington, substituting for Bob Schieffer, CBS News Special Correspondent Gloria Borger.

BORGER: And welcome again to the broadcast. Bob is off this week.

So now joining us: from Madison, Wisconsin, Health and Human Services Secretary Tommy Thompson; from Long Beach Island, New Jersey, Senator Arlen Specter; and here in our studio, Dr. John Gearhart. We're going to start first with Secretary Thompson.

Mr. Secretary, since the president announced his decision to allow federal funding for stem cell research on 64 existing stem cell lines, there's been a lot of controversy over that. You said at the time that these lines were, quote, "real, viable and robust" and that you had checked and double-checked the availability of these lines.

Now we have had reports that somewhere between one-half and one-third of these lines are not so usable. Do you still stand by your original statement?

TOMMY THOMPSON, HHS Secretary: Absolutely. First off, let's set the record clear and correctly. First off, you couldn't do research on embryonic stem cells with federal funds prior to the president's announcement. He made a great announcement, and it came through.

Secondly, we made an assessment and we made an inventory, and a lot of people before that inventory didn't think there were more than 10 or 15 or 20. There are 60 to 64 in different phases. Some are more robust and viable than others, but all 64 are qualified to be federally funded. And that's got to be brought into this perspective. Before the president's speech there was not federal funds; now there are.

And the third thing, there has been embryonic research done on mice for 20 years now, two decades, and 90 percent of that research has been on five lines. Dr. Jamie Thompson (ph), who discovered the embryonic stem cells in 1998, he's got five lines, but most of his research is done on two lines. And Dr. McKay (ph) at NIH said tht there's no question, if they even had one viable line that they would be able to do a lot of basic research. And what the federal government and the federal research is going to allow is the basic research.

Now, all of these lines are in different areas, different diversity and different cultures. And so, a lot of these experiments and research is going to be carried on on lines that are more mature. Some of that research will be done on those lines that are just beginning. It takes approximately six months for a good embryonic stem cell line to get viable.

BORGER: Let me turn to Senator Specter on this.

You've heard Secretary Thompson's explanation. He says there's enough lines to do viable research. Do you buy that?

SEN. ARLEN SPECTER, R-PA: Gloria, I think that there are very many questions which will have to be addressed in congressional hearings. I thought the president made a very reasoned presentation, but I believe he's gotten bad information from what has developed since.

You had Goteborg University in Sweden represented to have 19 lines. It turns out they have only three. You had India, supposed to have seven lines; turns out that all seven are speculative. In San Diego, a U.S. laboratory was supposed to have nine, and they are far from being viable.

And then you have the issue that the president did not address in his August 9 speech about therapy. And as information has come to light, we find that all of these cell lines have had nutrients from mouse feeder. And according to the Food and Drug Administration regulations, they cannot be used for therapy.

So that when you have a matter which is as important as this one with a potential to cure Parkinson's, delay Alzheimer's, perhaps cure cancer and heart ailments, these are major questions which I think have to be answered.

And the subcommittee, appropriations subcommittee, which I had chaired, which has had nine hearings, will be having two more hearings in September to answer these questions, to say if the federal program, the president's program, is sufficient.

BORGER: Well, Secretary Thompson, do you believe, as Senator Specter believes, that you got some bad information here?

THOMPSON: No, I don't think so. I think the NIH - nobody has ever done an inventory. NIH made a complete, exhaustive inventory of all of the research lines that are available. And there are 64 that meet the president's criteria to be federally funded.

BORGER: Well, let's...

THOMPSON: Now, first off, the basic research has got to be done. The basic research has not been completed, Gloria, and that has to be done before you can get to the next stage of therapy.

And a lot of people think that, you know, that the cures are right around the corner. And we have to get the basic research done. And that's where the federal dollars are going to come in and allow to us carry on in that federal research, ad the next stage is the therapy.

And the private sector will be coming in and doing a lot of funding when it gets to that stage. But it's going to take some time to get there.

But we have enough lines to do the basic research. And that's what I think everybody has to understand. And we've got to get these scientists and get the federal dollars out there and begin this research so the questions that Senator Specter is talking about, the questions that a lot of people are talking about, are able to have some real concrete, empirical, scientific evidence behind them. That's what I want, and I know that's what NIH wants.

BORGER: Well, let's go to a researcher here.

SPECTER: Gloria, Gloria...

BORGER: Well, I just want to go to Dr. Gearhart for one moment, because he is an actual researcher who has worked on stem cell lines.

From your point of view, first of all, what happened here? How do you think there was this confusion?

DR. JOHN GEARHART, Johns Hopkins University: Well, first, I do want to emphasize what the secretary said, that for the first time now we're able to use federal funds in this area.

But by the same token, there is a growing concern that our hands may be tied, from the standpoint of what cells actually are available. Yes, what was reported to the NIH were 64 cell lines. As we learned, and Senator Specter has mentioned, there are some problems arising with some of these lines.

But there's a third issue which I think hasn't been resolved - is being addressed now but hasn't been resolved. And that is, even if there are 30 lines or 20 lines or 15 lines, when will they be available to investigators, if they will be available to investigators, and under what conditions?

These companies and institutions have spent a good deal of money in deriving these lines, and certainly they would like to recover their investment. So this still has to be resolved as well.

BORGER: Senator Specter, go ahead.

SPECTER: Well, on the question you raised about whether the president had the facts, let me be very specific. The representation was made that Goteborg University from Sweden had 19 stem cell lines. Dr. Lars Hamburger has been very specific that they only had three lines and had expressed surprise that a contrary representation would be made.

And then there are the questions which Dr. Gearhart raises about patents, property rights, about the sufficiency of informed consent.

Look here, Gloria, my point is this. This is a very, very important matter, and there are a great many questions which the scientists have come forward with, really essentially saying, you shouldn't tie the hands of the scientists, as Dr. Gearhart has just said.

And the purpose of the congressional hearings will be to go into these details and to see if, when you have a cutoff date in absolute terms - nothing will be done on stem cells after August 9 with respect to fderal funding - that raises the whole issue of therapy, and the existing lines are contaminated.

BORGER: Senator Specter, let me ask you this very quickly, because I want Secretary Thompson to respond.

SPECTER: Sure.

BORGER: Do you believe that the administration, in taking its count, was deliberately optimistic here in order to justify its policy of federal funding for existing stem cell lines?

SPECTER: Well...

BORGER: And then I'd like the secretary to respond.

SPECTER: I've been asked whether the issue has been politicized, and I have said that I'm not going to make any charges like that.

But when you come down to one basic fact - and perhaps Secretary Thompson will want to respond to it - Dr. Lars Hamburger was quoted as saying that he flew from Gothenburg in Sweden and talked specifically to Secretary Thompson, told him there weren't 19 lines from the Swedish laboratory, only three. And after that conversation was held, the Department of Health and Human Services continued to say there were 19 lines from Sweden.

BORGER: Well, Secretary Thompson, would you like to respond to that?

THOMPSON: Well, first off, let me just point out there are 19 lines. They're in different areas of production and replication, but there are 19 lines from the Goteborg University that meet the president's guidelines. And that was what the inventory was all about.

And I did have a meeting with Dr. Hamburger but we did not discuss the number of lines specifically. We talked very tangentially about the fact that there are 19 lines, but there are different areas of production, different areas of maturity, different areas of replication.

But there are 19 lines that would qualify for federal funding. There are 64 lines that do qualify. But they're in different phases, different maturity. And all of these, hopefully, will be.

But even if there are not 64 that really are viable, that are necessary for research, there are plenty of lines that are. And WARF, the Wisconsin Alumni Research Foundation here in Madison, has indicated they have five viable lines that will meet all of the researchers' basic needs right now.

And so, I don't think we should quibble about the numbers. I think what we have to do is get the scientists, get the money, get the dollars for research out there. Get the scientists into the laboratories and start doing the research.

Senator Specter and I both want embryonic stem cell research to go forward. Both of us want to be able to come up with some cures. Everybody in America, especially the president, wants that to take place. Now it's up to us to get the federal research dollars out there to do this basic research, and I think that point is being missed by a lot of people.

BORGER: Well, Secretary Thompson, a lot of people say that, actually, the research dollars are going to start to disappear. Just last week sombody who was pledging $60 million to Stanford University said he didn't want to give the money to Stanford University because he felt the administration's policy was going to hold back research. So aren't you worried about that?

THOMPSON: I'm worried only about getting the national registry up; getting these embryonic stem cell lines available; getting the negotiations done so the scientists, the investigators, are able to get the federal dollars and start doing the basic research.

I think, once the basic research has been completed, I think people are going to come in from all over, and hopefully it's going to be as optimistic and as successful as every one of us want it to be.

And when that happens, I think there is going to be a lot more dollars available for the research to take it to the next stage. And that next stage is the therapy stage, really coming up with the necessary drugs to solve some of these maladies that afflict every family in America.

BORGER: I just want to go to the researcher here very quickly, the scientist.

Do you believe, Dr. Gearhart, that the money is going to disappear? And do you think you have enough stem cell lines?

GEARHART: Well, first, let me say on Secretary Thompson's remarks that, yes, five cell lines certainly would do the job to get started. And I agree with him, we should be in the laboratory working on these lines.

But eventually, you know, there is going to be a lot of necessary, formidable scientific challenge here to bring this research to the bedside, if you know what I mean. And I don't think these lines are going to suffice.

And I guess all the scientists are asking for at this point in time is that, if more lines are needed - as Senator Specter pointed out, all of the lines that exist already have been brought into existence using what we call feeder cells and whatnot. We've contaminated them, if you will, to a certain extent with mouse-based things, that we have to re-establish new lines without that product present.

And so eventually we would like to generate more lines. And if it's necessary, we would like to think that Mr. Bush would reconsider his policy.

BORGER: Well, thank you. I'm going to have to change the subject entirely for just one moment and go to Senator Specter.

Senator Specter, there were front-page reports today that the administration is intending to give the Chinese a green light to modernize and expand their missile force and test missiles, apparently in exchange for some kind of a nod of agreement about our missile defense program. Is this a good idea?

SPECTER: Well, Gloria, I intend to talk to White House officials about that when I get back after Labor Day. But I am very skeptical about it.

I just got back from a trip to China, talked to the president and the premier there. And I would not like to see the Chinese expand their nuclear capability.

I think it is much too son to even think about that as an offset to our missile defense. I think that we can yet work the matter out with President Putin of Russia.

And we are looking at a country with a 1,250,000,000 people, and they are the coming colossus of the world and a superpower. And I would not like to see them become any more powerful in the nuclear line. I think we ought to formulate our policy in many different ways to try to avoid just that.

BORGER: Well, thank you, Senator Specter, and thanks to everyone.

And we'll be back in a moment with our roundtable.

(COMMERCIAL BREAK)

BORGER: And with us now, Tom Friedman of the New York Times and Dan Balz of The Washington Post.

Tom, you just heard what Senator Specter had to say about us saying to the Chinese, "Go ahead and test your missiles if you give us the nod on our missile defense." What do you think about that?

TOM FRIEDMAN, The New York Times: Well, I think this really symbolizes, Gloria, how distorting this missile defense idea can become.

The administration has a problem, the Chinese have a problem. The administration's problem is, they know that they're not going to get the support of Congress or the Europeans unless they can get the Chinese and Russians to basically go along with this missile defense idea.

The Chinese have a problem. They only have about 20 long-range nukes which on a good day could hit the San Diego Zoo if the wind were blowing right.

(LAUGHTER)

FRIEDMAN: So even the smallest American missile defense system can nullify their whole nuclear deterrence.

So, basically, what the administration seems to be saying to the Chinese is, "Look, we can't stop you anyway, but you're going to be modernizing and expanding your nuclear missile force. Maybe you want to do a little testing on the side? Maybe you'd like to see even some of this missile defense technology we're working on. Go ahead, we'll win your assent."

What's the problem with that? Well, one is how the rest of the world reads that. How does India, Pakistan, Iraq, other countries that we're trying to...

BORGER: Arms race, arms race?

FRIEDMAN: ... that we're trying to really limit their development of nuclear missiles, how are they going to read that?

But the most interesting story, as Senator Specter alluded to, is what's going to happen inside the Republican Party? The Republican Party is really divided on China. You've got the Boeing school, who want to do business with China - and Boeing, incidentally, is building that missile shield - and you've got the Mao school, led by Jesse Helms, who thinks this is just, you know, the Cold War all over again, they're going to be our biggest enemy.

And there's going to be a really interesting fight when the Boeing school in the Republican Party sits down with the Mao school, and the Mao school says, "Say what?"

(LAUGHTER)

BORGER: Well let me bring Dan in on this. Because not only does the administration have an issue with missile defense as it returns from its extended summer break, but also it's got a real problem now with the economy. It's got a shrinking surplus. Wall Street has got some problems, so consumer confidence is down.

DAN BALZ, The Washington Post: It was very interesting on Friday, Ari Fleischer was briefing the press, the White House press secretary, and he said that President Bush will be focused like a laser beam on the economy.

BORGER: We've heard that.

(LAUGHTER)

BALZ: Now, these are the exact words that Bill Clinton used right after he was elected. And I'm waiting now for the "It's the economy, stupid" bumper-stickers to come out from the Republican National Committee.

BORGER: But isn't it the economy?

BALZ: Two things have happened. That's exactly right. The problem in the time that Bush was away in August is, the economy showed that it is much more resistant to some of the efforts that the Federal Reserve and the first wave of the tax rebates were designed to do, which was to move us out of this trough and get us growing again.

The second is that there were revised forecasts of what has happened to the surplus because of the economy, but even more because of the tax cut that Bush pushed. And that is that the non-Social Security surplus for the next four years has been wiped out.

Bush now has a problem on two fronts. One is, he has to show that he has the ability to help turn this economy around. He has to show what his father was unable to demonstrate in his first term, which is that he has a plan for the economy and that he's on top of this issue.

The second is, he has to show that he can live up to the promise he made at the beginning of this year, which is that he would help increase funds for education, for health care, for missile defense and other priorities, and cut taxes, and still do it without using Social Security funds. He's got a big problem.

BORGER: Well, and the fight's going to be who lost the surplus.

BALZ: The fight will be two things: Who lost the surplus, and who's saving the economy?

The Democrats have a bigger advantage on who lost the surplus, because the tax cut is the principal reason, combined with the slowdown, that the non-Social Security surplus is way down, practically nonexistent for the next four years.

Bush, I think, wants to focus right now on who's doing what for the economy, because, in fact, the longer the economy stays slow, the more there is an argument for the tax cut. But the longer the economy stays slow, the bigger political problem the Republicans will have heading into the midterm elections.

BORGER: How does this sort of slowing national economy affect Bush vis-a-vis foreign policy, what he wants to get in the Pentagon, as well as missile defense, as Dan was talking about?

B>FRIEDMAN: Well, it's really, you know, Grover Norquist meet Don Rumsfeld.

BORGER: Right.

(LAUGHTER)

FRIEDMAN: Maybe the two of you should have talked earlier.

(CROSSTALK)

BORGER: Grover Norquist being a conservative...

FRIEDMAN: ... conservative, tax-cutting,...

BORGER: Right.

FRIEDMAN: ... really the ideologue who drove the tax cut.

And clearly Bush is going to - what we now know, Gloria, is that nobody ever sat down in the beginning and said, look, we want to do missile defense, radical change in our nuclear posture, we want to do a radical tax cut, we want to do this on education. And no one ever sat down and said, how do we do the math? There was no synthesis of any of these theological positions.

BORGER: Well, very quickly, Tom, I also want to raise the U.N. conference on racism, which is meeting in South Africa. We all know that Secretary of State Colin Powell decided not to go. Was that a good idea?

FRIEDMAN: I think it was a good idea. This conference proves that a worthy cause doesn't make a worthy conference. It turned into a festival of anti-Israel bashing.

And all I can say, Gloria, is, you weep for the trees that were cut down to produce all the statements of this conference. You also weep for the U.N., because it's conferences like this that really give the U.N. a bad name.

You also weep for the Middle East, because what this conference really symbolizes is that, as the peace process collapses, we're not going back to a pre-Oslo phase. We're going back to a pre-Anwar Sadat Middle East, Zionism is racism, Israel totally isolated from the Arab world. You weep for all of that.

BORGER: Dan, George Bush, as I alluded to before, is back from a vacation that was 26 days long. Is that going to hurt him when he comes back to Washington? Are people going to remember that, that he took the summer off?

BALZ: Well, a little bit, and the Democrats will try to remind people that George W. Bush was not working as hard as the American people might have wanted him to work.

But I think the question is really going to be what happens over the next couple of months in this debate over spending and priorities. If Bush is on top of things, if it looks like he has got solutions, if things are moving forward, the vacation will fade.

If there are continuing problems, that will be one more argument against the kind of leadership that he has provided.

BORGER: And he has got these mid-term elections coming up. Are they worried about how all this is going to affect their showing in the 2002 midterms?

BALZ: There are a lot of Republican strategists that I talked to this week who are worried about the big issue of the economy. I think they think they can finesse the debate over the spending bills this fall. But what they're worried about is, if the economy doesn't bgin to bounce back, they've got a real problem.

BORGER: Well, thank you both. I'm afraid we're going to have to end it there.
And I'll be back with a final word in a moment.

(COMMERCIAL BREAK)

BORGER: That's all we have time for this week, and Bob will be right back here next Sunday. Thanks for watching Face the Nation.



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