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CNN LOU DOBBS MONEYLINE

SARS Death Toll Reaches 506; FBI Contact Indicted for Spying

Aired May 8, 2003 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU DOBBS, HOST: Wolf, thank you very much, and good evening, everyone.
Tonight, the SARS virus is much more deadly than originally believed, the mortality originally set at four percent. The World Health Organization now says 15 out of every 100 people contract the virus will die. Peter Viles will have our special report.

Another sign tonight that the United States is shifting its alliances away from old allies in western Europe, such as France and Germany. Senior White House correspondent, John King, will have that report for us.

And top coalition officials said today they are working hard to rebuild Iraq and restore essential services. "Vanity Fair" columnist, Christopher Hitchens, will be here, recent returned from southern Iraq to give us his views on reconstruction and the prospects for stable government in Iraq.

Tonight, as I said, the death rate from SARS has now climbed to 15 percent. That's nearly four times worse than the original estimate. This shocking news as the World Health Organization reports 506 people have now died from the virus worldwide. The number of infections has grown to more than 7,000, most of those infections in China.

Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNNfn CORRESPONDENT (voice-over): In Hong Kong, a street festival turned into a campaign against SARS, residents praying, casting spells. In a symbol of hope, this child dressed as a doctor and carried through the streets.

Outside Beijing, there was unrest. Residents ransacked this school when they heard it was to be used as a SARS quarantine facility. The government continued its campaign of quarantine and hygiene but said the situation is quote, still grim.

And now, the World Health Organization says the death rate is much higher than previous estimates. The numbers, 7,053 cases of SARS reported, 506 people have died, yielding an apparent death rate of 7.2 percent. But the World Health Organization now believes the true death rate is closer to 15 percent and 50 percent for those over 65.

The United States has not reported a new case since Sunday, but health officials are still nervous.

DR. JULIE GERBERDING, DIRECTOR, CENTERS FOR DISEASE CONTROL: It's very sobering to appreciate that despite all of this technology capacity and our strong emphasis on communicating information and science to people, that we are experiencing ongoing vulnerability because until this disease is contained everywhere in the world, it remains a problem for all of us.

VILES: Perhaps the most surprising statistic of all, 96.8 percent of current SARS cases are in greater China. The WHO now recommends against travel to Beijing, Hong Kong, Taipei, as well as four other Chinese provinces and fears that remote areas of China are not prepared to fight the disease.

HENK BEKEDAM, WHO REPRESENTATIVE TO CHINA: You need to be ready for your prevention. You need to be ready for your hospital infection control. You need to be ready for your treatment, et cetera, so there are many steps what needs to (UNINTELLIGIBLE) you need to be ready for in order to deal with SARS.

(END VIDEOTAPE)

VILES: The CDC now believes that some people who have SARS super spreaders. In Singapore, it found that 81 percent of those infected did not spread the virus to anyone at all, but there were five people in Singapore, super spreaders, those five people together infected 144 people. Lou?

DOBBS: Is there any sign in China, Pete, that this is abating?

VILES: None whatsoever, really. They numbers are a little bit lower in Hong Kong. Hong Kong had the burst at the beginning, but we're still seeing big numbers from throughout the country and from some of the more remote areas that the WHO is real worried about because they don't have the healthcare infrastructure in rural China.

The State Department, the U.S. State Department, gave half a million dollars to the Red Cross to put to work immediately in China on this.

DOBBS: And candidly, we just don't know the quality of the reports that we're getting from the Chinese government from those remote provinces.

VILES: Right, which is why we don't focus so much on day-to-day numbers because sometimes a bunch of numbers come in two to three days late.

DOBBS: Canada, the worst hit country outside of China, the status there?

VILES: Not a single new case reported today in Canada. In fact, in the entire world, only one case reported today outside of greater China.

DOBBS: And not one in this country since Sunday? VILES: Not since Sunday. Yes.

DOBBS: Pet, thank you very much. Peter Viles.

Well, another sign tonight that the United States is rethinking its traditional alliances in Europe. The Senate unanimously ratified a treaty that admits seven more countries to NATO. Those countries include three former Soviet republics and a former Yugoslav republic.

Senior White House correspondent, John King has the story.

(BEGIN VIDEOTAPE)

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT (voice-over): An East Room welcome for soon to be new members of the NATO alliance. No coincidence the seven European nations on hand backed President Bush in the war in Iraq.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The peoples of Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia have a fresh memory of tyranny, and they know the consequences of complacency in the face of danger.

KING: Earlier, the emir of Qatar in the Oval Office, another reminder of the shifting alliance in the wake of a war that strained some old friendships and put new ones to the test.

BUSH: Mr. Emir, you made some promises to America, and you kept your promises.

KING: A key U.S. command center in Saudi Arabia is being moved to Qatar because the tiny Arab emirate, unlike the Saudis, is happy to publicly embrace a U.S. Military presence.

EMIR OF QATAR (through translator): We in Qatar are very keen to have a very unique and strong and distinct relationship with the United States.

KING: Wednesday night, it was Spain's prime minister and a joint effort to convince France, Russia, and others who opposed the war with the bitterness aside and move quickly to lift U.N. sanctions.

JOSE MARIA ANZAR, SPANISH PRESIDENT (through translator): And it's all about the Iraqi people, so I hope we're successful.

KING: Mr. Bush was reminded that before the war, Chile and Mexico refused to back the United States and the Security Council.

BUSH: They're friends of ours, period.

KING: Perhaps no grudges, but clearly favorites, and support for the Iraq war is a leading indicator these days. A planned Bush trip to Canada was postponed when Australia's prime minister was invited to the president's ranch, and Japan's prime minister will follow later this month. But then, in just three weeks, comes an annual meeting that includes the leaders of France, Germany and Russia, all Iraq war opponents.

(END VIDEOTAPE)

KING: Senior U.S. officials say that now, and in the weeks ahead, the president's goal to focus on post-war Iraq, working both closely with wartime allies and trying to keep differences with others to a minimum, but these senior officials say that while Mr. Bush is eager to move on, that does not mean he is about to forget. Lou?

DOBBS: Not to forget, John. Is there also a sense there at the White House that there is a preparation underway to truly try to mend these relationships that have been rended by the war?

KING: Well in the next few weeks in the U.N. Security Council will be a key test of that. The United States is looking -- the United States puts it this way, Lou. It says that it believes France and Germany did the harm, Russia did the harm, and it is incumbent on those nations to reach out with the olive branch first.

So, if the debate about lifting the sanctions goes relatively smoothly, look then for President Bush to reciprocate. He'll get the chance very soon. In three weeks, he will be in Evian, France, with President Chirac, Chancellor Schroeder, and President Putin.

You have the U.N. debate, then that trip to the G-8 summit, two very quick tests of how willing this president is to reach out, but the White House says, again, the test for them is how willing are those other nations to reach first. Lou?

DOBBS: And we don't want to even begin to speculate what would what happen if that United Nations resolution were to go poorly.

KING: No, we wouldn't.

DOBBS: John, thank you very much. John King, our senior White House correspondent.

A U.S. soldier was killed by a sniper in southeastern Baghdad today. Another soldier was wounded in a separate incident. The shootings were the latest in a series of attacks against troops in Iraq in recent days.

Also today, 11 marines were injured, one of them seriously, in an explosion on the amphibious assault ship, the USS Saipan. This ship is in the northern Persian Gulf on the way back to the United States. The cause of the explosion is under investigation.

Tomorrow the United States will introduce an U.N. resolution calling for an immediate end to international sanctions against Iraq. That resolution will also call for the phasing out of the U.N.'s oil for food program over the next four months. The proposal already faces strong opposition from France and Russia. A senior U.S. envoy has traveled to Moscow trying to convince Russia to support the resolution. Russia's unwillingness to support the United States on the lifting of sanctions against Iraq is only the latest sign of a split between the two countries. Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNNfn CORRESPONDENT (voice over): Victory day in Russia in honor of the allied victory in World War II, but in today's world, the United States and Russia stand far apart. Relations were warm just a year ago when Presidents Bush and Putin met, but Russia threw up obstacles to reaching a U.N. agreement on Iraq before the war, and now Russia's been refusing to support the United States' position over lifting U.N. sanctions.

Today, a senior U.S. envoy presented the Russians the text of a draft resolution to lift sanctions, but Russia has been insisting on the condition Iraq is free and clear of weapons of mass destruction.

PAUL SAUNDERS, THE NIXON CENTER: Russia has spent the last several years trying to get the sanctions lifted in the United Nations and, you know, arguing that Iraq didn't have these weapons, and there was no proof that these weapons existed. It seems a little self- serving, at this point, to take the position that they have taken.

PILGRIM: The real issue is oil. Experts say the Russians think an end to the sanctions puts Iraqi oil into the hands of the United States.

Another issue may also divide the two countries, Russia has been helping Iran develop its nuclear program, but the United States is calling for resolution to condemn it. Analysts say it's unlikely Russia supports any pressure on Teheran.

CELESTE WALLANDER, RUSSIA AND EURASIA PROGRAM, CSIS: The United States wants to see an end to Russian nuclear cooperation with Iran. No negotiations, no compromise. There's not -- it's hard to see how you could compromise. From the Russian side, not much give either. Iran is one of the few countries that is actually willing to pay hard, cold cash.

(END VIDEOTAPE)

PILGRIM: President Bush and President Putin are to meet in St. Petersburg in a few weeks, and so much was made of the personal relationship between the two leaders and may take just that to get things back on track. Lou?

DOBBS: Kitty, thank you.

French President Jacques Chirac today attended celebrations to mark the 58th anniversary of the liberation of Europe from Nazi Germany. President Chirac later reads at the tomb of the unknown soldier in Paris. His defense minister today called for better relations with the United States, but there was no message of thanks from President Chirac for the U.S. role in the liberation of France, nor for the removal of Saddam Hussein from power in Iraq.

The FBI has intensified its investigation of activities of two Middle Eastern terrorist organizations working in the United States, the Hezbollah and Hamas. Sources tell CNN's Kelli Arena that scores of alleged members of these two groups are under intense surveillance.

Kelli Arena joins us now with more on the story now. Kelli?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Lou, much of the focus is on Hezbollah. Officials say that there are active cells in the United States involved in everything from gathering intelligence to raising funds to procuring items, such as GPS systems, that are readily available here but not elsewhere.

Sources put the number of those under some sort of acts of surveillance at around 150. Officials say that there are investigations under way in at least two dozen U.S. cities, those include Detroit and Los Angeles, and those investigations are mostly focused on people who allegedly provide financial support to these organizations, and when charges can be filed, we're told, that they will be.

Now, officials stress, Lou, that there is not any new intelligence suggesting that Hezbollah is planning an attack against the United States or U.S. interests, but they point out that the war on terror has raised the U.S. profile in the Middle East among extremist groups.

Counterterrorism officials also point out that before September 11th, Hezbollah was responsible for more American deaths than any other group. Speaking of September 11th, today FBI Director, Robert Mueller, said that the U.S. is on the right track in reducing the threat from al Qaeda, but he said that vigilance remains key.

(BEGIN VIDEO CLIP)

ROBERT MUELLER, DIRECTOR, FBI: There are a number of al Qaeda operators around the world who wish to kill Americans and others. And, consequently, for the foreseeable future, all of us, your community, other communities in the United States and around the world, will have to be alert to that possibility.

(END VIDEO CLIP)

ARENA: Mueller did express some confidence in the fight against terror, but FBI officials say that his comments should not be miscast. They say that he remains very concerned about the possibility of another attack. Lou?

DOBBS: Kelli, I think some people might be surprised to learn that just membership in Hezbollah and Hamas is not sufficient grounds for arrest, both being terrorist organizations in this country. Why is that?

ARENA: Well, sometimes, Lou, as counterterrorism officials say, it is better to surveil individuals that can lead you to other individuals and other contacts, which could be very useful in putting together more concrete charges. Also, just being a member doesn't necessarily mean that you're involved in any criminal activity.

Of course, there is a material support charge that used against certain alleged members of al Qaeda here, that just providing your body to the cause is a criminal activity, but in those cases, there was a lot more intelligence and much more solid information that perhaps these groups were up to something, Lou. It's better to wait and see, we're told at this point.

DOBBS: Kelli, thank you very much. Kelli Arena reporting from Washington.

Israeli forces today killed a senior member of the military wing of Hamas. He was killed in Gaza. Two Apache helicopters fired missiles at his automobile. Palestinians quickly gathered around the wreckage, shouted their support for Hamas.

Israel says the man helped planned a large number of suicide attacks against Israel. Israeli Prime Minister Ariel Sharon today said he is prepared to reopen peace talks with Syria without any preconditions. Those talks broke down three years ago over the issue of the Israeli-occupied Golan Heights.

Secretary of State, Colin Powell, begins a visit to the Middle East this Saturday.

Still ahead here, some better than expected news on employment. But it doesn't necessarily mean the worst is over for the job market. We'll have details for you on that.

And Democrats have a plan of their own to cut taxes and to stimulate the job market and the economy. The Democrats say they can do all that for a fraction of the half trillion dollar Republican proposals. Congressman Charles Rangel, ranking member of the House Ways and Means Committee, is our guest. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The Dow Jones industrial average lost 69 points. The Nasdaq lost 17 points. The S & P dropped just over a percent, over one point. Weak retail numbers a factor. Christine Romans joins us now with details on the activity. Christine?

CHRISTINE ROMANS, CNNfn CORRESPONDENT: And Lou, the Dow has not shaved just about one percent off the two-month rally. It's still up two percent this year, and it's 1,000 points above October's five-year lows. So, for some perspective there.

Average volume today, about five stocks fell for every four that rose. Many said the market is taking a deserved breather. The S&P 500 still about four percent above that 200-day moving average. In company news, Ford said its goal of flat net pricing for Ford Lincoln and Mercury brands in the U.S. is at risk because of consumer incentives. Those are incentives are expected to last beyond the second quarter.

Meanwhile, plenty of action in oil, currency, and bond markets today. The euro streaks to another four-year high against the dollar after the European Central Bank left rates unchanged. Euro's rates double those in the U.S.

The 10-year note yield fell to 3.62 percent, those near March lows.

And crude prices rallied three percent after that explosion aboard a U.S. ship in the Gulf. Also, some data showing a draw down of crude supplies. So, a lot of action there. Lou?

DOBBS: A lot of action. That 10-year note declining, that is good news for consumers but problematic for the markets.

ROMANS: It really is something to watch back to those March levels. And back in March, people were saying that was as far as it could go.

DOBBS: Terrific. Christine, thanks. Christine Romans.

It has now been 521 days since Enron went bankrupt. Fifteen Enron executives have now been charged. Fifty other executives in corporate American have no been charged. No one is in jail.

Coming up next, in the latest issue of "Vanity Fair", Christopher Hitchens explains why he says this war with Iraq began 13 years ago, and how that reality affects the rebuilding of Iraq. He's our guest next.

In a remarkable story of survival and perseverance, a man who took drastic action to save his own life speaks out. That story and much more still ahead here. Stay with us.

(COMMERCIAL BREAK)

DOBBS: In news across America tonight, police say criminal charges are likely after a high school hazing incident in suburban Chicago. Five teenage girls were injured when a group of senior girls slapped, punched, and dumped human waste on them, among other things. Police are also investigating whether parents contributed to the melee, supporting the students with kegs of beer.

The hiker who cut off his own arm to survive faced reporters today. Aaron Ralston used his pocket knife to free himself after his arm was trapped under a huge boulder.

(BEGIN VIDEO CLIP)

AARON RALSTON, HIKER: I came to peace with death over the course of the time that I spent in the canyon. I very much felt that if it were my time to go, it would be my time to go. That it wouldn't matter what I did, but at the same time, the counterpositive of that came very much into play, too, that if it weren't my time to go, then it wasn't going to be my time.

(END VIDEO CLIP)

Aaron Ralston said a greater presence than himself helped him through the ordeal.

In other news tonight, a new species of giant jelly fish has been discovered. Scientists call it "Big Red". This creature that you're looking at is three feet across. It has arms instead of tentacles. Twenty-three of these jelly fish have been found in several areas of the Pacific Ocean.

"Vanity Fair's" columnist, Christopher Hitchens says the war against Saddam Hussein has freed Iraqis from one of the most evil dictatorships in recent history. Writing in the June edition of "Vanity Fair," Hitchens describes his journey from Kuwait to southern Iraq in March. Hitchens said he found plenty of evidence that Hussein's day of reckoning was well over due.

Christopher Hitchens joins us now from Palo Alto, California. Good to have you with us.

CHRISTOPHER HITCHENS, COLUMNIST, "VANITY FAIR": Thanks for having me.

DOBBS: The -- your journey, particularly to Safwan and southern Iraq, what is evoked there, a sense of both -- that you evoke -- is a sense of history of this regime. Give us your insights as to what you think the future holds.

HITCHENS: Well, do you mind if I start with the past? Even so...

DOBBS: Not at you will. Not at all.

HITCHENS: But it wasn't much of a trip. I mean, I was not up the sharp end. I wasn't embedded. I wasn't taking risks. I wasn't in a position that my dear friend, Mike Kelly, was in when he was killed outside Baghdad Airport.

But I had long thought -- and I had been in Iraq before in the previous war -- that really, all the talk that there had been about the rush to war, the push for war, the drive for war, all that propaganda, was essentially nonsensical because in 1990, Saddam Hussein made his only self-criticism, the only self-criticism he ever made. He said, I could either invade Kuwait, or I could finish developing my nuclear weapon. Maybe I'll invade Kuwait before the weapon, and then later he said, oh, I should have got the nuclear weapon before I invaded. By the way, he was right about that.

But that means that he inaugurated, at that point, something like a dozen years' war, where the United States could probably be criticized most for doing too little and for acting too slowly, and so, all that we've really been arguing about lately has to do with whether or not those who said it should have been finished in 1991, when it could have been finished, we should have taken the side of the rebels then, taken the risk of supporting a Shia insurrection at that point, helping the Kurds, removing the regime.

DOBBS: Absolutely.

HITCHENS: We'd be 11 years into nation building by now, if we'd done that. That seems to be the core of the argument.

DOBBS: And as you point out, of course, for the fact of the matter is, the mistakes of Saddam Hussein made possible his removal from power ultimately.

The mistakes of the United States, again, as you point out, Norman Schwarzkopf at the end of hostilities making a peace, permitting helicopters to fly.

HUTCHINS: It still hurts me to read this. The little town I was in, in southern Iraq, was far as I got, -- I can't boast of going any further -- is where those talks took place between Schwarzkopf and the Iraqis.

We have the transcripts of the meeting. They say, ok, we have lost this round, but do you mind if we keep your helicopters in the air just to be able to transport things? And he says, yes, that's all right. And they ask again, are you sure they mean that? Because they basically can't believe their luck.

And then, they use those gunships to kill, we think, probably not less than 50,000 Shia inhabitants of southern Iraq, and were going to try and do that to the Kurds, as well, so it was a knife edge.

And it's not just been wise after the event, I believe, to say that there was an argument in real time between the Bush administration members. Mr. Cheney is the only one I know who has changed his mind. Most of those that took the view at that time, still think, or still do think until recently, that they were correct in saving Saddam Hussein.

DOBBS: Of course, Mr. Cheney was in the chain of command, along with Schwarzkopf and Colin Powell.

HITCHENS: And Brent Scowcroft and many others.

DOBBS: When they made the decision not to move toward Baghdad because they had bad information, namely, that the Republican Guard had been absolutely devastated.

HITCHENS: Yes. And, well, we know now the harvest of all that. It hurts to think of how many wonderful people in Iraq at the academic community, lawyers, human rights activists, ordinary civilians, intellectuals, people from (UNINTELLIGIBLE) would now be alive, who have been horribly murdered and tortured and reduced to misery since, by a half application of violence, through sanctions and overflights. DOBBS: Mistakes made then, mistakes part of human experience, but now we have an opportunity not to make mistakes. Is it your sense that the United States is on the right track? That there is the prospect here, a commitment here, on the part of the United States to create a stable government, one that can provide, ultimately, a representation of the Iraqi people with equity, with democracy?

HITCHENS: Well, look. I'll say this much. The risk has been taken that -- if you should call it a risk -- the gamble, the honorable risk has been taken that Iraqis should have the main say. After all, the two main phenomena we have seen since the fall of Saddam Hussein, both watched by, you know, U.S. Marines.

At first, a tremendous infusion of Shia Muslim feeling, which doesn't always play very well with the American establishment.

And second, the rebirth of what was once a huge party, and may still be, the Iraqi Communist Party. So, the green flag of Shia militancy and the red flag, and a hammer and sickle, I might add, of the very brave but rather stupid Communist Party, raised openly.

That's clearly not a colonial occupation. They've liberated these forces, and they are taking the chance of believing that the Iraqi people are so grown up, have been through so much, that they're the best judgers of that.

If that changes, I hope I'll be the first person to criticize the policy, but for now, that's roughly what's been done. I wish myself that a lot more emphasis was being placed on the work of the Iraqi National Congress and the Patriotic Union of Kurdistan, the two healthiest forces in Iraq, Ahmed Chalabi's group and Baham Salis (ph) and Chahal Chalabani's (ph) group.

I think that perhaps the United States is afraid of seeming too partisan in supporting these two, but it sometimes makes the opposite mistake of, especially with the CIA -- being biased against them.

DOBBS: Well, as you say, a honorable risk taken, an honorable war fought. And we thank you very much, as always, for being here, and thanks for the terrific reads in this month's -- well, actually June's -- I'm a little ahead of it -- June's edition.

HITCHENS: On the newsstands now, at fine bookstores everywhere. Thank you for saying so.

DOBBS: Christopher Hitchens, thanks for being here.

HITCHENS: Bye.

DOBBS: We'll have the thought of the day next on an uncommon attribute.

And a dramatic story that you perhaps won't believe. This one has it all. Sex, spies, state secrets, Charles Feldman. He'll have the very latest for us on the story of a double agent. And stormy weather tearing across the country again. These are live pictures coming to us of severe flooding in Georgia tonight. We'll have a full wrap up of mother nature's wrath. It is widespread, reaching from the Rocky Mountains to the southeastern states.

Stay with us.

(COMMERCIAL BREAK)

(NEWSBREAK)

DOBBS: A dramatic new development tonight in the case of the former FBI agent, his lover, and the secrets she allegedly passed on to China. A federal grand jury has charged Katrina Leung in a five- count indictment.

Charles Feldman joins us now live from Los Angeles. Charles, what can you tell us about this indictment?

CHARLES FELDMAN, CNN CORRESPONDENT: Well, Lou, what a story this is, right out of a spy novel. She was indicted, Katrina Leung on five counts as you said of possessing documents relating to national security, documents that according to the indictment she had reason to believe could be used to harm the national security interests of the United States.

Now, just the other day, just yesterday, her long-time lover of 20 years and former FBI handler, James Smith, was himself indicted, he on charges of gross negligence.

According to the government, he would regularly come home with documents in his briefcase, leave the briefcase open, and unattended and Ms. Leung allegedly would then lift the documents, copy them, and then, and here's the interesting part, Lou, then it is unclear what she actually did with those documents.

Ad because it is unclear in large measure it is one of the reasons why she is not, at least as of now been charged with espionage because the government doesn't really know what damage, if any, she actually did the national security interest of the United States.

So, this investigation is still very much ongoing but she does on the counts today, Lou, face up to 50 years behind bars if convicted. She is being held without bond. Her long-time lover and ex-FBI handler has been out on bail to the tune of $250,000. Both are scheduled to be arraigned in federal court next week - Lou.

DOBBS: Neither cooperating with authorities because, as you say, like a spy novel with the exception that the spies, that is the CIA, the FBI in this case apparently don't know precisely what or how intelligence was conveyed to the Chinese government in this case.

FELDMAN: That's exactly right and there's another interesting thing here that Ms. Leung not only had an affair with her ex-FBI handler, Lou, she had an affair with another FBI agent up in San Francisco who is also now retired. He is cooperating, however, with the government so he has not been charged, and what if anything he has to say of substance will, I'm sure, end up at some future trial.

DOBBS: Okay, Katrina Leung charged, five indictments just now. We appreciate it Charles Feldman reporting from Los Angeles.

Well, that brings us to the next segment, our "Thought of the Day," penned more than 200 years and it's certainly is relevant today as then, "Common sense is not so common," from French writer, philosopher Voltaire.

Violent weather continues to affect large parts of the country tonight. Tornado watches are in effect for several plain states. Floods are a concern in the southeastern part of the country tonight, and tense moments earlier in Denver, Colorado today, two funnel clouds spotted near the city's airport. They eventually dissipated and never touched down.

A nearby hailstorm turned Denver streets white, however. More than three inches of hail, not snow, three inches of hail fell this afternoon. Snow plows were required to clear the highways.

And, two days of torrential rain has swamped parts of the south. Several rivers have overflowed their banks forcing hundreds of people from their homes in Alabama, Georgia, and Tennessee. The flooding in central Alabama is, in fact, the worst in 130 years.

Parts of Illinois, Kansas, and Nebraska tonight are on tornado watch. Two people in Kansas City were killed this past weekend when nine tornadoes touched down there. At least two of those twisters had winds in excess of 200 miles an hour. Officials have recorded more than 135 tornadoes and 40 deaths since Sunday.

The European Commission has given the United States until this fall to change a disputed tax policy or face $4 billion in trade sanctions. The European Union wants the United States to drop favorable tax treatment for companies that do business overseas. This could lead to a trade war.

Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNNfn CORRESPONDENT (voice-over): Shots across the trade bow are coming from both sides of the Atlantic, the World Trade Organization giving Europe the go ahead to slap tariffs on jewelry, machinery, appliances, wood and paper products, and software, up to $4 billion worth of sanctions on some of the biggest names in American business and the sanctions would only be the start.

American companies would also have to contend with a huge hit to the bottom line caused by the loss of tax protection, a hit that would run in the tens of billions of dollars.

KIMBERLY PINTER, NATIONAL ASSN. OF MANUFACTURERS: A $50 billion tax increase on the manufacturing sector, even over ten years would be economically disastrous both for the economy as a whole and, as you mentioned, on earnings because, for example, there are a lot of contracts that are currently in effect that take the benefit into account.

TUCKER: The European Union has given the United States until autumn to comply or face a specific list of proposed tariffs to go into effect at the start of next year.

While American and European trade representatives have been talking cooperation there are undeniable tensions, tensions which are made worse by weak economies on both sides of the Atlantic and the erosion of the relationships between France and Germany and the United States.

NILE GARDINER, HERITAGE FOUNDATION: I believe that the latest threat to issue sanctions is partly a byproduct of a huge loss of face by the French and the Germans over the Iraq question. Paris and Berlin have been utterly humiliated by the developments in Iraq and this, I think, is an attempt to try to get back at Washington over this.

(END VIDEOTAPE)

TUCKER: And some think that payback may have been on the minds of the management at Airbus when they made the decision earlier this week to go with a bid to supply engines to their planes from a European consortium despite that consortium having been underbid for the contract by 20 percent by an American company Pratt & Whitney - Lou.

DOBBS: You know the politics are ugly. The commerce is starting to get just as ugly as the politics.

TUCKER: It is absolutely, and a Pricewaterhouse done last year, Lou, laid three and a half million jobs at risk if this tax benefit that the WTO wants us to do away with is done away with.

DOBBS: Jobs internationally or domestically?

TUCKER: American jobs. American jobs domestically in the United States.

DOBBS: Bill Tucker, thank you.

And this note, last year the United States ran a trade deficit of $82 billion with Europe alone. The latest readings from the Census Bureau for this year find that the United States ran a $41 billion deficit in January and another $40 billion in February suggesting Americans are continuing to spend far more on foreign goods than foreign countries spend on ours despite a dollar that has been hammered against the Euro.

Turning now to our poll question, "Which country is the most reliable ally of the United States, Russia, France, Germany or Poland?" Russia, France, Germany or Poland, cast your vote at cnn.com/moneyline. We'll have preliminary results late in the broadcast.

And we now have the final results of yesterday's question, "How much does gas mileage influence your decision to buy a car?" Fifty- eight percent of you said quite a lot and 30 percent said somewhat, 12 percent said not at all.

Coming up next, experts issue dire predictions about a terrorist backlash after the war began against Saddam Hussein. When we continue, Daniel Pipes the author of "Militant Islam Reaches America" will join me to explain why his forecast was correct, that no backlash would emerge.

And, we'll share some of your thoughts, some strong reaction to our discussion on SUVs last evening and fuel efficiency, and some other strong thoughts about a variety of subjects. Stay with us.

(COMMERCIAL BREAK)

DOBBS: My next guest says the war against Saddam Hussein and U.S. military action in Afghanistan have undercut al Qaeda operations and recruiting. Daniel Pipes, a noted Middle East expert, the author of "Militant Islam Reaches America" joins us now from Philadelphia, Daniel good to have you here.

DANIEL PIPES, "MILITANT ISLAM REACHES AMERICA": Thank you, Lou.

DOBBS: You correctly forecast early in the hostilities that those suggesting that there would be some sort of Arab street backlash were incorrect. Tell us, if you would, why you believed that at the time.

PIPES: Well, actually, the short answer would be I'd simply dusted off my notes from 1991 when I made the same prediction and it was right then and it was right in 2003 and presumably right another dozen years from now again.

Basically, its premise, this idea that the Arab street will rise up on a kind of counter logical notion that Arabs in contrast to other people when they're defeated are more inclined to take action and engage in terrorism and overthrow government but that's not the case with them or with anyone else. They're people like the rest of us.

DOBBS: As you said, the Arabs when they are defeated, do you believe that Arabs believe that defeat of Saddam Hussein was an Arabic defeat?

PIPES: All the reporting I've seen suggests that in the cafes in Cairo and the political salons in Kuwait and so forth, there is a sense that - well, let me take that back, not in Kuwait but in Morocco and, you know, around the Arab world there's a sense that the Arabs lost a battle here. There's a lot of support for Saddam, not for him as an individual but for the Arabs to fight and defeat or at least hold off in a heroic way the coalition forces.

DOBBS: The idea that there is some sort of pan-Arab view of the world I personally, Daniel, am suspicious of that. I quite understand the areas of commonality and Islamic religion that is shared by most of the Middle Eastern countries but - nearly all of the Middle Eastern countries but at the same time there seems to be no evidence beyond a certain intelligentsia, academic, and sort of the (unintelligible) of some journalists in the Middle East about the Arab state and this pan- Arab view of the world. What makes you think it truly exists?

PIPES: Well, no, you're not going to get an argument from me. I agree with you. You're right. What this harks back to though is a sense of the 1950s and '60s when Arabism, pan-Arabism was a pretty popular and powerful notion. It has long since been discredited and it doesn't have the power that you're arguing against, no it doesn't. But, it continues among analysts to be a kind of bogeyman and people expect it to come to life.

DOBBS: And we in the national media continue too often to give it too much perhaps service and credence. One of the exciting and positive opportunities here obviously to strengthen those impulses that do exist in Iraq for self governance for representative and equitable government, how likely do you think it is that the United States, the coalition, will be successful in building such a government and creating such a condition for that climate?

PIPES: Good question, Lou, and tough question and I range back and forth. I have my optimistic and my pessimistic moods.

DOBBS: Yes.

PIPES: But I worry about an Intifada. I worry about a rising up against American troops if they're there too long and I worry about anarchy if we leave too soon and it's going to be a real challenge to Paul Bremer and the others who are overseeing this rehabilitation to get it just exactly right and I wish them very well and it's such a tough assignment.

DOBBS: Christopher Hitchens referred to it as a noble gamble and that resonates with me, how about you?

PIPES: Yes, yes. It is - it is high stakes gamble. I'm optimistic. At the same time I can see so many sources of problems.

DOBBS: Sure. Another noble gamble, if you will, is the one that will be required on the part of both the Israelis and the Palestinians with a roadmap last week published. How hopeful are you?

PIPES: Not terribly, Lou. I believe that there needs to be what I call change of heart on the Palestinian side, a true and lasting acceptance of Israel and a true and lasting enunciation of violence before negotiations can really make a constructive difference.

DOBBS: Mahmoud Abbas, do you believe he will be a strong, effective leader?

PIPES: Maybe, maybe not. I'm really not sure but I don't think that the premises are laid yet. In other words, the Palestinians as a body politic, regardless of their prime minister, have come to the conclusion that Israel is there as a permanent reality, immutable fact, and they have not any desire to use violence against it. That to me is the key fact. DOBBS: Daniel, if it were that renunciation of terror and that acceptance of Israel, which has been enunciated, were to be which Israel would it be, the Israel of today or would it be the Israel of '67 borders?

PIPES: Once there is a true coming to terms by the Palestinians with the reality of an Israeli state and a true renunciation over - a permanent renunciation of violence, then the negotiations can truly and constructively begin.

Now, I am not in a position to tell you how they're going to come out. I think at that point it's worth really discussing this and looking at not just the borders but Jerusalem and the water and the armaments and who lives where, all these complicated questions but I think it's premature now. I think we still need to get...

DOBBS: I prefer the word, Daniel, early. We will, and I've got to drop it there but it is always good talking with you.

PIPES: Thank you.

DOBBS: Daniel Pipes, we always enjoy talking with you. Thank you.

PIPES: Thank you.

DOBBS: A reminder now to vote in our poll tonight, the question: "Which country is the most reliable ally of the United States, Russia, France, Germany, or Poland?" Cast your vote at cnn.com/moneyline. We'll have the preliminary results coming up.

When we continue, some good news for President Bush tonight in our latest CNN-USA Today Gallup Poll, Bill Schneider will have that for us in just a moment. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Good news for President Bush tonight according to our latest CNN-USA Today Gallup Poll. Most Americans say the president's tax cut is a good idea. They also approve of his handling of the economy and world affairs.

Senior political analyst Bill Schneider with the report.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Last week President Bush played top gun and the box office was steady, 70 percent job approval before the president spoke aboard the Abraham Lincoln, 69 percent after.

The president's job ratings have held steady at around 70 percent approval since the war in Iraq started, like he reached his upper limit and stayed there. The president's also been playing top tax cutter with more impact. Two weeks ago the public was inclined to think President Bush's tax cuts were a bad idea. Support has jumped 10 points. Most Americans now think the tax cuts are a good idea.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Well, let me just describe to you what it means to the family of four making $40,000 a year. It means their taxes would go from $1,178 a year to $45 a year.

SCHNEIDER: But do most people think the president's tax cuts will reduce their taxes? No. They do, however, think it will increase the deficit. So what?

BUSH: I'm concerned about the deficit but not as concerned about the deficit as I am about people trying to find work.

SCHNEIDER: The president appears to be making headway with this argument.

BUSH: Our motto is this, if tax relief is good for Americans years from now it is even better when the American economy needs it today.

SCHNEIDER: The number of Americans who believe tax cuts will help the economy has gone up, so has the number who think tax cuts will hurt the economy, but not as much.

(END VIDEOTAPE)

SCHNEIDER: Republicans right now are solidly behind this tax cut and Democrats are two-to-one against it, Independents they're split right down the middle, so I think we can say, Lou, on the tax issue the top gun has a powerful partisan recoil - Lou.

DOBBS: That's an artful metaphor there, Bill. The idea here of the tax cut, tax cuts as a concept, but what we are watching with the news just today out of the Senate, new adjustments in that plan, Congressman Bill Thomas with his, HR too which changes a number of aspects of it, a tax cut but we're not sure what that tax cut is quite yet.

SCHNEIDER: Well, I think it's getting closer and closer to the figure the president says is the one he wants, $550 billion at least over the next ten years. We've seen the number creeping up. Now, the Senate Finance Committee is talking about a deal for about $415 billion.

The president made an interesting comment. He uses this in all of his speeches. He said, the debate now is not whether there's going to be tax relief, it's how much tax relief, and once the debate is on that territory, then it's really the Republicans' territory and we're seeing that happen now.

DOBBS: Right.

SCHNEIDER: It's a debate over how much and it's getting closer and closer to the figure the president wants.

DOBBS: Especially with both houses having approved it. Now we'll have to deal with deficits, a declining dollar, and capital flows into the markets which are not quite as easy to talk about as just cutting taxes.

SCHNEIDER: That's right.

DOBBS: Bill Schneider, thank you very much.

SCHNEIDER: Sure, Lou.

DOBBS: We had hoped to be talking with Congressman Charles Rangel, the Ranking Member of the House Ways and Means Committee, but at this hour he's still talking with the chairman of the committee, Congressman Bill Thomas, the topic of course that they're discussing, tax cuts.

There is no suggestion that the Republican chairman is in any way trying to stifle the Democrat Ranking Member from joining us here to express his views. We hope to be talking with Congressman Rangel perhaps tomorrow.

As we promised we're going to monitor the national debt on this program. Tonight it totals more than - well almost $6.5 trillion, your family's share, well it's only $70,000. You might have noticed the national debt has declined since we reported it to you last night. The Treasury Department says that's because of a slight up-tick in tax receipts.

And our "Quote of the Day" comes from Capitol Hill where one Democratic senator suggested a part of the tax plan before the Finance Committee with $85 billion in available offsets is simply gimmickry.

"Tax cuts are fun to do. It's great to cut taxes but it's not free. We've got to find a way to pay for them. The offsets that we have in this bill have already been used. I mean how many times can an offset be an offset? I mean these offsets are as rare as a fat chicken running around Baghdad," those words from Senator John Breaux, Democrat of Louisiana.

When we continue, we'll have the preliminary results of tonight's poll. We'll share some of your thoughts. Many of you writing in about Arianna Huffington and Robert Kennedy, Jr. from last night's broadcast. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The preliminary results of our poll tonight, the question: "Which country is the most reliable ally of the United States?" Four percent of you said Russia, 15 percent said France, 14 Germany, and look at this, 67 percent said Poland, and if there's any better indication of shifting tides and times the response here is certainly it, scientific or not.

And we will ask you to continue voting over the course of the next 23 hours on this question. We'll have the final results tomorrow night.

A quick look at some of your thoughts, many of you wrote in about my commentary last night on the president's tax cut proposals.

Mike Harkreader from Brentwood, Tennessee wrote to say: "When you announced you would give your opinion on the president's economic package, I told my wife it was a no-brainer, as I was sure you would support the president's proposal. Well, I had a serving of cold crow and humble pie for supper Wednesday evening. Your credibility as a fair, thoughtful journalist is intact." Well thanks, Mike. We all have that meal to dine on from time to time.

And many of you also wrote us about the debate over SUVs and our guest last night. Rick Casares wrote: "Mr. Kennedy is right on the money. It's not stretch to think our current foreign policy is shaped by our demand for gasoline. SUVs are indeed a weapon of mass destruction."

R.M. Rafford from Oklahoma City, however, said: "Let's see Huffington and Kennedy, Jr. haul two horses, six kids, saddles and tack in any car they advocate other than a large V-8 SUV that gets 20 miles per gallon. There are many legitimate needs that only these SUVs serve."

And Warren Wasmer of Pasadena, Florida wrote to say: "I find it interesting that wealthy people like Ms. Huffington and Mr. Kennedy think the working people should pay more for cars and fuel. I wonder how much gas the limos that pick them up for their appearances use?"

And, Ron Wambolt from Woodway, Washington asked: "Lou, is Robert Kennedy, Jr., actually proposing that the taxes we pay on gasoline should be increased another $3 to $4 gallon as in Europe since it's their massive taxes that makes gas so expensive in Europe and the Europeans need that revenue to fund their pervasive socialist policies? Does he also want to turn the U.S. into a socialist country?"

Well, I certainly hope not. We always love hearing from you. Send us your thoughts. E-mail us at loudobbs@cnn.com. Thanks for being with us tonight.

Tomorrow our guests include Lawrence Gostin, director of the Center for Law and Public Health at Georgetown University who says America isn't ready to deal with the SARS virus outbreak.

And, the editors of the nation's top business magazines join us in our weekly "Editor's Circle." For all of us here goodnight from New York.

"LIVE FROM THE HEADLINES" with Paula Zahn is coming up next.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com



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