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LOU DOBBS TONIGHT

Investigation Launched Into CIA Leak; Guantanamo Bay Translator Arrested

Aired September 30, 2003 - 18:00   ET

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

ANNOUNCER: This is LOU DOBBS TONIGHT for Tuesday, September 30. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.

Tonight, the Justice Department is investigating the alleged betrayal of U.S. national security interests from the Potomac to Guantanamo Bay.

The Justice Department has launched a full-scale criminal investigation into the leak of a CIA officer's name, possibly by members of President Bush's administration. The FBI investigation into possible treason and espionage at Guantanamo Bay, Cuba, today resulted in the arrest of a third suspect. The civilian translator was arrested in Boston after he returned on a flight from Egypt.

CNN Pentagon correspondent Jamie McIntyre reports -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, Lou, here's what we know about Ahmed Mehalba.

He is an American citizen of Egyptian descent. He's a former U.S. Army enlisted man who attended the counterintelligence school at Fort Huachuca in Arizona. His father was a retired military intelligence officer in the Egyptian army. He was arrested at Boston's Logan Airport on his way back to Guantanamo Bay from a visit to Egypt, after a search of his luggage turned up 132 compact discs which he said contained music and videos.

One of the discs was labeled "backup No. 3 for M.O.'s profile." And that disc included a document labeled "secret." Now, he said he purchased the C.D.s as blanks. And he denied knowing how any of the files got on them. He appeared briefly in court today, but he remains in federal custody pending a detention hearing likely tomorrow.

Now, it looks like the FBI might have been interested in Mehalba since 2001, when he left the military. Courts records show that his girlfriend was discharged from the military, who also attended that same school, after she was accused of stealing a vehicle, a laptop computer, and classified counterintelligence training material.

Now, this arrest is the latest in what is the ever-widening probe of the loss of the classified information from the Guantanamo Bay Naval Base, where the Taliban and al Qaeda suspects are held. With today's arrests, three people are being detained now, including a Muslim Army chaplain, an Air Force translator. And more arrests are likely. Sources say another member of the Air Force, a Navy cook and a civilian contractor for the Marine Corps are all under scrutiny -- Lou.

DOBBS: Jamie, first, do we have any indication that this suspect turned over that information, returning, as he was, on a flight from Egypt?

MCINTYRE: Well, he denied that he was carrying any classified information at all. In fact, that's what the technical charge is, making a false statement, because then they found what they believe is classified information on one of those discs.

They're now going through the process of looking at everything on all of the discs and on his computer to find out what else might be there. But the first thing they nailed him on was, they say, making a false statement to the FBI.

DOBBS: And, Jamie, quickly, this is remarkable that a chaplain and translators can be charged with access to classified information. Any indication there at the Pentagon how these people would have access to classified information?

MCINTYRE: Well, a lot of people in the military have access to some level of classified information, because almost everything is classified at some level.

And there are people here who admitted to me that they have broken the rules sometimes in terms of moving things from one computer to another, simply trying to do a better job. So, sometimes, it can be fairly innocuous. But there are very strict rules about the handling of classified information there at Guantanamo. And it also could be something much more nefarious.

DOBBS: Jamie McIntyre, senior Pentagon correspondent, thank you.

Well, the Justice Department's full-scale criminal investigation to determine who revealed the identities of a CIA operative to a syndicated newspaper columnist, Robert Novak, has not yet produced a suspect. But today, Attorney General John Ashcroft said the White House and the CIA have been instructed to preserve all documents relevant to the investigation.

Justice correspondent Kelli Arena has the report -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Lou, the FBI will conduct this investigation, working with career prosecutors from the Justice Department's criminal division.

Now, the word career here is very important. It means that these are not political appointees. They have a great deal of experience in dealing with leak investigations. According to Justice officials, they look at about 50 leak complaints a year, mostly from the CIA and the National Security Agency. And about half of those, 25, are actually investigated each year.

(BEGIN VIDEO CLIP) JOHN ASHCROFT, ATTORNEY GENERAL: The prosecutors and agents who are and will be handling this investigation are career professionals with extensive experience in handling matters involving sensitive national security information and with experience relating to investigations of unauthorized disclosures of such information.

(END VIDEO CLIP)

ARENA: Now, despite that vote of confidence, some Democratic members of Congress are calling on Ashcroft to appoint a special counsel.

They allege that the department waited to tell the White House an investigation was under way, giving White House staff time to possibly destroy relevant documents. Now, based on official statements, as far as I can tell, a decision to investigate was made on Friday, not by Ashcroft, but by a career official at Justice. And the White House was informed Monday night.

Now, Justice officials say, it's a sheer matter of bureaucracy, working your way up the food chain and letting know. And you also have a weekend in between. So they're not making much of it. As for the special counsel, the attorney general refused to comment on that point. He said that he would -- he said that there was a criminal investigation under way and that he would not comment on how that criminal investigation is proceeding.

But other Justice Department officials tell me that it has not been ruled out, appointing a special counsel. Now, it's important, Lou, to understand, a special counsel is not an independent counsel. He or she would be appointed by the attorney general, report to the attorney general, and would use the same FBI agents to conduct this investigation.

And one more point, Lou. Leak investigations generally are not successful and are almost always closed without naming a suspect.

DOBBS: Kelli, thank you very much. Hopefully, this one will lead to a conclusion, and a strong one. Thank you very much, Kelli Arena.

Leading Democrats today said they are concerned about objectivity of the Department of Justice investigation, career investigators are not. As Kelli just reported, top Democrats in both the Senate and the House called for the appointment of a special counsel to take over this investigation.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: The conflicts that would exist in the Justice Department are obvious. John Ashcroft won't even go after Ken Lay. How will he possibly go after somebody who appointed him as attorney general? So I think that there is a real concern about objectivity, about the degree to which they're willing to pursue this. And I think that that's the concern expressed about all of my colleagues in various ways over the last couple of days.

REP. NANCY PELOSI (D-CA), MINORITY LEADER: Given allegations about the involvement of senior White House officials and the past close association between the attorney general and one of those officials, the investigation should be headed by a person independent of the administration. If there was ever a case for an appointment of a special counsel, this is it.

(END VIDEO CLIP)

DOBBS: The White House, for its part, says a special prosecutor is unnecessary. And President Bush has instructed government officials to cooperate fully with the Department of Justice investigation.

Senior White House correspondent John King has the story for us -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Lou, the president interrupting a travel day. He's out raising money today, also meeting with business leader to discuss the economy in the Midwest.

But the president knew he needed to go before reporters and issue his first comments on the investigation, the president addressing both the legal issues -- and they are big legal issues -- as well as the swirling political debate, the president telling reporters in Chicago that he wants to get to the bottom of this, that let the chips fall where they may. If somebody did this, they should be held accountable.

But the president also, in his statement, while trying to project an image of calm, dismissing the Democratic complaints about the need for an independent or a special counsel. The president says he has full confidence in the Justice Department.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm absolutely confident that the Justice Department will do a very good job. There's a special division of career Justice Department officials who are tasked with doing this kind of work. They have done this kind of work before in Washington this year. I have told our administration, people in my administration, to be fully cooperative. I want to know the truth.

(END VIDEO CLIP)

KING: The president also said at that news conference that he had no evidence at all that anyone in the administration did this. You heard the Democratic leader, Nancy Pelosi, talking about a close relationship between the attorney general and one senior White House official.

The official she had in mind is Karl Rove, the president's top political adviser. He once did campaign work for John Ashcroft when he was running for the Senate back in 1994. here at White House, everyone came to work this morning to receive a chilling memo from the White House counsel, Alberto Gonzales, telling them the investigation was under way, that the president expected their full cooperation, that memo, Lou, also telling White House officials not to destroy any records, e-mail, phone logs, any documents at all that might be relevant -- Lou.

DOBBS: John, what is reaction there amongst the White House staff to this? For all intents and purposes, this leak, no matter what else you think about it, was politically stupid, as well as criminal. What is the reaction there?

KING: Well, it's an interesting reaction, because this is a fiercely loyal group, the president's inner circle. And they say they don't believe anyone here did this, but they also say in the next breath that they can't rule that out.

They say the president has told them to fully cooperate, but also to get about their business, to not to be paralyzed by this. And so they're in damage-control mode here at the White House. We spoke earlier to John Podesta, the former Clinton White House chief of staff. And he was saying that an event like this -- and, remember, there were several investigations of the Clinton White House -- he says, you sit at the table at these senior staff meetings looking around, wondering if someone else at the table might be the person responsible.

So some sense of nervousness here, even as they say they will get about their business and let the investigation run its course.

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

Coming up next here: One week until the California recall election, one of the candidates is considering calling it quits. Our Bob Franken will report.

And "Uncovered": A growing health care crisis in this country leaves more than 40 million American without health insurance. Bill Tucker reports.

And the "Great American Giveaway": tonight, two unconventional views. Wharton Professor Jeremy Siegel says there's an upside to exporting all of those American jobs overseas. And Dan Griswold of the Cato Institute says the way to take care of that illegal alien problem is to simply open our borders. They join us coming up.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: One week until a historic recall election in California. Tonight, one of the most recognizable candidates may be ready to call it quits, Arianna Huffington expected to announce her plans tonight on "LARRY KING LIVE."

Bob Franken has the story from Los Angeles -- Bob. BOB FRANKEN, CNN NATIONAL CORRESPONDENT: And, Lou, why, you might ask, is somebody who is pulling 2 percent in the latest poll generating such interest in the possibility that she's going to pull out?

Friends and advisers say that's a probability, but Arianna Huffington is keeping her own counsel right now. The reason is, according to many analysts, is that Arianna Huffington has evolved into the darling of the liberals, the liberals who are badly needed to turn out in force to try and save Gray Davis from being recalled from office.

Now, Arianna Huffington, if she decides to pull out, the other part of her announcement will be what she's going to do. Will she support another candidate or will she contend herself with just fighting the recall? Of course, Gray Davis is fighting for his political life. A CNN/"USA Today" poll shows that 63 percent of those who are considered probable voters would turn him out office. Of course, very volatile in this state. There's another poll coming out this evening that is of tremendous interest to everybody. And it is "The Los Angeles Times" poll. It's considered perhaps one of the most accurate.

And there's going to be high interest in whether it tracks the CNN poll, which was horrible news for Davis and great news for Arnold Schwarzenegger or whether there are some contradictions. The Davis people say that the CNN poll was -- quote -- "a joke." "The L.A. Times" poll will go a long way toward showing them just how funny it is -- Lou.

DOBBS: Bob, thank you very much -- Bob Franken.

Tonight, 15 percent of Americans, or 44 million people, are without health insurance; 2.5 million people lost their coverage last year alone because of rising insurance costs and rising unemployment. But behind those numbers, a tragic human story.

Bill Tucker joins us now with more -- Bill.

BILL TUCKER, CNN CORRESPONDENT: Lou, the rise in the uninsured is the second in as many years. And the increase is a result of a lower percentage of people being covered by employer-based insurance plans.

In addition, only one in five employees decide to pick up their insurance coverage when they're laid off. It's a decision that can have brutal consequences.

(BEGIN VIDEOTAPE)

TUCKER (voice-over): Nearly 44 million Americans have no health care insurance. Paul Braucher is one of them. The self-employed interior designer and painter dropped his insurance coverage to cut costs. Then he was diagnosed with cancer.

PAUL BRAUCHER, UNINSURED: I had no coverage of any kind. So to get the first procedure done, I had to give the surgeon $6,000.

TUCKER: His father, a Korean War veteran and retired schoolteacher, and his mother used up every bit of their home equity line of credit and all of their savings to come to the help of their son to pay his bills.

VIRGINIA BRAUCHER, MOTHER OF PAUL: I would not like to see anybody go through what we did and what Paul's going through and the worry and the panic and knowing that this is really life and death.

TUCKER: Family and friends held fund-raisers, posted a Web site for people to make donations. But it takes more than just family and friends to help the uninsured.

DANA ROWLAND, KAISER FAMILY FOUNDATION: For many who show up for care and can't afford the care they need, the rest of us, through our private health insurance and through government programs like Medicare and Medicaid, have to help offset the cost of providing care to people without insurance.

TUCKER: New York state Medicaid has decided it will pay for part of Paul's expenses, but just how much is not certain.

DANIEL BRAUCHER, FATHER OF PAUL: Get the word out and make sure you get health insurance before anything happens. You cannot afford to be without health insurance, no possible way.

(END VIDEOTAPE)

TUCKER: Paul is now back in New York City, where he continues his recovery in and awaits another surgery next month -- Lou.

DOBBS: Can't afford to be without insurance. And the tragedy is, there are too many of our citizens who can't afford it.

Bill Tucker, thank you very much.

Coming up next here: rebuilding Iraq. The bills are piling up. So far, American taxpayers are picking up the tab. Lisa Sylvester reports from Washington on where much of the money will go. Congressman Jerry Lewis of California joins us to tell us about his recent inspection of Iraq.

(COMMERCIAL BREAK)

DOBBS: A U.S. soldier was killed in fighting in Afghanistan. Two other soldiers were wounded. The military said the fighting took place in a remote area near the border of Pakistan; 86 American troops have now been killed in Afghanistan, 31 of them in combat.

It is still a war in Iraq as well. Central Command today said 310 troops have been killed in Iraq since the beginning of the war; 194 troops were killed in action; 116 have died in accidents. And another 1,695 troops have been wound and injured, most of those in combat. The House and Senate Appropriation Committees today began considering the president's $87 billion request for Iraq and Afghanistan. Much of the debate over that package centers around the $20 billion slated for rebuilding Iraq. Several lawmakers are now questioning whether all of the White House's proposals are really needed, whether American taxpayers should be paying for them.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The reconstruction of Iraq looks costly, but some item items seem frivolous: $20 million for a four-week business course at a cost of $10,000 per student; $30 million for English-as-a-second-language courses; $54 million to study Iraq's postal service; $100 million to build seven planned communities, including an elementary school, two high schools and a market, and $400 million to build two prisons at $50,000 a bed.

TOM SCHATZ, CITIZENS AGAINST GOVERNMENT WASTE: The federal government has many problems in terms of providing education in this country, yet they're going to build communities with high schools and other facilities in Iraq. And I think taxpayers have a right to be upset about how this money is being spent.

SYLVESTER: Some Democrats say, if the United States is willing to pick up the tab overseas, they should pay for these things at home. Defense Secretary Rumsfeld says, it's not enough to just rebuild the Iraqi infrastructure, but to bridge the Iraqis with the Western world.

DONALD RUMSFELD, SECRETARY OF DEFENSE: The investments the president is requesting are, in a very real sense, a critical element of the coalition's exit strategy. The sooner the Iraqis can defend their own people, the sooner the U.S. and coalition forces can come home.

SYLVESTER: But even some conservatives have their doubts.

BRIAN RIEDL, THE HERITAGE FOUNDATION: I think a lot of conservatives are upset, not that we're spending the money, but that the money's coming out from American tax dollars, as opposed to Iraqi oil revenues.

(END VIDEOTAPE)

SYLVESTER: Some Democrats want to separate the reconstruction request from the military funding measure. This way, they would be able to pass a bill giving the troops additional money immediately and continue to debate the reconstruction bill. But the White House opposes this -- Lou.

DOBBS: Lisa, thank you -- Lisa Sylvester from Washington.

My next guest has just returned from Iraq. He says it's vital that Congress approve that $20 billion. Congressman Jerry Lewis is chairman of the House Defense Appropriations Subcommittee and joins us tonight Washington.

Congressman, good to have you here.

REP. JERRY LEWIS (R), CALIFORNIA: Good to be here, Lou.

DOBBS: Your assessment of the situation in Iraq after taking a close, personal look at it?

LEWIS: Lou, 17 members of Congress traveled together, many who had been for going to Iraq, some opposed to it, Democrats and Republicans alike.

After we actually saw what Saddam Hussein had done to his people and to that country, we are all supportive of this proposition, largely because there's little doubt that Saddam Hussein's regime was the worst in history since Stalin's time or Nazi Germany. And, indeed, the American people, I think, if they had a chance to really see firsthand what has been done in that country by way of Saddam Hussein, they'd want us out front.

I believe those Democrats, for example, who voted against going to the war in the first place, who were with us, who now are going to support this proposition are doing so because they know it's in the best interests of the United States and the best interests of freedom and opportunity for the Iraqi people.

DOBBS: Congressman, I think, probably, there is general support for helping Iraq rebuild. Certainly, that is part of the president's democratization plan; $20 billion, why -- the issue is very clear, why should American taxpayers be paying that bill, rather than Iraqis?

LEWIS: Well, in the long range, America's involved in the first place for more than humanitarian reasons. We have a vested interest in extending peace and opportunity and fighting the war on terrorism around the world.

We are the ones who are most threatened if things fall apart in a country like Iraq and it spreads to encourage terrorists throughout the Middle East. Indeed, $20 billion is a lot of money in anybody's measurement. But the fact is that this kind of reconstruction and military efforts are very expensive and it is our No. 1 priority, that is, the war on terrorism. And that war is being fought first right here, right there in Iraq.

DOBBS: I understand, Congressman. But, again, the issue, whether it is the United States or the Iraqis, and the Iraqis have some of the largest, if not the second largest, oil reserves in the world. Why should the American government be borrowing the money for reconstruction, rather than the Iraqi government?

LEWIS: Well, if it were feasible for the Iraqi government to do so, I would agree with you. The fact is that their infrastructure is in a handbasket.

Saddam Hussein ignored even the oil flows. The systems do not work and that -- there is simply not money available. Presently, there are some

(CROSSTALK)

DOBBS: I'm sorry, Congressman. I didn't mean to suggest that the work should not be done, but, rather, the $20 billion in that request be constructed in the form of a loan, rather than a gift.

LEWIS: Well, it's being suggested by some that that would be realistic. I, frankly, think we will consider that as a possibility.

But presently, there are approximately $210 billion of reparation money and loans outstanding that Saddam Hussein got from the Frances and the Germanys of this world. I would suggest that we pressure them or they should consider forgiving some of those loans. And, in turn, the economy there would have a chance of straightening out in a reasonable time. And, thereby, the expenses of the American taxpayer could disappear.

DOBBS: Well, I'm certain that the German government and the French government, with all of their interest and concern about Iraq, will proceed to quickly forgive those loans.

(LAUGHTER)

DOBBS: Congressman, thank you very much -- Congressman Jerry Lewis of California.

LEWIS: Thank you.

DOBBS: That brings us to tonight's poll question. Who should borrow the $20 billion to rebuild Iraq, the U.S. government, the Iraqi government, the United Nations, or perhaps France and Germany? Cast your vote at CNN.com/Lou. We will have the results later in the show.

Coming up next: the next NAFTA, expanded free trade that could even cost more American jobs. Peter Viles will have the report. Dan Griswold of the Cato center will also join us to tell us why those illegal aliens really shouldn't be illegal.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: The departments of Justice and Transportation today announced a broad effort to crack down on illegal shipments of hazardous materials. Unbelievably, most of the 1.5 billion tons of hazardous cargo shipped across this country every year go unchecked.

While passenger security has been tightened in the past two years, no new security measures have been added for cargo shipments. Securing air cargo will be considerably more difficult now that the Transportation Security Administration has cut another 3,000 airport screeners from its payroll. The deadline for those cuts was today. And all 6,000 screeners have been eliminated.

Turning now to our continuing coverage of the economic crisis we call "Exporting America," tonight, we focus on this nation's trade policy, which aims to expand NAFTA throughout the hemisphere. The Bush administration's top trade negotiator is in Central America this week, there to work on the fine points of a regional trade agreement. It will likely reopen the contentious debate over NAFTA in Congress and around the country.

Peter Viles is here now with the story for us -- Peter.

PETER VILES, CNN CORRESPONDENT: Lou, they call this deal CAFTA, the son of NAFTA. It has been a stated goal of this president for 18 months now to expand NAFTA south to at least five nations of Central America.

(BEGIN VIDEO CLIP)

BUSH: Today, I announce, the United States will explore a free trade agreement with the countries of Central America.

VILES: With American corporations using free trade deals to send jobs overseas, it's doubtful the applause would be as loud today. Unions are campaigning to stop CAFTA even before the deal is finalized.

SCOTT PAUL, AFL-CIO: The Bush administration believes in their hearts and minds that CAFTA is a good thing, primarily because they only listen to multinational companies, which have the most to gain. What they aren't hearing are voices from the heartland or for that matter voices from workers in Central America.

VILES: But CAFTA negotiations continued. Trade Representative Robert Zoellick will spend the week meeting the presidents of Costa Rica, El Salvador and Nicaragua. In fact, he'll visit a symbol of America's exporting problem, a Procter & Gamble facility in Costa Rica. It's clear U.S. companies see Costa Rica as a factory. According to national action plan under CAFTA, quote, "the bulk of foreign direct investment flowing into Costa Rica is originated in the United States. It is export-oriented, mainly to the U.S. market." Which begs the question, what is in this deal for American workers?

ALAN TONELSON, U.S. BUSINESS AND IND. COUNCIL: These markets are so small and so poor and so broke that there is nothing in this trade agreement for the American worker, except lost jobs. That is the only possible result. These countries have to become net exporters to the United States, or else they fall apart.

(END VIDEOTAPE)

VILES: Now, while labor groups believe they can defeat NAFTA in Congress, it is worth noting that Congress this summer easily approved two new free trade agreements, one with Chile, one with Singapore, both approved easily, Lou, in the Senate.

DOBBS: Peter, thank you very much. Exporting America continues. Peter Viles.

Well, while manufacturing jobs are moving out of this country along with a lot of other jobs, illegal aliens are moving in to find work. My next guest says the United States should make it not more difficult but rather easier for Mexican workers in particular to cross the border legally. And doing so, he says, will improve national security. Dan Griswold is the associate director of the Cato Institute Center for Trade Policy Studies. He joins us from Washington, D.C. Dan, good to have you with us.

DAN GRISWOLD, ASSOCIATE DIRECTOR, TRADE POLICY STUDIES: Hi, Lou. Glad to be with you.

DOBBS: Now, at first impression, the idea of solving an illegal alien problem by making it legal sounds expedient, to say the very least.

GRISWOLD: Well, Lou, we've got a problem. U.S. immigration law is colliding with reality and reality is winning. We have eight million undocumented workers here in the United States, 200,000, 300,000 more coming in every year, and this is after 15 years of pretty vigorous enforcement. We have employer sanctions for the first time in U.S. history, dramatically increased resources at the border.

The problem is, a fundamental mismatch between supply and demand. The U.S. economy continues to create demand for low skilled jobs. The Labor Department says we're going to create an additional seven million jobs over the next decade, at a time when American workers are getting better educated, we're getting older. The pool of Americans who are happy taking these jobs on a long-term basis is shrinking. And so it's inevitable that Mexican workers, they're peaceful, they're hard-working people, they want to come here and work hard. Most of them don't want to stay forever. They go back home after they've saved up money and sent it back.

This would recognize reality. I think it would be better to have these workers here with documents, so we know who's here, so they can have full worker rights and protections, rather than eight million people living in a kind of legal twilight zone. That's not good for anybody.

DOBBS: Not good for anyone, but at the same time, it's not altogether a solution, is it, Dan? We've got nearly approximately 700,000 illegal aliens crossing our borders every single year. It continues unabated despite the national security interest in this war on terror. We have not been deporting illegal aliens. As a matter of fact, you just used the expression, "undocumented worker." They're illegal aliens. The niceties of language, it's sort of interesting to hear how there's been this language shift, from illegal alien to undocumented worker, to guest without status. I mean, where does the nonsense end?

GRISWOLD: Well, whatever you call them, you know, 99 percent of the people that the border patrol apprehends have no criminal record, they're just people not all that different from you and me who want to improve their condition in life.

I think we should welcome them. You know, President Bush and President Fox, before September 11, they said we need an immigration system that is safe, orderly, legal and dignified. We have one that's unsafe, disorderly, illegal and undignified.

DOBBS: So the solution is to simply change laws so it's not -- at this point, you're saying that anybody who wants to come into the United States and work, it's legal?

GRISWOLD: No.

DOBBS: There is no immigration policy in this country right now. This administration doesn't have one. The previous administration didn't have one. The one before that. We have got to be straight with the American people don't we, Dan? We are changing the very nature of this country.

GRISWOLD: I think it should be legal and orderly. Wouldn't it be better if they came across in an orderly process, through urban points, San Diego, El Paso, they had documents, they took jobs legally, we'd know who's here. You know, here's the national security implication. When people don't have documents, they hesitate to cooperate with law enforcement people, we have created an entire industry of smuggling and illegal documented. If we had...

DOBBS: We created -- wow, wow, wait, wait, Dan. (UNINTELLIGIBLE). We have created? My goodness, we have not -- as I said, we haven't got an immigration policy. We haven't made a determination by -- through our elected representatives, through our president of what that immigration policy is. We're changing the very nature of work in this country. It almost sounds to me, and I don't think you mean this, but it's almost a patronizing plantation outlook in economics.

GRISWOLD: That's what we have now, because they don't have documents.

DOBBS: Well, what you're suggesting is that we have people -- so long as we have people willing to accept jobs at back-breaking labor, for no pay, and we say that's necessary to our economy, I think this country has to be embarrassed and it should be ashamed, don't you?

GRISWOLD: (UNINTELLIGIBLE).

DOBBS: I'm sorry?

GRISWOLD: ... earn the minimum wage or more. They're not getting paid no pay; in fact, they're getting paid quite well compared to what they could earn back in Mexico, and when they get legal documents, as we found in the '80s, their pay goes up. Their working conditions go up. We invest more in their...

DOBBS: Dan, I'm one of those people who have been -- I've been in those groves, those farm workers are breaking their backs picking fruit and citrus in this country. Let me tell you, minimum wage doesn't quite get it. It's a very tough situation. We have a situation in this country where people have low wages across the board. If the idea that we would just continue to import cheap labor, which is in the precise position of exporting our high-paid jobs and bringing in further low-scale pay workers. What is the solution? GRISWOLD: Well, it seems to me we have two alternatives. We can redouble our efforts of the last 15 years that have failed, we can double and triple the number of agents on the border, we can round up millions of people at great human and economic cost, it would be crippling to major U.S. industries -- construction, hotel, motel industries -- or we can recognize reality, we can create a legal channel, as Senator John McCain and Congressman Flake and Congressman Kolbe, three border state Republicans, want to do, as President Bush wants to do, has said he wants to do in the past.

It's not a radical notion. We had legal immigration throughout most of our nation's history. They helped build America and make it the great country that it is.

DOBBS: Legal immigration I think is the point. Dan, we thank you very much, and we will look forward to talking to you more on this.

Our series of special of reports on what this nation gives away tonight, American ingenuity. That story coming up next.

(COMMERCIAL BREAK)

DOBBS: This week in our series of special reports, we're looking into what the United States gives away to the rest of the world. Tonight we focus on intellectual property. This economy loses an estimated $200 billion a year because of ideas and products that are simply stolen. The problem has left one New York company facing a difficult choice that is a metaphor for what this country faces. Jan Hopkins joins us now with the story -- Jan.

JAN HOPKINS, CNNfn CORRESPONDENT: Thanks, Lou.

It's a Buffalo manufacturing company that's fighting for survival because China has stolen its technology.

(BEGIN VIDEOTAPE)

HOPKINS (voice-over): Eastman invented a special machine to cut stacks of fabric 100 years ago. Now most of the company's customers have moved to China. Eastman has a sales office there and competition. A Chinese company has stolen technology and is making an exact copy.

ROBERT STEVENSON, CEO, EASTMAN MACHINE CO.: It is a product that we have invested, obviously, over 100 years of development, can be produced in China for $250 a piece. My cost of the same unit is around $750.

HOPKINS: Stevenson says doesn't have resource to go after the Chinese. Small and medium sized companies rarely do.

JUDITH LEE, GIBSON, DUNN AND CRUTCHNER: The large Fortune 500 companies that have extensive global operations -- they consider the protection of intellectual property as a cost of doing business. HOPKINS: Stevenson worries that Eastman will have to lay off workers who have been loyal to the company for years, sometimes generations.

GLENN GEDDES, EASTMAN EMPLOYEE: My father was here for 40, I was here for 31.

HOPKINS: Eastman Machine has been in the Stevenson family for four generations. But Robert wonders if it will go into a fifth. He look across the street to the empty factory where Trico, the inventors of windshield wiper blades, once operated.

Across the area, factories are boarded up and jobs gone.

RICHARD DIETZ, FEDERAL RESERVE BANK OF NEW YORK: It's very difficult to compete with low cost labor in other countries. So a lot of manufacturing is finding they are, themselves, considering relocating some of their jobs to other countries.

HOPKINS: In order for Eastman to survive, Stevenson may have to send jobs overseas and lay off as many as half of his workers in Buffalo.

(END VIDEOTAPE)

HOPKINS: Eastman Machine did win one battle. U.S. Customs officers banned Chinese copies from coming into this country because the Chinese also stole the product manual. That's a copyright violation. But with few remaining customers in this country, it was a shallow victory for Eastman -- Lou.

DOBBS: That is an incredible story. They now simply have to move to China in order to compete after their designs were stolen?

HOPKINS: Right.

DOBBS: Amazing. Jan, thank you. Jan Hopkins.

Well, intellectual capital is not the only American resource being exported to China. As we have reported extensively on this show over the past months, there is great concern now about the number of American jobs being exported as well to China.

My next guest says, however, that that isn't all bad for the economy.

Jeremy Siegel is a respected professor at the Wharton School of the University of Pennsylvania and joins us tonight from Philadelphia.

Good to have you here, professor.

JEREMY SIEGEL, PROFESSOR OF FINANCE, WHARTON SCHOOL, UNIV. OF PENN: Good evening, Lou.

DOBBS: When you say that is it -- that there are positives in the loss of all of these jobs that are being exported to China, to around the world, it seems at best counterintuitive.

SIEGEL: It does seem that way. But there is a very important other side that I think Americans should realize. And that is that when China or India can produce goods and services cheaper that means that we, as consumers -- and we're all consumers -- are able to have our income go further, stretched longer, increase productivities. My belief -- a lot of the increase in productivity we're seeing is really because of a lower cost of goods for China.

So that means that we have more purchasing power, we can spend more on other things that we couldn't afford if it were being produced in the United States by a higher cost producer.

DOBBS: Jeremy, you're the professor. But if we're achieving higher productivity through lower-costs Chinese imports, isn't the effect of productivity higher productivity, to put in a bance (ph) and to defer job creation?

SIEGEL: Well...

DOBBS: Further?

SIEGEL: Certainly part of productivity growth is laying off workers that are not as productive. But the flip side of that is consumers having more income to spend on other goods or services. In other words, if we can buy a television $100 cheaper from China than we could here, that's $100 that consumers can spend on DVDs or on entertainment that is produced here rather than abroad.

DOBBS: Let me pose the inverse to you, professor. Certainly lower costs, consumer goods that are being imported from China now have resulted in a tremendous trade deficit. But isn't the inverse corollary that if U.S. jobs here were robust, high-paying, their families would have greater personal disposable income to buy perhaps higher priced American-made products?

SIEGEL: I'm glad you mentioned the trade deficit. That's a very important issue.

And if we actually take a look at the last quarter century or the last 10 years, when we developed this trade deficit, still despite that, the U.S. has been the foremost job engine in the world. Since 1979, when our manufacturing workers...

DOBBS: Right.

SIEGEL: ... employees peaked, we have -- we have lost approximately 5 million manufacturing workers during that period. But we've gained 40 million other jobs.

DOBBS: Wait, professor. Professor, Jeremy Siegel....

(CROSSTALK)

SIEGEL: ...and they have more protectionism...

(LAUGHTER)

SIEGEL: ...and they don't have a trade deficit.

DOBBS: Jeremy Siegel, I have read almost everything you've ever written. You and I have known each other for years. But that almost sounded like a political construction. You're not suggesting that the loss of all of those manufacturing jobs resulted in the creation of 40 million jobs over two decades, are you?

SIEGEL: No.

DOBBS: Because I didn't want to infer that from any inadvertent construction.

SIEGEL: I'm saying very much what Alan Greenspan has said for the last 10 years. He says, yes, we're losing jobs, but we as an American economy have been able to produce more jobs in reflection to the jobs that are lost.

Certainly I'm not saying that one causes the other. But when you look at the big picture, we are still the foremost job creators in the world.

DOBBS: Yes, we are. And we're the wealthiest nation in the world and we have the strongest markets, albeit from time to time we have flaws. but at the same time, we are looking at the Jobs and Growth Act of 2003, in which we are seeing capital expenditures moving overseas.

They're still -- companies are still getting a 50 percent tax break if those moneys are spent before the end of 2004. It doesn't matter whether they're Chinese made or where they're made or American made. Those companies are getting a break.

We're looking at not only manufacturing jobs, but I.T. jobs, sophisticated, high-paying jobs being shipped. This is brand new, professor, as you know. And we're acting as though because we have been successful in the past, because we are blessed with great resources we can just go on blindly without good data, without a strong policy analysis and a determination of what our future will look like.

That's not good economic thinking, it's not good political thinking, is it?

DOBBS: I was listening to your former clip just before we started seeking and it reminded me of Bill Gates saying that we're doing very well in China. All we have to do is to get them to pay for what they're using.

And you're right. The theft of trade secrets and copyrights is rampant. Of course, we're having trouble with our own Internet and downloading in the United States. What is theft and what is not? I mean, I -- we see it here at the universities. Our Ph.D. Students are coming from abroad. They're taking a lot of the university jobs that were formally almost always Americans in Ph.D. This is the global world I think that we live in, Lou. Listen, we don't say Minnesota is losing jobs, Iowa is gaining jobs. I think we have to look at the whole world and look at what is happening to the world economy because that's eventually, I think, where our future is going to lie.

DOBBS: Professor, it's determining what that future is that obviously is the reason for our focus here, and looking less to serendipity and perhaps misplaced confidence in the unlimited success that we as Americans might enjoy.

Professor Jeremy Siegel, it's always good to have you here. Come back soon.

SIEGEL: Thank you, Lou.

DOBBS: One success story tonight to report in the fight against shipping U.S. jobs overseas. Late today, Malden Mills closed a deal that could allow owner Aaron Feuerstein to buy back his textile company as it emerges from bankruptcy. That would allow him to keep nearly 1,000 jobs here at home. The creditors, including GE Capital, wanted to ship those jobs to China.

The company gained national attention back in 1995, after Feruerstein kept 1,200 workers on a payroll after a fire destroyed his factory.

Tonight's thought is on business. "In democracies, nothing is more great or more brilliant than commerce. It attracts the attention of the public and fills the imagination of the multitude. All energetic passions are directed towards it." That from philosopher, author, political scientist Alexis De Tocqueville.

A reminder to vote in our poll. The question -- "Who should borrow that $20 to rebuild Iraq?" The U.S. government? The Iraqi government? The United Nations? Perhaps France and Germany? Cast your vote at cnn.com/lou. We'll have the results a little later in the show.

Tonight's quote is from a member of Iraq's interim governing council who today urged U.S. lawmaker to give that money to Iraq, saying, "This money, if given as a grant, will be a very big boost to the relationship between the United States and the Iraqi people. And indeed, with the entire Arab and Muslim world. it means the United States came to help the Iraqi people. So grant we prefer." Ahmed Chalabi, leader of the Iraqi National Congress.

Coming up next, Christine Romans with market.

A million dollars may not go as far as it used to, but despite the economy, more Americans know just how far that million dollars will go. We'll have that good news for story and much more still ahead.

Please stay with us.

(COMMERCIAL BREAK)

DOBBS: A million may not go as far as it used to, but despite the economy, more Americans know just how far that million dollars will go. We'll have that good news story and much more still ahead. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The results of our poll tonight. Who should borrow that $20 billion to rebuild Iraq? Twenty-three percent of you said the U.S. government, 61 percent said the Iraqi government, 13 percent held off to the United Nations, 3 percent optimisticly with suggesting France and Germany.

The millionaires club in this country is growing. Almost 4 million American households now have liquid assets of more than $1 million, an increase of more than 14 percent a year ago. It is the highest level in a couple of decades. NFO WorldGroup which conducted that survey, attributed to the rise of stability in the equity marks and well-diversified portfolios whatever that means. The stock market didn't help create any new millionaires and diversification was entirely the answer in this market that saw the Dow fall 105, the Nasdaq down 38 almost and the S&P almost 11 points lower.

Christine Romans is here with the explanation.

CHRISTINE ROMANS, CNNfn CORRESPONDENT: Weak consumer confidence, Chicago manufacturing helped push the market lower here. It was the last day, Lou, of the month and the quarter so we will run down the numbers for you. September the first down month in seven for the Dow and S&P. The Nasdaq had its worst month in a year. Still stocks were up for the quarter. Yesterday we invertly showed you yearly numbered. Here are quarter numbers.

For the quarter, single digit gains for blue chips, 10 percent higher for the Nasdaq. Take a look at the stocks over the past 52 weeks. Big gains there. Investors have been moving out of bonds, into stocks in recent months. Past few weeks that trend has continued. But watch for flows into stocks to slow, some are saying, because of the sandal surrounding mutual fund market timing. Alliance company today suspended two executives after finding conflicts of interests related to mutual fund trading. Eliot Spitzer probe rippling through Wall Street. And today FCC Chief William Donaldson said the SEC is studying rules to thwart market timing. Janus tonight, Lou, outlining finds of it's internal review into fund shenanigans. There were 12 special relationships and frequent trading in five retail funds and two other adviser funds. It has hired Ernst & Young to find OKWU: how much it cost fund holders.

Meanwhile, Wall Street job loses. Morgan Stanley says it fired dozens of employee's including about a dozen fund managers not related to any Wall Street probes, Morgan Stanley quick to point.

DOBBS: Fund manager?

ROMANS: Fund mangers because of performer. And Ford cut 3,000 jobs. That brings us back to consumer confidence. That number, one of the reading in there, 35 percent of those surveyed thinks jobs are hard to find. That's the highest since December of 1993.

DOBBS: And as the saying goes, we will see what the next few months bring.

ROMANS: Absolutely.

DOBBS: Christine Romans, thank you.

Taking a look at your thoughts now.

Hue Gray of Madison, Alabama wrote in to say "Lou, thank you for keeping us informed with the "Great American Giveaway." If the politically correct networks had the courage to realize the damage created and step up to the plate with the truth maybe we'd have a chance at bringing this country back to the standard for which it was famous, rather than filling greedy corporate coffers."

Matt Nelson of Champaign, Illinois, "Thank you for finally bringing to light the giving away of American jobs. Academics have experienced similar giveaways. It is becoming rate to find an American professor at our major educational institutions."

Sherry Bunting of Wilderness, Missouri wrote about the cross country freedom ride. "Why don't they do more to stop the flood of people who are here illegally, like the ones on those buses. They come here and take our jobs and get medical care that even some of our own citizens can't get."

And I should point out, not all of the people on those buses are illegal. Although we told that some of them are according to organizers of the group.

Gary Gleason of Tacoma, Washington said, "Thanks, Lou, for your comments on all of the jobs being outsourced. I worked for Boeing for 23 years and gave everything to that company and now they are spitting on all of our careers by outsourcing jobs to, as you said, slave labor markets."

Jeff of Phoenix, Arizona. "It appears the people responsible for sending all the manufacturing jobs out of the country are quickly becoming a threat no different than the terrorists. It's economic treason."

Corky Woodring of Dillon, Colorado, "Some of these companies should outsource the management. If they keep letting their greedy companies send all the jobs away, soon there will be no one left in the good old USA to buy their products."

Not the first time we've heard that idea. It seems to be growing at popularity. We love hearing from you. E-mail us at loudobbs@cnn.com. That's our show for tonight. Thanks for being with us.

Tomorrow our special report "The Great American Giveaway." Why billions of dollars are being spent on health care for illegal aliens.

Frank Newport of the Gallop group and Matthew Felling (ph) of Statistical Assessment Service face off on the validity of all of the those popular survey polls. The Ed Gillespie, the chairmen of the Republican National Committee joins us. And the national coordinator of the freedom ride will be here with me. Please be with us.

For all us here good night from New York. "ANDERSON 360" is next.

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

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