MR. MORALES: Did President Bush exaggerate the threat posed by Saddam Hussein? At issue is a statement in the President?s State of the Union address last January in which he said the Iraqi dictator had sought uranium from Africa in order to develop a nuclear weapons program. The White House now admits the statement was based on discredited intelligence.

Meanwhile, at least 33 U.S. soldiers have been killed by hostile fire in Iraq since May 1, when President Bush declared that major combat in the country was over.

Also on the minds of many Americans is the economy. With a record federal budget deficit now expected to exceed $ 450 billion, will there be a recovery any time soon?

All of this leaves many observers asking whether President Bush will be able to win re-election. Or will the opposition Democrats field a candidate who can lead them to victory against the Republicans and George Bush?

Joining me to examine some of the challenges facing the Bush administration are: David Keene, Chairman of the American Conservative Union -- the nation?s oldest and largest grassroots conservative political organization. And, Will Marshall -- President of the Progressive Policy Institute, which seeks to define and promote liberal politics here in the United States.

Will Marshall, let me begin with you. According to most polls, President Bush?s public approval ratings here at home are slipping. Looking ahead to next year?s election, what?s the number one problem facing the White House?

MR. MARSHALL: I think there is an erosion of confidence in this president?s leadership. He has enjoyed an extraordinarily high level of popularity since the September 11 th terrorist attacks, which has been not just the natural rallying around a president. It has to be said it was a reflection of what many Americans thought was his resolute way of dealing with the al-Qaida threat. But I think that is beginning to dissipate now and we?re seeing this president beginning to deal with an array of problems that are largely of his own making. And I think people are beginning to see someone who is not the flawless Commander-in-Chief that they saw back during the war on terror. I?m talking about the enormous budget deficit that was reported this week, the continuing fighting in Iraq, and historically high unemployment levels -- the highest levels in 20 years -- just a whole array of problems that are coming home to roost and raising old doubts about this president that existed before September 11 th.

MR. MORALES: David Keene, let me get your take on that.

MR. KEENE: I think, in part, Will is right. But what?s really happening, it seems to me, is that as we approach the political season -- as people begin to focus on the election -- the Democrats are out there running; the Democrats in Congress are attacking the President. They?re trying to bring down his numbers [i.e., public approval ratings], and to some degree that fall in his numbers is natural, to some degree that?s because of the attacks on him, and to some degree it?s because of things he has done.

But you know, the White House has always felt, correctly I think, that this next election is going to be very close. We?ve just come off a presidency in which the winner -- Bill Clinton -- never got 50% of the vote. The country remains pretty evenly divided on a partisan basis. And even when Bush had much higher approval numbers, if you put him in against a generic Democrat [i.e., an unnamed Democratic opponent], the contest closed up very quickly because what we have in this country are deeply felt partisan feelings among more people than is usually the case. So I don?t see anything that?s happening as unnatural. The problems that Will is talking about obviously do exist. The question of whether the economy is going to get better quickly or whether it?s going to stagnate or get worse is a question that?s being debated. I happen to think there are signs that it?s getting better and much of what Bush has done will allow him to take credit for that. But that?s what the debate is going to be all about during the course of the next year or so.

MR. MARSHALL: I think that David is right in his analysis that this was always destined to be a close election. I?m not sure all Republicans shared that view. I think that after the mid-term elections [last November], some saw the possibility of a Republican realignment [i.e., a major, long-term ideological and electoral shift in the country toward the Republicans] based on the party?s enormous advantages on security issues. But I agree with David?s analysis.

But I think that the President?s problems are not based just on performance, that is the disappearance of an enormous federal budget surplus and the appearance of large deficits. It goes deeper. It goes to questions of trust and strong leadership because I think that has been the essence of George Bush?s political strength. Even people who disagreed with his policy positions on ?X? or ?Y? thought, ?This guy is a strong leader. He knows where he wants to go. He?s honest and forthright.? And frankly, even some of his legendary troubles with the English language seemed to reinforce the image of a certain integrity and sincerity. And the latest wave of troubles, including the uranium report in the State of the Union address, which turned out not to be accurate, has gone to the heart of George Bush?s strength -- again, the fact that people have generally trusted him and seen him as a strong leader. So I think what?s happening now is more than the usual policy disagreements that you?ll have at any point in anybody?s presidency. And it?s a deeper threat to this president?s political outlook [i.e., future].

MR. KEENE: What Will is talking about reflects the Democratic attack on George Bush which is designed exactly to undermine that credibility. For example, regarding the 16 words in the State of the Union message, the questioning of Bush, while he said we relied on British intelligence or on this or that is being characterized as something that he was duplicitous about when, in fact, he has been pretty open about it. And there hasn?t been evidence of that [that the President was duplicitous]. But it?s understandable that that?s what?s being attacked because if that personal quality can be undermined, that will indeed help the Democrats.

MR. MORALES: Looking ahead at the race for the White House from the Democratic side, so far we have nine candidates. Let?s begin with Will Marshall, who in your view is the most likely to emerge as the front runner?

MR. MARSHALL: The race really hasn?t begun. We?ve really been having a primary about money -- who can raise the most. And to some extent partisan activists, liberal activists in the Democratic Party have coalesced to some surprising degree around Howard Dean of Vermont. I continue to think that the candidates with the best chance to appeal to the American people on a broad basis and give George Bush a tough race are Joe Lieberman [of Connecticut], John Kerry [of Massachusetts], and John Edwards of North Carolina. I think they have qualities that reach farther across the country and into groups that don?t traditionally vote Democratic or that are not Democratic die hards. So I would say that those are the candidates with the best possibility to reach independent voters, moderates and swing voters that we?re going to need to bring into the Democratic fold in order to beat George Bush.

MR. MORALES: And David Keene, you get the last word.

MR. KEENE: I?m usually wrong about who is leading and who is behind in my own party. I?ll only say that whoever is nominated by the Democrats will be able to run a viable race because of the partisan divide. But I?ll tell you one thing, I?ll keep George Bush?s problems as opposed to theirs any day of the week.

MR. MORALES: Gentlemen, we?ll have to leave it there. I would like to thank my guests: Will Marshall, President of the Progressive Policy Institute; and David Keene, Chairman of the American Conservative Union.