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Lou Dobbs Tonight

Pentagon Announces New Iraq Troop Deployments; Democrats Facing Crisis in South?; Interview With Education Secretary Rod Paige

Aired November 06, 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.


ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, November 6. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.

President Bush today called for democracy throughout the Middle East. Mr. Bush said the global wave of freedom has barely reached Arab states. Suzanne Malveaux will report from the White House.

From Washington tonight, we'll report that we're all working harder than ever for less, while politicians ballyhoo our higher productivity.

And tonight, "Wasted Minds: Our Failing Schools." We're spending more on education and our students are falling farther behind. Tonight, we'll be joined by the secretary of the Department of Education, Rod Paige, to find out why.

And Howard Dean says he's sorry. John Edwards says Dean is condescending. And our senior political analyst, Bill Schneider, says the Democrats are facing a crisis in South.

The Pentagon today announced details of its plans to send almost 130,000 new troops to Iraq with the words, "Ladies and gentlemen, we are at war." Air Force General Norton Schwartz said the military will respond to the nation's call to duty; 85,000 active duty troops and more than 40,000 Reserve and National Guard troops will replace units scheduled to leave Iraq early next year. The 1st Marine Expeditionary Force is among the active-duty units being ordered to Iraq. It recently came home after taking part in the attack on Baghdad.

Senior Pentagon correspondent Jamie McIntyre reports -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, Lou, there are about 132,000 troops in Iraq now. And under the Pentagon plan, by May of next year, that would be down to about 105,000 troops, assuming the security permits it.

Now, even as attacks against U.S. forces are mounting, the Pentagon is planning to send, if you do the math, about 25,000 fewer troops to Iraq. This is for essentially the second year of the U.S. occupation. The Pentagon is arguing, however, that the rotation plan, although it's fewer troops, will provide a better mix that can engage and go after the insurgents.

(BEGIN VIDEO CLIP) DONALD RUMSFELD, SECRETARY OF DEFENSE: Numbers do not necessarily equate with capability. We're bringing in forces that are appropriate to deal with the evolving threats in Iraq today, including more mobile infantry elements.

(END VIDEO CLIP)

MCINTYRE: Mobile and infantry are the key words there. The Pentagon is trying to get troops that are going to be better suited to go after some of the insurgents. Among them, the 85,000 combat troops you mentioned, Lou, are three Army National Guard brigades, built around the Army's new Striker combat vehicles. These are the wheeled vehicles that are more nimble and maneuverable than tanks or Bradleys.

Altogether, some 43,000 Guard and Reserve troops are getting the call. Mostly, those are from the Army, although Marine units, as you mentioned. Also, the Navy and Air Force have a small number in there as well. And some of those troops will be heading to Afghanistan.

Today, the issue also came up about the numbers of Iraqi forces that are actually helping to provide security. Just yesterday, the Pentagon said 115,000. Today, they said 118,000, a jump of 3,000 in just 24 hours.

And the chairman of the joint chiefs trying to respond today to some of the skepticism about whether those numbers are inflated.

(BEGIN VIDEO CLIP)

GEN. RICHARD MYERS, JOINT CHIEFS CHAIRMAN: I think this is due largely to the fact that all of the Iraqi security force programs are now up and running. And they're paying decent wages, which, in turn, has led to an increase in successful recruiting.

(END VIDEO CLIP)

MCINTYRE: Now, Defense Secretary Rumsfeld today stressed again that, if any of his commanders feel that they need more forces, all they need to do is ask for them. But he said they had a discussion again today with General Abizaid, the Central Commander, and General Sanchez, the commander of troops on the ground. He said not one commander has expressed a need for more U.S. troops at this point -- Lou.

DOBBS: Jamie, thank you very much -- Jamie McIntyre, our senior Pentagon correspondent.

Two more American soldiers were killed today in Iraq. One was killed near Baghdad when insurgents ambushed a patrol of the 82nd Airborne Division. The other soldier was killed when his truck ran over a land mine near the border with Syria. Also today, Poland lost its first trooper, its first combat death, in fact, since it sent 2,000 troops to Iraq.

The Polish soldier was shot near Karbala. He was the first Pole to die in combat since the Second World War. Meanwhile, the U.S. Army held a memorial service in Iraq for the 15 soldiers who were killed when terrorists shot down a Chinook helicopter Sunday; 1,000 troops attended the service. Many wore black cavalry hats as a reminder of their service in the Indian wars in the Old West.

The United States is facing a growing insurgency in Iraq. But it seems American troops know very little about who is responsible for those attacks. A senior intelligence official in Washington said the United States has now only fragmentary intelligence about the insurgents and the terrorists.

Our national security correspondent David Ensor has the report.

David, this is a remarkable admission. Just how bad is our intelligence in Iraq?

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: Well, Lou, as you said, this official says it's only fragmentary intelligence, though he says a major effort is under way now to fill in the gaps.

The official says -- quote -- "We are reduced to making analytical inferences on this, based on fragmentary intelligence." And that, of course, worries senior people over at the CIA, because, as he put it, "There is an insurgency in Iraq and it is growing."

U.S. officials say they are making inroads developing Iraqi sources of information and they are using other kinds of surveillance techniques better. But experts, like former CIA analyst Ken Pollack, say the hostility of many Sunnis in Iraq in the central area of the country is perhaps the main issue that needs to be addressed.

(BEGIN VIDEO CLIP)

KENNETH POLLACK, CNN ANALYST: If the Sunni population at large were to turn against the insurgents and begin to cooperate with the United States, under those circumstances, you could see a lot of intelligence coming in, simply because people will say, hey, there's a group of guys down the street who are playing around with explosives. They're probably up to no good. Why don't you check them out?

That's how insurgent warfare gets solved, when the population comes over to the side of the government forces and says, basically, to themselves, we're better off with the government than the insurgents.

(END VIDEO CLIP)

ENSOR: Within that Sunni population in Iraq, U.S. officials say the attacks are coming from three groups, within that group, the die- hard Baathists, radical Islamic terrorist supporters and some old- fashioned Arab nationalists -- Lou.

DOBBS: David, in that categorization of those attacking U.S. forces and Iraqi civilians, there's nothing really new. This war has been planned for some time. There is considerable knowledge about the region. Why in the world is the CIA, the DIA, and other U.S. intelligence agencies not able to do a far better job? ENSOR: They simply don't the human intelligence sources in the right places. And they point out that these attacks, in many cases, are only known about by the actual attackers themselves.

They're on a very ad hoc basis, in many cases. So it's extremely difficult to get intelligence. They underscore the point that Ken Pollack made a moment ago. And that is that they've got to get to a point where the population in the Sunni area is against the attackers and wants to turn them in to the U.S. and to the new Iraqi authorities. That's the only thing that's going to stop them.

DOBBS: And the fact is that our intelligence agencies simultaneously are admitting there is a critical shortage of Arab speakers in their ranks. This seems to be a very difficult challenge for our intelligence agencies across the board. Is that correct?

ENSOR: That is correct.

They have done a lot of hiring in the last couple of years. And a lot of native Arabic speakers have been brought on board. But you're right. They still have a terrible shortage. There's a lot of need there. They're looking at various other ways of getting interceptions and so forth translated, perhaps developing some machinery that might be able to actually translate Arabic into English without a person being involved -- Lou.

DOBBS: Astonishing, David. Thank you very much, David Ensor, our national security correspondent.

President Bush today tried to shift the debate about Iraq to a broader discussion of U.S. strategic goals in the Middle East. President Bush said the failure of democracy in Iraq would encourage terrorists all around the world.

White House correspondent Suzanne Malveaux reports -- Suzanne.

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Lou, today, President Bush signed an $87.5 billion package, that for military operations and reconstruction in Iraq and Afghanistan, 64 percent -- $64 billion, rather, for the military operations and $18 billion for Iraqi reconstruction.

The big victory here is that the president got that reconstruction money in the form of grants, not loans, as he had lobbied. That nearly guarantees that he doesn't have to go back to Congress asking for more money during the election campaign season.

Now, despite the polls that show that more than half of Americans do not approve of this big package, President Bush using the occasion to argue that this money shows there is support for the U.S. mission inside of Iraq. Also, President Bush earlier today outlined his broad vision for a new policy in dealing with the Middle East, to work with countries who are making democratic reforms.

(BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It is worth our effort. It is worth our sacrifice, because we know the stakes. The failure of Iraqi democracy would embolden terrorists around the world and increase dangers to the American people and extinguish the hopes of millions in the region.

(END VIDEO CLIP)

MALVEAUX: Now, today, President Bush criticized Iraq and Syria for what he called was a legacy of torture and oppression. He also encouraged, prodded very gently, Egypt and Saudi Arabia to do better in their democratic reforms. He praised many countries for moving forward.

But, Lou, I should let you know there were no solid policy changes, simply a broad vision of what he sees the Middle East should be -- Lou.

DOBBS: Suzanne, thank you. And, of course, the president enunciated the direction of that Middle East policy at beginning of this year.

There are reports, Suzanne, that the United States turned down a last-minute peace deal offered from Iraq that could have perhaps avoided a war, reportedly through an intermediary. What is the White House today saying about that?

MALVEAUX: Well, I spoke with White House spokesman Scott McClellan on a number of occasions about that. This is about a report of Richard Perle, who talk with somebody, a Lebanese businessman, and brought that information to the CIA, saying that, allegedly, there was some sort of offer from Saddam Hussein to end this peacefully, Scott McClellan saying that there are no credible or legitimate reports at all of any kind of offer that would have averted military action.

As a matter of fact, he said that Saddam Hussein was given 48 hours to get out of the country or face military action, that Saddam Hussein missed that opportunity. He says there was no reason for back channels, because the door was wide open for Saddam Hussein -- Lou.

DOBBS: Suzanne, thank you -- Suzanne Malveaux, White House correspondent.

Following up now on another story that we have been reporting in Washington, the Pentagon today agreed to a compromise plan that would provide the Air Force with 100 new refueling tanker aircraft. The Air Force will lease 20 Boeing 767 tankers and buy, purchase, 80 more. The Pentagon originally had wanted to lease all of those 100 aircraft.

The plan was thrown out after protests from Congress about the high costs of leasing. Today's deal will cut overall cost of the program from $21 billion to about $17 billion.

Still ahead here tonight, "The Great American Giveaway." Who says this is a jobless recovery? Nearly two million jobs have been created in the past three years. They've just been filled by immigrants and illegal aliens. Peter Viles will report.

And our special report tonight, "Wasted Minds: Our Failing Schools" -- tonight, students without textbooks. That's only part of the education crisis facing this country. Lisa Sylvester reports tonight. Education Secretary Rod Paige joins us.

And tonight, "Grange On Point." The Pentagon says it will cut the number of troops in Iraq. General David Grange says more troops are needed, not fewer.

Stay with us. We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Employment level for those born in the United States fell by 800,000.

STEVEN CAMAROTA, CENTER FOR IMMIGRATION STUDIES: Given that immigration has been so heavy in the last year -- three years -- despite the recession, it's very possible that what we are seeing is some significant job displacement among Americans, especially those at the bottom end of the labor market.

VILES: Here's another surprise. Those illegal workers, like the 250 arrested at Wal-Mart stores last month, are covered by some American labor laws, including time-and-a-half pay for overtime. Says the Department of Labor -- quote -- "The department's Wage and Hour Division will continue to enforce the Fair Labor Standards Act without regard to whether an employee is documented or undocumented."

MATTHEW HAYES, FRIEND OF IMMIGRATION LAW ENFORCEMENT: The bulk of back pay claims that are made in front of state departments of labor are for folks who have no legal immigration status, who are here illegally. And there's no inquiry. Generally speaking, on the state level, and even on the federal level, if it's simply a back pay claim, there is no inquiry as to immigration status.

VILES (on camera): Now, this policy, if you can call it a policy, means that those 250 Wal-Mart workers can sue for back pay under American labor laws at the same time they're being deported under American immigration laws.

Peter Viles, CNN, New York.

(END VIDEOTAPE)

DOBBS: And Mexican President Vicente Fox in Texas today, continuing his campaign for greater rights for immigrants and illegal aliens in this country.

President Fox met with Texas Governor Rick Perry. And the Mexican president asked Governor Perry to support a law that would allow immigrants and illegal aliens to use their Mexican identification cards to obtain their Texas driver's licenses. A similar law was passed in New Mexico, which Vicente Fox has already visited. Governor Perry has voiced concerns about that law, saying more documentation is needed to protect national security.

Before visiting Texas, Fox traveled to Arizona and New Mexico to push for better health care and educational benefits for Mexican immigrants and Mexican illegal aliens.

A new report today shows productivity in this country surged to a 10-year high. That's, of course, great news for businesses and the economy. But that increase in productivity is being carried on the backs of the already-overworked average American. And all of this comes while CEO paychecks are, yes, at an all-time high.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Americans are working harder than ever.

LEE PRICE, ECONOMIC POLICY INSTITUTE: People are working much harder now than they were a couple of years ago. They're afraid of losing their jobs. When somebody in their accounting office or in the restaurant leaves or is forced out, everybody else is working harder to get the same thing done.

PILGRIM: The statistics prove it. Productivity climbed 7.4 percent last quarter. Even with the economy growing, companies are still shedding jobs, 2.5 million jobs in the last 2.5 years. The productivity gains, due to squeezing workers, may only be temporary, according to one theory explained by Federal Reserve Chairman Greenspan.

ALAN GREENSPAN, FEDERAL RESERVE CHAIRMAN: An unusual amount of caution is leading businesses to press workers and facilities to a greater degree than can be sustained over the long haul.

PILGRIM: Official government statistics don't show significantly longer work weeks. But one private survey of 700 companies shows, workers average 44-hour work weeks. Economists say employees are often pushed to work longer hours after off the books.

Radio stations say they've started commuter drive time programs at 5:00 in the morning, because more people are heading to work at that time. Americans get fewer vacation days than workers in other countries, often less than half of what other workers enjoy in Europe and Japan. According to ComPsych, the second largest employee- assistance company in the country, 56 percent of Americans now admit to postponing even those vacation days, for fear of losing their jobs.

(END VIDEOTAPE)

PILGRIM: Another survey by that same group found 63 percent of workers admit to extremely high levels of stress. That's up 15 percent in just the last six months -- Lou. DOBBS: And that's why everyone should be extraordinarily careful when they get excited about these high productivity numbers, as we emerge from recession to recovery.

Kitty Pilgrim, thank you very much, reporting tonight from Washington.

And it brings us to the subject of tonight's poll. The question: Is this economic recovery benefiting you yet? Yes, no, or what recovery? Cast your vote at CNN.com/Lou. We'll have the results coming up later in the show.

But coming right up, "Wasted Minds: Our Failing Schools" -- tonight, closing the book on valuable school programs that are already far too rare, students falling farther behind. Lisa Sylvester will have the report. Secretary of the Department of Education Rod Paige is our guest.

And who has the edge of the race for the White House, or at least the Southern vote, comes down to good old-fashioned values. Senior political analyst Bill Schneider will have the answer for us and more still ahead.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight, in our series of special reports, "Our Failing Schools," cutbacks in school budgets are coming at the expense, of course, of students. In Alabama, for example, more than two-thirds of the student there fail to meet proficiency standards on achievement tests. The state's response? Incredibly, it is cutting spending on education.

Lisa Sylvester is here now and has the report for us -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Lou, unlike many other states, Alabama's public schools get most of its funding from the state, which is in the midst of an enormous budget crisis. And that means making some very tough decisions.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Some Alabama schools are so pressed for money, the students don't even have their own textbooks, making it difficult to assign homework.

UNIDENTIFIED FEMALE: This is your independent reading time.

SYLVESTER: But the deep cuts don't end there; 3,600 teachers will be let go next year. Tutorial problems that help students graduate on time are on the chopping block. And a nationally renowned reading program that promises to bring all students up to grade reading levels is being scaled back.

ED RICHARDSON, ALABAMA EDUCATION SUPERINTENDENT: What we're going to see is our test schools and our student achievement levels decline, dropout rate go up, which I think would have a long-term impact on this state.

CHILDREN: Go. I'm.

SYLVESTER: Alabama schools had to slash $100 million from this year's budget and are bracing for another $200 million reduction next year.

AMY RODGERS, TEACHER, HALCYON ELEMENTARY SCHOOL: This reading program gives children the confidence that they need to learn to read. Without this program, unfortunately, many children would be left behind.

SYLVESTER: It's not just Alabama schools facing a severe budget crunch. The American Federation of Teachers estimates that districts in at least 22 states have cut spending; 13 states have gone as far as to scale back K-through-12 programs, the last thing anyone wants to touch. Without learning the fundamentals, students may struggle the rest of their lives.

WILLIAM COX, STANDARD & POOR'S SCHOOL EVALUATION SERVICES: If you're not investing today in good reading programs, that are very important particularly for early childhood development in the early grades, then that creates a long-term impact that you can't make up.

SYLVESTER: Many school districts have opted to cut electives as the least painful option. Schools in Roseburg, Oregon, for instance offer Spanish, but not French. But even cutting subjects like music, art and foreign languages has a direct impact on the core subjects.

LEE PATERSON, ROSEBURG SUPERINTENDENT: The research does show that students who take a second language do perform better than their peers who don't have that opportunity. The same can be said of music.

SYLVESTER: The decision to save money by cutting school funding looks to be shortsighted, because, ultimately, someone has to pay. And right now, it's the students in the classroom.

(END VIDEOTAPE)

SYLVESTER: Schools are having to get very creative to raise money. One school district in Austin, Texas, for instance, wants to sell the naming rights for its new stadium. Bidding starts at $2 million -- Lou.

DOBBS: And we wish them well.

Lisa, thanks. Incredible, what the state of Alabama faces, and those students. Lisa Sylvester, thank you.

Well, this country spends $470 billion on education each and every year. My guest tonight says that should be enough to ensure that every third grader is able to read at a third grade level. The secretary of the Department of Education, Rod Paige, also says parents should have the option to use vouchers to send their children to better schools.

Secretary Paige is with us now.

Good to have you here.

ROD PAIGE, EDUCATION SECRETARY: It's good to be here.

DOBBS: Mr. Secretary, that's an enormous amount of money, $470 billion. Why in the world can't our children, too many of them, why can't they read?

PAIGE: Absolutely.

In fact, this nation last year spent more money on K-12 education than it did on national defense. Is it too much to ask that a fourth grade child read on a fourth grade level after this nation commits that much public money? There are clearly other reasons why our students are not performing.

DOBBS: What are they, in your judgment?

PAIGE: Well, I think accountability is a good example of something we need to be better at.

And that is why the president, in his No Child Left Behind act, has accountability right up at forefront, accountability, stop making excuses about some students who are having difficult situations at home, difficult languages, but take responsibility for students and teach our students to read.

DOBBS: That's great. We know, first, critics say that it's simply not an adequately funded, while noble goal. What is your reaction to those critics?

PAIGE: What's underfunded about $288 billion K-12 last year, federal and state?

DOBBS: That's...

PAIGE: That's a lot of money.

DOBBS: That's a lot of money, by any definition.

PAIGE: That's right.

DOBBS: Yet we just heard from Lisa Sylvester. She reported on the state of Alabama with students who don't even have textbooks. Your department is responsible for education at the federal level. But there are 50 states out there also responsible, and all of those school districts. And the idea that our public education, which was the -- in my judgment, the great treasure of this company in our 200- year history, it is going -- I'll just say it -- it's going to hell in a handbasket.

PAIGE: Well, no, I'm not sure I would agree with that. I know, when President Bush took office in 2000 in January, we found that our education system was not meeting, despite the fact that we had many wonderful educators and many wonderful teachers and principals and some great schools, primarily, our system was not operating effectively. But now that the president has proposed and the Congress has enacted the No Child Left Behind Act, I think there are many positives things that we can say about what's going on in our education.

DOBBS: Oh, I'm not arguing, Mr. Secretary, that there aren't many positives in that educational system. But what I'm saying is that, when 36 percent of our fourth graders can't read at a fourth grade level, when we have students who can't find a textbook in the state of Alabama -- and it's not the only state in which that's occurring -- we've got a horrible problem.

(CROSSTALK)

DOBBS: And that, to me, is inexcusable.

PAIGE: It is. And we do have a horrible problem.

And that is why we as a nation must embrace the vision of the president that every child learn. And the No Child Left Behind Act is the framework around which we can improve this terrible situation that you're speaking of.

DOBBS: The fact is, our special-education programs, which are laudable and notable and remarkable, in point of fact, many teachers blame the inability to deal effectively with special-ed students for slowing down other students and diverting much needed money and time.

How do we deal with that issue, because no one wants to talk about it, it seems?

PAIGE: Well, let's talk about it.

The No Child Left Behind idea means no child left behind. A child who has special education needs is just like a child that does not have special education needs. Every child should get our best effort. So if a child has special needs, we need to meet that child's need just like we do others. So we want every single child to learn.

DOBBS: Every child to learn?

PAIGE: That's right.

DOBBS: The definition of special ed needs -- is it truly, while noble and aspirational -- is it realistic when we're punishing many students because of that diversion of funding?

PAIGE: Well, I think what we need to do...

DOBBS: And time?

PAIGE: Well, what we need to make sure that we're adequately addressing needs of all students, no matter what they are.

The Special Education Act i-d-e-a is being is looked at now -- it's been -- to be reauthorized, and look at some of the issues in that we need to improve in that particular act. But we cannot leave special ed children behind either.

DOBBS: And let's -- let's talk also about minorities in this country. Still, the gap in testing in excess of 30 percent, whether black or Hispanic, behind white students.

PAIGE: Absolutely. And that is what we're working about -- working now. That is why it's so important that we embrace the No Child Left Behind Act and continue to work on the framework that it provides for us.

DOBBS: Mr. Secretary, I'll buy into the No Child Left Behind. But what I can't buy into is why through -- and not to put this on the Bush administration, the Clinton administration, the administrations before it, the problems that are deep-seeded in the educational system. I keep asking myself and let me ask you, where in the world is the National Education Association? Where is the teachers' association? Where is the PTA? Everyone goes on as if we can just simply surrender our future, not worry about the fact students are not being taught mathematics and natural sciences. How frustrated must you be?

PAIGE: Oh, I think if I had the luxury to be frustrated, I could be very frustrated. But what I'm going to do is work hard to make sure that we get accountability in schools, that parents get choices, that we're using the right pedagogy, and that we have local options and flexibility.

This is what we're going to do on a No Child Left Behind Act. And that is going to be the framework around which we're going to improve schools. But we must improve schools in a way that every single child has an opportunity to learn.

DOBBS: Mr. Secretary, we thanks -- we thank you very much, as always, for being here. It's -- it is one of the toughest jobs in Washington, if not the toughest, in point of fact, because you're so dependent on so many other people, including communities and the parents of the students who you're trying to serve.

PAIGE: That's right. And that's why the nation must embrace this and help us make sure that we create a system in America where every single child has an opportunity to learn. That's what the president wants. That's what I want as well.

DOBBS: I think that's what we all want.

PAIGE: Thank you.

DOBBS: Mr. Secretary, thank you very much.

PAIGE: Thank you.

DOBBS: Secretary Rod Paige.

PAIGE: Thank you.

DOBBS: Coming up next, your government at work. The deficit, soaring. But tens of thousands of government officials are flying high, and we do mean flying in high style. You're paying for it. That story and the market next.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: A rally in the market today. The Nasdaq at its highest level in almost two years. The Dow up 36 points, the Nasdaq up 17, the S&P six points higher.

New York's attorney general, Eliot Spitzer, who was here with us last night, making progress in his investigation of the mutual fund industry.

Christine Romans with the story -- Christine.

CHRISTINE ROMANS, CNNfn CORRESPONDENT: Mutual funds under fire here today again, Lou, as the Street cleaning continues. The New York attorney general may charge Alliance Capital, Strong Capital, and its founder, Richard Strong, late next week. And settlement talks continue as some of these firms under investigation struggle to come out of this mutual fund mess with some integrity intact.

Alliance says the internal investigation has found instances of market timing and it expects sanctions and fines, and it pledged to pay back shareholders.

Meanwhile, the scandal hurts confidence in corporate America. Look at this: a U.S. Trust survey of the wealthiest Americans shows 79 percent question the reliability of financial statements, 92 percent want more vigilance from boards and 85 percent favor greater regulation of companies and of Wall Street.

And angry words again today from the largest state pension fund on the proposed new structure of the New York Stock Exchange.

(BEGIN VIDEO CLIP)

SEAN HARRIGAN, CALPERS PRESIDENT: I think we learned a hard lesson in the accounting industry scandals. They tried to self- regulate, and perhaps it worked for a short period of time. But over time, it failed miserably and I see the same fundamental flaw in the New York Stock Exchange self-regulatory proposal.

(END VIDEO CLIP)

ROMANS: And following up on our report several weeks ago about the ouster of Motorola CEO Christopher Galvin, he will consult for at least $1.9 million a year for the next two years. Under his tenure at Motorola, the stock fell 47 percent, debt doubled, sales fell and thousands of jobs were cut. He will be staying on for two more years as a consultant because of the contract he had already signed with the company.

DOBBS: It's just about $2 million a year, and with that kind of performance you'd want him at your beck and call if you were the new CEO, so that you could know not what to do (UNINTELLIGIBLE).

ROMANS: I guess so.

DOBBS: Christine, thanks. Christine Romans.

Your government at work tonight. High-ranking Defense Department officials flying first class and business class at your expense. A new General Accounting Office report found the Defense Department spent almost $124 million for what it calls "improper premium travel" during the fiscal years 2001 and '02. The money spent on 68,000 premium class airline tickets. The GAO report says nearly three quarters of all DOD premium travel during those years wasn't properly authorized. And it says the offenders including military and civilian defense officials, including political appointees.

A reminder to vote in tonight's poll. Following the upbeat news on the economy, "Is the economic recovery benefiting you yet? Yes? No? Or what recovery?" Cast your vote at cn -- cnn.com/lou. Results coming right up.

Coming up next, General David Grange "On Point." The Pentagon cutting the number of troops in Iraq. General Grange says the United States needs an overwhelming number of troops on the ground in Iraq. "Grange on Point" is Next.

Please stay with us.

(COMMERCIAL BREAK)

DOBBS: "Grange On Point" tonight, cutting the number of American troops in Iraq. The Pentagon today said it will begin rotating new troops into Iraq next year, sending over fewer than will return. Joining me now, General David Grange. General Grange, this decision to cut troops, is it the right answer, in your judgment?

BRIG. GEN. DAVID GRANGE, RET. ARMY: Well, I think, right now, Lou, what you have is a critical period. You have the guerrilla forces, insurgents there conducting a surge. They're smelling blood. They're killing as many American as they can to break the will, not only of American people, but also of the people of Iraq.

So it appeared to me that now would be a time that you'd want overwhelming force which comes both in capability and on boots on the ground, not less force.

And also, I think it sends a signal that maybe we want to leave to quick. G.I.'s want to come home, but not until the mission's over. So now is not the time to announce lesser capability, whether it be power, capability or on boots on the ground. DOBBS: Our troops in Iraq have to be wondering what in the world is going on, wouldn't you say? Because they're talking about fewer forces, they're facing more attacks every day. That -- is that a concern that you would have?

GRANGE: Well, it's hard to second guess the commander on the ground, because he has his finger on the pulse. But it would seem to me that now is the time to have this overwhelming force until you have the transition with the Iraqi police civil defense, military can take over for U.S. and other coalition forces.

So during this critical phase you need to have the proper amount of force on the ground, the right types of forces on the ground, to win.

DOBBS: What you're saying seems, to me, to make great sense. Secretary of Defense Rumsfeld today said that he had not heard a request from single field commander in Iraq for more troops. There is always that question, would one expect a field commander to buck what is the obvious policy of the Rumsfeld Pentagon? What do you think?

GRANGE: Well, I know some that would. I know some that did. I would say --

DOBBS: Are they still in the army?

GRANGE: You know, Lou, one of the principles in the military in operations is what they call weighing the main effort. In other words, you resource the main effort so there's no doubt that you will win. And I -- that's it principle that the military personnel follow, the leaders follow. And that's really what has to be done here.

And so until these things work out with Turkish and other coalition forces and the Iraqi forces you need to have enough G.Is to do no doubt, not just enough forces, but more than enough forces to give you the flexibility.

DOBBS: "Stars and Stripe" poll, General Grange, found more than half of those surveyed in the poll would not re-enlist in the army. Is that a crisis?

GRANGE: Well, it's not a crisis now. Right now all of the services met or got beyond the quota that they tried to bring into the armed forces all of the services. But I think in the future it may be. Now, usually only about half of a force does re-enlist, but you want the majority of them to do that because that's your crop of seasoned, wedded, troopers that train the new guys and gals that come into the force.

DOBBS: Right.

GRANGE: And so it would be a crisis down the road and I think there may be.

DOBBS: And with 40 attacks a day, and let me be clear, I mean, I am absolutely, totally, fully supportive of our commanders, our troops in Iraq, the president's policy in going into Iraq, democracy is a wonderful ideal. But protecting our troops, it has to be the No. 1, it would seem to me, priority for our men and women in Iraq.

What happens if these attacks go beyond 40 a day? They're already at 40. They were 30, they've been escalating throughout. We just heard from our national correspondent David Ensor that our intelligence is, in a word, lousy, and not improving. What does the future hold, in your judgment?

GRANGE: Couple things there, Lou. First of all, on the intelligence aspects it's the hardest part of this, you know, the answer's always we don't need more troops we need more actionable intelligence. Well, this type of intelligence you find by having enough people around to pick it up. It's not technical intelligence. It's human level intelligence, whether it come from the G.I. seeing something and reporting it or an Iraqi reporting it.

DOBBS: Right.

GRANGE: You've got to have that.

The other is that there's a surge right now and we have to counter with a surge with the coalition fores, to bring that amount of attacks down. There's thousands, thousands of patrols every day by coalition forces that we don't get a good feel for. I think that needs to be reported more aggressively so the American people can see the balance of Iraqi -- I mean insurgent operations and American operations.

DOBBS: General David Grange, as always, our thanks.

GRANGE: My pleasure.

DOBBS: Coming up next, a Democratic Senator from the state of Georgia makes the public endorsement for the presidential campaign.

(BEGIN VIDEO CLIP)

ZELL MILLER, (D) GEORGIA: I want a president that's got a little grit in his craw. I want a president that's got some Churchill in him.

(END VIDEO CLIP)

DOBBS: We'll tell you who's the gritty candidate who has Zell Miller's vote. The choice may surprise you. Stay with us.

(COMMERCIAL BREAK)

DOBBS: One of the nation's largest unions today was expected to endorse Democratic presidential candidate Howard Dean, it didn't. It delayed the decision. The Service Employees International Union said it will wait until next Wednesday to announce its support for the former Vermont governor. Dean today met with leaders of the union. The union represents almost 2 million service workers, including janitors and healthcare workers. One of the Senate's most prominent Democrats says the endorsement won't help Dean or any of the Democratic presidents win the elect. Senator Zell Miller of Georgia, who retires next year, has been blasting all nine Democratic candidates for their parties nomination, saying they simply don't have what it takes to lead this nation. That's why Senator Miller says, he's endorsing President Bush.

(BEGIN VIDEO CLIP)

MILLER: What they have done is that they have taken the worst, and I'm talking about all of them, they have taken the worst possible feature of the Mondale campaign, raise your taxes and they have taken the worst possible feature of the Mcgovern campaign, peace at any price and they have combined them. What they ought to have been looking at is how John Kennedy carried the south. He carried Georgia by a larger percentage than he did his own state of Massachusetts. And he did it by being the tax cutter and he did it by being tough on national security.

(END VIDEO CLIP)

DOBBS: Senator Miller's endorsement of President Bush isn't certainly the only problem facing the Democrats in the south. Senior political analyst Bill Schneider reports.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: You've heard about the Democratic party's problems in south, they just got bigger. As Republicans took governorships away from the Democrats in Kentucky and Mississippi this week.

ED GILLESPIE, CHAIRMAN NATL. REPUBLICAN CMTE: I think it's clear that they have a problems in the south.

SCHNEIDER: The chairman of the Democratic Governor's Association claimed the bad national economy triggered a strong anti-incumbent mood in the electorate, meaning the GOP victories are bad news for President Bush, since he'll be the incumbent in chief next year.

Maybe in California last month, where the debate between Gray Davis Republican Arnold Schwarzenegger was about the state's finances. But the force driving the GOP to victory in the south isn't economics. It's values. The president campaigning for the Republican in Mississippi.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I like the fact that Haley Barbour's a man of good values. He honors his family. He treasures his relationship with the almighty.

SCHNEIDER: In Kentucky, Democratic Governor Paul Patton had a big values problem, after he confessed marital infidelity last year.

GOV. PAUL PATTON (D), KENTUCKY: My mistakes were mine alone. I take full responsibility.

SCHNEIDER: Though Governor Patton wasn't running, Bush new exactly thousand make his problems an issue.

BUSH: You want your kids looking at somebody for whom you can be proud. Ernie Fletcher values his faith. He values his family.

SCHNEIDER: How can Democrats compete in the south? By changing the subject, from values to economics. Which is what Howard Dean argued he was trying to do when he said, I want to be the candidate for guys with confederate flags in their pickup trucks.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: I make no apologies for reefing out to poor white people.

SCHNEIDER: By bringing up the confederate flag image, dean brought the debate right back to values when he defended his values, Dean fell right into the trap.

DEAN: I'm not going to take a backseat to anybody in terms of fighting bigotry. I'm the only person here that ever signed the bill that outlawed discrimination against gays and lesbians.

(END VIDEOTAPE)

SCHNEIDER: Now that was a bill legalizing gay civil unions in Vermont, a very tough sell I think to southern white voters who put confederate flags on their pickup trucks, Lou.

DOBBS: Bill, how big are Howard Dean's problems, this delay by the service workers union, this looks very ominous.

SCHNEIDER: I don't think it's really ominous because the delay's is really so another union (UNINTELLIGIBLE) and government workers can join in with the service workers union. And if both of them end up endorsing Dean, that's a breakthrough because the take on Dean has been he doesn't have support with union members, blue collar workers, minorities. The Democratic party's heartland constituencies. But if he gets two big union endorsements he can say, who are you calling the candidate of latte land?

DOBBS: And he stands still in the lead in all the relevant polls, correct?

SCHNEIDER: He's very much ahead in New Hampshire, neck and neck with Gephardt in Iowa.

DOBBS: All right. Bill Schneider, as always, thank you, sir.

Coming up next, top ten reasons to have a baby if you host a late night talk show. Number one, of course is new material. David Letterman's take on his latest production is coming up next. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The results of our poll now, is the economic recovering benefiting you yet? Six percent of you said, yes, 15 percent said, no, and 78 percent, I have to confess I suspected this would be the response would say, what recovery?

Talking a look now at some of "Your Thoughts" many wrote in our poll question last night, asking your reaction to the Democratic memo seeking to politicize prewar intelligence.

From Bridgeport, West Virginia, "I don't like the answer choices for your poll this evening. You should have a third choice entitled, payback!" That from Bryan Moore.

And from Cape Girardeau, Missouri, "It would appear that the Democrats are much more interested in defeating the Republicans than they are in defeating the terrorist," said Lawrence.

From Hot Springs, Arkansas, "Lou, in your interview with Senator Rockefeller, you gave him every opportunity to state that he didn't believe the memo was proper or to disavow it. He would not do either of these things, and that told me more than anything he said." That from David Briscoe.

From Ontario, Canada, "I appreciate your excellent review of the illegal immigration issue. Millions of illegal Mexicans is one thing, but now the President of the country they ran away from is here to help them. A foreign leader comes to the USA to tell you how to better treat the people who ran away from his country! Wouldn't it seem more logical for President Fox to do something in Mexico so his people stay home? That from Cathy Payne.

From Alexandria, Virginia, "Thanks to Lou Dobbs for raising issues related to U.S. immigration policy. Immigration today is having tremendous implications for education, economy, and the environment. Thank you for raising critically important immigration facts and issues." From Jeffrey Jacobs.

And from in Naperville, Illinois, "About the number of unemployment claims going down, I think that's very misleading. I'll be out of work a year tomorrow and I don't get unemployment simply because it has run out, not because I have a job." That from Lenny.

And this e-mail from New York City from a Fortune 500 executive who asked that his name be withheld, "I can tell you what high productivity means. It means we're working reduced staffs into the ground to do the work that should be done by more people and our employees put up with the stress and less time spent with family because they fear losing their job to an equally talented unemployed person. We're not more productive, we're working our staffs in a state of permanent unpaid overtime." We love hearing from you. E- mail us at loudobbs@cnn.com.

And finally tonight, David Letterman. David Letterman has become a father, known in the fast for being very private about his personal life. Letterman is now taking on the role of proud parent.

Jeanne Moos has the story.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: Can you imagine calling this man daddy?

DAVID LETTERMAN, HOST "THE LATE SHOW WITH DAVID LETTERMAN": The first thing I did after the baby was born, I took him home and dangled him over the balcony.

MICHAEL ZAM, NYU, CREATIVE WRITING: What is this guy who's kind of like ironic, kind of (UNINTELLIGIBLE). What's he going to be like coo coo cooing with the baby.

LETTERMAN: You have any idea what I named him?

UNIDENTIFIED MALE: Tell, them. You tell them.

LETTERMAN: Saddam.

SHERYL BERK, A&E BIOGRAPHY: Good god! I can think about, what time of bedtime story is he going to read this kid?

LETTERMAN: I am already interviewing hot nannies.

MOOS: Daddy Letterman, the most private of public men, showing the world baby pictures?

LETTERMAN: Looks like he's gotten a hold of one of my old hair pieces.

MOOS: At least the by doesn't hook like Paul Shaffer no matter what the "New York Post" says. A writer joked about the timing of the delivery during a ratings period.

MARK DAGOSTINO, "PEOPLE MAGAZINE": You have to wonder about Letterman. Did he plan the pregnancy so this baby would come right at peak of sweeps?

MOOS: People seem touched that this cranky comedian was touched by fatherhood.

LETTERMAN: My father passed away when he was 57. I'm 56. And yesterday I had my first child, so I named him for my father and his name's Harry Joseph Letterman.

MOOS: Media types call him the softer, gentler Dave.

(CROSSTALK)

UNIDENTIFIED MALE: Ever since the heart operation, exactly, it's like almost as if they when he opened him up he had a heart, now he uses it.

LETTERMAN: These men and women right here saved my life, and...

MOOS: Now, a delivery that's even better than his own.

LETTERMAN: By the way, labor, my god, what a biology lesson that is.

MOOS: Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

DOBBS: Our congratulations. That's our show tonight. Thanks for being with us.

Tomorrow, Charles Liu astrophysicist at the Museum of Natural History joins me to talk about the up coming lunar ellipse and the precedent solar storms, what they mean for us.

And heroes. Tomorrow night the story Marine Sargent Jason Witling (ph), how he's coping the serious injuries the sustained in combat in Iraq. Please join us.

For all of us here. Thanks for being with us tonight. Good night from New York. "ANDERSON COOPER 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





Facing Crisis in South?; Interview With Education Secretary Rod Paige>


Aired November 6, 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 Thursday, November 6. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.

President Bush today called for democracy throughout the Middle East. Mr. Bush said the global wave of freedom has barely reached Arab states. Suzanne Malveaux will report from the White House.

From Washington tonight, we'll report that we're all working harder than ever for less, while politicians ballyhoo our higher productivity.

And tonight, "Wasted Minds: Our Failing Schools." We're spending more on education and our students are falling farther behind. Tonight, we'll be joined by the secretary of the Department of Education, Rod Paige, to find out why.

And Howard Dean says he's sorry. John Edwards says Dean is condescending. And our senior political analyst, Bill Schneider, says the Democrats are facing a crisis in South.

The Pentagon today announced details of its plans to send almost 130,000 new troops to Iraq with the words, "Ladies and gentlemen, we are at war." Air Force General Norton Schwartz said the military will respond to the nation's call to duty; 85,000 active duty troops and more than 40,000 Reserve and National Guard troops will replace units scheduled to leave Iraq early next year. The 1st Marine Expeditionary Force is among the active-duty units being ordered to Iraq. It recently came home after taking part in the attack on Baghdad.

Senior Pentagon correspondent Jamie McIntyre reports -- Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, Lou, there are about 132,000 troops in Iraq now. And under the Pentagon plan, by May of next year, that would be down to about 105,000 troops, assuming the security permits it.

Now, even as attacks against U.S. forces are mounting, the Pentagon is planning to send, if you do the math, about 25,000 fewer troops to Iraq. This is for essentially the second year of the U.S. occupation. The Pentagon is arguing, however, that the rotation plan, although it's fewer troops, will provide a better mix that can engage and go after the insurgents.

(BEGIN VIDEO CLIP) DONALD RUMSFELD, SECRETARY OF DEFENSE: Numbers do not necessarily equate with capability. We're bringing in forces that are appropriate to deal with the evolving threats in Iraq today, including more mobile infantry elements.

(END VIDEO CLIP)

MCINTYRE: Mobile and infantry are the key words there. The Pentagon is trying to get troops that are going to be better suited to go after some of the insurgents. Among them, the 85,000 combat troops you mentioned, Lou, are three Army National Guard brigades, built around the Army's new Striker combat vehicles. These are the wheeled vehicles that are more nimble and maneuverable than tanks or Bradleys.

Altogether, some 43,000 Guard and Reserve troops are getting the call. Mostly, those are from the Army, although Marine units, as you mentioned. Also, the Navy and Air Force have a small number in there as well. And some of those troops will be heading to Afghanistan.

Today, the issue also came up about the numbers of Iraqi forces that are actually helping to provide security. Just yesterday, the Pentagon said 115,000. Today, they said 118,000, a jump of 3,000 in just 24 hours.

And the chairman of the joint chiefs trying to respond today to some of the skepticism about whether those numbers are inflated.

(BEGIN VIDEO CLIP)

GEN. RICHARD MYERS, JOINT CHIEFS CHAIRMAN: I think this is due largely to the fact that all of the Iraqi security force programs are now up and running. And they're paying decent wages, which, in turn, has led to an increase in successful recruiting.

(END VIDEO CLIP)

MCINTYRE: Now, Defense Secretary Rumsfeld today stressed again that, if any of his commanders feel that they need more forces, all they need to do is ask for them. But he said they had a discussion again today with General Abizaid, the Central Commander, and General Sanchez, the commander of troops on the ground. He said not one commander has expressed a need for more U.S. troops at this point -- Lou.

DOBBS: Jamie, thank you very much -- Jamie McIntyre, our senior Pentagon correspondent.

Two more American soldiers were killed today in Iraq. One was killed near Baghdad when insurgents ambushed a patrol of the 82nd Airborne Division. The other soldier was killed when his truck ran over a land mine near the border with Syria. Also today, Poland lost its first trooper, its first combat death, in fact, since it sent 2,000 troops to Iraq.

The Polish soldier was shot near Karbala. He was the first Pole to die in combat since the Second World War. Meanwhile, the U.S. Army held a memorial service in Iraq for the 15 soldiers who were killed when terrorists shot down a Chinook helicopter Sunday; 1,000 troops attended the service. Many wore black cavalry hats as a reminder of their service in the Indian wars in the Old West.

The United States is facing a growing insurgency in Iraq. But it seems American troops know very little about who is responsible for those attacks. A senior intelligence official in Washington said the United States has now only fragmentary intelligence about the insurgents and the terrorists.

Our national security correspondent David Ensor has the report.

David, this is a remarkable admission. Just how bad is our intelligence in Iraq?

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: Well, Lou, as you said, this official says it's only fragmentary intelligence, though he says a major effort is under way now to fill in the gaps.

The official says -- quote -- "We are reduced to making analytical inferences on this, based on fragmentary intelligence." And that, of course, worries senior people over at the CIA, because, as he put it, "There is an insurgency in Iraq and it is growing."

U.S. officials say they are making inroads developing Iraqi sources of information and they are using other kinds of surveillance techniques better. But experts, like former CIA analyst Ken Pollack, say the hostility of many Sunnis in Iraq in the central area of the country is perhaps the main issue that needs to be addressed.

(BEGIN VIDEO CLIP)

KENNETH POLLACK, CNN ANALYST: If the Sunni population at large were to turn against the insurgents and begin to cooperate with the United States, under those circumstances, you could see a lot of intelligence coming in, simply because people will say, hey, there's a group of guys down the street who are playing around with explosives. They're probably up to no good. Why don't you check them out?

That's how insurgent warfare gets solved, when the population comes over to the side of the government forces and says, basically, to themselves, we're better off with the government than the insurgents.

(END VIDEO CLIP)

ENSOR: Within that Sunni population in Iraq, U.S. officials say the attacks are coming from three groups, within that group, the die- hard Baathists, radical Islamic terrorist supporters and some old- fashioned Arab nationalists -- Lou.

DOBBS: David, in that categorization of those attacking U.S. forces and Iraqi civilians, there's nothing really new. This war has been planned for some time. There is considerable knowledge about the region. Why in the world is the CIA, the DIA, and other U.S. intelligence agencies not able to do a far better job? ENSOR: They simply don't the human intelligence sources in the right places. And they point out that these attacks, in many cases, are only known about by the actual attackers themselves.

They're on a very ad hoc basis, in many cases. So it's extremely difficult to get intelligence. They underscore the point that Ken Pollack made a moment ago. And that is that they've got to get to a point where the population in the Sunni area is against the attackers and wants to turn them in to the U.S. and to the new Iraqi authorities. That's the only thing that's going to stop them.

DOBBS: And the fact is that our intelligence agencies simultaneously are admitting there is a critical shortage of Arab speakers in their ranks. This seems to be a very difficult challenge for our intelligence agencies across the board. Is that correct?

ENSOR: That is correct.

They have done a lot of hiring in the last couple of years. And a lot of native Arabic speakers have been brought on board. But you're right. They still have a terrible shortage. There's a lot of need there. They're looking at various other ways of getting interceptions and so forth translated, perhaps developing some machinery that might be able to actually translate Arabic into English without a person being involved -- Lou.

DOBBS: Astonishing, David. Thank you very much, David Ensor, our national security correspondent.

President Bush today tried to shift the debate about Iraq to a broader discussion of U.S. strategic goals in the Middle East. President Bush said the failure of democracy in Iraq would encourage terrorists all around the world.

White House correspondent Suzanne Malveaux reports -- Suzanne.

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Lou, today, President Bush signed an $87.5 billion package, that for military operations and reconstruction in Iraq and Afghanistan, 64 percent -- $64 billion, rather, for the military operations and $18 billion for Iraqi reconstruction.

The big victory here is that the president got that reconstruction money in the form of grants, not loans, as he had lobbied. That nearly guarantees that he doesn't have to go back to Congress asking for more money during the election campaign season.

Now, despite the polls that show that more than half of Americans do not approve of this big package, President Bush using the occasion to argue that this money shows there is support for the U.S. mission inside of Iraq. Also, President Bush earlier today outlined his broad vision for a new policy in dealing with the Middle East, to work with countries who are making democratic reforms.

(BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It is worth our effort. It is worth our sacrifice, because we know the stakes. The failure of Iraqi democracy would embolden terrorists around the world and increase dangers to the American people and extinguish the hopes of millions in the region.

(END VIDEO CLIP)

MALVEAUX: Now, today, President Bush criticized Iraq and Syria for what he called was a legacy of torture and oppression. He also encouraged, prodded very gently, Egypt and Saudi Arabia to do better in their democratic reforms. He praised many countries for moving forward.

But, Lou, I should let you know there were no solid policy changes, simply a broad vision of what he sees the Middle East should be -- Lou.

DOBBS: Suzanne, thank you. And, of course, the president enunciated the direction of that Middle East policy at beginning of this year.

There are reports, Suzanne, that the United States turned down a last-minute peace deal offered from Iraq that could have perhaps avoided a war, reportedly through an intermediary. What is the White House today saying about that?

MALVEAUX: Well, I spoke with White House spokesman Scott McClellan on a number of occasions about that. This is about a report of Richard Perle, who talk with somebody, a Lebanese businessman, and brought that information to the CIA, saying that, allegedly, there was some sort of offer from Saddam Hussein to end this peacefully, Scott McClellan saying that there are no credible or legitimate reports at all of any kind of offer that would have averted military action.

As a matter of fact, he said that Saddam Hussein was given 48 hours to get out of the country or face military action, that Saddam Hussein missed that opportunity. He says there was no reason for back channels, because the door was wide open for Saddam Hussein -- Lou.

DOBBS: Suzanne, thank you -- Suzanne Malveaux, White House correspondent.

Following up now on another story that we have been reporting in Washington, the Pentagon today agreed to a compromise plan that would provide the Air Force with 100 new refueling tanker aircraft. The Air Force will lease 20 Boeing 767 tankers and buy, purchase, 80 more. The Pentagon originally had wanted to lease all of those 100 aircraft.

The plan was thrown out after protests from Congress about the high costs of leasing. Today's deal will cut overall cost of the program from $21 billion to about $17 billion.

Still ahead here tonight, "The Great American Giveaway." Who says this is a jobless recovery? Nearly two million jobs have been created in the past three years. They've just been filled by immigrants and illegal aliens. Peter Viles will report.

And our special report tonight, "Wasted Minds: Our Failing Schools" -- tonight, students without textbooks. That's only part of the education crisis facing this country. Lisa Sylvester reports tonight. Education Secretary Rod Paige joins us.

And tonight, "Grange On Point." The Pentagon says it will cut the number of troops in Iraq. General David Grange says more troops are needed, not fewer.

Stay with us. We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Employment level for those born in the United States fell by 800,000.

STEVEN CAMAROTA, CENTER FOR IMMIGRATION STUDIES: Given that immigration has been so heavy in the last year -- three years -- despite the recession, it's very possible that what we are seeing is some significant job displacement among Americans, especially those at the bottom end of the labor market.

VILES: Here's another surprise. Those illegal workers, like the 250 arrested at Wal-Mart stores last month, are covered by some American labor laws, including time-and-a-half pay for overtime. Says the Department of Labor -- quote -- "The department's Wage and Hour Division will continue to enforce the Fair Labor Standards Act without regard to whether an employee is documented or undocumented."

MATTHEW HAYES, FRIEND OF IMMIGRATION LAW ENFORCEMENT: The bulk of back pay claims that are made in front of state departments of labor are for folks who have no legal immigration status, who are here illegally. And there's no inquiry. Generally speaking, on the state level, and even on the federal level, if it's simply a back pay claim, there is no inquiry as to immigration status.

VILES (on camera): Now, this policy, if you can call it a policy, means that those 250 Wal-Mart workers can sue for back pay under American labor laws at the same time they're being deported under American immigration laws.

Peter Viles, CNN, New York.

(END VIDEOTAPE)

DOBBS: And Mexican President Vicente Fox in Texas today, continuing his campaign for greater rights for immigrants and illegal aliens in this country.

President Fox met with Texas Governor Rick Perry. And the Mexican president asked Governor Perry to support a law that would allow immigrants and illegal aliens to use their Mexican identification cards to obtain their Texas driver's licenses. A similar law was passed in New Mexico, which Vicente Fox has already visited. Governor Perry has voiced concerns about that law, saying more documentation is needed to protect national security.

Before visiting Texas, Fox traveled to Arizona and New Mexico to push for better health care and educational benefits for Mexican immigrants and Mexican illegal aliens.

A new report today shows productivity in this country surged to a 10-year high. That's, of course, great news for businesses and the economy. But that increase in productivity is being carried on the backs of the already-overworked average American. And all of this comes while CEO paychecks are, yes, at an all-time high.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Americans are working harder than ever.

LEE PRICE, ECONOMIC POLICY INSTITUTE: People are working much harder now than they were a couple of years ago. They're afraid of losing their jobs. When somebody in their accounting office or in the restaurant leaves or is forced out, everybody else is working harder to get the same thing done.

PILGRIM: The statistics prove it. Productivity climbed 7.4 percent last quarter. Even with the economy growing, companies are still shedding jobs, 2.5 million jobs in the last 2.5 years. The productivity gains, due to squeezing workers, may only be temporary, according to one theory explained by Federal Reserve Chairman Greenspan.

ALAN GREENSPAN, FEDERAL RESERVE CHAIRMAN: An unusual amount of caution is leading businesses to press workers and facilities to a greater degree than can be sustained over the long haul.

PILGRIM: Official government statistics don't show significantly longer work weeks. But one private survey of 700 companies shows, workers average 44-hour work weeks. Economists say employees are often pushed to work longer hours after off the books.

Radio stations say they've started commuter drive time programs at 5:00 in the morning, because more people are heading to work at that time. Americans get fewer vacation days than workers in other countries, often less than half of what other workers enjoy in Europe and Japan. According to ComPsych, the second largest employee- assistance company in the country, 56 percent of Americans now admit to postponing even those vacation days, for fear of losing their jobs.

(END VIDEOTAPE)

PILGRIM: Another survey by that same group found 63 percent of workers admit to extremely high levels of stress. That's up 15 percent in just the last six months -- Lou. DOBBS: And that's why everyone should be extraordinarily careful when they get excited about these high productivity numbers, as we emerge from recession to recovery.

Kitty Pilgrim, thank you very much, reporting tonight from Washington.

And it brings us to the subject of tonight's poll. The question: Is this economic recovery benefiting you yet? Yes, no, or what recovery? Cast your vote at CNN.com/Lou. We'll have the results coming up later in the show.

But coming right up, "Wasted Minds: Our Failing Schools" -- tonight, closing the book on valuable school programs that are already far too rare, students falling farther behind. Lisa Sylvester will have the report. Secretary of the Department of Education Rod Paige is our guest.

And who has the edge of the race for the White House, or at least the Southern vote, comes down to good old-fashioned values. Senior political analyst Bill Schneider will have the answer for us and more still ahead.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight, in our series of special reports, "Our Failing Schools," cutbacks in school budgets are coming at the expense, of course, of students. In Alabama, for example, more than two-thirds of the student there fail to meet proficiency standards on achievement tests. The state's response? Incredibly, it is cutting spending on education.

Lisa Sylvester is here now and has the report for us -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Lou, unlike many other states, Alabama's public schools get most of its funding from the state, which is in the midst of an enormous budget crisis. And that means making some very tough decisions.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Some Alabama schools are so pressed for money, the students don't even have their own textbooks, making it difficult to assign homework.

UNIDENTIFIED FEMALE: This is your independent reading time.

SYLVESTER: But the deep cuts don't end there; 3,600 teachers will be let go next year. Tutorial problems that help students graduate on time are on the chopping block. And a nationally renowned reading program that promises to bring all students up to grade reading levels is being scaled back.

ED RICHARDSON, ALABAMA EDUCATION SUPERINTENDENT: What we're going to see is our test schools and our student achievement levels decline, dropout rate go up, which I think would have a long-term impact on this state.

CHILDREN: Go. I'm.

SYLVESTER: Alabama schools had to slash $100 million from this year's budget and are bracing for another $200 million reduction next year.

AMY RODGERS, TEACHER, HALCYON ELEMENTARY SCHOOL: This reading program gives children the confidence that they need to learn to read. Without this program, unfortunately, many children would be left behind.

SYLVESTER: It's not just Alabama schools facing a severe budget crunch. The American Federation of Teachers estimates that districts in at least 22 states have cut spending; 13 states have gone as far as to scale back K-through-12 programs, the last thing anyone wants to touch. Without learning the fundamentals, students may struggle the rest of their lives.

WILLIAM COX, STANDARD & POOR'S SCHOOL EVALUATION SERVICES: If you're not investing today in good reading programs, that are very important particularly for early childhood development in the early grades, then that creates a long-term impact that you can't make up.

SYLVESTER: Many school districts have opted to cut electives as the least painful option. Schools in Roseburg, Oregon, for instance offer Spanish, but not French. But even cutting subjects like music, art and foreign languages has a direct impact on the core subjects.

LEE PATERSON, ROSEBURG SUPERINTENDENT: The research does show that students who take a second language do perform better than their peers who don't have that opportunity. The same can be said of music.

SYLVESTER: The decision to save money by cutting school funding looks to be shortsighted, because, ultimately, someone has to pay. And right now, it's the students in the classroom.

(END VIDEOTAPE)

SYLVESTER: Schools are having to get very creative to raise money. One school district in Austin, Texas, for instance, wants to sell the naming rights for its new stadium. Bidding starts at $2 million -- Lou.

DOBBS: And we wish them well.

Lisa, thanks. Incredible, what the state of Alabama faces, and those students. Lisa Sylvester, thank you.

Well, this country spends $470 billion on education each and every year. My guest tonight says that should be enough to ensure that every third grader is able to read at a third grade level. The secretary of the Department of Education, Rod Paige, also says parents should have the option to use vouchers to send their children to better schools.

Secretary Paige is with us now.

Good to have you here.

ROD PAIGE, EDUCATION SECRETARY: It's good to be here.

DOBBS: Mr. Secretary, that's an enormous amount of money, $470 billion. Why in the world can't our children, too many of them, why can't they read?

PAIGE: Absolutely.

In fact, this nation last year spent more money on K-12 education than it did on national defense. Is it too much to ask that a fourth grade child read on a fourth grade level after this nation commits that much public money? There are clearly other reasons why our students are not performing.

DOBBS: What are they, in your judgment?

PAIGE: Well, I think accountability is a good example of something we need to be better at.

And that is why the president, in his No Child Left Behind act, has accountability right up at forefront, accountability, stop making excuses about some students who are having difficult situations at home, difficult languages, but take responsibility for students and teach our students to read.

DOBBS: That's great. We know, first, critics say that it's simply not an adequately funded, while noble goal. What is your reaction to those critics?

PAIGE: What's underfunded about $288 billion K-12 last year, federal and state?

DOBBS: That's...

PAIGE: That's a lot of money.

DOBBS: That's a lot of money, by any definition.

PAIGE: That's right.

DOBBS: Yet we just heard from Lisa Sylvester. She reported on the state of Alabama with students who don't even have textbooks. Your department is responsible for education at the federal level. But there are 50 states out there also responsible, and all of those school districts. And the idea that our public education, which was the -- in my judgment, the great treasure of this company in our 200- year history, it is going -- I'll just say it -- it's going to hell in a handbasket.

PAIGE: Well, no, I'm not sure I would agree with that. I know, when President Bush took office in 2000 in January, we found that our education system was not meeting, despite the fact that we had many wonderful educators and many wonderful teachers and principals and some great schools, primarily, our system was not operating effectively. But now that the president has proposed and the Congress has enacted the No Child Left Behind Act, I think there are many positives things that we can say about what's going on in our education.

DOBBS: Oh, I'm not arguing, Mr. Secretary, that there aren't many positives in that educational system. But what I'm saying is that, when 36 percent of our fourth graders can't read at a fourth grade level, when we have students who can't find a textbook in the state of Alabama -- and it's not the only state in which that's occurring -- we've got a horrible problem.

(CROSSTALK)

DOBBS: And that, to me, is inexcusable.

PAIGE: It is. And we do have a horrible problem.

And that is why we as a nation must embrace the vision of the president that every child learn. And the No Child Left Behind Act is the framework around which we can improve this terrible situation that you're speaking of.

DOBBS: The fact is, our special-education programs, which are laudable and notable and remarkable, in point of fact, many teachers blame the inability to deal effectively with special-ed students for slowing down other students and diverting much needed money and time.

How do we deal with that issue, because no one wants to talk about it, it seems?

PAIGE: Well, let's talk about it.

The No Child Left Behind idea means no child left behind. A child who has special education needs is just like a child that does not have special education needs. Every child should get our best effort. So if a child has special needs, we need to meet that child's need just like we do others. So we want every single child to learn.

DOBBS: Every child to learn?

PAIGE: That's right.

DOBBS: The definition of special ed needs -- is it truly, while noble and aspirational -- is it realistic when we're punishing many students because of that diversion of funding?

PAIGE: Well, I think what we need to do...

DOBBS: And time?

PAIGE: Well, what we need to make sure that we're adequately addressing needs of all students, no matter what they are.

The Special Education Act i-d-e-a is being is looked at now -- it's been -- to be reauthorized, and look at some of the issues in that we need to improve in that particular act. But we cannot leave special ed children behind either.

DOBBS: And let's -- let's talk also about minorities in this country. Still, the gap in testing in excess of 30 percent, whether black or Hispanic, behind white students.

PAIGE: Absolutely. And that is what we're working about -- working now. That is why it's so important that we embrace the No Child Left Behind Act and continue to work on the framework that it provides for us.

DOBBS: Mr. Secretary, I'll buy into the No Child Left Behind. But what I can't buy into is why through -- and not to put this on the Bush administration, the Clinton administration, the administrations before it, the problems that are deep-seeded in the educational system. I keep asking myself and let me ask you, where in the world is the National Education Association? Where is the teachers' association? Where is the PTA? Everyone goes on as if we can just simply surrender our future, not worry about the fact students are not being taught mathematics and natural sciences. How frustrated must you be?

PAIGE: Oh, I think if I had the luxury to be frustrated, I could be very frustrated. But what I'm going to do is work hard to make sure that we get accountability in schools, that parents get choices, that we're using the right pedagogy, and that we have local options and flexibility.

This is what we're going to do on a No Child Left Behind Act. And that is going to be the framework around which we're going to improve schools. But we must improve schools in a way that every single child has an opportunity to learn.

DOBBS: Mr. Secretary, we thanks -- we thank you very much, as always, for being here. It's -- it is one of the toughest jobs in Washington, if not the toughest, in point of fact, because you're so dependent on so many other people, including communities and the parents of the students who you're trying to serve.

PAIGE: That's right. And that's why the nation must embrace this and help us make sure that we create a system in America where every single child has an opportunity to learn. That's what the president wants. That's what I want as well.

DOBBS: I think that's what we all want.

PAIGE: Thank you.

DOBBS: Mr. Secretary, thank you very much.

PAIGE: Thank you.

DOBBS: Secretary Rod Paige.

PAIGE: Thank you.

DOBBS: Coming up next, your government at work. The deficit, soaring. But tens of thousands of government officials are flying high, and we do mean flying in high style. You're paying for it. That story and the market next.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: A rally in the market today. The Nasdaq at its highest level in almost two years. The Dow up 36 points, the Nasdaq up 17, the S&P six points higher.

New York's attorney general, Eliot Spitzer, who was here with us last night, making progress in his investigation of the mutual fund industry.

Christine Romans with the story -- Christine.

CHRISTINE ROMANS, CNNfn CORRESPONDENT: Mutual funds under fire here today again, Lou, as the Street cleaning continues. The New York attorney general may charge Alliance Capital, Strong Capital, and its founder, Richard Strong, late next week. And settlement talks continue as some of these firms under investigation struggle to come out of this mutual fund mess with some integrity intact.

Alliance says the internal investigation has found instances of market timing and it expects sanctions and fines, and it pledged to pay back shareholders.

Meanwhile, the scandal hurts confidence in corporate America. Look at this: a U.S. Trust survey of the wealthiest Americans shows 79 percent question the reliability of financial statements, 92 percent want more vigilance from boards and 85 percent favor greater regulation of companies and of Wall Street.

And angry words again today from the largest state pension fund on the proposed new structure of the New York Stock Exchange.

(BEGIN VIDEO CLIP)

SEAN HARRIGAN, CALPERS PRESIDENT: I think we learned a hard lesson in the accounting industry scandals. They tried to self- regulate, and perhaps it worked for a short period of time. But over time, it failed miserably and I see the same fundamental flaw in the New York Stock Exchange self-regulatory proposal.

(END VIDEO CLIP)

ROMANS: And following up on our report several weeks ago about the ouster of Motorola CEO Christopher Galvin, he will consult for at least $1.9 million a year for the next two years. Under his tenure at Motorola, the stock fell 47 percent, debt doubled, sales fell and thousands of jobs were cut. He will be staying on for two more years as a consultant because of the contract he had already signed with the company.

DOBBS: It's just about $2 million a year, and with that kind of performance you'd want him at your beck and call if you were the new CEO, so that you could know not what to do (UNINTELLIGIBLE).

ROMANS: I guess so.

DOBBS: Christine, thanks. Christine Romans.

Your government at work tonight. High-ranking Defense Department officials flying first class and business class at your expense. A new General Accounting Office report found the Defense Department spent almost $124 million for what it calls "improper premium travel" during the fiscal years 2001 and '02. The money spent on 68,000 premium class airline tickets. The GAO report says nearly three quarters of all DOD premium travel during those years wasn't properly authorized. And it says the offenders including military and civilian defense officials, including political appointees.

A reminder to vote in tonight's poll. Following the upbeat news on the economy, "Is the economic recovery benefiting you yet? Yes? No? Or what recovery?" Cast your vote at cn -- cnn.com/lou. Results coming right up.

Coming up next, General David Grange "On Point." The Pentagon cutting the number of troops in Iraq. General Grange says the United States needs an overwhelming number of troops on the ground in Iraq. "Grange on Point" is Next.

Please stay with us.

(COMMERCIAL BREAK)

DOBBS: "Grange On Point" tonight, cutting the number of American troops in Iraq. The Pentagon today said it will begin rotating new troops into Iraq next year, sending over fewer than will return. Joining me now, General David Grange. General Grange, this decision to cut troops, is it the right answer, in your judgment?

BRIG. GEN. DAVID GRANGE, RET. ARMY: Well, I think, right now, Lou, what you have is a critical period. You have the guerrilla forces, insurgents there conducting a surge. They're smelling blood. They're killing as many American as they can to break the will, not only of American people, but also of the people of Iraq.

So it appeared to me that now would be a time that you'd want overwhelming force which comes both in capability and on boots on the ground, not less force.

And also, I think it sends a signal that maybe we want to leave to quick. G.I.'s want to come home, but not until the mission's over. So now is not the time to announce lesser capability, whether it be power, capability or on boots on the ground. DOBBS: Our troops in Iraq have to be wondering what in the world is going on, wouldn't you say? Because they're talking about fewer forces, they're facing more attacks every day. That -- is that a concern that you would have?

GRANGE: Well, it's hard to second guess the commander on the ground, because he has his finger on the pulse. But it would seem to me that now is the time to have this overwhelming force until you have the transition with the Iraqi police civil defense, military can take over for U.S. and other coalition forces.

So during this critical phase you need to have the proper amount of force on the ground, the right types of forces on the ground, to win.

DOBBS: What you're saying seems, to me, to make great sense. Secretary of Defense Rumsfeld today said that he had not heard a request from single field commander in Iraq for more troops. There is always that question, would one expect a field commander to buck what is the obvious policy of the Rumsfeld Pentagon? What do you think?

GRANGE: Well, I know some that would. I know some that did. I would say --

DOBBS: Are they still in the army?

GRANGE: You know, Lou, one of the principles in the military in operations is what they call weighing the main effort. In other words, you resource the main effort so there's no doubt that you will win. And I -- that's it principle that the military personnel follow, the leaders follow. And that's really what has to be done here.

And so until these things work out with Turkish and other coalition forces and the Iraqi forces you need to have enough G.Is to do no doubt, not just enough forces, but more than enough forces to give you the flexibility.

DOBBS: "Stars and Stripe" poll, General Grange, found more than half of those surveyed in the poll would not re-enlist in the army. Is that a crisis?

GRANGE: Well, it's not a crisis now. Right now all of the services met or got beyond the quota that they tried to bring into the armed forces all of the services. But I think in the future it may be. Now, usually only about half of a force does re-enlist, but you want the majority of them to do that because that's your crop of seasoned, wedded, troopers that train the new guys and gals that come into the force.

DOBBS: Right.

GRANGE: And so it would be a crisis down the road and I think there may be.

DOBBS: And with 40 attacks a day, and let me be clear, I mean, I am absolutely, totally, fully supportive of our commanders, our troops in Iraq, the president's policy in going into Iraq, democracy is a wonderful ideal. But protecting our troops, it has to be the No. 1, it would seem to me, priority for our men and women in Iraq.

What happens if these attacks go beyond 40 a day? They're already at 40. They were 30, they've been escalating throughout. We just heard from our national correspondent David Ensor that our intelligence is, in a word, lousy, and not improving. What does the future hold, in your judgment?

GRANGE: Couple things there, Lou. First of all, on the intelligence aspects it's the hardest part of this, you know, the answer's always we don't need more troops we need more actionable intelligence. Well, this type of intelligence you find by having enough people around to pick it up. It's not technical intelligence. It's human level intelligence, whether it come from the G.I. seeing something and reporting it or an Iraqi reporting it.

DOBBS: Right.

GRANGE: You've got to have that.

The other is that there's a surge right now and we have to counter with a surge with the coalition fores, to bring that amount of attacks down. There's thousands, thousands of patrols every day by coalition forces that we don't get a good feel for. I think that needs to be reported more aggressively so the American people can see the balance of Iraqi -- I mean insurgent operations and American operations.

DOBBS: General David Grange, as always, our thanks.

GRANGE: My pleasure.

DOBBS: Coming up next, a Democratic Senator from the state of Georgia makes the public endorsement for the presidential campaign.

(BEGIN VIDEO CLIP)

ZELL MILLER, (D) GEORGIA: I want a president that's got a little grit in his craw. I want a president that's got some Churchill in him.

(END VIDEO CLIP)

DOBBS: We'll tell you who's the gritty candidate who has Zell Miller's vote. The choice may surprise you. Stay with us.

(COMMERCIAL BREAK)

DOBBS: One of the nation's largest unions today was expected to endorse Democratic presidential candidate Howard Dean, it didn't. It delayed the decision. The Service Employees International Union said it will wait until next Wednesday to announce its support for the former Vermont governor. Dean today met with leaders of the union. The union represents almost 2 million service workers, including janitors and healthcare workers. One of the Senate's most prominent Democrats says the endorsement won't help Dean or any of the Democratic presidents win the elect. Senator Zell Miller of Georgia, who retires next year, has been blasting all nine Democratic candidates for their parties nomination, saying they simply don't have what it takes to lead this nation. That's why Senator Miller says, he's endorsing President Bush.

(BEGIN VIDEO CLIP)

MILLER: What they have done is that they have taken the worst, and I'm talking about all of them, they have taken the worst possible feature of the Mondale campaign, raise your taxes and they have taken the worst possible feature of the Mcgovern campaign, peace at any price and they have combined them. What they ought to have been looking at is how John Kennedy carried the south. He carried Georgia by a larger percentage than he did his own state of Massachusetts. And he did it by being the tax cutter and he did it by being tough on national security.

(END VIDEO CLIP)

DOBBS: Senator Miller's endorsement of President Bush isn't certainly the only problem facing the Democrats in the south. Senior political analyst Bill Schneider reports.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: You've heard about the Democratic party's problems in south, they just got bigger. As Republicans took governorships away from the Democrats in Kentucky and Mississippi this week.

ED GILLESPIE, CHAIRMAN NATL. REPUBLICAN CMTE: I think it's clear that they have a problems in the south.

SCHNEIDER: The chairman of the Democratic Governor's Association claimed the bad national economy triggered a strong anti-incumbent mood in the electorate, meaning the GOP victories are bad news for President Bush, since he'll be the incumbent in chief next year.

Maybe in California last month, where the debate between Gray Davis Republican Arnold Schwarzenegger was about the state's finances. But the force driving the GOP to victory in the south isn't economics. It's values. The president campaigning for the Republican in Mississippi.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I like the fact that Haley Barbour's a man of good values. He honors his family. He treasures his relationship with the almighty.

SCHNEIDER: In Kentucky, Democratic Governor Paul Patton had a big values problem, after he confessed marital infidelity last year.

GOV. PAUL PATTON (D), KENTUCKY: My mistakes were mine alone. I take full responsibility.

SCHNEIDER: Though Governor Patton wasn't running, Bush new exactly thousand make his problems an issue.

BUSH: You want your kids looking at somebody for whom you can be proud. Ernie Fletcher values his faith. He values his family.

SCHNEIDER: How can Democrats compete in the south? By changing the subject, from values to economics. Which is what Howard Dean argued he was trying to do when he said, I want to be the candidate for guys with confederate flags in their pickup trucks.

HOWARD DEAN (D), PRESIDENTIAL CANDIDATE: I make no apologies for reefing out to poor white people.

SCHNEIDER: By bringing up the confederate flag image, dean brought the debate right back to values when he defended his values, Dean fell right into the trap.

DEAN: I'm not going to take a backseat to anybody in terms of fighting bigotry. I'm the only person here that ever signed the bill that outlawed discrimination against gays and lesbians.

(END VIDEOTAPE)

SCHNEIDER: Now that was a bill legalizing gay civil unions in Vermont, a very tough sell I think to southern white voters who put confederate flags on their pickup trucks, Lou.

DOBBS: Bill, how big are Howard Dean's problems, this delay by the service workers union, this looks very ominous.

SCHNEIDER: I don't think it's really ominous because the delay's is really so another union (UNINTELLIGIBLE) and government workers can join in with the service workers union. And if both of them end up endorsing Dean, that's a breakthrough because the take on Dean has been he doesn't have support with union members, blue collar workers, minorities. The Democratic party's heartland constituencies. But if he gets two big union endorsements he can say, who are you calling the candidate of latte land?

DOBBS: And he stands still in the lead in all the relevant polls, correct?

SCHNEIDER: He's very much ahead in New Hampshire, neck and neck with Gephardt in Iowa.

DOBBS: All right. Bill Schneider, as always, thank you, sir.

Coming up next, top ten reasons to have a baby if you host a late night talk show. Number one, of course is new material. David Letterman's take on his latest production is coming up next. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The results of our poll now, is the economic recovering benefiting you yet? Six percent of you said, yes, 15 percent said, no, and 78 percent, I have to confess I suspected this would be the response would say, what recovery?

Talking a look now at some of "Your Thoughts" many wrote in our poll question last night, asking your reaction to the Democratic memo seeking to politicize prewar intelligence.

From Bridgeport, West Virginia, "I don't like the answer choices for your poll this evening. You should have a third choice entitled, payback!" That from Bryan Moore.

And from Cape Girardeau, Missouri, "It would appear that the Democrats are much more interested in defeating the Republicans than they are in defeating the terrorist," said Lawrence.

From Hot Springs, Arkansas, "Lou, in your interview with Senator Rockefeller, you gave him every opportunity to state that he didn't believe the memo was proper or to disavow it. He would not do either of these things, and that told me more than anything he said." That from David Briscoe.

From Ontario, Canada, "I appreciate your excellent review of the illegal immigration issue. Millions of illegal Mexicans is one thing, but now the President of the country they ran away from is here to help them. A foreign leader comes to the USA to tell you how to better treat the people who ran away from his country! Wouldn't it seem more logical for President Fox to do something in Mexico so his people stay home? That from Cathy Payne.

From Alexandria, Virginia, "Thanks to Lou Dobbs for raising issues related to U.S. immigration policy. Immigration today is having tremendous implications for education, economy, and the environment. Thank you for raising critically important immigration facts and issues." From Jeffrey Jacobs.

And from in Naperville, Illinois, "About the number of unemployment claims going down, I think that's very misleading. I'll be out of work a year tomorrow and I don't get unemployment simply because it has run out, not because I have a job." That from Lenny.

And this e-mail from New York City from a Fortune 500 executive who asked that his name be withheld, "I can tell you what high productivity means. It means we're working reduced staffs into the ground to do the work that should be done by more people and our employees put up with the stress and less time spent with family because they fear losing their job to an equally talented unemployed person. We're not more productive, we're working our staffs in a state of permanent unpaid overtime." We love hearing from you. E- mail us at loudobbs@cnn.com.

And finally tonight, David Letterman. David Letterman has become a father, known in the fast for being very private about his personal life. Letterman is now taking on the role of proud parent.

Jeanne Moos has the story.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: Can you imagine calling this man daddy?

DAVID LETTERMAN, HOST "THE LATE SHOW WITH DAVID LETTERMAN": The first thing I did after the baby was born, I took him home and dangled him over the balcony.

MICHAEL ZAM, NYU, CREATIVE WRITING: What is this guy who's kind of like ironic, kind of (UNINTELLIGIBLE). What's he going to be like coo coo cooing with the baby.

LETTERMAN: You have any idea what I named him?

UNIDENTIFIED MALE: Tell, them. You tell them.

LETTERMAN: Saddam.

SHERYL BERK, A&E BIOGRAPHY: Good god! I can think about, what time of bedtime story is he going to read this kid?

LETTERMAN: I am already interviewing hot nannies.

MOOS: Daddy Letterman, the most private of public men, showing the world baby pictures?

LETTERMAN: Looks like he's gotten a hold of one of my old hair pieces.

MOOS: At least the by doesn't hook like Paul Shaffer no matter what the "New York Post" says. A writer joked about the timing of the delivery during a ratings period.

MARK DAGOSTINO, "PEOPLE MAGAZINE": You have to wonder about Letterman. Did he plan the pregnancy so this baby would come right at peak of sweeps?

MOOS: People seem touched that this cranky comedian was touched by fatherhood.

LETTERMAN: My father passed away when he was 57. I'm 56. And yesterday I had my first child, so I named him for my father and his name's Harry Joseph Letterman.

MOOS: Media types call him the softer, gentler Dave.

(CROSSTALK)

UNIDENTIFIED MALE: Ever since the heart operation, exactly, it's like almost as if they when he opened him up he had a heart, now he uses it.

LETTERMAN: These men and women right here saved my life, and...

MOOS: Now, a delivery that's even better than his own.

LETTERMAN: By the way, labor, my god, what a biology lesson that is.

MOOS: Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

DOBBS: Our congratulations. That's our show tonight. Thanks for being with us.

Tomorrow, Charles Liu astrophysicist at the Museum of Natural History joins me to talk about the up coming lunar ellipse and the precedent solar storms, what they mean for us.

And heroes. Tomorrow night the story Marine Sargent Jason Witling (ph), how he's coping the serious injuries the sustained in combat in Iraq. Please join us.

For all of us here. Thanks for being with us tonight. Good night from New York. "ANDERSON COOPER 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





Facing Crisis in South?; Interview With Education Secretary Rod Paige>