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LOU DOBBS TONIGHT

Republican Launch Counterattack; Martha Stewart Prosecution Dealt Blow

Aired February 13, 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 United States is exporting not only jobs, but money, and lots of it, more than ever before.

ALAN TONELSON, U.S. BUSINESS & INDUSTRY COUNCIL: If we have an economic future in this country, it's not in services and it's not in high tech.

Economist Bruce Bartlett says the chairman of the president's Council of Economic Advisers shouldn't resign for saying it's a good idea to export American jobs. He's our guest tonight.

The Republicans launch their counterattack.

(BEGIN VIDEO CLIP, AD)

UNIDENTIFIED ACTRESS: More special interest money than any other senator?

(END VIDEO CLIP)

DOBBS: A video e-mail to six million people. Our panel of top political journalists assesses a week in which presidential politics took a decidedly negative nosedive.

And Martha Stewart on trial. The judge deals a damaging blow to the prosecution. We'll have a live report from federal court.

And in "Heroes," the inspiring story of a true American patriot.

UNIDENTIFIED MALE: I see every flag. The whole patriotism thing really stands out.

DOBBS: In "Heroes" tonight, the story of Private Christopher Bowser.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Friday, February 13. Here now, Lou Dobbs.

DOBBS: Good evening.

Tonight, the most alarming evidence yet of the high cost of free trade policies. Americans are sending money overseas at an alarming rate. The trade deficit last year swelled to almost a half trillion dollars, $489 billion, our trade deficits, with China, Mexico, Canadian and the Europe Union hit all-time highs in 2003.

And perhaps even more troubling, two of what had been the strongest areas of trade for the United States are now showing alarming new signs of weakness.

Bill Tucker has the report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): They are the sectors that economists love to point to as our economical salvation, the United States as a service economy; we can rely on our economic future in high tech and biotechnology.

But the new trade numbers serve up a hard dose of reality, as we exported money out of the country and eroded our strength. The surplus in the service sector shrank to $60 billion last year, a dramatic drop from a $91 billion surplus in 1997. And what had been a trade surplus in high technology as eventually as 2001 has now become a $27.5 billion deficit.

TONELSON: And what these trade figures tell us is that, if we have an economic future in this country, it's not in services and it's not in high tech. If it's not in those two sectors, I'm not sure what it is that sustains a First World standard of living here.

TUCKER: Manufacturing remains in pain; 582,000 more jobs were lost and over three million jobs have now been lost in three years, raising the question, what kind of work is going to be left?

ROBERT SCOTT, ECONOMIC POLICY INSTITUTE: We see now that, with outsourcing of services, that workers in the high paid sector of the service industries are also beginning to see the threat of foreign competition. So no one seems to be safe.

TUCKER: Ultimately, as the trade deficit rises, every Americans' standard of living is put at risk.

CLYDE PRESTOWITZ, ECONOMIC STRATEGY INSTITUTE: We're consuming more than we produce, which means that we are kind of living at an artificially high standard of living, financed by foreign lenders, particularly Japan and China.

TUCKER: Until recently, few Americans or their leaders seemed to care about the trade deficit.

(END VIDEOTAPE)

TUCKER: But a half a trillion dollars went out of this country last year. And now, with the reality of that number staring us in the face, it will perhaps prompt some political action on the economy -- Lou.

DOBBS: Bill, thank you.

And turning to that subject, on Capitol Hill tonight, a growing and increasingly powerful backlash against the export of American jobs to cheap overseas labor markets. There is now a proposal in the Senate to force American companies to publicly declare their plans to move jobs out of this country when they do so and to give their employees at least three months notice.

Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): On the campaign and in Washington, outsourcing of American jobs suddenly a hot issue, in Wisconsin, where 68,000 manufacturing jobs have disappeared.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: The president's top economist told the truth to America, finally, that this administration welcomes the outsourcing of jobs, because they think it's part of the natural process.

VILES: John Edwards had been campaigning to force American companies to publicly disclose any jobs they export. And now that Edwards idea has been proposed as legislation.

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: Workers have a right to know what is going to happen to their job, so then we have the opportunity to do something about it.

VILES: The Jobs For America Act would require that companies planning to lay off 15 or more workers and send the jobs overseas notify those workers and the federal government at least three months before the layoffs.

ROBERT BOROSAGE, CO-DIRECTOR, CAMPAIGN FOR AMERICA'S FUTURE: You hope you have some deterrent effect on companies and make them think twice, because they can't simply lay people off and then slip overseas, without taking the public relations blow that comes with it.

VILES: The USBIC, representing small manufacturers, supports disclosure, calling it -- quote -- "a good start."

But the bigger manufacturing lobby, the National Association of Manufacturers, did not immediately take a position, a spokesman saying -- quote -- "This is not going to keep jobs here and could well be counterproductive. Instead, we should focus on the factors that would keep jobs here."

(END VIDEOTAPE)

VILES: You can expect many of the big-business lobbies to oppose this legislation. They generally oppose any additional reporting requirements to the government. And these big companies often won't even tell the media when they plan to move jobs. They say that is sensitive and competitive information and they won't give it out, Lou.

DOBBS: And, frankly, it is pretty clear that many of them are outright embarrassed.

VILES: Sure.

DOBBS: In point of fact, giving their employees who are training replacements for jobs being shipped overseas financial incentives not to tell anyone.

VILES: Sure.

And we have seen memos, internal memos, from IBM reported in the media, where they coach their employees on how to discuss this, certain words not to use. So they really don't want to discuss this publicly.

DOBBS: Pete, thank you very much.

VILES: Sure.

DOBBS: One of the principle focuses of recent criticism of the Bush administration, of course, has been the failure to find weapons of mass destruction in Iraq and suggestions that the administration either misinterpreted, misconstrued or outright distorted prewar intelligence.

According to a new report, there was considerable intelligence three months before the war began that evidence of weapons of mass destruction might never turn up.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): When chief U.S. weapons inspector David Kay said recently weapons of mass destruction may never be found in Iraq, it was a shock.

DAVID KAY, FORMER CHIEF U.S. WEAPONS INSPECTOR: It turns out we were all wrong.

PILGRIM: But now it turns out a classified study warned of that three months before the war.

A senior intelligence officer tells us -- quote -- "The report in no way suggested that weapons of mass destruction were not present. It only suggested that if the war ended with lots of looting, rioting and lack of control in urban areas, that it would be more difficult to find the weapons of mass destruction, which is precisely what happened."

MICHAEL O'HANLON, BROOKINGS INSTITUTION: It sounds more like that some people believe the agents would be distributed, disbursed, broken up into smaller quantities and spread throughout much of the country and that, in the process of prosecuting a difficult war, we might never find all those different stocks of weapons.

PILGRIM: But some see the report as a stronger warning. GARY MILHOLLIN, ARMS CONTROL EXPERT: It was a warning to the people who are conducting the war that, unless they did something to prevent looting, did something to prevent guerrilla warfare and did something to secure the sites where mass destruction weapons might be, that it would be very hard to find them.

PILGRIM: At the time of the war, pretty much the entire world was convinced there were weapons, coalition of the willing and not willing alike.

LEE FEINSTEIN, COUNCIL ON FOREIGN RELATIONS: Before the war, you know, it was the American judgment, but it was also the judgment of the U.N. inspectors. It was also the judgment of the major opponents of the war, including the Germans and the French.

PILGRIM: CIA Director George Tenet said last week he believed Iraq had weapons just months before the war. But he suggested proving it now is going to be harder.

GEORGE TENET, CIA DIRECTOR: Remember, finding things in Iraq is always very tough.

PILGRIM: It seems that hindsight wasn't hindsight at all.

(END VIDEOTAPE)

PILGRIM: The problem now is, with the past looting and the continued security problems on the ground, it may be harder and harder to find out what was or still is in Iraq -- Lou.

DOBBS: Kitty, thank you very much.

Well, still ahead here, hundreds of terrorist suspects held in Guantanamo Bay. The Pentagon says they can appeal against their detention. But Defense Secretary Donald Rumsfeld says America is at war.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: Were they not detained, they would return to the fight and continue to kill innocent men, women and children.

(END VIDEO CLIP)

DOBBS: In "Exporting America" tonight, I'll be talking with a leading economist who supports the chairman of the president's Council of Economic Advisers on the shipment of American jobs to cheap overseas labor markets.

And a break for Martha Stewart, a blow for the prosecution. We'll have a report from the federal courthouse.

Stay with us.

(COMMERCIAL BREAK) DOBBS: We want to update you on a story that is breaking right now in Washington.

The White House has decided to release all of President George Bush's National Guard records. We understand that to mean all of the records in their entirety.

Our White House correspondent Suzanne Malveaux is now perusing some of those records and will be looking through all of them. She'll be joining us here in just a moment for a live report on what those records contain. And that will be coming up here momentarily.

Defense Secretary Donald Rumsfeld today said terrorist suspects being held at Guantanamo Bay will be allowed to appeal their detentions to a new review board. That panel will determine whether those suspects are still a threat to the United States. The U.S. is holding nearly 700 Taliban or al Qaeda suspects at Guantanamo Bay.

Pentagon correspondent Barbara Starr with the report.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): For the first time, Defense Secretary Donald Rumsfeld detailed the critical intelligence the U.S. is getting from interrogation of suspected Taliban and al Qaeda prisoners.

RUMSFELD: Detainees currently being held at Guantanamo bay have revealed al Qaeda leadership structures, operatives, funding mechanisms, communication methods, training and selection programs.

STARR: That disclosure was designed to demonstrate that the 650 detainees are being held because they are dangerous, but the Bush administration also responding to international criticism that detainees are in legal limbo, with no assurances about their future, the International Committee of the Red Cross in January saying that: "U.S. authorities have placed the internees in Guantanamo beyond the law. The internees still have no idea about their fate and no means of recourse through any legal mechanism."

The Pentagon says there will now be a parole board, each detainee's case to be reviewed annually to determine if they are still a threat or if they can be released. The U.S. wants to return more than 100 detainees to their home country for either continued detention or release. Nearly 90 have already left Guantanamo Bay. Still, the Pentagon says, some of the most lethal al Qaeda operatives are being held.

PAUL BUTLER, DEPUTY ASST. SECY. OF DEFENSE DETAINEE OPERATIONS: There's an individual who served as a bodyguard for Osama bin Laden and escorted him to Tora Bora, Afghanistan, following the fall of Jalalabad.

STARR: The secretary making it clear the U.S. believes the detainees have plenty to tell their interrogators. RUMSFELD: They have provided information on al Qaeda front companies and on bank accounts, on surface-to-air missiles, improvised explosive devices, and tactics that are used by terrorist elements.

STARR (on camera): But a note of worry. U.S. officials believe at least one of the released detainees may have already returned to the battlefield. So the process for any future releases will be a cautious one.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

DOBBS: A National Guard soldier suspected of trying to pass information to the al Qaeda is being questioned tonight. The soldier was arrested yesterday, shortly before his brigade was to deploy to Iraq. Officials say the soldiers converted to Islam within the past five years.

Katharine Barrett is at Fort Lewis, Washington, and has the report -- Katharine.

KATHARINE BARRETT, CNN CORRESPONDENT: Lou, it is here at Fort Lewis that specialist Ryan Anderson is being held in that ongoing investigation.

I spent most of the day today retracing some of the earlier steps in Mr. Anderson's life. We went to the neighborhood where he grew up, a quiet suburban neighborhood where longtime neighbors of his father and stepmother said that the family was a normal, wonderful family, nothing to make them stand out, nothing, that is, except, an incident in 1998, when Ryan Anderson was seen on the streets of this quiet middle-class neighborhood shouldering a rifle with a bayonet.

Law enforcement officials were called, but there were no charges ever filed and no laws apparently broken in that incident. Ryan Anderson's current next-door neighbor, one Jack Roberts, also confirms that Ryan was apparently a gun enthusiast who, when wasn't undergoing his military training here at Fort Lewis, liked to go to shooting ranges in his free time.

Now, it was about two years ago that Specialist Ryan Anderson supposedly initiated contact with Seattle's close-knit community via an e-mail chat room. It's an Islamic community chat room. He entered this chat room and began e-mailing under the name Abdul Rashid (ph), AKA Gunfighter. Local Muslim leaders say they were immediately suspicious of this outsider.

(BEGIN VIDEO CLIP)

AZIZ JUNEJO, SEATTLE MUSLIM COMMUNITY: He was a marksman shooter and thought that he should get together a group of Muslims from the area, men and women, and teach them how to shoot and we should have a group that goes out and shoots. And this was completely against the norms of what we think is correct or right and immediately disassociated ourselves with him. (END VIDEOTAPE)

BARRETT: But after disassociating themselves from him in the e- mail chat room, Anderson allegedly took it upon himself to show up at a local mosque, again, to try to recruit shooters to join this shooting group.

That's the very latest from here -- Lou.

DOBBS: Katharine, thank you very much -- Katharine Barrett from Fort Lewis, Washington.

Coming up next; President Bush ordered the release of all of his National Guard files during the Vietnam War. We'll be going live to the White House for the very latest, White House correspondent Suzanne Malveaux with that.

And the Bush-Cheney reelection campaign striking back against Democratic front-runner, Senator John Kerry. We'll be joined by our of top political journalists.

And a major setback for federal prosecutors today in the case against Martha Stewart.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: As we have just reported, the White House has released all of the president's military service files from 1968 to 1973.

The White House released those documents to end speculation that the president did not complete his National Guard service.

White House correspondent Suzanne Malveaux, who has just had the matter of moments to begin looking through those documents, has the story for us -- Suzanne.

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Lou, this is certainly what you would call a document dump.

This is just what was released and given to us by the White House. This is at least 300 pages worth of documents. There are essentially three different groups, one of them, of course, from the Texas Air National Guard, a summary of his performance and duties there, another one from essentially a service base in Denver. That is where they have a vault where they have all the original documentation. That was assembled in 2000.

And then, of course, one that is more recent, 2004, another summary. We are told a lot of these pages are repetitive, some of the elements blackened out, but only those of Social Security numbers and perhaps medical issues with family members. But they say everything else is simply an open book.

Now, we spoke with Dan Bartlett, Scott McClellan, and a number of White House officials in the press office this evening. We said, why did the president do it? Why did he feel the need to do this? He said, put it out. This is when they received the documents. It was in the morning that they got all of these pages. He said there has been an impression that has been left to the American people that there is something that they have to hide, that he did not perform his duties admirably or completely.

They say they want to put all of those questions to rest. It was just moments ago they took us in groups into the Roosevelt Room. That's where we examined and watched -- went over the medical records. We were not allowed to take those out of the room. But, simply, they want to show that he showed up in Alabama, that he showed up in Texas, that he did his duty, that he was discharged honorably.

Lou, it's going to take a lot of time to get through all of this, but the bottom line is, they believe it shows that the president did not shirk his duties. The big question here is whether the Democrats are going to look at this and say, is this enough? Is this proof that he actually performed those duties in Alabama and Texas?

DOBBS: Well, at some point, Suzanne, it comes down to, if you will, an objective standard of truth as well. You looked at the medical records there in the Roosevelt Room. To your eye, do those records establish that he was in Alabama, that he did show up there, because that has been the principal area of question?

MALVEAUX: Well, certainly, what we looked at is -- we saw three different medical records, one from 1968, one from 1970 and one from '71. One was from Houston, Texas, another Alabama, and another in Georgia.

Those three examines show that, at least on those days, he was certainly there to get this medical examination. It shows that he was in good health, that he was fit to fly, that -- White House officials saying that -- so there's nothing in those records specifically that show that either he was disqualified from flying or that he didn't show up.

DOBBS: And, Suzanne, today, we're going to give you at least another five to 10 minutes to go through those 300 pages of records. But, today, also, coming forward, the man who was the commander in Alabama, who says that he does remember Lieutenant George W. Bush, and confirming his presence in Alabama.

Did the White House have any statements about those comments and that corroboration, at least?

MALVEAUX: Well, I asked Dan Bartlett that question. And he said, look, they are not looking for anybody to corroborate the president's story. They haven't been seeking people out and that that is one man's story.

But they say, from the very beginning, that the president stands by his story, that he performed his duty, that they don't need anybody to say whether or not he was there or not. They have got the documentation to prove it, be it dental records, be it performance records, payroll records. They don't believe that it's necessary.

DOBBS: Thank you very much, Suzanne Malveaux, reporting from the White House.

Coming up next here: The president's reelection team has launched a counter attack in what it says is already an ugly campaign.

(BEGIN VIDEO CLIP)

ED GILLESPIE, REPUBLICAN NATIONAL COMMITTEE CHAIRMAN: The Democrats have used some of the most vicious rhetoric in the history of presidential politics.

(END VIDEO CLIP)

DOBBS: A panel of top political journalists join us next to assess attack ads, counterattacks, and what is a pretty tough campaign, and it's early yet.

Also ahead, "Made in America," an American company managing to grow every year it has been in business without exporting American jobs. We'll have that report. And our feature series, "Heroes," tonight, the remarkable story of an American soldier who survived a harrowing attack in combat -- that and a great deal more ahead.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: The Bush-Cheney reelection campaign has launched its first coordinated attack against Senator John Kerry, and Senator Kerry has not yet won the Democratic presidential nomination.

The counteroffensive came hours after Republican National Committee Chairman Ed Gillespie predicted Democrats will run what he called the dirtiest campaign in modern presidential politics.

Joining me now, our panel of top political journalists, Carlos Watson, CNN political analyst, joining us tonight from Mountain View, California, Jay Carney, deputy Washington bureau chief "TIME" magazine, joining us from Washington, also in Washington, our senior political analyst, Bill Schneider.

Bill, let me begin with you.

The dirtiest politics, this is quite a statement this early in the campaign. What is your assessment?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: My assessment is that they are a little bit worried, because the Democrats now believe they have the standing to run an aggressive campaign.

Look, the Democrats know one thing. Michael Dukakis, back in 1988, was tarred by the Republicans, in fact, George Bush's father, as a Massachusetts liberal, and he didn't fight back. So the whole point of the Kerry campaign is to say, we're not going to be Michael Dukakis. We're going to fight back. We're not going to take it. In fact, we're going to punch first. And that's some of the things they have done, especially by raising the issue of George Bush's military record, because, with Kerry as the prospective nominee, Democrats believe they have the standing to raise the military issue, in a way that they didn't in 2000, when it first came up.

DOBBS: Jay -- Jay Carney, the fact is, the White House has just released those documents which we're going through right now, Suzanne Malveaux looking forward to an interesting evening of reading.

Do you think that's going to put this issue to rest?

JAY CARNEY, "TIME": Well, it might. It certainly seems that, between those records, which we'll have to see those details of and the fact that there are now -- there's now at least one person from the Guard in Alabama in those years who says that he saw George W. Bush doing his duty on base in Alabama, that that might put to rest the issue of whether George W. Bush fulfilled his duty in the Guard.

It won't put to rest, however, the sort of broader issue that I think the Democrats are eager to get out, which is that these two men of essentially the same generation, who graduated from the same university, Yale, made two very different choices, when faced with going to war in the late 1960s. George W. Bush, who supported the war, nevertheless very deliberately made a decision to go into the National Guard, which he has said essentially, back in 1994, he did in order to avoid service.

And John Kerry, although even as a college student in his senior year, was already having qualms about the war, enlisted, went to Vietnam and fought.

DOBBS: Let me turn to you, Carlos.

It that sounds to me like that's a very slippery slope, frankly. And even some of the people close to the Kerry campaign are concerned, equating National Guard service as less than something honorable and appropriate. Is there a potential that could backfire against the Kerry campaign?

CARLOS WATSON, CNN POLITICAL ANALYST: It certainly could boomerang. Remember that one of the president's strong suits when you look at all the polls across a variety of organizations, said fundamentally people think he's likable, and for the most part, although he's had some recent issues with the WMD's they found him to be trustworthy. And so, for this to be seen quote, unquote, "as a personal attack on the president as opposed to an attack on policy grounds certainly could backfire."

It's especially serious, Lou, because if you think of the Kerry primary campaign, you put it in context, Kerry literally probably has had the best primary campaign of any candidate, nonincumbent candidate I have seen, in the last 20 years. Meaning that, not only has he won an overwhelming majority of the contest, and today the AFL-CIO has come out in support, and you saw Wes Clark come out and support, but what is really significant in the minds of voters people haven't even voted yet, they only know two things about him, A, that he's a winner, and B that he's a war hero. For him to start getting into a little bit of mudslinging could be a very slippery slope.

DOBBS: Well, let's take a look, if you would gentlemen, at this e-mail, that went out to some 6 million people in the Republican base, if we could roll that. I'd love to have your assessment of this.

(BEGIN VIDEO CLIP)

ANNOUNCER: More special interest money than any other Senator? How much? For what? Nominations and donations coincided? Wait. Watchdog groups. Fact, Kerry. Brought to you by the special interests. Millions from executive at HMOs, Telecoms, Drug Companies, ka-ching. Unprincipled?

(END VIDEO CLIP)

DOBBS: Jay your thoughts, is that an attack ad?

CARNEY: Oh, sure. All is fair in war and politics. But what is striking about this ad is two things. First of all, this is the first salvo from the Bush/Cheney campaign. And instead of being an ad that promotes their candidate, it goes after the opponent who is not even the nominee for the Democrats yet.

Second, going after anybody for special interests, is somewhat risky for George W. Bush, because even his campaign advisers would admit that his weakness with the American public is the perception he that might favor business over the little guy, that his tax cuts might favor the wealthy. And the perception when it comes to environment regulations and other things that he favors corporations.

Bush himself has taken quite a bit of money from lobbyist. Much more than John Kerry.

WATSON: Lou, the one thing that I know Republicans involved in the campaign would say, they would say, as opposed to quote, unquote "name calling." which they feel Terry McAuliffe the Democratic National Committee chair did when he talked about the president being AWOL. They would say we are only pointing to his record. The Kerry people responded it is only $640,000. And it wasn't a quid pro quo.

But the other thing that I would add, and I think is interesting, as Jay started to note, as is often the case, the ads in general election context often first surface during the primaries. So remember, Howard Dean has been charging this against John Kerry, much as the Willy Horton ad which Michael Dukakis was hit with in the general in '88, first came up by Al Gore, one of his fellow Democrats. So, again, we're seeing primary charges resurface in a general election context.

DOBBS: And they were careful, Bill, to call that chapter one. Making it very clear there's a lot more to come.

SCHNEIDER: Well, yes. But they are trying to make this a referendum on John Kerry and on the Democrats. It ain't going to happen. George Bush is the president of the United States. He's running for reelection. When a president runs for reelection the election is always inevitably a referendum on that president and his record. It always is.

So in the end, people are going to judge, do they want to rehire George Bush or do they want to fire him, the way they fire his father? And right now the polling shows they are on the cusp. The public is right at 50 percent. It could go either way. They haven't made up their minds. But I think for the Bush campaign and the Republicans try to recast this as a referendum on Kerry that's very unlikely to work.

DOBBS: Gentlemen, thank you very for that 50/50 thought. I suggest you gentlemen are going to be very busy, as are all of us here. Thank you very much, Carlos Watson, Jay Carney and Bill Schneider.

Tonight's thought is on losing. "Losing is no disgrace if you have given it your best." And those words, of course, from baseball hall of fame pitcher Jim Palmer. Best or worse this campaign obviously engaged.

Turning now to the case against Martha Stewart, the judge in trial today dealt the prosecution a damaging blow, that decision a break for Martha Stewart, after days of incriminating testimony. Deborah Feyerick has the very latest for us from the federal courthouse in Manhattan.

(BEGIN VIDEOTAPE)

DEBORAH FEYERICK, CNN CORRESPONDENT: It was a relatively good day for Martha Stewart, even her broker, co-defendant Peter Bacanovic left the court smiling. A judge ruled that experts will not be able to testify about comments Stewart made defending herself. Prosecutors charged Stewart with security fraud.

(voice-over): They say that she manipulated stock prices by denying she had done anything wrong. Prosecutors wanted to call experts to describe how Stewart's statements actually affected her stock. The judge said no, saying that that's something the jury could decide.

Now a source close to Stewart calls the victory a ruling. Saying that it was a tough charge to prove before, now it's essentially impossible. Prosecutors will have to prove this charge another way. Deborah Feyerick, CNN, New York.

(END VIDEOTAPE)

DOBBS: Coming up next here, defending the president's man and defending outsourcing. Economist Bruce Bartlett says the president's top economic adviser should not resign, for saying outsourcing, exporting those American jobs overseas is a good idea. Bruce Bartlett will be here.

And the story of a young army private who is an inspiration and a true American hero. His story and a great deal more still ahead. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: My guest says the chairman of the White House Council of Economic Advisors, Gregory Mankiw, should not resign for defending the export of American jobs to cheap overseas labor markets. Bruce Bartlett is the senior fellow at the National Center For Policy Analysis. He says using foreigners to do low level service jobs is perfectly defensible. He's here tonight to explain that. And joins us from Washington. Good to have you with us.

BRUCE BARTLETT, NATIONAL CENTER FOR POLICY ANALYSIS: Happy to be here.

DOBBS: Let me start by saying in my opinion, I don't think Gregory Mankiw should resign either. I think the president should probably fire him. The fact of the matter is, saying that 2.6 million jobs will be created and defending outsourcing of American jobs is, to me, absurd. What do you think?

BARTLETT: Well, first of all, if you read what was actually written in the economic report, it was really nothing remarkable at all. It was pointing out that many big corporations used to have inhouse services for accounting and engineering and janitorial services. And they have contracted those out to companies that are not now considered to be manufacturing companies.

And if you add the number of people who are in this category, called business service, to the number of people who have lost quote, unquote manufacturing jobs, they almost exactly equal. So that what has been going on here is an increase in specialization of companies doing one thing, accounting or one thing, engineering. And not -- and companies are concentrating more on their core functions.

DOBBS: Let me quote Gregory Mankiw. "Maybe we will outsource a few radiologist, what does that mean? Well maybe the next generation of doctors will train fewer radiologist and we'll train more general practioners or surgeons. We've learned we don't have a comparative advantage in radiologists."

Now, the question that seems to me to be very straightforward, outsourcing all of these jobs, people talking about higher productivity, specialization, the fact is, Bruce, we are watching jobs leave this country for only one reason, and that is because they are cheaper in India, in Poland, in Ireland, China, wherever it may be. How can you rationalize that as having anything do with comparative advantage?

BARTLETT: For one thing, U.S. companies have to compete in a world market. And if a company based in Germany is able to outsource and reduce its labor costs by hiring people in the Czech Republic, our companies would be at a comparative disadvantage. So you don't really have any choice. Also, even if you and I could agree that outsourcing is terrible and the government should stop it, there's no practical way to do it. If I send an e-mail to an Indian programmer and ask him to write a program for me and he sends it back to me over the Internet...

DOBBS: Let me help you out, Bruce. You say there's no practical way to end it. We could end it tomorrow. Corporate America can decide that they are going to maintain some commitment to their stakeholders, that is the working men and women of this country, not export the job, use the expression, higher product and efficiency when they mean lower cost. That's deceitful and dishonest.

BARTLETT: Well, if some companies did it and some companies didn't, then the ones that would -- that did not outsource would be at a comparative disadvantage. Again, the competition, the nature of the free markets tells people you have to do this.

DOBBS: You are a great free marketeer, a terrific economist and a good thinker. You tell me if this is such a good idea, free trade and exporting factors of production, which as I think you will agree has nothing to do with comparative advantage. Nothing that David Ricardo envisioned. There's nothing in it that David Ricardo envisioned despite the suggestion of some less honest economists. The fact is free trade right now looks like it costs us about a half trillion dollars this year, cumulatively about $3 trillion. We're a net importer of capital. We are exporting our wealth and our factors of production, knowledge base, what in the world. How can you call that free trade?

BARTLETT: Well, we don't have anything remotely like true free trade, but on the other hand, we do have a relatively open world economy. And I think it's demonstrably the case that a rising tide has lifted all boats. We talk about unemployment all the time but we only have a 5.6 percent unemployment rate. Not a very high rate by historical standards. The real standard of living of Americans has risen all the years that we have been talking about jobs being exported.

DOBBS: What have real earnings done over the last 30 years in this country. Bruce, you know the answer to that.

BARTLETT: There's some data problems.

DOBBS: You and I don't have the luxury of having problems with data. We know what the data tells us.

BARTLETT: If you look, for example, for real median family income it continues to rise. That's as good a measure of the well- being of the American people as any measure we have.

DOBBS: That's one way to avoid saying that it has declined.

BARTLETT: Well, one reason earnings have fallen is because benefits have gone up dramatically.

DOBBS: I understand. But it's a point you said there's really no free trade. Why is it that we keep hearing about free trade? We hear Carly Fiorina say there's no God-given right to an American job. This is first and foremost a political economy. We're making political judgments. This economy exists to provide a quality of life to the men and women who make up -- and children who make up the society.

BARTLETT: Well that's certainly true, but you always have to look at the alternative. The alternative to not having imports of half a trillion dollars isn't that we would produce half a trillion dollars more goods in the United States. It might be we would be worse off by having half a trillion dollars less goods to consume. You always have to look at the alternatives and I think that the alternative to -- of having some kind of protection is a cure worse than the disease. Tariffs on steel, it costs more jobs in the steel using industries than it saved in the steel producing industries, for example.

DOBBS: My question is very simply, what are we going to do about those jobs that are being exported overseas for cheap labor markets? You know, when we talked about comparative advantage, the fact is the Indian economy has a huge unemployment level, the Chinese have a huge unemployment rate, there is no way in which we can ever compete on a dollar basis hour for hour, product, our workers in this country with those people. It has nothing to do with comparative. They can suck up all the jobs in this country that we're going to create in the next five years.

BARTLETT: You can't look at just look at wage rates, you have to look at skill levels. You have to look at productivity. If a U.S. worker is five times as productive as a Chinese worker, it doesn't bother an employer to pay him five times more than he pays the Chinese worker because he'd have to hire five Chinese workers to do the same job. That's where we have to compete.

DOBBS: Well, to suggest that we make up three cents an hour or $2 an hour competition on wage costs by going to increments of 5x on productivity seems a little unnecessary burden to put on men and women working in this country, don't you think?

BARTLETT: It's not just productivity, it's also innovation. It's also a lot of jobs that they do here in our country cannot be done anywhere else. We need to concentrate on those kind of jobs instead of trying to save low-level jobs that we have to subsidize to keep.

DOBBS: Wait a minute. Of the 112,000 jobs created last month, the Labor Department reports that more than three-fourths of them were in low level, low paying, retail sector. I don't understand.

BARTLETT: Well, a great many of the jobs that are being created in this economy are not being counted even in that survey. They are jobs -- they are counted in the household survey as being -- people who are self-employed and contracted out.

DOBBS: Bruce, I appreciate it and it's good to talk with you.

BARTLETT: Thank you.

DOBBS: And I imagine Greg Mankiw is saying thank you right now.

Coming up next, the exploding trade deficit, exporting America, and election polls, all of that and a great deal more still ahead with tonight's newsmakers. Stay with us.

(COMMERCIAL BREAK)

DOBBS: As we reported the trade deficit widened to a staggering new record last year. Nearly a half trillion dollars. By far the biggest share of that to China, another record, 124 billion. Joining us tonight on newsmaker Steve Forbes, the editor and chief of "Forbes." Rik Kirkland, editor-in-chief of "Fortune." Mark Morrison, managing editor of "Businessweek." Gentlemen, good to have you here. Mark, how troubled are you by that, the record trade deficit?

MARK MORRISON, "BUSINESSWEEK": Troubled but not extremely troubled. I think that exports from the United States are picking up. I think there's going to be some help with the Chinese currency. Overall, our economy is doing very, very well. And no, it's not producing jobs, which it better start doing so soon or it's going to be a very interesting election.

RIK KIRKLAND, "FORTUNE": Look at the last couple of years, even during the worst of the recession what happens is the U.S. consumer and U.S. growth, thanks to our spending, we grew faster than the rest of the world. That's why this trade deficit is so big. Very quick way to bring it down is if we stop growing it will get very small. We don't want that. Hopefully...

DOBBS: Interestingly, it didn't decline during the most recent recession.

KIRKLAND: It always lags once a currency starts to fall, which the dollar has done. We hope if economic theory holds true, we need it to this time, it is going to shrink in the year ahead as other countries grow faster.

DOBBS: Is that a Greg Mankiw-like forecast?

KIRKLAND: It's just the way it usually works. So let's hope it's still true.

DOBBS: 2.6 million jobs, Steve Forbes, says Gregory Mankiw, the president's chairman of the Council of Economic Advisers. What a clever thing to do for the president.

STEVE FORBES, "FORBES": Well, the president picked the number up and what we have here is really federal government, as you know, Lou, has two different surveys, the household survey and the payroll survey.

DOBBS: You know Bruce Bartlett?

FORBES: Well, we didn't have a chance to hear him. But we are starting to create jobs again and just as we always have done before.

DOBBS: Well, as I pointed out, household survey, labor survey, it doesn't matter, 112,000 jobs created. 70,000 plus of those in the low wage retail sector. You thrilled with that, Steve Forbes? FORBES: I think when this recovery is over, this expansion is over, several years from now, we'll create a record number not only of overall jobs but high pay jobs.

DOBBS: There's a little pressure on this administration and your party to do it pretty quickly isn't there -- Rik?

KIRKLAND: Yes, I think there is. One reason you put out a number like that, the time the results are in you have either won or lost you so you might as well go for broke.

DOBBS: That's an interesting approach.

KIRKLAND: That's sort of how I look at it. It is true the forecasting record is awful. Last year they said it was going to be 1.7 and I think it was -53,000. So, there's a pretty big headwind here.

MARK MORRISON, "BUSINESSWEEK": And the administration is really feeling the heat on this jobs issue, and I think that's why they felt compelled to set a bar fairly high and TO come out with something semioffensive. I mean, they have been very much on the defensive and this election is headed for a big showdown in the midwest where this jobs issue has the most traction.

DOBBS: The president in Ohio traveling to Pennsylvania, has been there 25 times since elected. Obviously key states, also key states with some serious problems. Outsourcing, these jobs which we talked about considerably here, that is now a focus of the Senate, it's a focus of Don Manzullo, the Republican Congressman, calling for the resignation of Mankiw. What is the president to do here?

FORBES: I think the president has got to start making the case that this economy is starting to get back on track. That the bubble happened under Clinton-Gore, that we are starting to -- profits are exceeding...

DOBBS: People are tired of that, Steve. People don't want to hear that. He has been in office 3 years.

FORBES: They don't want to hear it, because they haven't made the case yet. and you dismiss the household survey. What is wrong with that?

(CROSSTALK)

FORBES: This administration created over a million jobs last year.

KIRKLAND: Didn't Chairman Greenspan dismiss the household survey?

DOBBS: Net jobs?

FORBES: Yes.

DOBBS: Let me write that down.

FORBES: Household survey, come on.

DOBBS: Why do you dismiss it?

DOBBS: The reason I dismiss it is because none of us...

FORBES: It doesn't agree with your position.

DOBBS: Not at all. Let me explain to you why I don't agree it. The fact is it isn't the basis of any survey we used to count job creation, on the part of any news organization in this country period. And the introduction of it now, because it's inconvenient to use it is ridiculous.

KIRKLAND: For my sins I listen carefully to Chairman Greenspan's testimony this week and he also says the payroll survey is the one you have to watch. And it concerns him that it is not showing signs of life.

DOBBS: Say that for Steve's benefit one more time.

KIRKLAND: Mr. Greenspan. Steve may choose not to agree with the chairman. He's done that on occasion.

MORRISON: We'd all like to see more job creation and less exporting of jobs. But coming to the right answer as to achieving that, what policy changes, can we make? We don't want to go down a protectionist road.

DOBBS: Why not?

MORRISON: What would you suggest?

DOBBS: Why not?

You want to know what I would suggest? You go first.

FORBES: I don't want another depression.

DOBBS: You don't want a Great Depression. Do you think Smoot Hawley caused the depression?

FORBES: It certainly contributed to it.

DOBBS: Oh, for crying out loud. The fact of the matter is, that...

FORBES: Do you want to go to North Carolina and say to the BMW workers send the jobs back to Germany?

DOBBS: I haven't made a proposal yet and Forbes is all over me here.

FORBES: You want to have a lively show, keep your ratings up.

(LAUGHTER)

DOBBS: Yes, we'll do that talking about Smoot Hawley.

The fact of the matter is...

FORBES: Culture (ph) Janet Jackson Act.

DOBBS: The fact of the matter is, we're exporting our wealth at an alarming rate. We simply cannot continue this. And we've got 3 trillion dollars in IOUs. You tell me, at some point you are going to have to make a decision, either you are going to have free trade that has mindlessly lead us to this point, or you are going to have fair, managed, mutual trade and build the economy back up.

FORBES: The trouble with managed trade it's managed by politicians.

DOBBS: Well, I'd rather it be managed by politicians...

FORBES: Managing anything is something to be avoided and deplored. There -- our economy today.

DOBBS: There are politicians who care about working men and women in this country. Who care about long-term wealth of this economy than heads of multinationals who are indifferent.

KIRKLAND: Lou, is Europe better off than the U.S., though?

DOBBS: Depends on how you define it, and which part of Europe.

I've got to go.

We're going to answer that riveting question next week. Please join us next Friday. Sorry, Rik, we've got to run.

Rik Kirkland, Mark Morrison, Steve Forbes -- even -- thanks for being here.

Coming up next, "Heroes," the inspiring story of a true American patriot who served in Iraq, wounded and we'll have his inspirational story next. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: In "Heroes" tonight, an army private who went well above and beyond what his country and the military ask of him. Casey Wian has his story.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Private Christopher Bowser joined the army in March, 2002, motivated by 9/11 and family tradition. His mom is an inactive Army reserve major. Chris served in Korea for a year. Though guaranteed 6 month state-side after that, he instead signed a waiver, volunteering for Iraq. PFC. CHRISTOPHER BOWSER, ARMY: I signed that waiver so I could go over and get with my guys and be there with them while they were at war instead of just hanging out back at the States, relaxing, while they're getting shot at. I wouldn't have felt right.

WIAN: In Iraq, Bowser was a gunner, standing atop a Humvee, manning a machine gun and grenade launcher. He'd been there just 19 day.

BOWSER: We were escorting a bunch of troops who were on foot. They were walking the street doing a patrol looking for anything suspicious.

WIAN: Bowser's leader saw a suspicious vehicle. He warned the others, but not in time.

BOWSER: And the next thing I know, I hear a big explosion, big, just, boom. And big flash of light. As the driver was getting out is when the grenade went off. It landed right by my feet. The blast broke both my legs and I got hit with about 30-some pieces of shrapnel.

So, I pushed myself on to the top of the truck so I can sort of sitting there with the legs in the gunner's spot and all of my legs are smoking. Just my pants are billowing smoke. And I was, like, oh God, this is bad.

WIAN: Private Bowser threw himself off the Humvee, landed on the ground unarmed and in shock. Fellow soldiers dragged him to safety as tracer bullets flew overhead aimed at the Iraqi attackers. Bowser remembers no pain until medical help arrived.

BOWSER: That hurts a lot.

WIAN: Two months and three major surgeries later, he's in physical therapy, making remarkable progress. Doctors said it would be at least a year before he'd walk normally. But he's already donated his walker to a medical facility near his Indiana home.

Now back at Fort Campbell, Kentucky, Bowser says the experience hasn't changed him, except for one thing.

BOWSER: I notice the American flag that I would have been like down the street and see a couple of houses. Now I see every flag. The whole -- the patriotism thing really stands out.

WIAN: As does Private Bowser. Casey Wian, CNN reporting.

(END VIDEOTAPE)

DOBBS: And that's our show for tonight. We thank you for being with us. Have a very pleasant weekend. For all of us here, good night from New York.

END

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



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