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LOU DOBBS TONIGHT

White House Produces Records of President Bush's Military Service; Kerry Headed for Victory?

Aired February 10, 2004 - 18:00   ET

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

(BEGIN VIDEOTAPE)
LOU DOBBS, CNN ANCHOR (voice-over): Tonight, the White House has produced evidence that President Bush fulfilled his National Guard duties.

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: These documents show that he met his requirements.

DOBBS: Two key Democratic primaries in the South tonight. The first polls close in one hour. Senator John Kerry appears headed for another decisive victory.

In France, a decision to ban Muslim head scarves and other religious symbols in all public schools, a special report from Paris.

Is Rush Limbaugh being prosecuted in Florida or is he being persecuted? We'll have the answer in our special report.

And outrage on Capitol Hill after the White House says exporting jobs is good for America.

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: I can't understand how anything could be more upside down.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Tuesday, February 10. Here now, Lou Dobbs.

DOBBS: Good evening.

The White House today launched a counterattack against Democrats who say President Bush failed to show up for part of his Air National Guard service some 30 years ago. The White House today released the president's military payroll records from the early 1970s.

White House correspondent Suzanne Malveaux has the report.

(BEGIN VIDEOTAPE)

SUZANNE MALVEAUX, CNN CORRESPONDENT (voice-over): In an effort to silence the critics, the White House released new documents that it claims shows President Bush fulfilled his National Guard duty during Vietnam.

MCCLELLAN: When you are serving in the National Guard, you're paid for the days on which you are served.

MALVEAUX: The documents include point summaries and payroll records that the White House says shows Mr. Bush logged the time required between 1972 to 1974 to be considered active in the National Guard. He received what military analysts consider only a passing grade for his time, 56 points out of 50-point minimum.

The personnel director for the Texas Air National Guard asked to review Mr. Bush's record by the White House issued the statement, saying: "This clearly shows that 1st Lieutenant George W. Bush has satisfactory years for both '72 to '73 and '73 to '74, which proves that he completed his military obligation in a satisfactory manner."

One point of contention, a controversial six-month period when Mr. Bush transferred to a Guard unit in Alabama. No one has come forward to attest he showed up for service, including his former commander. But the president stands by his own memory.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There may be no evidence, but I did report.

MALVEAUX: But the head of the Democratic National Committee Terry, McAuliffe, said there is no still no evidence that George W. Bush showed up for duty as ordered while in Alabama.

Senator John Kerry, the front-runner for the Democratic presidential nomination and Vietnam war hero, regularly campaigns with his band of brothers from his military days. Republicans are accusing the Democrats of attacking Mr. Bush's military record to score political points.

ED GILLESPIE, REPUBLICAN NATIONAL COMMITTEE CHAIRMAN: This is the kind of tactic I think we need to get used to. I think it's the kind of dirty politics that the Democrats are intent on engaging in on this election year.

(END VIDEOTAPE)

MALVEAUX: Now, despite the release of documents, there are still some holes as to where Mr. Bush was when. But White House aides hope that he is judged on his military leadership as a wartime president, not on his service 30 years ago. But, Lou, they stand by his record.

DOBBS: And, Suzanne, these records produced, it was our understanding from the White House, up until this week, in fact, that all of the documents that were available had been produced. How did these materialize so quickly?

MALVEAUX: Well, here's how the White House explains it. They say the communications director, Dan Bartlett, was inquiring of the National Guard here as to how they might get a full account all of the records, take another look.

They were sent to Colorado, Denver, Colorado, at Air National Guard. That is where they were looking into some of these payroll records. Also, in Saint Louis, they were looking for the same records. They said that it was just days ago they were made available to the White House. Some of this is new material. Much of it, however, is material that was released before in 2000 during the election.

But they say, with the payroll as well as these summary points, they believe that they have made their case that the president did do his time and served the country.

DOBBS: Suzanne, thank you very much -- Suzanne Malveaux.

Well, Senator John Kerry is among those who question the president's military record. Tonight, Senator Kerry appears to be moving closer to winning the Democratic presidential nomination. He's expected to easily win primaries in Virginia and Tennessee tonight. They would mark his first victories in the South and his 11th and 12th primary and caucus wins in 14 statewide contest.

Tonight, Kelly Wallace will report from Senator Kerry's campaign tonight in Fairfield, Virginia, where he is hoping to have a victory celebrity later tonight. Senior political correspondent Candy Crowley, covering Senator John Edwards, she is reporting from Milwaukee, Wisconsin, the next focus for the North Carolina senator. And Dan Lothian, covering Wesley Clark in Memphis, Tennessee, where the general might be making his last stand.

We begin with Kelly Wallace in Virginia -- Kelly.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Lou, John Kerry very much wanted to keep the focus on himself, his record, and these contests in Virginia and Tennessee. He said he was not going to comment at all about the release of those documents by the White House concerning President Bush's National Guard service. He says he has said all he's going to say on this issue.

Early in the day, he was greeting customers at a diner in Memphis, Tennessee, before flying here to Virginia. He told reporters he is hopeful, but he is taking nothing for granted. That said, he and his aides very much believe victories tonight in Virginia and Tennessee very much possible, this after he has 10 wins and two losses, the candidate with tremendous momentum.

To put this in context, aides say it was just a month ago when John Kerry was in single digits in both states. Now, if he is able to pull off victories tonight, he would prove he can win with Democratic primary voters in the South. He could also force one of his Southern opponents, John Edwards or Wesley Clark, out of race. He was asked about this earlier today. And he said he is still focused on trying to win the nomination and that he respects each candidate's right to make decisions about how to proceed.

If, though, John Kerry does pull off victories, aides will say that this shows he can win all across the country, in the East, the West, the Midwest, the South. And they will say he is running a national campaign. They will contrast him with other candidates who they say are more regional candidates -- Lou.

DOBBS: Kelly, thank you.

Senator Kerry's lead in the polls has effectively left his competitors battling for second place. One of them, Senator John Edwards, says he expects to do well tonight.

Senior political correspondent Candy Crowley covering the Edwards campaign tonight from Wisconsin, where he is expected to arrive later -- Candy.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Lou, we didn't see a whole lot of John Edwards today. He did make a perfunctory visit across the bridge from Washington, D.C. into Arlington, where he shook hands with voters, was there about three minutes, but then went back to his house.

We're told he really took mostly a down day. In fact, they went to pick up the kids at day care, did those general family things. But Edwards has now boarded a plane in Washington. He is headed out here. On the plane, he told reporters he is pumped, he feels very good. He has said for the past couple of days that he would be happy with seconds. Obviously, he would be happier with firsts, but he can read the polls as well.

Whatever happens, he is coming here to Wisconsin. In fact, I can tell you that one of the things he also did today was talk on a conference call with members of his staff as they plotted out their strategy for March 2, Super Tuesday, which states they would pay a lot of attention to, which states they wanted to put more people in.

So this is a campaign looking ahead, with a very real feeling that John Edwards wears well, that, in fact, if he can be out here, the longer he is out here, the better people like him. And he feels that, in the end, if it's John Kerry vs. John Edwards, he has a real shot. It depends, of course, on money and stamina, how long he can hold on -- Lou.

DOBBS: What is the senator's rationale, Candy? He has said for weeks and weeks, reiterating the mantra, this, referring to the South, is my backyard. If he doesn't do well, doesn't win, how does he explain it? What does that mean for his campaign?

CROWLEY: Well, look, it's not good for his campaign.

But here's what they say. They say Edwards got a first in South Carolina a week ago. They feel, because of this condensed primary season, that he didn't have a lot of time to really sort of build on that, that they immediately came here. They believe that, because Kerry came zooming out of New Hampshire with a couple of surprise wins, that the momentum obviously favors the front-runner out of New Hampshire, because those races come so quickly.

Again, what they believe is that, when there is a tough spotlight on John Kerry, some of the patina of front-runner will begin to melt. And they believe that will be John Edwards' time to move in and make his case and that people will still be watching -- Lou. DOBBS: Well, everybody will be watching General Wesley Clark -- Candy, thank you -- because it is decision time for General Clark. Democratic Party officials tell us the pressure will be on General Clark to quit the race, if he doesn't win second place in either Virginia or Tennessee.

Dan Lothian is with the Clark campaign in Memphis -- Dan.

DAN LOTHIAN, CNN BOSTON BUREAU CHIEF: Well, it indeed, by all accounts, is a make-or-break situation for retired General Wesley Clark. He has spent a lot of time and resources here in Tennessee.

While he has gone and spent some time campaigning in Virginia, this is where he really said that he needed to do well. And, of course, the polls are showing that he is lagging well behind here. To try to make up some ground, this morning, he was doing a couple of radio interviews. He also tried to win the hearts of some of the voters by going directly to their stomachs, by going out at an intersection in Nashville and handing out some doughnuts.

He was also working the phones and trying to win over those undecided voters, trying to lay out his case of family value and his tax plan. Now, the Clark campaign has been very positive about moving on from this point. Clark himself has said all along that, no matter what happened tonight, that he would stay in the race. But, privately, there have been some discussions about moving forward, a lot of folks saying that it will be impossible for him to move on from the standpoint, at least, of money.

Already, the campaign has tapped the paychecks of some 250 staffers for a week. And so it will be difficult, many believe, for him to move forward if they can't win tonight -- Lou.

DOBBS: Dan, thank you.

The Democratic candidate who less than a month ago appeared on his way to the nomination is not expected to finish in the top three places in either of tonight's contests. Former Vermont Governor Howard Dean instead is focusing on Wisconsin, where he hopes to win the primary a week from today, even though he's running third as well.

Later here, we'll have more on the primaries today. I'll be talking with the chairman of Tennessee's Democratic Party, Randy Button. We'll also be talking with our panel of the country's top political journalists.

One of the big issue in the campaign, of course, is the massive loss American jobs to cheap labor markets overseas, the exporting of America, as we style it here. Today, Democrats on Capitol Hill strongly criticized the president's economic report and White House economist Greg Mankiw for saying that outsourcing -- quote -- "makes sense."

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE) KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The Bush administration says sending jobs overseas is a good for America. From call centers to white-collar work, the president's economic report says -- quote -- "When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically" -- unquote.

GREGORY MANKIW, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: Outsourcing is just a new way of doing international trade. We are very used to goods being produced abroad and being shipped here on ships or planes. What we're not used to is services being produced abroad and being sent here over the Internet or telephone wires.

PILGRIM: Democrats on Capitol Hill were outraged, saying, we are shipping American jobs overseas.

DASCHLE: If this is the administration's position, I think they owe an apology to every worker in America. There is absolutely no justification for arguing that we could support jobs going overseas, especially under these circumstances.

SEN. DEBBIE STABENOW (D), MICHIGAN: I wonder who -- what nation are they talking about? Whose economy are they talking about? It is certainly not good for ours.

REP. SHERROD BROWN (D), OHIO: It doesn't make sense for our country. It doesn't make sense for workers. It doesn't make sense for our people.

PILGRIM: The president's report expects 320,000 new jobs to be created each month. But nonfarm payrolls grew by half that, 112,000 jobs in January. And that was the biggest job growth in about three years.

(END VIDEOTAPE)

PILGRIM: The report says, when low-level jobs are lost overseas, Americans will move to higher-skilled jobs and the market decides those jobs will be -- Lou.

(CROSSTALK)

PILGRIM: That's the theory.

DOBBS: The market. All right.

PILGRIM: It's a new kind of trade, Lou. That's what they say.

DOBBS: And Wall Street, I remember, for years, people referring to Mr. Market when they talked about things that they simply could not comprehend the likelihood of occurring. Mr. Market, perhaps that expression will come back.

Kitty, thank you -- Kitty Pilgrim.

Well turning now to Iraq, a massive car bomb explosion today killed at least 50 people near an Iraqi police station; 150 others were wounded.

That bomb went off in a town South of Baghdad while people stood in line. They were in that line applying for jobs as policemen. The insurgents used a car that belonged to Saddam Hussein's intelligence service. And also today, gunmen killed four Iraqi policemen in two separate attacks in Baghdad.

Coming up next here, the first polls in tonight's primaries close in less than an hour. The chairman of the Democratic Party in the state of Tennessee, Randy Button, will join us. We'll be talking about the latest in the race for the Democratic Party's presidential nomination and the importance of a Southern strategy for the Democratic Party.

Also ahead tonight, new controversy over Rush Limbaugh. Is he being prosecuted or is he being persecuted? We'll have a special report with some answers from Florida.

And a designer who is fighting cheaper overseas competition to keep a historic American craft where it belongs, in America.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: When former Vice President Al Gore lost his home state of Tennessee in the 2000 presidential election, it was devastating for the Democratic officials in that state and obviously influenced who would be president in 2001.

My first guest tonight says it won't happen again this year, even if a Northerner named Senator John Kerry becomes the nominee of the party.

Randy Button is the chairman of Tennessee's Democratic Party. He joins us tonight from Nashville.

Good to have you with us.

RANDY BUTTON, CHAIRMAN, TENNESSEE DEMOCRATIC PARTY: Good to be here, Lou.

DOBBS: This has got to be, I know, an exciting night for you. It appears that Senator Kerry is going to lock up another impressive win there. Is that the way it appears to you right now?

BUTTON: Yes, he's doing very well in our state.

It could be close. General Clark started early in the state running TV. And John Edwards was the first candidate to visit Tennessee over a year ago. And he's done fairly well, too. So it could be close tonight.

DOBBS: Senator Kerry, though, has spent very little time in Tennessee. What are there, two or three times?

BUTTON: He's been here three times, three times, just recently.

DOBBS: And yet you expect him to do well with that, while the other candidates have spent some considerable amount of time. This is even the candidate who said once, Randy, that people were making a mistake looking to the South. Does that concern you?

BUTTON: No, not really. He is talking about issues that are important to Southerners, jobs. We have lost over 70,000 jobs under the Bush administration. And it's a big and important issue here in this state.

DOBBS: And who do you think will be coming in second? Have you got a sense of that?

BUTTON: No, it's going to be close. It's going to be close. I think all three candidates are going to be running very well. It may be the wee hours of the morning before we actually know who wins this one in Tennessee.

DOBBS: Well, as I said, obviously, Vice President Al Gore, then Vice President Al Gore, couldn't carry his home state. How important is a Southern strategy? How important will Tennessee be in this presidential election?

BUTTON: Well, Tennessee is going to be very important. We are going to be a targeted state by both the Democrats and the Republicans. We have seen George Bush here a lot in the last three years. But this is going to be a state that is a swing state.

And if you look at the past, it's been 1960 since Tennessee didn't go for the winner in November.

DOBBS: And somewhat confusing the situation for the Democratic Party, Al Gore backing Howard Dean, Senator Kerry doing well. What is the impact on the party itself and the organization in its potential support for the nominee, whoever he is?

BUTTON: Well, the impact on the party is that, you know, we're all unified. And I think, one thing, we had an event here just Sunday night. And we had over 2,000 people there.

And one thing that I heard coming out of that whole group was, no matter which candidate they were for, they were unified behind who the nominee was going to be and making sure that George Bush was beaten.

DOBBS: What do you, Randy, think will be the determinant issues in this campaign? We have heard a lot about electability. We have heard a lot about momentum. As we move into the campaign itself, what will be the issues that be will determinant in Tennessee?

BUTTON: Jobs.

George Bush coming down here and talking about economic recovery is like having the tractor stuck in the mud and calling it lawn art. In Tennessee, jobs are an important factor. Also, balancing the budget is going to be extremely important, and affordable health care. DOBBS: Did you say tractor stuck on the lawn?

(LAUGHTER)

DOBBS: You know what? I have spent a lot of time in the country. I'm a fan of tractors. I think that is the most -- I really like that metaphor. I'm not saying it's relevant. I just like the metaphor.

BUTTON: It's very relevant. It's very relevant in Tennessee, I can tell you.

(LAUGHTER)

DOBBS: Appreciate it. Randy Button, we thank you for your time.

BUTTON: Thank you, Lou.

DOBBS: And we hope you have a successful evening.

BUTTON: Thank you.

DOBBS: Randy Button, chairman of the Tennessee Democratic Party.

Coming up next here, a landmark decision in France. Muslim head scarves and other religious symbols could soon be banned from public schools, overwhelming support for that ban on the part of the French National Assembly. We'll have a report for you from Paris.

Also, the growing debate over whether there's been a rush to judgment in the Rush Limbaugh case. We'll have that special report and a great deal more still ahead here.

Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The French Parliament today voted overwhelmingly in favor of a ban against Muslim head scarves and other religious symbols in public school. France has about five million Muslims in its population, nearly 10 percent of the total population. And that's the largest Muslim population of any country in Europe.

Jim Bittermann has the report from Paris.

(BEGIN VIDEOTAPE)

JIM BITTERMANN, CNN CORRESPONDENT (voice-over): It was a vote so overwhelming, it surprised some of the legislators. Nearly 500 of the 577 deputies voted in favor of banning religious symbols from public schools. Only 36 voted against. Even the opposition Socialists voted in favor of it, although their parliamentary spokesman said he thought it may be unenforceable.

JEAN GLAVANY, SOCIALIST PARTY (through translator): We retain our right, but the law is necessary. BITTERMANN: Like the Socialists, nearly all political party leaders said a law was crucial to maintaining the secular nature of the French republic.

JACQUES BARROT, MAJORITY PARTY (through translator): It's a law that reaffirms the values of the republic and is necessary to put us on the side of equality of opportunity in a tolerant and a pluralistic France.

BITTERMANN: An anticipated protest outside the Parliament by Muslims against the law did not materialize. But many in the Islamic community are not happy with the approach the government is taking.

(END VIDEOTAPE)

BITTERMANN: And, Lou, what a lot of those people are unhappy about is that they believe that this may just be the thin edge of the wedge, that, in fact, this could be expanded or extended to include university students and perhaps public sector jobs, and, also, that it's not addressing the real problems, which is the sense of social and economic exclusion a lot of Muslims here feel from French society -- Lou.

DOBBS: The exclusion they feel, it wasn't but about four years ago that they had the right to citizenship itself. To what degree is assimilation really the critical underlying issue here?

BITTERMANN: Assimilation and what the French like to call an integration really is the issue here. Over the last 50 years, 40 or 50 years, there's been about five million Muslims come to this country. They represent now a tenth of the population. It's the second largest religion.

And yet, when you look around the place, you'll find that particularly among young people, they are still living in public housing estates on the outskirts of the city, unemployment as high as 50 percent among some people. So it is the question of assimilation that is really at the root of this.

DOBBS: Jim, thank you very much -- Jim Bittermann reporting tonight from Paris.

Coming up next here, Southern exposure, the Democratic presidential candidates battling tonight in Tennessee and Virginia. We'll be talking with our panel of top political journalists, as the first polls are just about to close in 35 minutes.

Also, "Exporting America" -- tonight, the U.S. Chamber of Commerce says it supports some outsourcing. The president says he supports some outsourcing. We'll be talking with the chamber president and CEO Tom Donohue. He'll be here to tell us why.

And damaging new testimony today in the fraud trial of Martha Stewart, we'll have that, a great deal more, still ahead.

Please stay with us. (COMMERCIAL BREAK)

DOBBS: Dramatic testimony in court today from Martha Stewart's assistant. Her assistant told a story of Martha Stewart, her broker and a potentially damaging telephone message.

Mary Snow now joins us from outside the federal courthouse in Lower Manhattan with the details -- Mary.

MARY SNOW, CNN CORRESPONDENT: Lou, after breaking down on the stand yesterday, Martha Stewart's personal assistant today delivered a blow to the defense.

Ann Armstrong testified that Martha Stewart altered a computerized phone log message having to do with her sale of ImClone stock. The message was taken on December 27, 2001, the day she sold that stock. And it was from her stockbroker, Peter Bacanovic. Armstrong testified that the message read, "Peter thinks ImClone is going to trade downward." She Said, In late January of 2002 that Martha Stewart sat at her desk, changed the message to read, "Peter Bacanovic called re: ImClone."

She testified that Martha Stewart instantly took the mouse, highlighted from the end of Peter's name, then she started typing over that. She said, Stewart stood up and instantly told her at that point to change it back to the way it was. Armstrong said it took a few days to retrieve the original message. She did, and, eventually, it was subpoenaed.

Also testifying today was the assistant regional manager from the SEC, testifying about the interviews about the interviews of Martha Stewart. She will resume her testimony tomorrow -- Lou.

DOBBS: Mary, thank you very much.

In Florida, another high-profile case involving another celebrity, this one Rush Limbaugh. But after four months, prosecutors there have not filed a single charge against the radio talk show host.

Bill Tucker has the report from Florida.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): The question about the number one personality in radio has become: Is Rush Limbaugh being fairly prosecuted or simply persecuted by the Palm Beach County prosecutor's office?

ROY BLACK, LIMBAUGH'S ATTORNEY: I think there's something about this case that has forced them or motivated them to act differently than in any other case. I mean there's no question that he's been singled out for investigation more than anyone else I've ever seen.

TUCKER: A charge denied by prosecutor Barry Krischer who says the Limbaugh case is being investigated like any other alleged crime. Yet some of the actions by the state attorney raise serious questions. RUSH LIMBAUGH, RADIO TALK-SHOW HOST: We have been informed that this afternoon the Palm Beach County state attorney's office will announce that it has seized my medical records.

TUCKER: Under Florida law, attorneys for defendants are to be notified before not after medical records are seized.

And then there's the prosecutor's decision to release letters between its office and Limbaugh's attorney discussing terms of a settlement. The prosecutor's office says the release of those letters was OK'd by both the Florida Bar and the state attorney general's office, but both groups say they did not give their approval.

BRUCE ROGOW, NOVA SOUTHEASTERN UNIVERSITY: I think what you're seeing is this enormous attention because it is Rush Limbaugh and then the prosecutor, I think, not using good judgment in how he's handled some of these matters.

TUCKER (on camera): The fate of Limbaugh's medical records will be decide here at the Fourth District Court of Appeals, the same court which allowed the ACLU to file a friend of the court brief on behalf of Limbaugh.

(voice-over): The American Civil Liberties Union is concerned about the law and its protection of the privacy of medical records, but there is another concern.

HOWARD SIMON, EXECUTIVE DIRECTOR, ACLU OF FLORIDA: I guess one thing that bothers me about this case is why -- you know, and, frankly, at least some suspicion as to whether or not the prosecutor is just after a highly visible national personality to put as a trophy on his mantelpiece.

TUCKER: And a trophy during an election year can be valuable.

(END VIDEOTAPE)

TUCKER: And county prosecutor Barry Krischer is up for reelection this year. He's a Democrat. And a profile of a tough prosecutor, not intimidated by the wealthy and powerful -- Lou, that could play well with some of the voters.

DOBBS: It could also blow up if -- with the ACLU supporting Rush Limbaugh in this case in basically saying it looks like a matter of partisan politics. Is there any sign that this is going to wind down and reach some conclusion?

TUCKER: No. If anything, it appears there is -- some former prosecutors that I spoke with today, Lou, that suggested that maybe any delay would work in Krischer's favor and he could probably favorably resolve this in Rush's favor after the election happens, but he'd like to delay it.

DOBBS: Justice delayed, I guess, we could style that.

Bill Tucker, thank you very much. Returning to the race for the presidential nomination, the first polls will close now in just about 27 minutes. These -- those polls, obviously, in Virginia, an hour later in Tennessee.

I'm joined now by our panel of the country's top political journalists: Ron Brownstein, national political correspondent for the "L.A. Times"; Karen Tumulty, the national political correspondent for "TIME" magazine; Roger Simon, political editor, "U.S. News & World Report."

Good to have you all with us.

And, as you are all tonight in Washington, let me begin not with a question about the primaries but about the president. Scott McClellan today, the White House spokesman, taking an hour, about, to deal with the president's service record in the National Guard 30 years ago. Was the release of this evidence, these records, payroll records enough to put this to bed, do you think, for the Democrats, Ron?

RON BROWNSTEIN, "LOS ANGELES TIMES": Well, you know, I think, certainly, the president tried today and the White House tried today to put it to bed, and they put out more information. They're in the position now of proving a negative. Really both sides.

I mean I have the sense that we're going to have this fester on, smolder on. Democrats today were saying there are more questions, and there are always more questions when you're dealing with something like this. I -- my sense is that we will end up in a somewhat murky position where the Democrats can't prove that he wasn't there right now and the White House has made strides toward proving that he was there, but Democrats are saying where was anybody on the base who saw him.

So I suspect it goes on but at a lower level. As I said yesterday, I think this is ultimately a sideshow in the larger scheme of things.

DOBBS: Karen.

KAREN TUMULTY, "TIME": Oh, I absolutely agree, and I just think that -- the longer this drags on, I think, at some point, it starts becoming difficult for the Democrats and even unseemly, although it was rather interesting that the White House was suddenly able to produce these records that we didn't know existed four years ago when this case first -- when these allegations were first brought up.

DOBBS: I asked that question of our White House Correspondent Suzanne Malveaux, Karen, and, apparently, this came about as a request by Dan Bartlett, White House communications director, inquiring at the center in Denver, and somebody there, apparently, had been doing some research.

TUMULTY: Well, yes. You know, it's amazing what you can find when you actually go look for it. ROGER SIMON, "U.S. NEWS & WORLD REPORT": But the -- but what the White House can't seem to find is anyone who served in Alabama with the president.

Now, if you served with a guy who later became president of the United States, you remember it, and you're very likely to come forward and say, yes, sure, I -- he was my wingman. I flew with him, and we, you know, went out, and -- I remember the guy, and he was there on these 11 occasions.

No such person seems to exist in the United States to date.

I don't think the White House has put this story to rest. And it may be a sideshow, but when is the last time you saw the White House on the defensive day after day? I don't think since 9/11 you've seen the White House like this.

DOBBS: Is the -- and the fact that the president this weekend chose to go on "Meet the Press" suggests perhaps, doesn't it, that there is a feeling there that he needs to get out in front now on a number of issues?

BROWNSTEIN: Absolutely, Lou. I mean, look, the reality is President Bush, from the beginning, has been a very polarizing president. That has given him sort of a small margin for error.

I mean his approval rating is never going to get that high because there are a lot of people who don't like what he's doing, while there are a lot of Republicans who do. So, right now, he's fallen back under 50 percent in most polls, which is -- right around 50 percent, which is a danger zone for any incumbent.

They've got concerns about the economy. They've got concerns about Iraq. They don't have Howard Dean, who they thought they were going to have. So they feel a need to get out there and put a message down.

Democrats clearly are relying heavily on economic populism, trying to make the case that he tilts toward the rich. The Republicans -- I think you saw Sunday President Bush is going to rely heavily on national security and also the argument that he is a strong and tested leader.

He seemed to be trying to make the case more that he would make tough decisions even if you don't agree with them, and that, I think, will be a central piece of his argument for reelection.

TUMULTY: And that's right. I mean one of the reasons this is so perilous for the president is the fact that so much of his support is, in fact, based on his personal quality.

In fact, two of his signature policy issues, his Medicare prescription drug program and his education No Child Left Behind program, are just getting hammered out there on the campaign trail.

So this is a president who has very much staked his presidency on how people view him as a person. So, when his credibility gets nicked, it's particularly damaging.

DOBBS: Tonight, is it your judgment, Roger, that we're seeing Kerry who is ahead in the polls -- and, obviously, there are always surprises. Is it your sense that this is -- this is now -- that Kerry -- it's now his nomination to lose?

SIMON: It is, I think. I think it has been. If he wins and wins decisively in Virginia and Tennessee tonight, it's going to be very hard to stop him.

There is one way he could still lose Wisconsin next week, however, and that's if he refuses to debate on Sunday in Milwaukee. His campaign aide, Steve Elmendorf, was on with Wolf Blitzer earlier today and refused to say that Kerry would come out and debate.

Cheeseheads don't forget, and they don't forgive. They're not going to treat John Kerry nicely if he suddenly gets a severe case of front-runner-itis and is too arrogant to debate in Milwaukee.

BROWNSTEIN: Lou, in terms of Edwards and Clark, if -- they really -- you have to ask the question, if they can't beat him in Tennessee and Virginia, states in which a majority of the electorate, in all likelihood, will be not liberals, a majority probably will not be college graduates, they'll be the kind of blue-collar people that John Edwards has been focusing on -- if they can't beat Kerry in those kinds of states, they really have to ask where are they going to beat him.

DOBBS: And, Karen, that would deny us ultimately a contest and general election between two Yale graduates and members of...

(LAUGHTER)

TUMULTY: Which is something, of course, they can't talk about.

DOBBS: Exactly.

Thank you. Thank you, all. Roger, Karen, Ron. We'll see what happens in those poll results, obviously, in just about 22 minutes here. We'll see.

And that brings us to the subject of our poll question tonight about the president's military service. Do you believe President Bush has adequately answered questions about his service in the National Guard? Yes or no? Cast your vote at cnn.com/lou. We'll have the results for you later here.

Coming up next, Tom Donohue, the president and CEO of the U.S. Chamber of Commerce on some growing trends in this country, the exporting of America and the rising population of illegal aliens and the suggestion of amnesty for them.

And made in America. We'll introduce you to a master craftsman who chooses to make products right here in this country. Imagine that.

We'll have that story and a great deal more still ahead. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: Tonight in our series of special reports "Made in America," we visit with a master craftsman who's helped lead a renaissance in a uniquely American craft, the handmade hook rug. If you want custom made for a large room and you want it made in America, the man to see is Stephen Anderson. Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): The hand-hooked rug, an American tradition dating back more than a hundred years and now enjoying a renaissance as top decorators embrace Americana and the work of Stephen Anderson, the new darling of those who can afford $60,000 for a large rug.

BARBARALEE DIAMONSTEIN-SPIELVOGEL, HANDMADE IN AMERICA: Stephen Anderson, who is a master craftsman, has almost single-handedly resuscitated interest and availability of the hand-hooked rug.

VILES: Anderson could easily have his rugs made in India or the Philippines, but he chooses to make them in New York City.

STEPHEN ANDERSON, AMERICAN CRAFTSMAN: It's a battle. It's much easier to have it made someplace else and have somebody else fly it in and someone else to go through the export-import stuff and a truck drop it off at your door.

VILES: But Anderson likes to control the entire process. He adapts traditional patterns. This is known as the log cabin pattern. Leaves are also very popular, as are animals.

ANDERSON: The most popular hook rug pattern ever printed in America.

VILES: He buys the wool, has it cut by hand, then hooked, the process that hasn't really changed in a century. It can take a dozen workers a month or longer to make a single large rug. Anderson also repairs antique rugs.

ANDERSON: We're selling hook rugs -- old hook rugs. Some of them are over a hundred years old, and I certainly feel that my rugs will long outlive these, and the fact that we have this cottage industry is kind of fabulous.

VILES: Making those rugs in America has always been a challenge for Anderson, but, recently, it has also become a selling point.

(on camera): Now, as you might expect, many of the new rugs now being billed as hand-hooked rugs are, in fact, not made by hand and not made in the United States. As Anderson says, they have the look but not the soul of the original genuine article -- Lou.

DOBBS: Soul has a lot to do with a lot of these issues, doesn't it? VILES: It sure does. A hundred-year-old rug. That has a soul.

DOBBS: Pete, thanks.

Peter Viles.

Well, we've been reporting here for a better part -- actually, more than a year on the exporting of America and the millions of illegal aliens who are crossing our borders amongst a host of special reports and issues that we look into here.

My guest tonight says the outsourcing of some U.S. jobs overseas can be good for our economy, and he says so can giving some illegal aliens legal status. Those aren't exactly the positions that we have been exploring or the positions that we've been finding supportable.

Tom Donohue, however, is president and CEO of the largest business organization in the country, the U.S. Chamber of Commerce.

Hey, we're delighted to have you with us.

TOM DONOHUE, U.S. CHAMBER OF COMMERCE: Glad to be back.

DOBBS: Let's start with outsourcing. The president of the United States, the White House, this administration says outsourcing is good for America. How in the world can he win reelection telling hardworking men and women that their jobs, which people now know are at risk -- it's just fine, it's for the good of the economy, it's good for the market?

DONOHUE: Well, first of all, I think the report today, while it might have sound economic principles, was a pretty stupid delivery of a message in a political year.

DOBBS: See, we're already agreeing right off the bat.

DONOHUE: Yes, but there are legitimate values in outsourcing -- not only jobs, but work -- to gain technical experience and benefit we don't have here, to lower the price of products, which means more and more of them are brought into the United States, used, for example, I.T., much broader use than it was 10 years ago, create more and more jobs.

But the bottom line is that we outsource very few jobs in relation to the size of our economy. We employ -- American companies employ 140 million Americans. They provide health care for 160 million Americans. They provide training in terms of 40 billion a year. The outsourcing deal over three or four or five years and the two or three sets of numbers are only going to be, you know, maybe two, maybe three million jobs, maybe four.

DOBBS: My God, Tom. we've lost 2.8 million manufacturing jobs in the last three years.

DONOHUE: And you're going to lose more, but the...

DOBBS: And we're going to lose more.

DONOHUE: But why?

DOBBS: But...

DONOHUE: And where did they go?

DOBBS: Before we get to the why, let me finish just the stipulation here. We've lost those jobs. You can argue that's not many in a labor force of 150 million people. But, by God, for those 2.8 million people, that's a lot of jobs.

And we've got a government saying we're going to train you. We've got a government arguing over whether or not we'll extend jobless benefits. We've got nearly 15 million people unemployed. We've got people saying...

DONOHUE: Well...

DOBBS: Let me finish. And then you can correct the record, as you see it.

And then we've got a government saying it's good for you to see your job outsourced.

The numbers at -- you can use Forrester. You can use the Berkeley study. It's either three million or -- it's 14 million over the next five to seven years. This doesn't come up to a happy result...

DONOHUE: The economy continues...

DOBBS: ... for real people.

DONOHUE: Of course. The economy continues to create a great number of jobs. And, as you know, we had a talk about how you measure it, but we are creating more jobs, we will don't create more jobs, and we will be in a position where we're not going to have enough people in a very short period of time because of our demographics to fill the jobs we have.

DOBBS: Now you're moving to the issue of illegal immigration.

DONOHUE: No, I'm not.

DOBBS: You're not?

DONOHUE: I'm moving to the issue of how many people live here, how many people work here, how many people are going to retire, and how many people are going to be available to work.

DOBBS: Right.

DONOHUE: Now there happen to be close to 10 million illegal workers in the United States.

DOBBS: So you were migrating to this issue.

DONOHUE: No, I'm talking about -- whether it's people that are here legally or illegally, we have got a demographic circumstance.

We're going to have a massive number of people retire in the next few years, and the 25- to 40-year-old people -- remember, that's when people sort of invented the pill and everything, and we don't have those people here to work.

There's a tremendous hole in the wall. We've got to think as small companies and big economies where are we going to get the people that are going to work in the United States.

DOBBS: How about -- how about legal immigration as an adjunct to natural childbirth?

DONOHUE: Well, I think legal immigration is a great idea, and both Sweeney and I -- he runs the AFL-CIO -- testified the day before 9/11 about a program that would bring us in that direction. After 9/11, of course, we tied down the borders. The president took a risky position. He took a big risk in coming out and saying we ought to make some changes.

DOBBS: A guest worker program for three years that can be extended.

DONOHUE: To six.

DOBBS: But the fact of the matter is it's a riskier proposition right now for us to be talking about homeland security and not even being able to secure our borders. It's a riskier proposition to have John Sweeney talking about organizing illegal aliens and Tom Donohue and his members talking about exploiting labor and...

DONOHUE: Excuse me. Those are your terms.

DOBBS: I'm talking.

DONOHUE: Right.

DOBBS: And you get the next shot.

DONOHUE: That's exactly right.

DOBBS: Fair deal.

Instead of talking about what is in the best interest of this country, absolutely, that is in terms of border security, humane treatment of illegal aliens and legal aliens, the insistence that there be a legal approach to immigration in this country rather than de facto, and an insistence that we have skills in the part of those immigrants who we do bring into this country rather than an ad hoc multicultural sort of acceptance of whatever will be on the part of another government.

DONOHUE: For many administrations of both parties in this country, we have denied the demographic reality we face and the fact that there are millions of illegal workers in the United States. The great preponderance of those are people that do nonskilled jobs.

The skilled people that come in under the H1B visas, we're able to get them -- have been able to get them to come in and do high-tech jobs. Because of what we're doing in homeland security, they dropped that number. And you only have two choices: Either bring them here to work or you send it where the work can be done because we don't have sufficient technical people.

We've got to train people. Companies spent $40 billion this year training people.

DOBBS: Even though Tom and I disagree on a number of these issues, I respect Tom greatly.

And because I know that your heart's in the right place and you want to move toward better education for American workers and a more rational immigration policy as well and -- and -- well, you and I are just going to have to agree to disagree on the exporting of American jobs right now.

I'd just like to share with our viewers and you a thought that I thought might be appropriate on this issue for a lot of folks to look at. "The significant problems we face cannot be solved at the same level of thinking we were at when we created them." Albert Einstein.

DONOHUE: I absolutely agree with that.

DOBBS: I wanted to end where we both agree.

DONOHUE: But remember what the other great mind said, Herman Kahn, that prevailing thought and conventional wisdom is almost always wrong.

DOBBS: That's why I'm totally against it.

Thanks very much, Tom Donohue, CEO of the U.S. Chamber of Commerce.

Coming up next, speculators on Wall Street flock to the architects of outsourcing. Christine Romans will have that story for us next. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: On Wall Street, stock prices higher. The Dow up 35 points almost. The NASDAQ rose nearly 15. The S&P 500 up almost 6 points. Wall Street tonight favoring some of the very companies exporting America, as we've been reporting to you here, extensively as they say.

Christine Romans is here now with the report.

What's this all about? CHRISTINE ROMANS, CNN CORRESPONDENT: Well, Wall Street's just not paying attention to you yet, Lou. They are touting everything you hate about exporting American jobs.

Wall Street analysts are recommending investors buy the stocks of those companies shipping American jobs overseas, specifically the Indian outsourcing firms, Infosys, Wipro, Cognizant, Satyam. Look at all those buy ratings.

Analysts at Smith Barney, Wachovia, Brean Murray, and many others, Lou, say these companies are good buys for investors. This industry will explode. Never mind the growing backlash.

Brean Murray's outsourcing analyst is Ashish Thadani. He says government contracts are less than 2 percent of the outsourcing market, so legislation to stop the industry's growth just won't work. Besides, he says, the number of jobs that might be lost to off-shoring is minuscule relative to the overall work force.

Now, Lou, if that's true, then why are all these analysts so bullish on these stocks? In the past six months, the stocks in this area have doubled and tripled, and the analysts talk about being sensitive to American workers who are now jobless, but they continue to recommend these stocks.

DOBBS: You know, it's interesting that people are going to get really excited about the outsourcing. They never think about their jobs or their roles being outsourced.

ROMANS: If you can outsource Reuters journalists and you can outsource every kind of back office and tech support, you can outsource financial analysts, too.

DOBBS: And we'll take a vote later on the broadcast.

Christine Romans, thanks.

Coming up next, the story of a very curious, very large sea lion roaming far from home.

But, first, an update on the list of companies we confirm to be exporting America tonight. These are the companies -- U.S. companies sending American jobs overseas or employing cheap foreign labor instead of American workers. Our additions tonight include Ciber, Financial Technologies International. The entire list is growing exponentially. Log on to cnn.com/lou for the entire list.

We'll be right back. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: The results of tonight's poll: 5 percent of you say President Bush has adequately answered questions about his service in the National Guard. Ninety-five percent do not.

Well, finally tonight, speaking of important issues, a 300-pound sea lion allowing us to depart from sometimes the weighty issues that we confront here each evening. That sea lion in California has been found far from home.

The sea lion apparently swam up river from the ocean into the canals of Central California, a trek of some 65 miles -- or rather a swim. That's where he decided to take in some sun on the back of this highway patrol car, California Highway Patrol.

A spokeswoman for the Marine Mammal Center says it's common for sea lions to follow their prey until they're so far away, they don't know how to get back. The sea lion soon will be safely on his way back home.

That's our show for tonight. We thank you for being with us.

Tomorrow night, we'll have the latest on the race for the Democratic nomination. Republican Party Chairman Ed Gillespie joins us. Please join us.

For all of us here, good night from New York.

CNN's special election coverage begins now.

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

Service; Kerry Headed for Victory?>


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