Return to Transcripts main page
Lou Dobbs Moneyline
Dow Declines 46.50 to 10150.55; Nasdaq Advances 18.64 to 2055.74
Aired January 08, 2002 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is LOU DOBBS MONEYLINE for Tuesday, January 8. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening. Almost four months after terrorists launched a major coordinated attack against the United States, thousands of people from countries with active terrorist cells remain at large in this country. Law enforcement officials are preparing to search for as many as 6,000 people of Middle Eastern and Arab descent, who are no longer eligible to stay on U.S. soil. Officials say the names will be entered on the FBI database, they say that any of those people, who apply for a driver's license or pulled is pulled over for a speeding ticket will be arrested and deported. Officials say the search for deportable aliens will begin immediately.
U.S. forces captured 12 al Qaeda and Taliban fighters near a huge training facility, southwest of Khost. The Pentagon says it's particularly interested in two of those prisoners. The Pentagon also says the complex which was hit by U.S. cruise missiles in 1998 was much larger than previously thought.
CNN has also confirmed that special forces are still combing through the tunnels and bunkers, they are looking for additional intelligence on the al Qaeda. The Pentagon says laptop computers, cell phones and documents have already been removed from the area.
Bill Hemmer is in Kandahar and has more on the story for us -- Bill.
BILL HEMMER, CNN CORRESPONDENT: Lou, good morning from Kandahar. The man accused of running the terrorist training camps here in Afghanistan, Ibn al-Sheikh (ph) al-Aibi (ph) has been -- quote -- "most cooperative with U.S. investigators." Al-Aibi, from Libya, was moved from Kandahar, under secret movement yesterday. He's now being held on board the U.S.S. Bataan floating in the Arabian Sea. On that same ship, held for questioning, interrogation, are seven others including the American 20-year-old John Walker. Also, you might remember the name, Abdul Salaam Sayeef (ph) the former Pakistan ambassador to the Taliban. He has now been moved from the Bataan to Bagram, north of Kabul for questioning interrogation there.
Meanwhile, back here in Kandahar, we now know the planning has been quite delicate and intricate from moving these detainees from here in Afghanistan to Guantanamo Bay, Cuba. We know for the past three days, military planners and investigators have been rehearsing their moves to try and make this as smooth as possible. As one source told me, they believe right now Kandahar is ready for the movement; they're waiting for Cuba thought to come on line, again the movement could come within hours, possibly six hours or 24 hours away. But again, the movement is in that direction to fly in one straight shot from here in Kandahar, straight to Guantanamo Bay, Ccuba.
Also, in eastern Afghanistan, Lou, as you mentioned a short time ago, the Pentagon now confirming they continue to find massive amounts of information, cell phones and laptops there, in those complex caves and tunnel areas in eastern Afghanistan. It is this information they're using, not only to track down al Qaeda terrorists here in Afghanistan. But also suspects around the world as that al Qaeda network now stretches into more than 60 countries. And two of those al Qaeda members apprehended yesterday in eastern Afghanistan have now been brought here to Kandahar. The running total as we have it now 301, in the facility here in Kandahar -- Lou.
DOBBS: Bill, thank you very much. Bill Hemmer reporting from Kandahar.
A delegation of U.S. Senators say they encourage Pakistan's president to do whatever he can to renounce terrorism, and to diffuse tension in the region. Senator John McCain and eight other U.S. Senators met with Pakistan President Pervez Musharraf in Islamabad today. Musharraf says he plans to deliver a nationally televised address to his nation this week, promising to crack down on terrorist groups. India, for its part, blames Pakistan for harboring terrorists. And India says it's pleased with Musharraf's words, but still wants to see definitive action. The U.S. Senators are making stops in as many as nine Asian countries, before returning home. Yesterday they were in Afghanistan.
The Pentagon, today, said a friendly fire incident that killed three U.S. soldiers in Afghanistan last month, points to human error and not mechanical malfunction. A senior Pentagon official stressed that the findings are preliminary.
Meanwhile, today, U.S. warplanes continued to dropped bombs along the Afghan-Pakistani border. They're trying to flush out al Qaeda and Taliban fighters who may be trying to move into Pakistan.
Jamie McIntyre is at the Pentagon and has more on that story for us --Jamie.
JAMIE MCINTYRE, CNN CORRESPONDENT: Well, a couple of items, Lou. One is that those airstrikes taking place in the south, some of those were called in late yesterday, when U.S. forces on the ground discovered another compound that was a part of the complex, massive complex at Zhawar Kili, where the U.S. has discovered that the complex is much larger than it originally thought.
Here we see an F-14 taking out -- flattening one of the buildings they found with a laser-guided bomb. An up close look, again, revealed that that was a much more extensive facility. At the same time those troops scouring this former al Qaeda stronghold came across a group of 14 people and from them, they identified two of who they say are senior al Qaeda. They were the ones who were called out and sent to Kandahar. And today at the Pentagon today, the Pentagon following its policy, not identifying who the two are.
GEN. RICHARD MYERS, JOINT CHIEFS CHAIRMAN: Let me just say about the identity of the two that were taken. They were the ones of interest that we thought, that were senior enough where they might have the kind of information, that we're looking for in terms of operational methodology, future operations and so forth.
MCINTYRE: Pentagon officials are also being more cautious tonight in describing the circumstances of the death of Sergeant First Class Nathan Chapman, who was first described as having been killed in an ambush last week. Now some Pentagon officials are being more cautious, saying they don't know exactly what happened, and they're backing away from indications that there might have been a set-up after he met with friendly Afghan officials on the ground. They are urging us to wait for the results of the investigation. And preliminary results of the investigation of a friendly fire incident on December 5, would seem to indicate that the solders on the ground, who were hit by the errant bomb, accidentally called the strike in on their own location, but again, preliminary conclusion, final report due out later this month -- Lou.
DOBBS: Jamie McIntyre, thank you very much for that update. Jamie McIntyre from the Pentagon.
The Pentagon is not saying which countries will be next in the war on terrorism. But in an interview with the "New York Times," Deputy Defense Secretary Wolfowitz, suggested denying terrorists safe haven in countries like Indonesia, Somalia and the Philippines, those countries could well be next. That could mean more controversial targets, like Iraq could be put off, delayed or perhaps avoided altogether.
For more now, I'm joined by former defense secretary, MONEYLINE contributor, William Cohen. Bill, good to have you here.
WILLIAM COHEN, FRMR. DEFENSE SECRETARY: Lou, good to be here.
DOBBS: The comments by Wolfowitz seem to be a softening, in his position at least. What are we to make of these comments?
COHEN: Well, it may be a case of deliberate ambiguity on the part of the administration. Secretary Wolfowitz has been the leading advocate for moving against countries such as Iraq, and to do so rather aggressively and with a rather timing on this. And now he seems to be backing away from that, but it could be on the one hand that we don't have the political support necessary to put an effective campaign together with some of the countries in the region to go after Iraq. It could be a situation where they want to build upon success, after success before they turn into Iraq.
It could be a diversion. I think that keeping everybody guessing is actually -- it's in the Pentagon's interest to do that right now. DOBBS: It certainly is, but at the same time, I would think, that internationally, that it would be well for us to be clear about our intent. The president so definitive at the early stages of this war against terrorism saying you're either with us or your against us. To move into this ambiguous level, for whatever the reason, is a little, a little less comfortable.
COHEN: Well he's pointed to countries, Secretary Wolfowitz has pointed to countries such as the Philippines, where we do have the president of the Philippines who is very much engaged in fighting terrorism. She may want to have some support from the United States in helping to route out the terrorists in her own country. There may be others who are seeking support. So that would be consistent with what the president has advocated, the long march toward eradicating terrorism. With respect to Iraq, another matter. Again from a military point of view, now that you have the forces over there, it would be the right time to go after Iraq. But politically you still need support in the region, so far I don't think we have seen the kind of support necessary that would allow an effective management in all of the assets necessary to go after Saddam Hussein.
DOBBS: We have seen an extraordinary success to this point in Afghanistan. There is still, obviously, significant mopping up to do, the capture of Osama bin Laden, Mohammed Omar remain chief among the uncompleted business. But the fact is, we have done this with very limited cooperation in the region. Say Pakistan, what more cooperation would be required for the United States should it deem necessary to attack Iraq?
COHEN: First of all, we have had great support, not simply from Pakistan, we've had it from Russia, we've had it from Uzbekistan and Tajikistan. We have had it from many other countries throughout the world. The Brits who are with us in flying many of the missions and on the ground. So we've had international support.
With respect to going after Iraq --
DOBBS: I'm sorry, I meant all of the countries in the region.
COHEN: But we've had international support. If we were to go to Iraq, it would be very questionable whether we had any other country with us. We would need, at a minimum, to have Kuwait, we need to have Turkey, we would need to have some of the other countries who would have the land base aircraft to support such a mission.
DOBBS: Let's move to your judgment, irrespective of these other matters. Let's find out what Bill Cohen thinks, should Iraq be either next or high on the list of next?
COHEN: I think Iraq should always be high on the list, given what Saddam Hussein has done in the past, and may pose in the future in terms of a threat. I think it would be premature to go after him at this point. I think we have to build on more successes, to make this campaign long-term sustainable and successful.
DOBBS: Somalia, the Philippines, Indonesia? COHEN: Well, in the Philippines we may very well have the support of President Arroyo. Indonesia, that remains an open question, although they do have some strong terrorist activities in Indonesia. Same with Somalia, we don't have a government as such, that can lend the kind of support that would be necessary to raise these issues on Somalia.
DOBBS: Let's move to just quickly on a couple of those issues. One is, should Indonesia be reluctant in cooperation with the United States, whether it be in terms of intelligence operation, paramilitary or military what does the United States do?
COHEN: I think the solution is not a military solution there, it's more international, more diplomatic, more economic to isolate those groups in that country and for them to seek the assistance of the Indonesian government.
DOBBS: And Somalia?
COHEN: Well, Somalia is a more difficult challenge, because we don't have the kind of support necessary on the ground. There would be a question of what kind of assets could be put in place to help lend support for U.S. forces that might go in there. So it's a more dubious case in Somalia, right now, it could come on later.
DOBBS: Bill, as always, we appreciate it. Bill Cohen.
COHEN: Thanks, Lou.
DOBBS: Well, Maryland State Police, tonight, say a speeding infraction involving one of the September 11 hijackers was a routine stop, and they had no reason to believe that Ziad Jarrah was a criminal. Today, law enforcement officials released a state troopers videotape of Jarrah being pulled over. For more on the story, Susan Candiotti in Washington -- Susan.
SUSAN CANDIOTTI, CNN CORRESPONDENT: Good evening, Lou. Two days before commandeering a plane on a mission of death, one of the 19 terrorists had a brush with the law. Ziad Jarrah on of the hijackers aboard Flight 93 that crashed in Pennsylvania was stopped for speeding September 9. He had got a ticket, it was just after midnight near the Maryland-Delaware state line. Jarrah was heading north, presumably on his way to Newark for a flight of terror. Because of a Maryland public information law for the first time, we are seeing videotape of that traffic stop by a Maryland State Trooper.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You were going 90 in a 65. Your driver's license registration, please?
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: We're at the beck and call, if you will, systems if we check every name. And without any reason to believe someone might be wanted or there might be information that we need to know about, we don't run every name of every person we stop.
(END VIDEO CLIP)
CANDIOTTI:Two days after that happened, Jarrah along with 18 others hijacked four planes, killing thousands on September 11. Jarrah was in the country legally. He was not on any kind of terrorist watch list, he was cooperative and investigators insist the trooper had no way of knowing what was to come. And perhaps even more chilling than the videotape, authorities admit even if Jarrah and others were on a watch list, during a routine traffic stop, police don't have the time or manpower to automatically run a name in a national crime database -- Lou.
DOBBS: Susan, thank you very much. Susan Candiotti from Washington.
Since September 11 security has been increase nationwide, for everyone. One example this past Saturday, Congressman John Dingle, he is a 75-year-old Democrat from Michigan, he was forced to drop his pants at Reagan National Airport, after his artificial hip set off a metal detector. The Congressman was led into office where a security employee waved a metal-detecting wand over him. When word reached Transportation Secretary Norman Mineta, he called the congressman to apologize.
Coming up next, the president promotes his education bill on the road today. The reform considered a victory for both Democrats and Republicans. Now that's bipartisanship. We'll have that story for you next.
Also, we'll take a look at the specifics of education bill. How it works, who it helps, who it costs. And later, many celebrities have launched their own name brands with the help of Kmart. But as that retailer struggles, many are wondering what happens to the credibility of some of those star merchandises. MONEYLINE will continue in a moment. Stay with us.
(COMMERCIAL BREAK)
DOBBS: President Bush today signed into law a sweeping education reform bill, widely regarded as the largest, most substantial of the country's education system in more than three decades. The "No Child Left Behind" act is intended to help some of the neediest students in the country's 90,000 public schools. It's been hailed by President Bush as a victory rarely seen Washington these days, a bipartisan victory.
John King travelling with the president, joins us now from the president's most recent stop, a Boston Latin School in Massachusetts --John.
JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Lou, hello to you. It was an achievement both parties acknowledged, quite significant and quite unnoticed if you will. Because the compromise was struck late last year with all the attention of the Congress and the American people, and we in the news media on the war on terrorism. So Mr. Bush visiting three states today, he signed the bill in Ohio, then went on to New Hampshire, he final stop here in Massachusetts.
All states, the home of key lawmakers, Democrats and Republicans a like, who helped strike this compromise. First a look at the policy, it dramatically increases spending $26.5 billion dollars, the federal government will spend this year on elementary and secondary education, that's up $8 billion dollars from last year. A tripling to $1 billion of the amount the federal government will spend on reading programs, not only this year, but for the next five years. There's new testing here, if you're in public schools, grades 3-8, beginning in 2005 you will face annual testing in reading and math. Teachers also have to prove that they know their subjects, and parents will get access to statewide report cards so they can compare the schools their kid is in, to the schools across the state. Mr. Bush said, that is what he wanted most, accountability.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This bill says that we will hold people accountable for results. It says in return for receiving federal money, states must design accountability systems to measure, to determine whether or not children are learning to read and write and add and subtract in return for federal money.
(END VIDEO CLIP)
KING: Now the president also saluting the politics of this legislation, in recent days we have seen squabbling between the Republican president and Republicans in Congress, with Democrats in the Congress, especially the Democrats who run the United States Senate. Mr. Bush trying to work out a compromise on economic stimulus, suggesting in his remarks today, that perhaps they should go back to the lessons learned in shaping this education bill.
Here in Boston, one moment saluted Senator Edward Kennedy of Massachusetts, a liberal Democrat, not only for his work on this legislation. But Mr. Bush recalled that Laura Bush, the first lady was on up on Capitol Hill testifying before Senator Kennedy's committee when the September 11 attacks took place.
(BEGIN VIDEO CLIP)
BUSH: And I want to thank him publicly, in front of his home folks, for providing such comfort to Laura during an incredibly tough time. Ironically enough, Judd Gregg was there, as well. And both those men, went out of their way, to put their arm around Laura and let her know all would be right.
(END VIDEO CLIP)
KING: Mr. Bush called Senator Kennedy, not only a good Senator, but a good man. The White House hopes relationships like that carry over into the new year, despite all the partisan differences right now over an economic stimulus. Some at the White House believe, if the president keeps at it and keeps working Democrats like Senator Kennedy, in the weeks ahead, perhaps a compromise can be struck -- Lou.
DOBBS: Well it is good to see in the beginning of year, a noticeable civility and grace on both parts, there's some hope for bipartisanship, after all. John, thank you very much. John King from Boston.
Well, one of the main goals of the education bill, of course, is to close the funding gap between low-income students and high-income students. The new law authorizes up to $26.5 billion in spending. It gives states greater flexibility in how they spend that money.
Kitty Pilgrim has been looking into the financial aspects of this new law, and has the report for us.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Educators are today saying the new law gives a bigger bang for each education buck simply because of the accountability factor. The more than $26 billion law sends more money to the states, an increase of about $8 billion. In addition, the new law sets up a new money flow, helping states pay for new testing to be done in the schools.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And so, therefore, if you receive federal money, in return for federal money, the states, not the federal government, the states must develop a test for third through eighth graders on reading and math.
(APPLAUSE)
For the first time at the federal level, we've asked a simple question: Is our money being spent wisely? Are people learning?
PILGRIM: The new law attempts to level the playing field between wealthy and poor students. Next year, children in 3,000 underperforming schools will be eligible for tutoring from a variety of sources including religious institutions. The attempt to rescue underprivileged students is not a unique concept, but the new plan is more results oriented.
MARCI KANSTROOM, MANHATTAN INSTITUTE: The federal government sends money to states and to individual school districts for different federal programs. But the big new chunk of money for a new program is the state testing and accountability part. And for that, the federal government will send money directly to the states to develop a whole set of new tests.
PILGRIM: According to the National Education Association, because of the current economic slump, states have cut $11 billion from education budgets in the past year. States with shrinking budgets may opt to band together to cover some of the testing development costs.
(END VIDEOTAPE) (on camera): The secretary of education calls this new bill, quote, "a whole new way of doing business." In effect, it treats education more like a business, keeping it more results oriented and with a firmer eye on the bottom line -- Lou.
DOBBS: This is a huge amount of money to be pouring into an education system that has not exactly distinguished itself on a national level in terms of administration; $8 billion in just fundamental -- I mean, how are they going to manage that money?
PILGRIM: This money will primarily go to establishing testing across on the state level so that every state will have a test that they can give.
DOBBS: And, of course, one of the big issues -- the president talking about accountability. How about reward? Teachers making more money? They certainly deserve it.
PILGRIM: Well, after six years, on the accountability side of the teacher equation...
DOBBS: Six years?
PILGRIM: After six years, if the school is not performing, the teachers can be replaced.
DOBBS: Can we write in and suggest that maybe they give teachers some more money?
PILGRIM: We could try.
DOBBS: OK. We'll try. Kitty, thanks a lot -- Kitty Pilgrim.
Despite the president victory tour on education today, partisan finger pointing remains in Washington. Part of the reason, of course, is we're now officially in an election year. Topic one is turning to be, of course, the economy. Tim O'Brien has the story from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): Never in its history has the U.S. Congress been so evenly split between Democrats and Republicans. The stimulus package went up in flames last month, not because the president didn't understand the politics, say some Democrats, but because he didn't understand the arithmetic.
SEN. BYRON DORGAN (D), SOUTH DAKOTA: With the Congress so evenly split, this president really needs to sit down with the leaders of Congress and say, all right, let's shut the door and when we come out of the room, we'll have a compromise that we all think represents the best of the ideas that are being offered in the room. And that's not happening.
O'BRIEN: Instead, says Senator Dorgan, the president is only making matters worse by suggesting Democrats are out to raise taxes. BUSH: Not over my dead body will they raise your taxes.
O'BRIEN: While they do oppose accelerating tax cuts passed by Congress last spring, no Democrat is calling for a tax increase. Some Republicans say Mr. Bush gave up too much to Democrats in the early stages of negotiation, leaving himself little room to compromise.
The White House has been blaming Tom Daschle, the Senate majority leader, for the breakdown in negotiations. In a speech Friday, Daschle made it clear that the administration's economic policies will be an issue in this November's off-year elections.
SEN. PHIL GRAMM (R), TEXAS: I was kind of surprised that Senator Daschle decided to give this big speech. And whether he intended to do it or not, the basic message was bipartisanship is over in Washington, D.C. I don't know where we go from here except downhill.
O'BRIEN: Nothing has occurred since Congress went out last month that might help bridge the philosophical divide between Democrats and Republicans. The president and his cabinet got a briefing on the state of the economy yesterday from Fed chairman Alan Greenspan.
(END VIDEOTAPE)
(on camera): And the state of the economy is the linchpin. Should economic indicators in coming weeks show a strengthening economy, the urgency of a stimulus package will be gone. A further weakening of the economy, however, would almost certainly stimulate lawmakers to confront one another. And, Lou, that may be unpleasant, maybe difficult, but not as bad as facing angry voters in November.
DOBBS: Well, they'll be facing voters certainly in November. How many and how angry, we'll find out. It's a little troubling in all of this that it's clearly all about partisanship now in terms of this one issue on the economy. And, as we all know, the economy will be fundamental, its strength or its weakness, in determining which way people vote.
O'BRIEN: That's exactly right. It's certainly not going to be national defense or the president's war on terrorism. Democrats give Mr. Bush very good marks on that. But it is going to be the economy. And, of course, George Bush doesn't have to look too far to find lessons about what a bad economy could do. His own father was in a similar situation several years ago.
DOBBS: OK. Tim, thank you very much. Tim O'Brien from Washington.
Another sign today that the great hope for the economy, the consumer may be stretched to the limit. The Federal Reserve reporting consumer debt surged by a record amount recently as Americans took on even more debt. Kathleen Hays is here now. She has more about the country's continuing love affair with credit and how it just might economy and perhaps even elections.
KATHLEEN HAYS, CNN CORRESPONDENT: Absolutely. You know, this never was a bit of a surprise, Lou, a record increase. People were looking for an increase but not like we got. Consumer credit surged $19.9 billion. That was 14 percent annual rate of increase. That is the fastest rate since 1995.
Now, you kind of say to yourself, is it a sign of the confident consumer? Could be. But does it mean that the consumer maybe will have less wherewithal to keep spending if they have to pay down debt. Now in December, we did see that chain store sales were up just about one-and-a-half percent. It wasn't awful, but it was not resounding.
Now we are going to share with you an interesting survey from the Cambridge Consumer Credit Group. We're looking as we just --- let's just -- we'll take our time here for a sec. Twenty-eight percent said their number one resolution this year is to pay down debt. Now that's also as much as the perennial favorite for all of us, right? What is our resolution every year, lose weight and exercise. That was 30 percent.
DOBBS: Why did you bring weight in this survey?
HAYS: I didn't bring it up. They did.
(LAUGHTER)
They are comparing our result to pay down debt.
DOBBS: I'll bet you're getting personal, Kathleen.
HAYS: Well gee, Lou, I won't go there. Thirteen percent, their number one goal this year, improve relationships. The next runner-up here: get a better job, said 12 percent. And, of course, another one, a perennial favorite if you have this problem, quit smoking or drinking, eight percent put that as their number one goal. So people, in fact -- you know, last -- this past month...
DOBBS: Where's this spike, Kathleen...
HAYS: Well, we just thought we'd put it in perspective, I guess. We have debt. We are going to try and pay it down. And, in fact, in the past month, 61 percent of the people in this survey did pay down debt. So again, the question is though, seriously...
DOBBS: So I've got a 60/40 shot of losing weight this year?
HAYS: Yes.
DOBBS: All right. I think I get it.
HAYS: There you go.
DOBBS: Kathleen, thanks -- Kathleen Hays.
Coming up next, war planes continue to bomb areas along the Afghan-Pakistan border. We'll bring you the latest on the war against terrorism. Also, we'll take a look at the link between social freedom and economic success in this world. There's a lot more to this story than just free markets. We'll be talking about that coming up next.
ANNOUNCER: Coming up, Lou talks with Adrian Karatnycky, CEO of Freedom House.
(COMMERCIAL BREAK)
DOBBS: In the war against terrorism, the Pentagon says preliminary findings of its investigation into a friendly fire incident suggest human error, not mechanical. The incident killed three U.S. soldiers in Afghanistan last month. In that incident, a 2,000-pound bomb erroneously programmed to hit the location of those troops, not the intended target nearby.
Meanwhile, U.S. war planes continue to pummel targets along the Afghan/Pakistan border, where al Qaeda and Taliban fighters are apparently trying to escape into Pakistan. CNN crews in the area say they have heard bombs falling.
And a 20-year-old man charged with a federal felony for allegedly trying to carry knives and other weapons through a security checkpoint at Chicago's Midway Airport. The man's duffel bag contained three pocket knives, 16 rounds of ammunition, handcuffs, lighter fluid, and a lighter. The U.S. Attorney's office described the man as a transient with no apparent link to terrorism.
Over the past decade, the relationship between democratic societies, free markets and prosperity has become abundantly clear. Recently, a non-profit organization that works to expand democracy around the world qualified that relationship in its report by Freedom House. That survey found countries which are not free are far less productive and prosperous than free nations. While only 40 percent of the world's population now lives in free countries, they create 87 percent of the global gross domestic product.
Joining me now, the president of Freedom House, Adrian Karatnycky.
Good to see you.
ADRIAN KARATNYCKY, PRESIDENT, FREEDOM HOUSE: Good to see you.
DOBBS: This survey -- I always think back to a wonderful book by Milton Friedman on democracy and capitalism that explained best and first, for me, at least, the relationship.
What is this survey? What is its fundamental finding and its importance to you?
KARATNYCKY: Well, the fundamental finding is that economic freedom and political freedom tend to go hand-in-hand. You don't have too many societies that are moving very far along in terms of their economic prosperity and economic liberty and lagging on political rights. China's one of the few exceptions that's in that category.
On the other hand, we also see that as political freedom has been expanding, there are a number of countries that have resisted that global trend. They primarily are countries in the Islamic world. And that's one of the issues that we've been focusing on this year.
DOBBS: That -- in your study -- and do we have a graphic to show this, if I may ask? We do not? All right, well, I'm sorry. We have -- it's number -- what is it? Forty-seven?
KARATNYCKY: There are 47 Islamic countries, and only 11 of them have anything resembling democratic government.
In the rest of the world, democracy is the predominant system, as is a more open, you know, free-market economy. I think the free- market economic systems perform -- are far weaker and far more -- far more poorly developed in the Islamic world than the rest of the world.
DOBBS: And what is the lesson for us in this? Amongst the Islamic nations, what can we do with this information in terms of U.S. foreign policy?
KARATNYCKY: Well, I think we've already seen the effect of this. In many of the countries where you don't have the sort of the pressure release, the pressure valve of political freedom, a lot of the radicals are exported to the West. So many of the cells that we are now concerned about are people who've been squeezed out of countries like Egypt and Saudi Arabia, and they've moved outside and they're menacing now our more open society.
So the inability of many Islamic states to deal with their own terrorist threat domestically, and to deal with their own societies, has created all sorts of open field for (INAUDIBLE).
DOBBS: The United States is a convenient, if you will, diversion for oppressive governments and societies -- that documented now.
What -- how should one anticipate the United States using this information? What should be the appropriate response in terms of foreign policy?
KARATNYCKY: Well, I think -- I think that we have to understand that first of all, the majority of Muslims -- if you count the Muslims that live in India, that live in Europe, that live in the United States, live in such countries as Bangladesh and Turkey -- the majority of Muslims now live under democracy. But the majority of Muslim countries are not democratic.
So there already is this kind of a political change towards the direction of greater openness for the majority of Muslims. We have to work with those democratic Muslims and democratic Muslim forces to help open up the closed societies in the Islamic world. Otherwise, then we're going to see this continuing pattern of exporting terrorism and of -- in many cases, many of these countries -- these repressive countries making deals with fundamentalist extremist Islamic movements -- as we see in the case of Saudi Arabia, where they back some of the most militant ideological tendencies and export those ideas to other parts of the world.
DOBBS: Adrian Karatnycky, of the Freedom House. Thanks very much. KARATNYCKY: Thanks very much.
DOBBS: Good to have you here.
Coming up next, celebrities who use the K-Mart name to market their merchandise now must figure how to handle the retailer's precarious financial situation. We'll have that story for you.
And the fallout from Enron continues. Coming up next, a look at the widespread damage to pension funds throughout the country as a result. We'll have that story and a lot more, still ahead here.
Stay with us.
(COMMERCIAL BREAK)
ANNOUNCER: LOU DOBBS MONEYLINE continues.
Here again, Lou Dobbs.
DOBBS: In the war against terrorism tonight, the Justice Department planning to find and to deport 6,000 people of Arab and Middle Eastern descent who are no longer eligible to remain in the United States. The program to track down those deportable aliens beginning immediately.
U.S. war plane have been blasting areas along the Afghan/Pakistan border, where al Qaeda and Taliban fighters may be trying to flee Afghanistan. U.S. Special Forces captured another 12 al Qaeda and Taliban fighters southwest of the town of Khost.
The anthrax mail scare, as well as the slumping economy, have had a devastating effect on the U.S. mail system. The Postal Service now says mail volume experienced the biggest drop last year in more than 30 years. It also comes at the same time the Post Office is in talks to raise postal rates on June 30 -- that, of course, much sooner than had originally been planned.
For nearly two years, investors have been slammed with disappointing earnings news. But warnings are running now below last year's level. That's an important shift that investors have been waiting for.
Bruce Francis has the story.
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): It's one of the first robins of recovery -- a sign that the winter of dire earnings news might finally be ending. Companies from Compaq to Procter & Gamble are pre-announcing positive earnings news, and the warnings are beginning to wane.
CHUCK HILL, THOMSON FINANCIAL FIRST: You can't have an earnings turnaround if we aren't at least starting to see some slowdown in the rate of warnings and downward revisions on the estimates. Well, it appears we're finally getting that.
FRANCIS: Hill says that as recently as three weeks ago, earnings warnings were running ahead of last year's level. But now, the tide has turned, and negative pre-announcements are just slightly behind last year's level.
And while those warnings stayed high for the first three quarters of 2001, and made up the majority of the early disclosures, they've dropped sharply recently.
Now, for the first time in two year, the majority of announcements are from companies that are on-track or ahead of projections.
But some analysts point out that fourth quarter numbers were slashed so much that they were easy to beat. That's not true for the rest of the year, according to Doug Cliggott.
DOUGLAS CLIGGOTT, JP MORGAN CHASE: When we look out into second quarter, third quarter of this year, expectations are extremely high. And so -- and, in effect, the bar hasn't been lowered for those quarters. So it's not clear at all that this current, "Hey, we're beating numbers" trend is going to be able to carry forward into the spring of this year.
(END VIDEOTAPE)
FRANCIS (on camera): But if you look at the big increases in the Dow and the Nasdaq since their September lows, investors seem to be betting that earnings will continue to improve -- and improve sharply.
Lou, it's not clear they will.
DOBBS: And, as you point out, the -- that improvement for last quarter -- what appears to be now an improvement the last quarter -- is it a one-quarter trend? Is it?
FRANCIS: It's not predictive. It's unambiguously a good sign, though.
DOBBS: OK. We'll take even that these days.
Bruce, thanks. Bruce Francis.
A mixed performance on Wall Street today. Blue chips extending yesterday's decline. Technology issues posting small gains on the day. The Dow down 46 points. The Nasdaq gained 18. The S&P 500 slipped four points.
Christine Romans over at the New York Stock Exchange, Greg Clarkin over at the Nasdaq market site.
Let's begin with you, Greg Clarkin.
(LAUGHTER) GREG CLARKIN, CNN CORRESPONDENT: All right, Lou. I tell you...
DOBBS: You're the winner on the day.
CLARKIN: We'll start with the winning index here. At the composite, not a bad day really. Saw a little nibbling around the software stocks, some of the semi-conductor issues. That was enough basically to offset some weakness in the wireless stocks.
Now, you take a look at some of the story stocks, there is some real interesting stories here.
Let's start with Western Wireless. The stock sold off more than 24 percent after the company came out and said revenue could be down as much as 12 percent over the previous quarter. Now, they cite a slowdown in travel that has cut into those very lucrative roaming minutes, as well as the fact that they added fewer subscribers than expected.
Some microsystems had a pretty good day, but want to call your attention to the bottom two companies: Movie Gallery and Hollywood Entertainment. Lot of talk about people staying at home, and that has really helped companies like this. They're home video rental chains.
Movie Gallery's the number-three video store company. Fourth- quarter earnings now they say will be around 27 to 32 cents a share, not the 17 to 21 cents a share as expected. The stock rising better than two bucks on that.
Hollywood Entertainment, the number-two video store chain: Same- store sales for the quarter up 11 percent for the fourth quarter, and they are expecting six to seven percent.
So much better numbers for both of those -- both of those companies, and really bears out the fact that at-home entertainment companies, if you will, had a real strong fourth quarter.
So, again, Lou, the composite up 18 points; 2055 is the closing level.
Back to you.
DOBBS: Greg, thanks a lot.
Christine Romans, thanks for being patient with me. Let's go to you.
CHRISTINE ROMANS, CNN CORRESPONDENT: Well, Lou, I have some good news here, as well.
The S&P 500 for the first five trading days of the year is up 1.1 percent. Historically, that's a good sign, bodes well the barometer for January and the rest of the year.
But for today, it was Gateway and AOL -- disappointing guidance from both of those hurting things here. Look at Gateway -- stumbled 25 percent after it lowered revenue forecasts for the fourth quarter. After the close, Moody's cutting Gateway credit ratings to junk status, warning it may cut them again.
AOL Time Warner shares -- parent of this network -- a one percent drop in prices. Wall Street adjusts to that new guidance for 2002, and news of that potentially $60 billion charge against its first- quarter earnings. Wall Street analysts, though are, for the most part, nonplused by that news.
BMC Software, meanwhile, up nicely on the day. It is a business software maker. It had, well, a positive earnings guidance. And Computer Associates doing nicely along with that, and an upgrade from an analyst.
But take a look at some of the movers here. Heavy equipment maker Caterpillar falling after a Morgan Stanley analyst said new federal truck emission standards might hurt earnings.
Goldman Sachs -- some financials tumbling here. Some worries about a big Japanese bank selling its stake in Goldman.
AFLAC and Tiffany, though, up strongly today on positive pre- announcements.
So a lot of folks starting to talk about that confession season. And the companies that say they're going to do well certainly have been doing well on Wall Street -- Lou.
DOBBS: And Gateway did -- while it had a dismal performance today, and disappointing Wall Street with that big runoff -- they did say they would, however, be profitable, did they not, this year?
ROMANS: Yes. It is their -- their earnings numbers looks like for the fourth quarter they're expecting to be profitable, but it's that revenue number that really spooked some people.
DOBBS: Yeah, well, there's a lot to spook folks these days.
ROMANS: Yeah.
DOBBS: Christine Romans, thank you.
ROMANS: Sure.
DOBBS: Enron employees and shareholders aren't the only ones suffering huge losses from the energy giant's collapse. The retirement funds of many of the nation's state and local government workers have also been hit.
Casey Wian has that story.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): Florida attracts retirees from all over the United States. But the retirement fund for the state's own government workers is looking a bit less inviting now, because of a big financial hit from the collapse of Enron.
The Florida retirement system has lost more than $300 million in Enron stock -- the largest loss by any U.S. pension fund. While the amount sounds huge, it's actually only about three-tenths of one percent of the assets of the $97 billion Florida fund.
State officials say Florida's 800,000 government workers, teachers and retirees will not lose any benefits.
COLEMAN STIPANOVICH, FLORIDA BOARD OF ADMIN.: The pension fund here in the State of Florida is a defined benefit fund, so the -- it's a guaranteed benefit. So there will -- the retirees or members in the future will not be impacted by this.
WIAN: Still, Florida wants its money back. The state has asked to be lead plaintiff in a class-action lawsuit by several other pension funds against Enron, and is considering suing Enron's accountants and directors.
Florida has also fired its investment adviser, Alliance Capital.
Beside Florida, other pension funds with Enron stock losses include Georgia, Ohio and New York City -- each out more than $100 million -- and Texas, New York State, Washington, and California.
PHILIP HALPERIN, CIO, UNIVERSITY OF CHICAGO: The dollars are large, but in fact, the percentage of the assets tend to be pretty small. Most large pension plans are invested in many asset classes in the stocks. They tend to invest really in just about every stock that there exists.
WIAN: Some pension funds have profited handsomely from investments in Enron -- such as California's giant Public Employees Retirement System, or CALPERS. From 1993 until last year's state energy crisis, CALPERS invested in two joint ventures with Enron.
CALPERS and Enron each invested more than $400 million in power plants and other energy projects. Those now-expired deals earned CALPERS nearly $400 million in profit. CALPERS does have a $45 million paper loss in Enron stock. It has not said if it will join pension fund lawsuits against its former partner.
Casey Wian, CNN Financial News, Los Angeles.
(END VIDEOTAPE)
DOBBS: Wendy's founder and popular television pitchman, Dave Thomas, died at the age of 69, after a long battle with liver cancer.
One of Thomas' greatest influences was Kentucky Fried Chicken founder, Colonel Sanders. Sanders brought Thomas into a management position at KFC. In 1969, Thomas opened his first Wendy's restaurant, in Columbus, Ohio. He named it after one of his daughters.
Twenty years later, Thomas appeared in his first of more than 800 commercials. He grew Wendy's into the third-largest fast-food chain, with more than 6,000 restaurants worldwide.
Still ahead, we'll be bringing you more on critical times for K- Mart. The retailer battling to lift sales while holding onto some valuable assets -- celebrity designers.
Stay with us.
(COMMERCIAL BREAK)
DOBBS: Troubling times for K-Mart, as it reports sagging December sales, and analysts' predictions of bankruptcy later in the year.
So where does that leave its celebrity designers like Martha Stewart, Jaclyn Smith and Kathy Ireland?
Susan Lisovicz tells us.
(BEGIN VIDEOTAPE)
KATHY IRELAND, CELEBRITY DESIGNER: You'll excuse me, I've got some shopping to do.
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Celebrity designers have become as much a staple at K-Mart as the Blue Light Special.
Former swimsuit model Kathy Ireland hawks socks, underwear and trendy separates for the nation's number-two retailer.
Actress Jaclyn Smith has been with K-Mart for two decades. Her name is behind more conservative apparel.
But it is the partnership with Martha Stewart that is truly making a splash. Martha has plastered her name on everything from linens to paint.
K-Mart won't break out individual performers, but Prudential Financial estimates Martha has become a $1 billion business for the discount giant. And some analysts say K-Mart needs her as much as she needs them.
HOWARD DAVIDOWITZ, CHAIRMAN, DAVIDOWITZ & ASSOCIATES: If you look at Target, they would never allow Martha Stewart to get this powerful. They would never allow it to happen. Nor would WalMart. They would never let it happen.
Martha Stewart's strength is a function of two things: her ability and K-Mart's weakness.
LISOVICZ: In fact, K-Mart's disappointing December sales and concerns about cash flow prompted Prudential to predict that if those trends continue through the first half of the year, the retailer would be forced to file for bankruptcy.
WAYNE HOOD, PRUDENTIAL FINANCIAL: It's an issue of poor brands. In fact, we think K-Mart has better brands, better quality brands in the stores than they've ever had in the history.
We think it's an issue of store execution, supply chain, management.
LISOVICZ: Kathy Ireland has a flooring and furniture line sold at JC Penney, Macy's and Sears.
IRELAND: Diversification has always been important to me. It's just the way that I wanted my brand to go from the beginning. And because I have been asked to bring my apparel to different channels of distribution, I will not go someplace that would be in direct competition with K-Mart.
(END VIDEOTAPE)
LISOVICZ (on camera): K-Mart said in a statement late today that it has, quote, "long-standing and solid relationships with some of the most distinctive brands in the retail industry." The company calls the partnerships "a benefit to all of us," adding, "We very much appreciate their support" -- Lou.
DOBBS: Susan, thank you very much. Susan Lisovicz.
Well, Wolf Blitzer Reports begins in just a few minutes. And let's find out what we're going to see.
Let's go to Wolf in Washington -- Wolf.
WOLF BLITZER, "WOLF BLITZER REPORTS": Thank you very much, Lou.
With Osama bin Laden at large and the Taliban dispersed, what are the terror threats now facing the United States? We'll go into the CNN WAR ROOM and ask our panel: Congressman Saxby Chambliss -- he's the chairman of the House Homeland and Terrorism Subcommittee; also, the former NATO Supreme Allied Commander, General Wesley Clark; and Robin Wright of the "Los Angeles Times."
It all begins right here, at the top of the hour -- Lou.
DOBBS: And we're looking forward to it.
Coming up next here, we'll be looking at some viewer thoughts in support of -- of all things -- short-selling.
Also, we'll take a look at what may move the markets tomorrow.
Stay with us.
(COMMERCIAL BREAK)
DOBBS: Tomorrow, President Bush continues to make remarks on education policy. He'll be -- tomorrow afternoon -- at Constitution Hall in Washington.
Homeland Security Director Tom Ridge will visit Nevada and New Mexico. He's on his way to Salt Lake City for a check on Olympic security.
Let's take a quick look now at some of your thoughts.
Albert Storey, in Eugene, Oregon, the home of the Ducks, is a little frustrated by recent activity in the market. He writes in to say, "If every time the market starts back up and we take a little profit and run, how can we rebound?"
Well, that's what makes markets.
Recently, some MONEYLINE viewers blasted short-sellers for driving this market lower. But Harold Vogel, in New York City, defends that practice, saying, "Short-sellers are of great benefit to the market. Indeed, more active short-selling would have helped contain the Nasdaq or Enron price balloons from getting too big."
Well, let's take a look at short-selling quickly. Certainly, going short last year proved to be a very wise strategy. A survey published today in the "Wall Street Journal," in fact, showed short- sellers' returns jumped 14 percent last year. Compare that to a seven percent decline for the Dow, a 13 percent decline for the Nasdaq.
That's MONEYLINE for this Tuesday evening. We thank you for being with us. Good night from New York City. "WOLF BLITZER REPORTS" begins right now.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
