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Lou Dobbs Tonight

U.S. Troops Under Fire; Safer Skies?

Aired September 02, 2003 - 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.


JOHN KING, CNN ANCHOR: Tough questions on Iraq tonight, as Congress returns to work. How much money and how many troops are needed to win the war? And how many more U.S. lives will be lost? Jonathan Karl will have our report.
A massive shakeup in airline security. Thousands more federal agents will be able to become air marshals. Bill Tucker will have that story.

Two media giants are close to a merger agreement that could shake up the entertainment industry. We'll tell what you a deal could mean for television viewers.

And target: Earth. A giant asteroid is heading our way. Astrophysicist Charles Liu will give us his judgment on the risk of Armageddon.

ANNOUNCER: This is LOU DOBBS TONIGHT for Tuesday, September 23. Sitting in for Lou Dobbs, who is on vacation, John King.

KING: Good evening.

Tonight: the rising cost in U.S. dead and wounded in Iraq. The military today said terrorists killed another two U.S. troops in Baghdad; 286 Americans have died in Iraq since the start of the war there. More than 1,100 more have been wounded.

Senior Pentagon correspondent Jamie McIntyre has the story for us -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, John, when a soldier dies in Iraq, the Pentagon makes a formal announcement in the form of a press release. But if a soldier is wounded, even if it is a life-threatening wound, it may not be mentioned unless it's in conjunction with a major combat incident.

But the Pentagon strongly denies it's downplaying or underreporting the numbers of U.S. troops wounded in combat. In fact, it updates the figures daily and releases them to any news organization that asks. As of yesterday, there were 1,141 U.S. troops wounded in action, 550 before President Bush an end to major combat on May 1, 591 since then.

But that's comparing a six-week period of major combat with the four months since then. If you look at the rates, before May 1, on an average, almost 14 U.S. troops were being wounded every day, while, since then, the average is less than five a day. Today, in a change-of-command ceremony for the U.S. Special Operations Command in Florida, Defense Secretary Donald Rumsfeld said that the sacrifice made by American troops in lives and in limb was a necessary part of the global war on terrorism.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: There is no safe, easy middle ground. Either we take this war to the terrorists and fight them where they are, or we'll have to deal with them here at home.

(END VIDEO CLIP)

MCINTYRE: Now, the ratio of dead to wounded has risen in modern warfare, too. For every American killed in Iraq today, four are wounded. In the Persian Gulf War, the ratio was just over 1-1. In the Vietnam War, less than 3-1.

The explanation for that, say the Pentagon officials, is better medical care delivered at the scene and also better body armor that prevents many soldiers who would have died from injuries in a previous generation now survive because of modern technology. But the main point the Pentagon wants to make today is that it's not in any way covering up the number of wounded in Iraq. Instead, it says, it would like to highlight the sacrifice that those soldiers, Marines, airmen, have made in the global war on terrorism. And many of those will carry the scars of battle for the rest of their life -- John.

KING: And, Jamie, we understand more action and more casualties today in Afghanistan as well. What can you tell us about that?

MCINTYRE: Well, that's an operation called Mountain Viper, an attempt by the U.S. military to take out some of the Taliban who have regrouped in the southern area of Afghanistan, south and southeast.

Several hundred Taliban fighters there, they've been fighting for about two weeks now. The U.S. claims it's killed about 67 Taliban fighters. Two U.S. soldiers were killed on Sunday in a firefight. But this is an operation, again, designed to try to mop up what's left of the Taliban as they're regrouping in that mountain area, where they have been attacking primarily Afghan military forces -- John.

KING: Jamie McIntyre at the Pentagon -- thank you, Jamie.

Another car bombing in Baghdad today. This time, the target was a police station. It was the latest in a series of bomb attacks over the past month.

Rym Brahimi reports from Baghdad.

(BEGIN VIDEOTAPE)

RYM BRAHIMI, CNN CORRESPONDENT (voice-over): The fourth car bomb in Iraq in four weeks. The target this time: a police station. The casualties: at least one person killed and, according to a hospital that took in the wounded, at least 18 people injured. UNIDENTIFIED MALE (through translator): Flying debris, glass, iron everything flying. It was a big explosion.

BRAHIMI: Having heard of the explosion, this woman came frantically looking for her son who works there. The police said a thick wall between the building and the car park where the bomb off prevented this latest attack from doing more damage.

The bomb exploded in the morning, on a day when former Iraqi policemen come to collect their salaries and look for jobs with the new Iraqi police force.

YAHYA IBRAHIM, IRAQI POLICE OFFICER (through translator): Those targeted were the police and, in general, the police came not to serve a certain person, but the country. They're not serving the Americans or a certain group or party. They're serving Iraq.

BRAHIMI (on camera): In a country where unemployment is high, getting trained as a policeman is a job. But policeman have been threatened by militants that are calling on Iraqis to kill them, as so-called collaborators, saying they're traitors for working with coalition forces.

(voice-over): Speaking to reporters, the U.S. administrator in Iraq, Paul Bremer, said the coalition would continue to fight terrorists in Iraq with the help, he said, of the Iraqi people.

PAUL BREMER, U.S. CIVILIAN ADMINISTRATOR: As twice before in the past month, the terrorists have taken innocent lives. Once again, the terrorists have shown they will stop at nothing in the pursuit of their aims. But they shall be stopped. We will stop them. We shall combat them and we shall overcome them.

BRAHIMI: This latest car bomb comes only four days after two simultaneous car bombs killed at least 83 people in the holy city of Najaf.

Rym Brahimi, CNN, Baghdad.

(END VIDEOTAPE)

KING: Nearly half a million Iraqis today went to Najaf to attend the funeral of the leading Shiite cleric killed in that attack. The late cleric's brother, a member of the U.S.-appointed governing council, told mourners that American troops should go home now. He said the coalition has failed to provide adequate security.

Coming up: Iraq's oil was supposed to rescue the country's economy and help the United States pay for the war. So why isn't it? Kitty Pilgrim will have the report.

Also ahead: Former CIA Director James Woolsey is just back from Asia. He joins us to discuss North Korea's nuclear ambitions and the situation in Iraq.

And our series of special reports on the "State of the States." Tonight: how Delaware has managed to avoid the budget crises gripping other states. Delaware's governor, Ruth Ann Minner, will join us.

(COMMERCIAL BREAK)

KING: Coming up: An asteroid is headed for Earth. And this is not Hollywood fiction. Astrophysicist Charles Liu of the American Museum of National History will join us.

(COMMERCIAL BREAK)

KING: Iraq is one of the top issues, if not the top issue, on Capitol Hill as members of Congress return from their August recess. Lawmakers want to ask the White House many of the questions they're hearing back home: How much will this war cost in terms of U.S. lives and tax dollars?

Congressional correspondent Jonathan Karl joins me from Capitol Hill -- Jonathan.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: John, well, this is certainly going to be the top issue as Congress gets back to work here on Capitol Hill.

What we have coming up next is, the administration will be coming, asking for more money to pay for the occupation and reconstruction of Iraq. And today here on Capitol Hill, members of the administration's budget team were briefing members of the Appropriations Committee, staff members, saying that they should be prepared for a significant budget request. And that was interpreted up here to mean between $30 billion and $60 billion in additional money needed to go to pay for the reconstruction and occupation of Iraq.

So you can bet you'll be hearing a lot about that. The money ultimately will come from Congress. But first, they're going to ask a lot of tough questions about what's happening on the ground in Iraq.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: So I would hope the senator from Iowa would recognize that there is an overwhelming opposition to this amendment and that we could voice vote it at this time. I yield.

(END VIDEO CLIP)

KARL: All right, that was John McCain talking on the floor there.

But, John, I can tell you that there will be some serious questions raised here, especially by Republicans. It's not just Democrats now raising questions about the president's policy towards Iraq. Serious questions are being made, raised by Republicans, like John McCain of Arizona, even Trent Lott, who you saw on the front page of today's "New York Times," today the administration and the president needs to get out there and more forcefully make the case to the American people about what needs to be done in Iraq. KING: And, Jon, I assume, if these Republicans are being more skeptical, more probing of the administration, it's because, when they were home, they were getting pushed a bit by their constituents.

KARL: No question.

What I've heard from several up here is that what they saw when they went home, talked to their constituents back in their home states, back in their districts, a lot of questions have been raised about the continuing news regarding U.S. casualties in Iraq, regarding the situation there, regarding the amount of money that's going to have to go there.

Obviously, one of the things they've talked about in Iraq, for instance, is the need to rebuild the country's electrical systems. Well, of course, we had a major power problem here in the United States in August, a lot of members of Congress hearing things from their constituents about the need to spend money here at home at the same time we'll be talking about big new money being spent in Iraq, so these members of Congress largely supportive of the president here on this, but are facing some tough questions back home.

They, in turn, will be asking tough questions of the administration.

KING: Jon Karl on Capitol Hill, an interesting few weeks ahead -- thank you, Jon.

KARL: Sure.

KING: The continuing violence in Iraq is threatening the reconstruction of the Iraqi economy. Iraq has the second largest oil reserves in the world. Only Saudi Arabia has more. But oil production is still far below what it was before the war.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): A key Iraqi pipeline was damaged just days ago. U.S. chief civilian administrator in Iraq Paul Bremer today said it will take weeks to repair. Pipeline attacks have been epidemic. And another northern pipeline was damaged earlier this summer.

BREMER: These attacks are not attacks on the coalition. These are attacks on the Iraqi people. This is money that belongs to the Iraqi people. Every day the northern pipeline was closed down cost the Iraqi people $7 million.

PILGRIM: Experts say oil has virtually stopped flowing to the north. And anything that is produced goes out through the south to Mina Al Bakr. Experts say the situation is so bad, Iraq has had to put some oil back into the ground, because it can't be shipped.

GEORGE BERANEK, PFC ENERGY: With the export pipeline to Jahan (ph) currently nonoperational due to sabotage, they have to reinject some of that crude oil back into the reservoir just to get it out of the way.

PILGRIM: Production is currently 900,000 barrels a day, considerably less than half the 2.5 to three million barrels a day that Iraq used to export before the war. Oil should solve Iraq's financial problems. Iraq is sitting on an ocean of it, 112 billion barrels in proven reserves, maybe double that.

But oil fields deteriorated under Saddam Hussein's regime. Then oil pumping and refining equipment was looted after the conflict, crippling the industry. Some experts say it could take another 16 months for oil output to even get back to prewar levels, which would generate $25 billion annually at today's prices. Cost estimates on rebuilding Iraq now run in the hundreds of billions of dollars.

(END VIDEOTAPE)

PILGRIM: Now, many people are scrambling solutions. One proposal being discussed is an oil loan program, using future oil revenues as collateral for loans to rebuild. That's a pretty controversial plan because of the need for an Iraqi government to eventually sign off on that -- John.

KING: And, Kitty, if the oil fields are so damaged and the equipment so damaged, what are we talking about in terms of an investment necessary to get things back up and flowing?

PILGRIM: Well, we spent the day talking to oil analysts. They said about $25 billion to $30 billion to repair the oil fields. That would put production at five million barrels a day, which was the sort of unofficial estimate for 2004. And that doesn't look -- that would be five times what they're producing at this point.

KING: Any sense, if they got that money, how long it would take?

PILGRIM: Oh, 16 months to even get to prewar levels. So there aren't really...

KING: Kitty Pilgrim, proof there that the money will come from the U.S. taxpayers in the short term.

And coming up, I'll talk with former CIA Director James Woolsey about the challenges facing the United States in both Iraq and North Korea.

Plus, the very latest on the mysterious circumstances surrounding the deaths of two men in Erie, Pennsylvania. Mike Brooks will have a live report.

Then: Safer skies? Will more air marshals make the difference? Bill Tucker has our report.

And Senator John Kerry makes it official. He's running for the White House. But can he beat the man already there? Senior political analyst Bill Schneider has that story. And we'll have a lot more when we come back.

(COMMERCIAL BREAK)

KING: A major court decision tonight that could affect death row prisoners in several Western states. A federal appeals court overturned about 100 death sentences in Arizona, Idaho and Montana. Those sentences were imposed by judges, not juries. Last year, the Supreme Court said that practice was unconstitutional. The appeals court said the inmates should have their sentences commuted to life in prison.

Tonight, the bizarre deaths of two pizza deliverymen in Erie, Pennsylvania, continues to baffle police. One of those men died when a bomb strapped to his body exploded. The other died of an apparent drug overdose. Authorities say there is no connection, at least not so far.

Mike Brooks joins us now from Atlanta with the latest -- Mike.

MIKE BROOKS, CNN LAW ENFORCEMENT ANALYST: Good evening, John.

Earlier today, the Pennsylvania State Police and the district attorney's office in Erie County, Pennsylvania, held a news conference. And what they said was that, basically, there was a collar that was around the neck of Brian Wells when what we now know was a pipe bomb that was attached to him went off.

They showed the locking mechanism, which they said was unique in its construction, not commercially manufactured. And the only purpose it had was to attach the device to his neck. It looks like a large handcuff with a -- looks like almost a bicycle combination lock. They said it's something that they've never seen before. And in my 26 years in law enforcement, I've not seen anything at all like this either, John.

They also said that a second person, a co-worker of Brian Wells, a Robert Pinetti, who was found dead in his home over the weekend, as I said, a co-worker of his who they thought may have been connected with Brian Wells, they said that they don't right now believe that he is connected to the bank robbery. They said that he died of natural causes, but they did find traces of methadone and also a Valium-type substance in his urine.

These were preliminary tests. And they're waiting for the autopsy to come back. They've also not been able to account for the hour that he disappeared from the pizza shop to deliver a pizza to an address that actually was a radio tower. So they're still trying to find out exactly what happened during that time. They also have submitted evidence to the FBI lab in Quantico of post-blast evidence, evidence from his home, also the two notes that were involved with the bank robbery that were instructions telling him what to do and also telling the tellers in the bank robbery what to do -- John.

KING: Mike, two quick ones here. Let's start first with this. Any theory yet from the police at all? BROOKS: They're leaving everything open right now. They said they're going on the theory he was either acting alone, someone forced him to do this, or, as they said today, that he was a bomb hostage. But they still are not discounting any theories whatsoever in this bizarre case -- John.

KING: And the police say unique construction in the case of this collar. You say you've never seen anything like this. Tell us, then, how does the FBI crime lab deal with that, when something new comes in? How do they sort of take it apart, if you will, and try to see if they can find something out from there a past case that matches up?

BROOKS: Well, one thing they can do is -- they served a search warrant on Wells' home. So they can go in to see if they find any of the component parts from this locking device and also from any of the post-blast they got, any components of the pipe bomb, send all that to the lab.

The FBI does have a great database on different component parts,, wires locks, seals, all these kind of things that they can go back and try to cross-reference to find out where some of these parts were manufactured, who is in that area in Erie sells those parts, and try to find out exactly where and when this particular device was put together.

Now, the locking device itself -- I was talking to some folks that deal in this kind of thing -- looks like some kind of locking device. It looks like a large handcuff, possibly some kind of clamp. But the locking device itself looks like a combination of a bicycle lock and some other homemade pieces that the person put together and put it around his neck -- John.

KING: All right, Mike Brooks trying to put the pieces together for us in Atlanta -- thanks very much, Mike.

BROOKS: Sure.

KING: And coming up: Safer in the skies? New plans to secure the nation's airlines. Bill Tucker will report.

Then: General Electric goes Hollywood in a multibillion dollar deal that will reinvent two media mainstays. Peter Viles has that report.

And an asteroid is closing in on planet Earth. Astrophysicist Charles Liu of the Museum of Natural History explains it when he joins us.

(COMMERCIAL BREAK)

KING: A leading Republican congressman today made his first court appearance on a manslaughter charge stemming from a car crash that killed a motorcyclist. Authorities say Congressman Bill Janklow of South Dakota was doing 71 miles an hour in a 55-mile-an-hour zone when he ran a stop sign and killed a farmer. Congressman Janklow says he saw the sign, but was going too fast to stop. If convicted, the Republican congressman could face up to 10 years in prison.

John Hinckley Jr. was back in court today. He's been confined to a mental hospital since he shot President Ronald Reagan two decades ago. Now Hinckley and his doctors say he is no longer a danger to anyone. Today, he asked a federal judge to allow him unsupervised outside visit with his parents. The judge will hold a hearing on that request in November. Back in 1981, Hinckley shot President Reagan and three others outside a Washington hotel. He was found not guilty of those shootings by reason of insanity.

One popular tourist destination in Washington will soon be welcoming more guests. Beginning September 16, the White House will once again allow more tours, not by anyone who wants them, but if you request a tour through your member of Congress and pass security restrictions, the White House will now let you in. Those tours were stopped after the September 11 terror attacks. Currently, tours are limited just to school and youth groups and some others, including military families. They were restarted on that limited basis in February 2002.

Elsewhere on the homeland security front, some changes in the skies. You'll be seeing some adjustments at the nation's airports which the government says should make air travel safe.

Bill Tucker has that report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): The federal air marshal program is getting a makeover. The program will be shifted to Immigration and Customs Enforcement, the law enforcement arm of the Department of Homeland Security.

TOM RIDGE, HOMELAND SECURITY SECRETARY: Depending on the need, we can move people in and out of situations where we need them. It doesn't necessarily mean that any assignment for one of these agents is going to be permanent, but it gives us a surge capability.

TUCKER: Which solves another problem few people want to talk about. This is the image: air marshal, lawmen in the air saving passengers and airliners, exciting stuff.

This is the reality, a crowded plane ride, boring. Under the reorganization, the air marshal program would become the sixth branch of the ICE, which already includes investigations, detention and removal officers, intelligence, air/Marine services, and the federal protective service, creating opportunity as well as flexibility, managerially smart, but critics say not necessarily the most cost- effective.

JOHN LOTT, AUTHOR, "THE BIAS AGAINST GUNS": One simple program would be to go and arm pilots. We only have about 150 to 200 pilots that are currently allowed to carry guns on planes, out of well over 100,000 commercial passenger pilots in the United States.

TUCKER: Gun training programs are less expensive. And guns in the cockpit are hardly a new idea.

(END VIDEOTAPE)

TUCKER: In 1963, pilots routinely carried guns under a federal law which required any pilot carrying U.S. mail to be armed. And some pilots continued to carry guns until as late as 1987 -- John.

KING: Now, Bill, there was some criticism from Congress when some lawmakers thought -- the administration denied it -- but some thought they were going to cut back on this program.

TUCKER: Right.

KING: Any early reaction now that they say they're going to expand it?

TUCKER: No. Nobody came out in a positive way.

Airline unions, generally speaking, that I spoke with today are happy that they're taking measures to do this. They do want to see them proceed with guns in the cockpit. Consumer groups, generally speaking, are happy with the moves today.

KING: Bill Tucker, thank you very much.

Now, don't count on face-recognition cameras to improve airport security any time soon. In recent tests at Boston's Logan Airport, the cameras failed to identify volunteer terrorists more than a third of the time. That's a rate of inaccuracy officials called excessive; 10 of the 19 September 11 hijackers boarded their flights at Logan Airport.

Tonight's quote comes on the challenges facing the Department of Homeland Security -- quote -- "In homeland security, we have to be right several thousand times a day. The terrorists only has to be right once or twice" -- that quote from Homeland Security Secretary Tom Ridge.

And that brings us to our poll question tonight: What makes you feel safer, the Department of Homeland Security, air marshals, the color-coded terror alert system, or none of the above? You can vote on our Web site, CNN.com/Lou. We'll share the preliminary results later in the show.

Now the results of last night's poll. We asked you, what will be the most important issue in the 2004 presidential election? A large majority of you, 83 percent, said jobs and the economy. Four percent said health care; 4 percent said homeland security; 9 percent said the war in Iraq.

A typhoon slammed into southern China today. Hong Kong virtually shut down as the storm approached. Businesses and schools were closed, most airline traffic halted. Earlier, the storm caused a major blackout and killed two people in Taiwan.

Half a world away, Hurricane Fabian continues to churn away in the Atlantic, winds in excess of 140 miles an hour. The storm is expected to head north and could bring rough seas and heavy rain to the East Coast of this country.

A wildfire in the French Riviera has killed three volunteer firefighters and seriously injured a fourth. That fire has destroyed 11,000 acres in just two days.

The rain is still falling in Indiana tonight. Flood warnings remain in effect for 35 counties. Up to nine inches of rain have fallen in parts of the state since Sunday.

It has been the stuff of science fiction for years. A giant asteroid crashes into the Earth. Cities and nations are destroyed. Life as we know it ends. Now that science fiction may -- emphasis on may -- become science fact. U.S. astronomers say an asteroid nearly a mile wide is on a collision course with Earth, a catastrophe that could wipe us out completely.

Charles Liu is an astrophysicist at the American Museum of Natural History. He joins us now. The odds here, I'm told -- this asteroid is more likely to hit the Earth than I am to win the Powerball. True?

CHARLES LIU, ASTROPHYSICIST, AMER. MUSEUM OF NATURAL HISTORY: Sometime within the next 100 years, yes. But the odds almost always decrease as time goes on. We've only known of this asteroid for a week. As more measurements are made, it's almost certain that the odds will head closer and closer to zero.

KING: Let's assume the worst for the sake of discussion.

LIU: OK.

KING: At some point, if the government made a decision -- or I assume world governments would have to get together. If they made a decision they had to deal with this, what can they do with the technology available today?

LIU: It's actually feasible in the next 10 or 11 years, if in fact the year 2014 is the target time, to find a way to bring what's most likely a rocket or set of rockets and attach it to this asteroid and over a course of many weeks and months, slowly guide it out of the way so that it will miss us by a lot.

KING: Now you say there's plenty of time. What does NASA -- what do other government agencies here in the United States and around the world -- how do they sort of put themselves on alert to watch this? Do you now increase the resources you put into watching it or do you just sit back and know you have time to track it?

LIU: The challenge is always to be ready. As long as we have a vibrant and innovative space program, either here in this country or throughout the world, there is always time to muster enough technology and energy to stop these things from happening.

Right now in the United States, United Kingdom and other places, there are monitoring groups, organizations, a few dozen people, really, is all that it takes. And they've done a great job so far. They've found thousands of objects and have been tracking them all, depending on how likely they are to be a threat to humanity.

KING: Still the stuff of movies for now. Since we're fortunate to have you, let me ask on other issue. Mars has been in the news quite a bit lately. There are two rovers on their way to Mars now. What is the goal? What is the most likely find or at least the biggest question as those missions head forth?

LIU: What they'd really love to find is evidence of water on Mars. Liquid water is one of the most essential building blocks for life as we know it. And we've gotten tantalizing evidence over the years that liquid water may exist under the surface not too far down. And if we have liquid water, they're going to be landing in areas where maybe water will be visible somehow through their technology. And if so, that's one step further in the direction of finding extraterrestrial life for the first time.

KING: Interesting questions. Charles Liu, thank you very much for joining us.

LIU: Pleasure to be here.

KING: And turning now to a more inevitable event, you might say. Today John Kerry made it official. The Massachusetts senator formally announced he is running for president, running for the Democratic nomination.

Bill Schneider assesses the senator's chances.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): John Kerry has four months to turn his campaign around. What can he do?

First, he has to showcase his strength. Kerry is a man of great intellectual stature. Is that something Americans want in a president? After four years of George W. Bush, they might.

Kerry's finest political moment came in 1996 when he faced Massachusetts Governor Bill Weld, no intellectual slouch in a series of eight remarkable campaign debates.

SEN. JOHN KERRY (D), MASSACHUSETTS: I would not say that being in public life is a sacrifice. I'm not sure that I see it that way.

SCHNEIDER: Kerry's natural constituency is educated upper-middle class professionals, the NPR vote. Kerry's problem is that he and Howard Dean are fishing in the same pond, and Dean has been catching more fish because he's using a powerful lure, contempt for President Bush.

In a recent poll, the majority of Democrats said they don't want a nominee who seeks common ground with Bush, they want a fighter who will take Bush on.

Does that mean Kerry has to imitate Dean? Yes, when it comes to showing contempt for Bush.

KERRY: And every day of this campaign, I will challenge George Bush for fundamentally taking our country in the wrong direction.

SCHNEIDER: So where does Kerry distinguish himself from Dean? There's an opening for an anti-Bush moderate, one who can appeal to blue collar Democrats who have so far not found a candidate.

They're not Dean people, but they don't look like Kerry people either. Kerry's a wealthy patrician, but he does have an impressive record of military service.

KERRY: The best lessons that I learned about being an American came in a place far away from America on that gun boat that Max referred to in the Mekong Delta with a small crew of volunteers.

SCHNEIDER: And a message that has a little of Bill Clinton's Populist touch.

KERRY: Let me put it plainly: if Americans aren't working, America's not working. So my economic plan sets this goal: to get back George Bush's 3 million jobs in my first 500 days as president.

(END VIDEOTAPE)

SCHNEIDER: Kerry announced his candidacy in South Carolina, not in Massachusetts, in front of an aircraft carrier, as if to say, hey, who you calling the Massachusetts liberal -- John.

KING: Well, Bill, he'll try to refute the Massachusetts liberal part. He also at least now appears to have the niche, if you will, of military service and heroism to himself. Is he likely to keep that niche?

SCHNEIDER: Well, we'll hear about whether General Wesley Clark -- emphasize General Wesley Clark -- is going to run within a couple of weeks. He's going to make his intentions known. In that case, of course, he's a general. He was the supreme commander of NATO. He has a distinguished military record. And he led the NATO forces in the war on Kosovo. So then Kerry won't look quite so unique as he has been looking.

The question is will General Clark do anything to really upset the odds in the race? General Clark is not a well-known figure. Some people say he's an Eisenhower for Democrats. But Eisenhower won a World War and most Democrats really don't really know very much about General Clark -- John.

KING: We'll keep our eyes on that as well. Thank you very much, Bill Schneider in Washington. Thank you.

SCHNEIDER: Sure. KING: And coming up, former CIA Director James Woolsey will give us his assessment of the challenges facing the United States in both Iraq and North Korea.

Plus, "The State of the States." Tonight, Delaware boasts big business and beautiful beaches. And both have helped The First State avoid the budget troubles plaguing other states. Delaware Governor Ruth Ann Minner will join us.

(COMMERCIAL BREAK)

KING: North Korea today said it is willing to resolve the stand- off over its nuclear program through dialogue. Just last week, Pyongyang said further talks would be useless.

Joining me now to talk more about the confusing situation in North Korea and the situation in Iraq is the former CIA Director James Woolsey. He joins us from Washington.

Thank you, sir. You're just back, I understand, from a trip to both Japan and South Korea. Tell us your assessment from talking to people there about how they see this going forward and whether they think the problem is North Korea or the United States.

JAMES WOOLSEY, FORMER CIA DIRECTOR: It's complicated in South Korea because generation that are now in their 30s and were younger and quite worried about us backing the dictators in South Korea, and also they've been influenced I think by North Korean propaganda and agents to some extent. That generation is the primary school teachers. They're the people in their 30s and early 40s now. And they are really, in many cases, rather alienated from the United States.

You get a South Korean who is in his 50s or older, he remembers the war. He remembers how important the United States was and looks on us really very -- in a friendly fashion. But the younger generation is a problem there in terms of U.S./South Korean relations. In Japan, I think things are on a longterm, really rather solid footing. The Japanese economy is just starting to come out of its doldrums. But most Japanese see themselves as rather closely allied with the United States for the long haul.

KING: What's your assessment?

Is the Bush administration taking a risk in waiting now apparently two months to try to have a second round of talks. North Korea gives mixed signals as to whether it will participate in such a round.

Is the United States taking a risk from a national security standpoint of letting the North Koreans to have time, time presumably they could use to make more nuclear weapons?

WOOLSEY: Yes, to some extent. I think we have weeks to months to get this sorted out, not months to years. We've detected, according to press reports, krypton 85 gas early this summer over North Korea which means they started the reprocessing of plutonium either at Yongbyong or some secret site which may exist. And we know for a number of years they've been working on a different process for getting the material, that is enriching uranium. They started cheating on the 1994 agreement with the Clinton administration just a very short time after they signed it by starting that uranium enrichment.

So, they conceivably could have several bombs worth of fissionable material to add to the one or two bombs worth they've had for a decade or so. Once they have that amount, they could test or they could start selling it clandestinely to terrorist organizations. You don't need a great deal of this, unfortunately. Plutonium bombs' worth is about the size of a grapefruit and weighs about 20 pounds. And for highly enriched uranium, about the size of a soccer ball and weighs about 40 pounds.

KING: Want to shift to the Iraq issue. As you well know, the you once lead, the CIA, is doing this top to bottom review of the intelligence it received and how it was analyzed before the war. Still no weapons of mass destruction found in Iraq. And one theory according to a "Los Angeles Times" report last week was perhaps the CIA and other intelligence agencies were deliberately misled by double agents of Saddam Hussein about the weapons program.

Does that sound at all plausible to you?

WOOSLEY: There is a range of possibilities. If the CIA was duped, it wasn't the only one. Israeli intelligence was so concerned they bought gas masks for practically the entire country. Russians, French, the U.N. inspectors, pretty much every one agreed Saddam had at least chemical and bacteriological advanced programs and some perhaps small stockpiles of weapons, as of some few months ago. There is a serious question as to whether or not they were destroyed at the last minute, whether they are still being hidden, whether some were smuggled into Syria. In some cases we're not talking about huge volumes. For example, Saddam admitted to producing 8,500 liters of anthrax in the late '80s. That sounds like a lot. I mean, after his son-in-law defected who was the head of the biological weapons program in '95. He admitted to making that much. But that is only about eight and half tons which is less than half a tractor-trailer load. If it's turned in powder, it's about four medium size suitcases worth. So, we're searching a country the size the state of California for things a half a tractor-trailer load or a few suitcases' worth. And that's a tough job.

KING: And quickly, James, your assessment on the home front. The major blackout a couple weeks back. The government says it was not terrorism. But does it to you expose weaknesses in terms of the vulnerability, of our domestic infrastructure to terrorist attack?

WOOLSEY: Absolutely. These complicated networks like the electricity grid or the Internet that we all live with can have small things call huge effects. A falling tree in American area near Lake Erie may have been responsible for blacking out some 50 million people in the U.S. and Canada. Those effects of the way these networks can work are sort of malignant. Nobody is trying to cause trouble there, but it could happen anyway.

There is another problem, which is malevolent actors such as on 9/11, taking over part of the air transport system and turning the aircraft into cruise missiles. We have to deal with both of those. We have to look at our infrastructure and fix its vulnerabilities to unintentional trouble and also its vulnerabilities to intentional malevolent terrorism. And sometimes those fixes are similar and sometimes they're quite different. Sometimes working positively on one can cause problems for the other. We have a number a years and a lot of work ahead of us.

KING: As always, former CIA director, James Woolsey, thank you for sharing your thoughts.

WOOSLEY: Good to be with you, John.

KING: And we continue now with our series of special reports, the state of the states. Tonight we look at Delaware which continues to thrive despite current economic conditions. Delaware's low taxes and cautious spending make it a magnet for businesses and families alike.

Lisa Sylvester has the report.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Joe Saxton is a carpenter in Wilmington, Delaware. He has lived here 65 years and has no intention of leaves.

JOE SAXTON: It has a lot to offer. It's a working man's town. It's not as fast as New York City or the bigger towns, but, you know, gives me all the excite I need.

SYLVESTER: There are many benefits living here. Housing is affordable, there lots of jobs. Delaware's unemployment rate is well below the national average. With no sales tax, Delaware's tax burden is the third lowest in the country.

VIJAY KESWANI, OWNER SEASIDE REFLECTIONS: Lot of people would say to me oh, I'm saving up my little extra housekeeping money just to come and spend here because there is no sales tax.

SYLVESTER: Delaware is one of only seven states that has maintained its triple a bond rating. And while many other states are using emergency federal funds to close their budget gaps, Delaware has put the money aside in savings. During the booming '90s when other states went on buying binges, the state government here in Dover kept the lid on spending and avoided tax cuts. In fact, the government operated a lot like a family on a budget.

J.J. DAVIS, DELAWARE STATE BUDGET DIRECTOR: It's exactly the same thing as you manage your own personal budget. You figure out how much money you'll have in any given year. You set aside money for future emergencies, hopefully they won't happen. But if they're there, there is a pot of resources available. SYLVESTER: Delaware's state government works closely with civic and business leaders. Reviewing revenue projections, six times a year. So the state was able to take quick action last year, raising taxes on cigarettes and slot machines when it realized that revenue was falling because of a downturn in the national economy. The state has worked hard in the last few decades attracting new businesses, like pharmaceutical company AstraZeneca and a financial giant MNBA .

Half of the fortune 500 companies are incorporated in Delaware.

BOB BYRD, DELAWARE ECON. FINANCIAL ADVISORY COUNCIL: They're here because of the tax structure. They're here because we give great service and we spend a lot of time about our secretary of state and our corporation department making sure from a technology standpoint they're very up to speed and know exactly what they're doing.

SYLVESTER: Delaware has promoted its miles of beach front property. It's drawing not just tourists but increasingly rivaling Florida as a mecca for retirees. The new residents are finding out what the old timers have tried to keep a secret. That Delaware is not only in great financial, but it's also a nice place to live.

Lisa Sylvester, CNN, Dover, Delaware.

(END VIDEOTAPE)

KING: More than a half million businesses have made Delaware their home, their legal home. Governor Ruth Ann Minner has proposed to tap that corporate base to helped close her state's budget shortfall.

Governor Minner joins me now from Dover.

Governor thank you so much for joining tonight.

Want to start with this. You've been very successful so far in dealing with the economic problem. One of the ticking time bombs governors across the country say healthcare costs. Give us your suggestions on what the states can do to deal with that.

GOV. RUTH ANN MINNER (D), DELAWARE: We started early working on our healthcare costs. It was one of our biggest problems. We combined a lot of our insurance policies to get a better buying rate. We looked at what we were doing with prescription drugs. We ended up joining a consortium of states to make sure we got the very best prices that we could. And we looked at all that we were doing by way of the people that we were covering to make sure we had the very best plan, giving the best benefits, but at the most cost effective price that we could get.

KING: Governor, good news on the economic front. The federal government says about half of your schools are failing to make the grade. Are your schools not making the grade or do you have issue with the federal government's standards?

MINNER: Well, you have to look at all of the testing that's been done in the education field. We started standards and accountability about 10 years ago. Our students have been constantly improving in every one of the areas we test. Reading, math, sciences, and in our writing. However, when it came to no child left behind, standards are different and we have to adjust to that. But if you look at the national tests, Delaware scored very high in the national tests. And we continue to do that. Our students are improving and we're working very hard to make sure we put the money in our schools to give them the opportunity to not only achieve good grades, but to succeed after they get out of school.

KING: You are on the front lines of the president in his Labor Day remarks yesterday said he's confident that the job growth is about to happen in the economy.

Your assessment, governor?

MINNER: Well, our economy has been better than most. When you look at the unemployment rates, we're doing much better. We've continued to work to bring jobs to Delaware. But we've worked very hard, with our corporations, with the businesses in our state, to make sure we keep the jobs that we have and have our own businesses grow. So it does make a difference. I've read some of the reports, like the president's read, that says things are getting better and you read another report, and it says the economy still sluggish, it may be another year before we see major improvement.

I will tell you that we're doing well in Delaware. We are maintaining our low unemployment rate. We're offering more jobs for people. We're having more companies come to us interested in incorporating in Delaware. And we look to continue to grow.

KING: And your success, I'm sure, is being watched closely by others. Governor Ruth Ann Minner of Delaware, thank you for joining us tonight.

MINNER: Thank you.

KING: And coming up, NBC and Vivendi are ready to rewrite the power structure in Hollywood. Peter Viles will have that report when we return.

(COMMERCIAL BREAK)

KING: The French conglomerate Vivendi today said it was talking exclusively with General Electric's NBC about a deal to merge the two company's entertainment assets. Peter Viles has that report.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): General Electric Chairman Jeff Immelt is about to get his hands on something Jack Welch never had, a big Hollywood studio. Immelt outmaneuvered Edgar Bronfman, Jr., and NBC now has exclusive rights to negotiate a merger with Vivendi Universal. If the deal closes, NBC's new toys will include cable's USA network and the Sci-Fi Channel, and big pieces of Hollywood, Universal Television, producer of "Law & Order," Universal Pictures, which made "Seabiscuit," and Universal's massive library, which includes thousands of films, from "Psycho" to "Jaws." For GE and its vice chairman, Bob Wright, the merger solves a problem. NBC is a great television network, but network television is not a growth business.

PORTER BIBB, MEDIATECH CAPITAL PARTNERS: The unspoken motive behind this transaction is the fact that Bob Wright and the NBC crew are sitting on top of a melting iceberg. NBC is number one in both audience ratings and profitability right now, among the major networks, but the major networks have been losing audience for the last 10 years.

VILES: Vivendi would get 3.8 billion in cash, would erase 1.6 billion in debt, would own 20 percent of the new entertainment company, and its management in France would end its unhappy adventure in Hollywood.

JEAN-RENE FORTOU, CHAIRMAN & CEO, VIVENDI UNIVERSAL (through translator): Unless there is an unknown that pops up, it's an offer that is very precise that should conclude in September.

VILES: The NBC/Universal combination would become the fifth media giant, with annual revenues of 13 billion, joining other giants, AOL Time Warner, Disney, Viacom and News Corp. It would rank fifth in revenue, but it would have by far the richest parent, General Electric, with $130 billion in annual revenue.

(END VIDEOTAPE)

VILES: And there has been some anti-big media backlash in Washington recently. And this deal does make big media even bigger. But it doesn't face any obvious regulatory hurdles, mainly because no broadcasting licenses would change hands in this deal -- John.

KING: Peter, thank you very much. When we return, we'll have the results of tonight's poll.

Then, New York Stock Exchange Chairman Dick Grasso's multimillion dollar paycheck has caught the attention of regulators. Susan Lisovicz will have that, and the market. Stay with us.

(COMMERCIAL BREAK)

KING: Now the results of our poll. What makes you feel safer, the Department of Homeland Security, air marshals or the color-coded terror alert system? A majority of you said none of the above.

On Wall Street, the historically weakest month for the market opened with a strong rally. The Dow Jones Industrials jumped 107 points. The Nasdaq rose 31. The S&P 500 gained almost 14. Susan Lisovicz has the market for us.

SUSAN LISOVICZ, CNN FINANCIAL NEWS CORRESPONDENT: And John, September has been the worst month on record for the last 50 years for the Dow and the S&P 500. You wouldn't know it today. Despite that bearish history in September, new month brought new highs. The "Stock Traders' Almanac" says, however, the Dow Jones Industrials have lost on average nearly 1 percent over the last 52 years in September.

Today, optimism reined, and it carried the blue chips above 9,500 for the first time since June of last year. The Nasdaq, meanwhile, hit a 17-month high. Bolstering the bulls, that huge perspective media deal that Peter Viles just reported. Shared of the French company Vivendi surged 8 percent on word it has picked NBC's parent company, GE, for exclusive negotiating rights for its cable TV and movie studio assets. GE the most actively traded issue on the Big Board.

And upbeat tech talk another positive factor. An upgrade on Dell lifted computers, while Microsoft rallied on favorable comments on software. Oracle and Cisco also gained on encouraging remarks.

In all, 402 stocks hit new highs at the NYSE, while only five hit new lows. That's bullish, John.

KING: Let's stay on the New York Stock Exchange, a different subject. This followed over Chairman Dick Grasso's $140 million deferred compensation plan. What's going on?

LISOVICZ: Well, the latest is that the SEC Chairman William Donaldson sent a letter today to the NYSE that that pay package raises serious questions about the governance structure at the NYSE. He wants those questions answered by September 9. The NYSE says it will.

KING: Susan Lisovicz, thank you very much, and that's our show for tonight. Thanks for joining us. For all of us here, good night from New York. "LIVE FROM THE HEADLINES" with Anderson Cooper up next.

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Aired September 2, 2003 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN KING, CNN ANCHOR: Tough questions on Iraq tonight, as Congress returns to work. How much money and how many troops are needed to win the war? And how many more U.S. lives will be lost? Jonathan Karl will have our report.
A massive shakeup in airline security. Thousands more federal agents will be able to become air marshals. Bill Tucker will have that story.

Two media giants are close to a merger agreement that could shake up the entertainment industry. We'll tell what you a deal could mean for television viewers.

And target: Earth. A giant asteroid is heading our way. Astrophysicist Charles Liu will give us his judgment on the risk of Armageddon.

ANNOUNCER: This is LOU DOBBS TONIGHT for Tuesday, September 23. Sitting in for Lou Dobbs, who is on vacation, John King.

KING: Good evening.

Tonight: the rising cost in U.S. dead and wounded in Iraq. The military today said terrorists killed another two U.S. troops in Baghdad; 286 Americans have died in Iraq since the start of the war there. More than 1,100 more have been wounded.

Senior Pentagon correspondent Jamie McIntyre has the story for us -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, John, when a soldier dies in Iraq, the Pentagon makes a formal announcement in the form of a press release. But if a soldier is wounded, even if it is a life-threatening wound, it may not be mentioned unless it's in conjunction with a major combat incident.

But the Pentagon strongly denies it's downplaying or underreporting the numbers of U.S. troops wounded in combat. In fact, it updates the figures daily and releases them to any news organization that asks. As of yesterday, there were 1,141 U.S. troops wounded in action, 550 before President Bush an end to major combat on May 1, 591 since then.

But that's comparing a six-week period of major combat with the four months since then. If you look at the rates, before May 1, on an average, almost 14 U.S. troops were being wounded every day, while, since then, the average is less than five a day. Today, in a change-of-command ceremony for the U.S. Special Operations Command in Florida, Defense Secretary Donald Rumsfeld said that the sacrifice made by American troops in lives and in limb was a necessary part of the global war on terrorism.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: There is no safe, easy middle ground. Either we take this war to the terrorists and fight them where they are, or we'll have to deal with them here at home.

(END VIDEO CLIP)

MCINTYRE: Now, the ratio of dead to wounded has risen in modern warfare, too. For every American killed in Iraq today, four are wounded. In the Persian Gulf War, the ratio was just over 1-1. In the Vietnam War, less than 3-1.

The explanation for that, say the Pentagon officials, is better medical care delivered at the scene and also better body armor that prevents many soldiers who would have died from injuries in a previous generation now survive because of modern technology. But the main point the Pentagon wants to make today is that it's not in any way covering up the number of wounded in Iraq. Instead, it says, it would like to highlight the sacrifice that those soldiers, Marines, airmen, have made in the global war on terrorism. And many of those will carry the scars of battle for the rest of their life -- John.

KING: And, Jamie, we understand more action and more casualties today in Afghanistan as well. What can you tell us about that?

MCINTYRE: Well, that's an operation called Mountain Viper, an attempt by the U.S. military to take out some of the Taliban who have regrouped in the southern area of Afghanistan, south and southeast.

Several hundred Taliban fighters there, they've been fighting for about two weeks now. The U.S. claims it's killed about 67 Taliban fighters. Two U.S. soldiers were killed on Sunday in a firefight. But this is an operation, again, designed to try to mop up what's left of the Taliban as they're regrouping in that mountain area, where they have been attacking primarily Afghan military forces -- John.

KING: Jamie McIntyre at the Pentagon -- thank you, Jamie.

Another car bombing in Baghdad today. This time, the target was a police station. It was the latest in a series of bomb attacks over the past month.

Rym Brahimi reports from Baghdad.

(BEGIN VIDEOTAPE)

RYM BRAHIMI, CNN CORRESPONDENT (voice-over): The fourth car bomb in Iraq in four weeks. The target this time: a police station. The casualties: at least one person killed and, according to a hospital that took in the wounded, at least 18 people injured. UNIDENTIFIED MALE (through translator): Flying debris, glass, iron everything flying. It was a big explosion.

BRAHIMI: Having heard of the explosion, this woman came frantically looking for her son who works there. The police said a thick wall between the building and the car park where the bomb off prevented this latest attack from doing more damage.

The bomb exploded in the morning, on a day when former Iraqi policemen come to collect their salaries and look for jobs with the new Iraqi police force.

YAHYA IBRAHIM, IRAQI POLICE OFFICER (through translator): Those targeted were the police and, in general, the police came not to serve a certain person, but the country. They're not serving the Americans or a certain group or party. They're serving Iraq.

BRAHIMI (on camera): In a country where unemployment is high, getting trained as a policeman is a job. But policeman have been threatened by militants that are calling on Iraqis to kill them, as so-called collaborators, saying they're traitors for working with coalition forces.

(voice-over): Speaking to reporters, the U.S. administrator in Iraq, Paul Bremer, said the coalition would continue to fight terrorists in Iraq with the help, he said, of the Iraqi people.

PAUL BREMER, U.S. CIVILIAN ADMINISTRATOR: As twice before in the past month, the terrorists have taken innocent lives. Once again, the terrorists have shown they will stop at nothing in the pursuit of their aims. But they shall be stopped. We will stop them. We shall combat them and we shall overcome them.

BRAHIMI: This latest car bomb comes only four days after two simultaneous car bombs killed at least 83 people in the holy city of Najaf.

Rym Brahimi, CNN, Baghdad.

(END VIDEOTAPE)

KING: Nearly half a million Iraqis today went to Najaf to attend the funeral of the leading Shiite cleric killed in that attack. The late cleric's brother, a member of the U.S.-appointed governing council, told mourners that American troops should go home now. He said the coalition has failed to provide adequate security.

Coming up: Iraq's oil was supposed to rescue the country's economy and help the United States pay for the war. So why isn't it? Kitty Pilgrim will have the report.

Also ahead: Former CIA Director James Woolsey is just back from Asia. He joins us to discuss North Korea's nuclear ambitions and the situation in Iraq.

And our series of special reports on the "State of the States." Tonight: how Delaware has managed to avoid the budget crises gripping other states. Delaware's governor, Ruth Ann Minner, will join us.

(COMMERCIAL BREAK)

KING: Coming up: An asteroid is headed for Earth. And this is not Hollywood fiction. Astrophysicist Charles Liu of the American Museum of National History will join us.

(COMMERCIAL BREAK)

KING: Iraq is one of the top issues, if not the top issue, on Capitol Hill as members of Congress return from their August recess. Lawmakers want to ask the White House many of the questions they're hearing back home: How much will this war cost in terms of U.S. lives and tax dollars?

Congressional correspondent Jonathan Karl joins me from Capitol Hill -- Jonathan.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: John, well, this is certainly going to be the top issue as Congress gets back to work here on Capitol Hill.

What we have coming up next is, the administration will be coming, asking for more money to pay for the occupation and reconstruction of Iraq. And today here on Capitol Hill, members of the administration's budget team were briefing members of the Appropriations Committee, staff members, saying that they should be prepared for a significant budget request. And that was interpreted up here to mean between $30 billion and $60 billion in additional money needed to go to pay for the reconstruction and occupation of Iraq.

So you can bet you'll be hearing a lot about that. The money ultimately will come from Congress. But first, they're going to ask a lot of tough questions about what's happening on the ground in Iraq.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: So I would hope the senator from Iowa would recognize that there is an overwhelming opposition to this amendment and that we could voice vote it at this time. I yield.

(END VIDEO CLIP)

KARL: All right, that was John McCain talking on the floor there.

But, John, I can tell you that there will be some serious questions raised here, especially by Republicans. It's not just Democrats now raising questions about the president's policy towards Iraq. Serious questions are being made, raised by Republicans, like John McCain of Arizona, even Trent Lott, who you saw on the front page of today's "New York Times," today the administration and the president needs to get out there and more forcefully make the case to the American people about what needs to be done in Iraq. KING: And, Jon, I assume, if these Republicans are being more skeptical, more probing of the administration, it's because, when they were home, they were getting pushed a bit by their constituents.

KARL: No question.

What I've heard from several up here is that what they saw when they went home, talked to their constituents back in their home states, back in their districts, a lot of questions have been raised about the continuing news regarding U.S. casualties in Iraq, regarding the situation there, regarding the amount of money that's going to have to go there.

Obviously, one of the things they've talked about in Iraq, for instance, is the need to rebuild the country's electrical systems. Well, of course, we had a major power problem here in the United States in August, a lot of members of Congress hearing things from their constituents about the need to spend money here at home at the same time we'll be talking about big new money being spent in Iraq, so these members of Congress largely supportive of the president here on this, but are facing some tough questions back home.

They, in turn, will be asking tough questions of the administration.

KING: Jon Karl on Capitol Hill, an interesting few weeks ahead -- thank you, Jon.

KARL: Sure.

KING: The continuing violence in Iraq is threatening the reconstruction of the Iraqi economy. Iraq has the second largest oil reserves in the world. Only Saudi Arabia has more. But oil production is still far below what it was before the war.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): A key Iraqi pipeline was damaged just days ago. U.S. chief civilian administrator in Iraq Paul Bremer today said it will take weeks to repair. Pipeline attacks have been epidemic. And another northern pipeline was damaged earlier this summer.

BREMER: These attacks are not attacks on the coalition. These are attacks on the Iraqi people. This is money that belongs to the Iraqi people. Every day the northern pipeline was closed down cost the Iraqi people $7 million.

PILGRIM: Experts say oil has virtually stopped flowing to the north. And anything that is produced goes out through the south to Mina Al Bakr. Experts say the situation is so bad, Iraq has had to put some oil back into the ground, because it can't be shipped.

GEORGE BERANEK, PFC ENERGY: With the export pipeline to Jahan (ph) currently nonoperational due to sabotage, they have to reinject some of that crude oil back into the reservoir just to get it out of the way.

PILGRIM: Production is currently 900,000 barrels a day, considerably less than half the 2.5 to three million barrels a day that Iraq used to export before the war. Oil should solve Iraq's financial problems. Iraq is sitting on an ocean of it, 112 billion barrels in proven reserves, maybe double that.

But oil fields deteriorated under Saddam Hussein's regime. Then oil pumping and refining equipment was looted after the conflict, crippling the industry. Some experts say it could take another 16 months for oil output to even get back to prewar levels, which would generate $25 billion annually at today's prices. Cost estimates on rebuilding Iraq now run in the hundreds of billions of dollars.

(END VIDEOTAPE)

PILGRIM: Now, many people are scrambling solutions. One proposal being discussed is an oil loan program, using future oil revenues as collateral for loans to rebuild. That's a pretty controversial plan because of the need for an Iraqi government to eventually sign off on that -- John.

KING: And, Kitty, if the oil fields are so damaged and the equipment so damaged, what are we talking about in terms of an investment necessary to get things back up and flowing?

PILGRIM: Well, we spent the day talking to oil analysts. They said about $25 billion to $30 billion to repair the oil fields. That would put production at five million barrels a day, which was the sort of unofficial estimate for 2004. And that doesn't look -- that would be five times what they're producing at this point.

KING: Any sense, if they got that money, how long it would take?

PILGRIM: Oh, 16 months to even get to prewar levels. So there aren't really...

KING: Kitty Pilgrim, proof there that the money will come from the U.S. taxpayers in the short term.

And coming up, I'll talk with former CIA Director James Woolsey about the challenges facing the United States in both Iraq and North Korea.

Plus, the very latest on the mysterious circumstances surrounding the deaths of two men in Erie, Pennsylvania. Mike Brooks will have a live report.

Then: Safer skies? Will more air marshals make the difference? Bill Tucker has our report.

And Senator John Kerry makes it official. He's running for the White House. But can he beat the man already there? Senior political analyst Bill Schneider has that story. And we'll have a lot more when we come back.

(COMMERCIAL BREAK)

KING: A major court decision tonight that could affect death row prisoners in several Western states. A federal appeals court overturned about 100 death sentences in Arizona, Idaho and Montana. Those sentences were imposed by judges, not juries. Last year, the Supreme Court said that practice was unconstitutional. The appeals court said the inmates should have their sentences commuted to life in prison.

Tonight, the bizarre deaths of two pizza deliverymen in Erie, Pennsylvania, continues to baffle police. One of those men died when a bomb strapped to his body exploded. The other died of an apparent drug overdose. Authorities say there is no connection, at least not so far.

Mike Brooks joins us now from Atlanta with the latest -- Mike.

MIKE BROOKS, CNN LAW ENFORCEMENT ANALYST: Good evening, John.

Earlier today, the Pennsylvania State Police and the district attorney's office in Erie County, Pennsylvania, held a news conference. And what they said was that, basically, there was a collar that was around the neck of Brian Wells when what we now know was a pipe bomb that was attached to him went off.

They showed the locking mechanism, which they said was unique in its construction, not commercially manufactured. And the only purpose it had was to attach the device to his neck. It looks like a large handcuff with a -- looks like almost a bicycle combination lock. They said it's something that they've never seen before. And in my 26 years in law enforcement, I've not seen anything at all like this either, John.

They also said that a second person, a co-worker of Brian Wells, a Robert Pinetti, who was found dead in his home over the weekend, as I said, a co-worker of his who they thought may have been connected with Brian Wells, they said that they don't right now believe that he is connected to the bank robbery. They said that he died of natural causes, but they did find traces of methadone and also a Valium-type substance in his urine.

These were preliminary tests. And they're waiting for the autopsy to come back. They've also not been able to account for the hour that he disappeared from the pizza shop to deliver a pizza to an address that actually was a radio tower. So they're still trying to find out exactly what happened during that time. They also have submitted evidence to the FBI lab in Quantico of post-blast evidence, evidence from his home, also the two notes that were involved with the bank robbery that were instructions telling him what to do and also telling the tellers in the bank robbery what to do -- John.

KING: Mike, two quick ones here. Let's start first with this. Any theory yet from the police at all? BROOKS: They're leaving everything open right now. They said they're going on the theory he was either acting alone, someone forced him to do this, or, as they said today, that he was a bomb hostage. But they still are not discounting any theories whatsoever in this bizarre case -- John.

KING: And the police say unique construction in the case of this collar. You say you've never seen anything like this. Tell us, then, how does the FBI crime lab deal with that, when something new comes in? How do they sort of take it apart, if you will, and try to see if they can find something out from there a past case that matches up?

BROOKS: Well, one thing they can do is -- they served a search warrant on Wells' home. So they can go in to see if they find any of the component parts from this locking device and also from any of the post-blast they got, any components of the pipe bomb, send all that to the lab.

The FBI does have a great database on different component parts,, wires locks, seals, all these kind of things that they can go back and try to cross-reference to find out where some of these parts were manufactured, who is in that area in Erie sells those parts, and try to find out exactly where and when this particular device was put together.

Now, the locking device itself -- I was talking to some folks that deal in this kind of thing -- looks like some kind of locking device. It looks like a large handcuff, possibly some kind of clamp. But the locking device itself looks like a combination of a bicycle lock and some other homemade pieces that the person put together and put it around his neck -- John.

KING: All right, Mike Brooks trying to put the pieces together for us in Atlanta -- thanks very much, Mike.

BROOKS: Sure.

KING: And coming up: Safer in the skies? New plans to secure the nation's airlines. Bill Tucker will report.

Then: General Electric goes Hollywood in a multibillion dollar deal that will reinvent two media mainstays. Peter Viles has that report.

And an asteroid is closing in on planet Earth. Astrophysicist Charles Liu of the Museum of Natural History explains it when he joins us.

(COMMERCIAL BREAK)

KING: A leading Republican congressman today made his first court appearance on a manslaughter charge stemming from a car crash that killed a motorcyclist. Authorities say Congressman Bill Janklow of South Dakota was doing 71 miles an hour in a 55-mile-an-hour zone when he ran a stop sign and killed a farmer. Congressman Janklow says he saw the sign, but was going too fast to stop. If convicted, the Republican congressman could face up to 10 years in prison.

John Hinckley Jr. was back in court today. He's been confined to a mental hospital since he shot President Ronald Reagan two decades ago. Now Hinckley and his doctors say he is no longer a danger to anyone. Today, he asked a federal judge to allow him unsupervised outside visit with his parents. The judge will hold a hearing on that request in November. Back in 1981, Hinckley shot President Reagan and three others outside a Washington hotel. He was found not guilty of those shootings by reason of insanity.

One popular tourist destination in Washington will soon be welcoming more guests. Beginning September 16, the White House will once again allow more tours, not by anyone who wants them, but if you request a tour through your member of Congress and pass security restrictions, the White House will now let you in. Those tours were stopped after the September 11 terror attacks. Currently, tours are limited just to school and youth groups and some others, including military families. They were restarted on that limited basis in February 2002.

Elsewhere on the homeland security front, some changes in the skies. You'll be seeing some adjustments at the nation's airports which the government says should make air travel safe.

Bill Tucker has that report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): The federal air marshal program is getting a makeover. The program will be shifted to Immigration and Customs Enforcement, the law enforcement arm of the Department of Homeland Security.

TOM RIDGE, HOMELAND SECURITY SECRETARY: Depending on the need, we can move people in and out of situations where we need them. It doesn't necessarily mean that any assignment for one of these agents is going to be permanent, but it gives us a surge capability.

TUCKER: Which solves another problem few people want to talk about. This is the image: air marshal, lawmen in the air saving passengers and airliners, exciting stuff.

This is the reality, a crowded plane ride, boring. Under the reorganization, the air marshal program would become the sixth branch of the ICE, which already includes investigations, detention and removal officers, intelligence, air/Marine services, and the federal protective service, creating opportunity as well as flexibility, managerially smart, but critics say not necessarily the most cost- effective.

JOHN LOTT, AUTHOR, "THE BIAS AGAINST GUNS": One simple program would be to go and arm pilots. We only have about 150 to 200 pilots that are currently allowed to carry guns on planes, out of well over 100,000 commercial passenger pilots in the United States.

TUCKER: Gun training programs are less expensive. And guns in the cockpit are hardly a new idea.

(END VIDEOTAPE)

TUCKER: In 1963, pilots routinely carried guns under a federal law which required any pilot carrying U.S. mail to be armed. And some pilots continued to carry guns until as late as 1987 -- John.

KING: Now, Bill, there was some criticism from Congress when some lawmakers thought -- the administration denied it -- but some thought they were going to cut back on this program.

TUCKER: Right.

KING: Any early reaction now that they say they're going to expand it?

TUCKER: No. Nobody came out in a positive way.

Airline unions, generally speaking, that I spoke with today are happy that they're taking measures to do this. They do want to see them proceed with guns in the cockpit. Consumer groups, generally speaking, are happy with the moves today.

KING: Bill Tucker, thank you very much.

Now, don't count on face-recognition cameras to improve airport security any time soon. In recent tests at Boston's Logan Airport, the cameras failed to identify volunteer terrorists more than a third of the time. That's a rate of inaccuracy officials called excessive; 10 of the 19 September 11 hijackers boarded their flights at Logan Airport.

Tonight's quote comes on the challenges facing the Department of Homeland Security -- quote -- "In homeland security, we have to be right several thousand times a day. The terrorists only has to be right once or twice" -- that quote from Homeland Security Secretary Tom Ridge.

And that brings us to our poll question tonight: What makes you feel safer, the Department of Homeland Security, air marshals, the color-coded terror alert system, or none of the above? You can vote on our Web site, CNN.com/Lou. We'll share the preliminary results later in the show.

Now the results of last night's poll. We asked you, what will be the most important issue in the 2004 presidential election? A large majority of you, 83 percent, said jobs and the economy. Four percent said health care; 4 percent said homeland security; 9 percent said the war in Iraq.

A typhoon slammed into southern China today. Hong Kong virtually shut down as the storm approached. Businesses and schools were closed, most airline traffic halted. Earlier, the storm caused a major blackout and killed two people in Taiwan.

Half a world away, Hurricane Fabian continues to churn away in the Atlantic, winds in excess of 140 miles an hour. The storm is expected to head north and could bring rough seas and heavy rain to the East Coast of this country.

A wildfire in the French Riviera has killed three volunteer firefighters and seriously injured a fourth. That fire has destroyed 11,000 acres in just two days.

The rain is still falling in Indiana tonight. Flood warnings remain in effect for 35 counties. Up to nine inches of rain have fallen in parts of the state since Sunday.

It has been the stuff of science fiction for years. A giant asteroid crashes into the Earth. Cities and nations are destroyed. Life as we know it ends. Now that science fiction may -- emphasis on may -- become science fact. U.S. astronomers say an asteroid nearly a mile wide is on a collision course with Earth, a catastrophe that could wipe us out completely.

Charles Liu is an astrophysicist at the American Museum of Natural History. He joins us now. The odds here, I'm told -- this asteroid is more likely to hit the Earth than I am to win the Powerball. True?

CHARLES LIU, ASTROPHYSICIST, AMER. MUSEUM OF NATURAL HISTORY: Sometime within the next 100 years, yes. But the odds almost always decrease as time goes on. We've only known of this asteroid for a week. As more measurements are made, it's almost certain that the odds will head closer and closer to zero.

KING: Let's assume the worst for the sake of discussion.

LIU: OK.

KING: At some point, if the government made a decision -- or I assume world governments would have to get together. If they made a decision they had to deal with this, what can they do with the technology available today?

LIU: It's actually feasible in the next 10 or 11 years, if in fact the year 2014 is the target time, to find a way to bring what's most likely a rocket or set of rockets and attach it to this asteroid and over a course of many weeks and months, slowly guide it out of the way so that it will miss us by a lot.

KING: Now you say there's plenty of time. What does NASA -- what do other government agencies here in the United States and around the world -- how do they sort of put themselves on alert to watch this? Do you now increase the resources you put into watching it or do you just sit back and know you have time to track it?

LIU: The challenge is always to be ready. As long as we have a vibrant and innovative space program, either here in this country or throughout the world, there is always time to muster enough technology and energy to stop these things from happening.

Right now in the United States, United Kingdom and other places, there are monitoring groups, organizations, a few dozen people, really, is all that it takes. And they've done a great job so far. They've found thousands of objects and have been tracking them all, depending on how likely they are to be a threat to humanity.

KING: Still the stuff of movies for now. Since we're fortunate to have you, let me ask on other issue. Mars has been in the news quite a bit lately. There are two rovers on their way to Mars now. What is the goal? What is the most likely find or at least the biggest question as those missions head forth?

LIU: What they'd really love to find is evidence of water on Mars. Liquid water is one of the most essential building blocks for life as we know it. And we've gotten tantalizing evidence over the years that liquid water may exist under the surface not too far down. And if we have liquid water, they're going to be landing in areas where maybe water will be visible somehow through their technology. And if so, that's one step further in the direction of finding extraterrestrial life for the first time.

KING: Interesting questions. Charles Liu, thank you very much for joining us.

LIU: Pleasure to be here.

KING: And turning now to a more inevitable event, you might say. Today John Kerry made it official. The Massachusetts senator formally announced he is running for president, running for the Democratic nomination.

Bill Schneider assesses the senator's chances.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): John Kerry has four months to turn his campaign around. What can he do?

First, he has to showcase his strength. Kerry is a man of great intellectual stature. Is that something Americans want in a president? After four years of George W. Bush, they might.

Kerry's finest political moment came in 1996 when he faced Massachusetts Governor Bill Weld, no intellectual slouch in a series of eight remarkable campaign debates.

SEN. JOHN KERRY (D), MASSACHUSETTS: I would not say that being in public life is a sacrifice. I'm not sure that I see it that way.

SCHNEIDER: Kerry's natural constituency is educated upper-middle class professionals, the NPR vote. Kerry's problem is that he and Howard Dean are fishing in the same pond, and Dean has been catching more fish because he's using a powerful lure, contempt for President Bush.

In a recent poll, the majority of Democrats said they don't want a nominee who seeks common ground with Bush, they want a fighter who will take Bush on.

Does that mean Kerry has to imitate Dean? Yes, when it comes to showing contempt for Bush.

KERRY: And every day of this campaign, I will challenge George Bush for fundamentally taking our country in the wrong direction.

SCHNEIDER: So where does Kerry distinguish himself from Dean? There's an opening for an anti-Bush moderate, one who can appeal to blue collar Democrats who have so far not found a candidate.

They're not Dean people, but they don't look like Kerry people either. Kerry's a wealthy patrician, but he does have an impressive record of military service.

KERRY: The best lessons that I learned about being an American came in a place far away from America on that gun boat that Max referred to in the Mekong Delta with a small crew of volunteers.

SCHNEIDER: And a message that has a little of Bill Clinton's Populist touch.

KERRY: Let me put it plainly: if Americans aren't working, America's not working. So my economic plan sets this goal: to get back George Bush's 3 million jobs in my first 500 days as president.

(END VIDEOTAPE)

SCHNEIDER: Kerry announced his candidacy in South Carolina, not in Massachusetts, in front of an aircraft carrier, as if to say, hey, who you calling the Massachusetts liberal -- John.

KING: Well, Bill, he'll try to refute the Massachusetts liberal part. He also at least now appears to have the niche, if you will, of military service and heroism to himself. Is he likely to keep that niche?

SCHNEIDER: Well, we'll hear about whether General Wesley Clark -- emphasize General Wesley Clark -- is going to run within a couple of weeks. He's going to make his intentions known. In that case, of course, he's a general. He was the supreme commander of NATO. He has a distinguished military record. And he led the NATO forces in the war on Kosovo. So then Kerry won't look quite so unique as he has been looking.

The question is will General Clark do anything to really upset the odds in the race? General Clark is not a well-known figure. Some people say he's an Eisenhower for Democrats. But Eisenhower won a World War and most Democrats really don't really know very much about General Clark -- John.

KING: We'll keep our eyes on that as well. Thank you very much, Bill Schneider in Washington. Thank you.

SCHNEIDER: Sure. KING: And coming up, former CIA Director James Woolsey will give us his assessment of the challenges facing the United States in both Iraq and North Korea.

Plus, "The State of the States." Tonight, Delaware boasts big business and beautiful beaches. And both have helped The First State avoid the budget troubles plaguing other states. Delaware Governor Ruth Ann Minner will join us.

(COMMERCIAL BREAK)

KING: North Korea today said it is willing to resolve the stand- off over its nuclear program through dialogue. Just last week, Pyongyang said further talks would be useless.

Joining me now to talk more about the confusing situation in North Korea and the situation in Iraq is the former CIA Director James Woolsey. He joins us from Washington.

Thank you, sir. You're just back, I understand, from a trip to both Japan and South Korea. Tell us your assessment from talking to people there about how they see this going forward and whether they think the problem is North Korea or the United States.

JAMES WOOLSEY, FORMER CIA DIRECTOR: It's complicated in South Korea because generation that are now in their 30s and were younger and quite worried about us backing the dictators in South Korea, and also they've been influenced I think by North Korean propaganda and agents to some extent. That generation is the primary school teachers. They're the people in their 30s and early 40s now. And they are really, in many cases, rather alienated from the United States.

You get a South Korean who is in his 50s or older, he remembers the war. He remembers how important the United States was and looks on us really very -- in a friendly fashion. But the younger generation is a problem there in terms of U.S./South Korean relations. In Japan, I think things are on a longterm, really rather solid footing. The Japanese economy is just starting to come out of its doldrums. But most Japanese see themselves as rather closely allied with the United States for the long haul.

KING: What's your assessment?

Is the Bush administration taking a risk in waiting now apparently two months to try to have a second round of talks. North Korea gives mixed signals as to whether it will participate in such a round.

Is the United States taking a risk from a national security standpoint of letting the North Koreans to have time, time presumably they could use to make more nuclear weapons?

WOOLSEY: Yes, to some extent. I think we have weeks to months to get this sorted out, not months to years. We've detected, according to press reports, krypton 85 gas early this summer over North Korea which means they started the reprocessing of plutonium either at Yongbyong or some secret site which may exist. And we know for a number of years they've been working on a different process for getting the material, that is enriching uranium. They started cheating on the 1994 agreement with the Clinton administration just a very short time after they signed it by starting that uranium enrichment.

So, they conceivably could have several bombs worth of fissionable material to add to the one or two bombs worth they've had for a decade or so. Once they have that amount, they could test or they could start selling it clandestinely to terrorist organizations. You don't need a great deal of this, unfortunately. Plutonium bombs' worth is about the size of a grapefruit and weighs about 20 pounds. And for highly enriched uranium, about the size of a soccer ball and weighs about 40 pounds.

KING: Want to shift to the Iraq issue. As you well know, the you once lead, the CIA, is doing this top to bottom review of the intelligence it received and how it was analyzed before the war. Still no weapons of mass destruction found in Iraq. And one theory according to a "Los Angeles Times" report last week was perhaps the CIA and other intelligence agencies were deliberately misled by double agents of Saddam Hussein about the weapons program.

Does that sound at all plausible to you?

WOOSLEY: There is a range of possibilities. If the CIA was duped, it wasn't the only one. Israeli intelligence was so concerned they bought gas masks for practically the entire country. Russians, French, the U.N. inspectors, pretty much every one agreed Saddam had at least chemical and bacteriological advanced programs and some perhaps small stockpiles of weapons, as of some few months ago. There is a serious question as to whether or not they were destroyed at the last minute, whether they are still being hidden, whether some were smuggled into Syria. In some cases we're not talking about huge volumes. For example, Saddam admitted to producing 8,500 liters of anthrax in the late '80s. That sounds like a lot. I mean, after his son-in-law defected who was the head of the biological weapons program in '95. He admitted to making that much. But that is only about eight and half tons which is less than half a tractor-trailer load. If it's turned in powder, it's about four medium size suitcases worth. So, we're searching a country the size the state of California for things a half a tractor-trailer load or a few suitcases' worth. And that's a tough job.

KING: And quickly, James, your assessment on the home front. The major blackout a couple weeks back. The government says it was not terrorism. But does it to you expose weaknesses in terms of the vulnerability, of our domestic infrastructure to terrorist attack?

WOOLSEY: Absolutely. These complicated networks like the electricity grid or the Internet that we all live with can have small things call huge effects. A falling tree in American area near Lake Erie may have been responsible for blacking out some 50 million people in the U.S. and Canada. Those effects of the way these networks can work are sort of malignant. Nobody is trying to cause trouble there, but it could happen anyway.

There is another problem, which is malevolent actors such as on 9/11, taking over part of the air transport system and turning the aircraft into cruise missiles. We have to deal with both of those. We have to look at our infrastructure and fix its vulnerabilities to unintentional trouble and also its vulnerabilities to intentional malevolent terrorism. And sometimes those fixes are similar and sometimes they're quite different. Sometimes working positively on one can cause problems for the other. We have a number a years and a lot of work ahead of us.

KING: As always, former CIA director, James Woolsey, thank you for sharing your thoughts.

WOOSLEY: Good to be with you, John.

KING: And we continue now with our series of special reports, the state of the states. Tonight we look at Delaware which continues to thrive despite current economic conditions. Delaware's low taxes and cautious spending make it a magnet for businesses and families alike.

Lisa Sylvester has the report.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Joe Saxton is a carpenter in Wilmington, Delaware. He has lived here 65 years and has no intention of leaves.

JOE SAXTON: It has a lot to offer. It's a working man's town. It's not as fast as New York City or the bigger towns, but, you know, gives me all the excite I need.

SYLVESTER: There are many benefits living here. Housing is affordable, there lots of jobs. Delaware's unemployment rate is well below the national average. With no sales tax, Delaware's tax burden is the third lowest in the country.

VIJAY KESWANI, OWNER SEASIDE REFLECTIONS: Lot of people would say to me oh, I'm saving up my little extra housekeeping money just to come and spend here because there is no sales tax.

SYLVESTER: Delaware is one of only seven states that has maintained its triple a bond rating. And while many other states are using emergency federal funds to close their budget gaps, Delaware has put the money aside in savings. During the booming '90s when other states went on buying binges, the state government here in Dover kept the lid on spending and avoided tax cuts. In fact, the government operated a lot like a family on a budget.

J.J. DAVIS, DELAWARE STATE BUDGET DIRECTOR: It's exactly the same thing as you manage your own personal budget. You figure out how much money you'll have in any given year. You set aside money for future emergencies, hopefully they won't happen. But if they're there, there is a pot of resources available. SYLVESTER: Delaware's state government works closely with civic and business leaders. Reviewing revenue projections, six times a year. So the state was able to take quick action last year, raising taxes on cigarettes and slot machines when it realized that revenue was falling because of a downturn in the national economy. The state has worked hard in the last few decades attracting new businesses, like pharmaceutical company AstraZeneca and a financial giant MNBA .

Half of the fortune 500 companies are incorporated in Delaware.

BOB BYRD, DELAWARE ECON. FINANCIAL ADVISORY COUNCIL: They're here because of the tax structure. They're here because we give great service and we spend a lot of time about our secretary of state and our corporation department making sure from a technology standpoint they're very up to speed and know exactly what they're doing.

SYLVESTER: Delaware has promoted its miles of beach front property. It's drawing not just tourists but increasingly rivaling Florida as a mecca for retirees. The new residents are finding out what the old timers have tried to keep a secret. That Delaware is not only in great financial, but it's also a nice place to live.

Lisa Sylvester, CNN, Dover, Delaware.

(END VIDEOTAPE)

KING: More than a half million businesses have made Delaware their home, their legal home. Governor Ruth Ann Minner has proposed to tap that corporate base to helped close her state's budget shortfall.

Governor Minner joins me now from Dover.

Governor thank you so much for joining tonight.

Want to start with this. You've been very successful so far in dealing with the economic problem. One of the ticking time bombs governors across the country say healthcare costs. Give us your suggestions on what the states can do to deal with that.

GOV. RUTH ANN MINNER (D), DELAWARE: We started early working on our healthcare costs. It was one of our biggest problems. We combined a lot of our insurance policies to get a better buying rate. We looked at what we were doing with prescription drugs. We ended up joining a consortium of states to make sure we got the very best prices that we could. And we looked at all that we were doing by way of the people that we were covering to make sure we had the very best plan, giving the best benefits, but at the most cost effective price that we could get.

KING: Governor, good news on the economic front. The federal government says about half of your schools are failing to make the grade. Are your schools not making the grade or do you have issue with the federal government's standards?

MINNER: Well, you have to look at all of the testing that's been done in the education field. We started standards and accountability about 10 years ago. Our students have been constantly improving in every one of the areas we test. Reading, math, sciences, and in our writing. However, when it came to no child left behind, standards are different and we have to adjust to that. But if you look at the national tests, Delaware scored very high in the national tests. And we continue to do that. Our students are improving and we're working very hard to make sure we put the money in our schools to give them the opportunity to not only achieve good grades, but to succeed after they get out of school.

KING: You are on the front lines of the president in his Labor Day remarks yesterday said he's confident that the job growth is about to happen in the economy.

Your assessment, governor?

MINNER: Well, our economy has been better than most. When you look at the unemployment rates, we're doing much better. We've continued to work to bring jobs to Delaware. But we've worked very hard, with our corporations, with the businesses in our state, to make sure we keep the jobs that we have and have our own businesses grow. So it does make a difference. I've read some of the reports, like the president's read, that says things are getting better and you read another report, and it says the economy still sluggish, it may be another year before we see major improvement.

I will tell you that we're doing well in Delaware. We are maintaining our low unemployment rate. We're offering more jobs for people. We're having more companies come to us interested in incorporating in Delaware. And we look to continue to grow.

KING: And your success, I'm sure, is being watched closely by others. Governor Ruth Ann Minner of Delaware, thank you for joining us tonight.

MINNER: Thank you.

KING: And coming up, NBC and Vivendi are ready to rewrite the power structure in Hollywood. Peter Viles will have that report when we return.

(COMMERCIAL BREAK)

KING: The French conglomerate Vivendi today said it was talking exclusively with General Electric's NBC about a deal to merge the two company's entertainment assets. Peter Viles has that report.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): General Electric Chairman Jeff Immelt is about to get his hands on something Jack Welch never had, a big Hollywood studio. Immelt outmaneuvered Edgar Bronfman, Jr., and NBC now has exclusive rights to negotiate a merger with Vivendi Universal. If the deal closes, NBC's new toys will include cable's USA network and the Sci-Fi Channel, and big pieces of Hollywood, Universal Television, producer of "Law & Order," Universal Pictures, which made "Seabiscuit," and Universal's massive library, which includes thousands of films, from "Psycho" to "Jaws." For GE and its vice chairman, Bob Wright, the merger solves a problem. NBC is a great television network, but network television is not a growth business.

PORTER BIBB, MEDIATECH CAPITAL PARTNERS: The unspoken motive behind this transaction is the fact that Bob Wright and the NBC crew are sitting on top of a melting iceberg. NBC is number one in both audience ratings and profitability right now, among the major networks, but the major networks have been losing audience for the last 10 years.

VILES: Vivendi would get 3.8 billion in cash, would erase 1.6 billion in debt, would own 20 percent of the new entertainment company, and its management in France would end its unhappy adventure in Hollywood.

JEAN-RENE FORTOU, CHAIRMAN & CEO, VIVENDI UNIVERSAL (through translator): Unless there is an unknown that pops up, it's an offer that is very precise that should conclude in September.

VILES: The NBC/Universal combination would become the fifth media giant, with annual revenues of 13 billion, joining other giants, AOL Time Warner, Disney, Viacom and News Corp. It would rank fifth in revenue, but it would have by far the richest parent, General Electric, with $130 billion in annual revenue.

(END VIDEOTAPE)

VILES: And there has been some anti-big media backlash in Washington recently. And this deal does make big media even bigger. But it doesn't face any obvious regulatory hurdles, mainly because no broadcasting licenses would change hands in this deal -- John.

KING: Peter, thank you very much. When we return, we'll have the results of tonight's poll.

Then, New York Stock Exchange Chairman Dick Grasso's multimillion dollar paycheck has caught the attention of regulators. Susan Lisovicz will have that, and the market. Stay with us.

(COMMERCIAL BREAK)

KING: Now the results of our poll. What makes you feel safer, the Department of Homeland Security, air marshals or the color-coded terror alert system? A majority of you said none of the above.

On Wall Street, the historically weakest month for the market opened with a strong rally. The Dow Jones Industrials jumped 107 points. The Nasdaq rose 31. The S&P 500 gained almost 14. Susan Lisovicz has the market for us.

SUSAN LISOVICZ, CNN FINANCIAL NEWS CORRESPONDENT: And John, September has been the worst month on record for the last 50 years for the Dow and the S&P 500. You wouldn't know it today. Despite that bearish history in September, new month brought new highs. The "Stock Traders' Almanac" says, however, the Dow Jones Industrials have lost on average nearly 1 percent over the last 52 years in September.

Today, optimism reined, and it carried the blue chips above 9,500 for the first time since June of last year. The Nasdaq, meanwhile, hit a 17-month high. Bolstering the bulls, that huge perspective media deal that Peter Viles just reported. Shared of the French company Vivendi surged 8 percent on word it has picked NBC's parent company, GE, for exclusive negotiating rights for its cable TV and movie studio assets. GE the most actively traded issue on the Big Board.

And upbeat tech talk another positive factor. An upgrade on Dell lifted computers, while Microsoft rallied on favorable comments on software. Oracle and Cisco also gained on encouraging remarks.

In all, 402 stocks hit new highs at the NYSE, while only five hit new lows. That's bullish, John.

KING: Let's stay on the New York Stock Exchange, a different subject. This followed over Chairman Dick Grasso's $140 million deferred compensation plan. What's going on?

LISOVICZ: Well, the latest is that the SEC Chairman William Donaldson sent a letter today to the NYSE that that pay package raises serious questions about the governance structure at the NYSE. He wants those questions answered by September 9. The NYSE says it will.

KING: Susan Lisovicz, thank you very much, and that's our show for tonight. Thanks for joining us. For all of us here, good night from New York. "LIVE FROM THE HEADLINES" with Anderson Cooper up next.

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