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Interview With European Union Trade Commissioner; President Bush Fires Back on Jobs

Aired February 26, 2004 - 18:00   ET


LOU DOBBS, CNN ANCHOR (voice-over): Europe has fired the first shot in what could turn out to be a trade war. The man who pulled the trigger is our guest tonight, European Union Trade Commissioner Pascal Lamy.

As politicians talk, jobs walk. Middle class America faces an uncertain future, wages declining, jobs being exported.

President Bush fighting back against his Democratic critics on the economy and jobs.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Empty talk about jobs won't get anybody hired.

DOBBS: And on the airwaves, the nation's largest radio network throws shock jock Howard Stern off the air. Is this controversy about free speech or simple decency?

UNIDENTIFIED MALE: I'm ashamed to associated in any way with those words.

DOBBS: And cutting Social Security benefits for future retirees. Tonight, we bring you the facts and, yes, more than a few opinions on the controversial proposal.


ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, February 26. Here now for an hour of news, debate and opinion is Lou Dobbs.

DOBBS: Good evening.

President Bush today attacked the Democrats and put the economy, jobs and taxes at the center of his reelection campaign. President Bush traveled to Kentucky, where he said Congress must make his tax cuts permanent in order to maintain economic growth and to create jobs. President Bush did not mention his Democratic rivals by name, but the president did say empty talk about jobs will not get anyone hired.

White House correspondent Dana Bash with the report -- Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, Lou, Kentucky is a state Mr. Bush won comfortably in 2000, but, like many states across the country, has lost tens of thousands of jobs on his watch, especially in manufacturing.

So today the president went to a very carefully arranged event by the White House to a pipe manufacturing company that says they are doing quite well right now. Why? Because, of course, of Mr. Bush's tax cuts. Now, making those tax cuts permanent is really the top of the president's prescription for making the economy better and creating new jobs. But Republicans, especially in the Senate, have said that will really be very difficult to do across the board this year, simply that the votes aren't there.

So the president seemed to acknowledge that perhaps what he needs to do is push for it in baby steps this year. He seemed to acknowledge that, at the minimum, at least expand and make permanent those that will expire next year.


BUSH: I'm calling on Congress to make the tax cuts that are set to expire permanent. I would like Congress to make all tax cuts permanent. But at the very minimum, the very minimum, they need to listen to the stories up here on the stage and make those set to expire in 2005 permanent. For the sake of our economy, for the sake of American families, for the sake of small business owners and for the sake of job creation, the tax cuts need to be permanent.


BASH: With Democrats, though, running on jobs, jobs, jobs, the president began to take on his critics in a more direct way just as he did earlier this week in a much more partisan speech, saying that Democrats are talking about jobs, but they don't really have a prescription for making them better, for actually creating jobs. He said that is what is needed. He said that is what he can do in the coming year.

And, Lou, tomorrow, the president's commerce secretary will be going to Detroit to talk about the need for creating jobs here at home, more damage control over Greg Mankiw, the president's top economic adviser's remarks a couple weeks ago that perhaps outsourcing may not be so bad -- Lou.

DOBBS: Thank you very much, Dana.

One of the biggest challenges now facing the president is the precarious future of America's middle class. The economy has lost almost three million manufacturing jobs over the past three years. Hundreds of thousands of service jobs have been exported overseas, and nearly one million Americans are about to lose their unemployment benefits.

Bill Tucker reports.


BILL TUCKER, CNN CORRESPONDENT (voice-over): Come Sunday, unemployment benefits for three-quarters of a million Americans will end. They will have no one to thank but Congress itself, which has failed to extend its federal unemployment benefits program.

The Center For Budget and Policy Priorities is now projecting a record number of workers will exhaust all of their benefits in the first half of this year.

JOAN ENTMACHER, NATIONAL WOMEN'S LAW CENTER: For families who don't have any income coming in, it's not just the loss of a small amount of money. They can't keep up their mortgage payments. They can't keep up their credit card payments.

TUCKER: But it's not just been the last two months that have been rough on the American worker. It's been the last three decades. The average real income for 99 percent of Americans during that time rose just $2,700, while the top one-tenth of 1 percent saw their income increase by more than $20 million.

In relative terms, the richest sprinted the length of 2 1/2 football fields, while the rest of us ran over a yard. And over the last decade, the tax burden has shifted dramatically. According to the IRS, the 400 richest Americans effectively got a tax cut of 43 percent, while the rest of us paid 1.5 percent more.

LEONARD BURMAN, URBAN INSTITUTE: It's if the money is just coming from heaven. The fact is that that money has to be repaid. And chances are that middle-income people are going to be paying it back.

TUCKER: And while our tax rate increased, so did energy prices. In the past decade, natural gas, which most Americans use to heat their homes, rose 28 percent, adjusted for inflation, and gasoline 15 percent. And just this week, it was announced that supplies are dwindling and prices are expected to spike as weather warms.


TUCKER: And just how stressed is the consumer? Well, take a look at total consumer debt. The Federal Reserve earlier this month, Lou, reported that the consumer debt total now reaches $2 trillion.

DOBBS: These are incredible pressures against the middle class in this country.

Thank you very much, Bill. Thanks, Bill Tucker.

The economy and jobs are likely, almost certain, to be the top issues in tonight's debate among the presidential candidates. It is the first debate since Howard Dean dropped out of the contest. This debate comes four days before the Super Tuesday primaries and caucuses.

Joining me now from outside the university of Southern California, the venue of the debate tonight, are Judy Woodruff, host of CNN's "INSIDE POLITICS," and Ron Brownstein, political columnist with "The Los Angeles Times." Ron will be one of the panelists in tonight's debate.

Judy, does this look to be a fiery contest amongst the four remaining candidates?

JUDY WOODRUFF, CNN ANCHOR: In fact, Lou, tonight is the night.

If John Edwards doesn't separate himself somehow from John Kerry, doesn't distinguish himself, doesn't begin to draw very sharp differences between himself and John Kerry, I think most analysts believe this is his last shot to do that. He has got to find a way to stop the momentum, to stop John Kerry's march to the nomination. If doesn't do that on Super Tuesday, there really is no time left. This is the -- going to be a big collection of delegates. He's got to do it on Tuesday.

DOBBS: How important is this debate tonight, in your estimation, Ron?

RON BROWNSTEIN, CNN POLITICAL ANALYST: Well, I agree totally with Judy.

Every Tuesday, we see the same lesson reconfirmed. Unless you provide people a good reason not to vote for the front-runner, the person they see on the front page of the newspapers and the lead story in the news magazines and so forth, most of them are going to do it. And John Edwards really has really just begun in the last few weeks emphasizing trade, a little bit on health care, but hasn't provided an overarching reason why voters should switch from Kerry to him. I think he really does have to that tonight. It may be, as Judy said, his last chance to really affect next Tuesday's result.

DOBBS: The voters, forming whatever impressions they may as a result of this debate tonight, this is really the last and best shot for all but the front-runner John Kerry, is it not, Judy?

WOODRUFF: Well, Lou, in fact, there is an additional debate. There's this debate here tonight in Los Angeles, Kerry, Edwards Kucinich and Sharpton. There will be another debate. The same four candidates will debate Sunday afternoon, I believe it is, in New York City.

But, you know, California is a big prize. There are more delegates at stake here than any other state. Both of these encounters are going to be important.

Lou, if I may, I just want to throw in that John Edwards is trying right now, at the 11th hour, if you will, to talk again about the very issues you led off in your show tonight. He was saying again today that the U.S. -- that he as president would stop rewarding companies with tax breaks that send jobs overseas. He would instead give tax breaks to companies that keep jobs in the U.S.

So this is very much a live debate. And you're right. Jobs and the economy are bound to come up tonight. Ron is the one to really ask about that, because he's going to be one of the questioners.

DOBBS: Ron, do you want to give away any of your questions here tonight?




BROWNSTEIN: I think the challenge for John Edwards is to delineate the difference going forward. John Kerry did vote for the North American Free Trade Agreement. John Edwards was not in the Congress at the time, said he opposed it.

But when you look at what they are talking from doing here on out, both men have agreed to what has been the top demand of organized labor, that any future trade agreement include labor and environmental standards in the core of the agreement enforceable by trade sanctions. That was something Bill Clinton wouldn't do. They both have done it.

And it's not clear whether Edwards can make a sharp enough distinction to build a campaign around on that issue alone.

DOBBS: Judy Woodruff, Ron Brownstein, thank you both. And we are all looking forward to tonight's event.

Tonight's debate sponsored by CNN and "The Los Angeles Times," it begins at 9:00 p.m. Eastern, 6:00 p.m. Pacific. It is hosted by our own Larry King. We'll have a preview with Paula Zahn and, afterwards, analysis with Aaron Brown.

Still ahead here tonight, California in crisis, a massive budget deficit. Voters must choose between a highly controversial recovery plan or tax increases and service cuts.

The nation's No. 1 shock jock, Howard Stern, fires back, that after America's largest radio network throws him off the air.

And "Failing Grades," our special report tonight, the search for collusion solutions to the crisis in our educational system. Senator Edward Kennedy is our guest -- that and a great deal more still ahead here.

Please stay with us.


DOBBS: The nation's most populated state still faces a crisis, despite the election of Arnold Schwarzenegger as governor. In less than a week, California could be forced to deal with higher taxes and dangerous cutbacks of all sorts of essential services. It all depends on what the voters say next Tuesday.

Casey Wian has the story from Los Angeles.



SEN. DIANNE FEINSTEIN (D), CALIFORNIA: The state faces a massive fiscal crisis. Now, that's the reality and we've got to deal with it.


CASEY WIAN, CNN CORRESPONDENT (voice-over): U.S. Senator Dianne Feinstein warns, California could default on its existing debt if two measures on Tuesday's ballot fail. Governor Arnold Schwarzenegger's Proposition 57 and 58 would issue $15 billion in bonds and restrict the ability of lawmakers to borrow money in the future. Without them, the state's $95 million budget could face a $25 billion big deficit.

CAROL EVANS, CALIFORNIA TAXPAYERS ASSOCIATION: It's scary to think about. There are not a lot of options for the state. We can continue with short-term borrowing, which is very expensive. We could look toward tax increases, which is not popular with this governor.


GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I'm committed to putting our financial house in order and I need your help. After all, it is your money.


WIAN: Lawmakers are considering several alternatives if the measures fail, including raising taxes on high-income Californians and raising gasoline taxes. Spending could be cut for community colleges, highway construction and for doctors treating low-income patients.

A month ago, the bond measure was trailing in polls by 7 percentage points. As recently as Friday, it was down by 3. Four days later, a new poll showed the bond proposition ahead by 14 percent, a turnaround that has amazed political veterans.

ALLAN HOFFENBLUM, REPUBLICAN STRATEGIST: The governor has convinced me and I think most Californians now that we got to bite the bullet and it is the only short-term measure out there to basically try to put your thumb in the dike, because we are leaking so badly.

WIAN: With the measures now looking like they will pass, Californians are beginning to feel more optimistic about the state's fortune.

(on camera): According to a "Los Angeles Times" poll released today, 32 percent of Californians now believe things here are generally headed in the right direction, compared to just 14 percent in August.

Casey Wian, CNN, Los Angeles.


DOBBS: Illegal immigration is a crisis for this country and it has reached critical proportions in California and other border states. Outspoken remarks on that issue by the president of Mexico, Vicente Fox, are only now adding to the controversy. The Mexican president has effectively asked President Bush to make it easier for illegal aliens to cross the border between Mexico and the United States. President Fox has told Mexico's Parliament that he wants the United States to allow a -- quote -- "legal, safe and orderly migration" -- end quote.

An estimated 23 million Mexicans live in this country. Five million of them are illegal, at least. Vicente Fox says he is the president of all Mexicans, including those in the United States.

Coming up next, the head of the country's largest radio network defends his decision to suspend shock jock Howard Stern. Indecency or freedom of speech? We'll have the latest for you next.

And still ahead, "Failing Grades," charter and magnet schools supposed to improve public education in this country, many of those are struggling to succeed, public education still in crisis. We'll have that report.

And Senator Ted Kennedy joins us. All of that, a great deal more, still to come. Please stay with us.


JAY LENO, HOST: That show "The Apprentice," it is a huge hit for NBC. And tomorrow night's show is especially good. Instead of getting fired, the losing contestant's job is outsourced to India.




DOBBS: Radio shock jock Howard Stern today, no stranger to controversy, shot back at Clear Channel Communications for the company's suspension of him for indecent remarks. Stern said he is being punished only because of the conservative backlash over Janet Jackson's breast-baring Super Bowl performance.

Stern's came as the head of Clear Channel testified on Capitol Hill today about why the network fired another controversial radio host.


DOBBS (voice-over): The nation's largest radio network fired the top Florida disc jockey Tuesday for indecency. Today, Clear Channel's CEO apologized for Bubba the Love Sponge.

JOHN HOGAN, CEO, CLEAR CHANNEL COMMUNICATIONS: As a broadcaster, as a CEO, and as the father of a 9-year-old girl, I'm ashamed to be associated in any way with those words. They are tasteless. They are vulgar. They should not, do not, and will not represent what our radio stations are all about. DOBBS: The FCC has proposed fines of $755,000 for sexually explicit content on Bubba's show. Clear Channel suspended the country's No. 1 shock jock, Howard Stern, from six stations for his vulgar interview about Paris Hilton. Stern was not intimidated by the Clear Channel decision. This is what he had to say to a producer asking for an interview today.

HOWARD STERN, RADIO TALK SHOW HOST: If you want to interview me, the only one I'll do an interview with is you. I pick out the lingerie.

DOBBS: You get the idea.

Also on Capitol Hill today, Paxson Communications' CEO said the pornography and media industry are the real challenge for this country's decency standards.

LOWELL "BUD" PASSION, CHAIR & CEO, PAXSON COMMUNICATIONS: Two days ago, Tuesday, here in Washington, D.C., cable and satellite providers carried 675 hours of pornography, yes, a total of 675 hours of filth in one 24-hour period and at all hours of the day.

DOBBS: And it's not just paid television. Last November, more than nine million viewers tuned into CBS to watch "The Victoria Secret" fashion show.

Sexy scenes aren't hard to find in regularly scheduled prime-time programming. And pornography trade magazine "Adult Video News" cites blue-chip names such as News Corp. DirecTV, EchoStar, Comcast and Time Warner, the parent of CNN, and the major hotel chains as companies that profit from the viewership of pornography.


DOBBS: And that brings us to the subject of tonight's poll. The question: What offends you most, Howard Stern, corporate pornography, government standards of decency, gay marriage or opposition to gay marriage? Please cast your vote at We'll have the results for you later in the broadcast.

"Exporting America" and the failure of American trade policies are making their way into popular culture of late. At the White House last night, cheap imports into this country and the exploding trade deficit with China were the focus, at least on one television network.


RICHARD SCHIFF, ACTOR: We keep picking targets, we're going to end up in a trade war.

UNIDENTIFIED ACTOR: We're already in a trade war with China. That's why we got to make bras our first line of defense.


UNIDENTIFIED ACTOR: Chinese bras are killing us. SCHIFF: They are?

UNIDENTIFIED ACTOR: They are flooding Wal-Mart with cheap bras. Domestic producers can't complete. China has tripled its market share in two years.

SCHIFF: I assume we're all OK with French bras, right? Because I for one greatly prefer them.

UNIDENTIFIED ACTOR: This isn't funny.

SCHIFF: Of course not.


DOBBS: "The West Wing" episode was, however, based on reality; 95 percent of the bras sold in this country are imported, one-third of them from China. By the way, only 1 percent of those bras, slightly less, actually, come from France.

Coming up next here, outrage over Alan Greenspan's proposal to cut Social Security benefits for future retirees. I'll be joined by author David Cay Johnston. We'll be talking about what he thinks is a much better way to deal with the issue and to protect our retirees who depend on Social Security. The rich will not be happy with his ideas.

Also our special report, "Failing Grades," vouchers, magnets, charters, all sorts of solutions. Some call them at least solutions, but the critics have a clear warning.


UNIDENTIFIED MALE: Any of those kind of panaceas that people have offered have a very uneven track record.


DOBBS: Senator Ted Kennedy joins us to talk about No Child Left Behind. And the United States just days away from what could be a trade war with the European Union. I'll be talking with a man who apparently wanted to pull the trigger first, the European Union trade commissioner, Pascal Lamy -- that and a great deal more still ahead here.

Stay with us.


DOBBS: Our series of special reports "Failing Grades," education in America, tonight, public schools that operate like private schools.

Backers of programs such as charter schools and vouchers say parents should have a choice where they send their children, but critics say those programs lower standards for public education in this country.

Lisa Sylvester reports.


LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The Life Learning Academy in San Francisco is doing the near impossible, taking high school students making straight F's and turning them into A and B students. The school's dropout rate is zero.

PATRICIA RODRIGUEZ, STUDENT: Now that I'm learning, it is helping me out a lot. And I'm thinking I should learn to be a successful person.

SYLVESTER: The Life Learning Academy is one of nearly 3,000 public charter schools in the United States. Charter schools are run like private schools.

The principal has the authority to hire and fire teachers and if the schools don't improve, they are closed. Charter schools, along with magnet schools, focus on accountability and choice. Voucher programs go even further be, giving parents the option of enrolling their children in private schools. Proponents argue, if parents can shop around for the best schools, all schools will be pressured to boost academic performance.

NINA REES, DEPARTMENT OF EDUCATION: The public school system seems to be reacting positively to the competition that choice has created.

SYLVESTER: But critics say these choice programs are not the fix-it solution for the nation's education system. Some charter schools, like the John Reisenbach School in Harlem are on the verge of being shut down for failing to improve academic standard.

Charter schools like voucher programs may help a handful of students, but that may diminish the pot of money for the rest of the public schools. So a few students may be helped at the expense of the majority of the students. And for most magnet schools, you need to win a lottery to get in. And those schools usually attract students who are already the best and the brightest.

MICHAEL PONS, NATIONAL EDUCATION ASSOCIATION: The charter schools, private takeovers of companies, vouchers, any of those kinds of panaceas that people have offered have a very uneven track record.

SYLVESTER: Schools like the Learning Academy are successful because they focus on the basics, small class size, teacher quality, and the structured environment.

But this is an exception and not the rule for many public schools.


SYLVESTER: Nine percent of all charter schools close for failing to meet their goals. And a recent study done on the Milwaukee voucher program suggests that competition may not necessarily improve public education. The study shows that test scores are lower, not higher, in public schools that have to compete with private schools -- Lou.

DOBBS: The bottom line, at the end of all of this, is, Lisa, public school students shouldn't be forced to make a choice. They should be able to expect, rightfully, a solid education.

Lisa, thank you very much -- Lisa Sylvester from Washington.

Earlier, I talked with Senator Edward Kennedy, a longtime advocate of education reform and a supporter of the No Child Left Behind program. I asked him if the money needed to fund that program is forthcoming, and, if not, what will be required.


SEN. EDWARD KENNEDY (D), MASSACHUSETTS: Well, first of all, the No Child Left Behind Act said that we needed reform, but we needed the resources in order to ensure that we were going to have the best opportunity for children in this country, understanding that the No. 1 concern for families across this nation is a good education.

We wanted to make that true with the No Child Left Behind. But as President Kennedy said we were going to the moon, he made sure that we had all of the funds to get us to the moon. This administration now is trying to do it with a tin cup budget, saying that we're only going to fund it with two-thirds or 60 percent of the children. We want to include all the children. No child should be left behind. Today, we're only providing the coverage for about 60 or 65 percent.

That is one of the major problems. There are other problems, too, which I hope this administration will address in the Department of Education. Otherwise, we'll do it legislatively.

DOBBS: Senator, this program requires, in its scope, 10 years to reach its potential, its desired goal. That's a long time in the lives of so many of our young people. We know that minorities, particularly African-Americans and Hispanics are testing as much as 30 points below those white students in the same testing. We have now new evidence that in the last year that blacks and Hispanics are failing to graduate at about a 50 percent rate. We -- can we really wait eight years to address the issues?

KENNEDY: Well, there are no silver bullets and no magic wands but we do know what is essential in terms of trying to provide educational opportunities. First of all, I think we have to try and provide earlier education. I think that's a major kind of a key even from zero to four or five. Not only the expansion of the Headstart program but early education. That is a key. That's important as well as the No Child Left Behind.

But then we have to invest in our children. We know what works. We know it takes well-trained teachers, smaller class size. An up-to- date curriculum. Parental involvement, supplementary services for children that are falling behind with a well thought out kind of a test to find out where the children are learning and where they are failing. We know that this can work. DOBBS: Senator, amongst the programs that are being tried, in local and state departments of education. One merit pay, incentives to teachers to perform as well as administrators, the removal in some instances of the so-called social pass requiring a rigorous adherence to testing. How do you react to those ideas and the sense that at least in some part they are working.

KENNEDY: States can make progress in the rates that they feel that they can make progress with not only by grades but also by different subgroups and they can make their judgments. But they have to make sure that we are going to have proficiency for all children at the end of the 12 years. So the states have maximum flexibility but they also have to have accountability and then we are going to have the accountability because we are also going to know nationwide what states are making it and what states are not. That seems to be the best way to do it.

DOBBS: Senator Kennedy, thank you very much.

The study I referenced is backed by Harvard University Civil Rights Project. It finds the graduation for Hispanic students this is year, 53 percent. For Native Americans 51 percent. For African- Americans 50 percent. The overall four-year graduation rate for high school students 68 percent. Tonight's thought is on education. "Education is not the filling of a pail, but rather the lighting of a fire." Irish poet William Butler Yeats.

Now a reminder to vote in our poll on decency standards in this country and what offends you the most? Howard Stern, corporate pornography, government standards of decency, gay marriage or opposition to gay marriage. Cast your vote at

Coming up next, raiding Social Security. Author and journalist, David Cay Johnston says Social Security taxes are financing the rich and a burden on the middle class and he is our guest next.

A trade war with Europe. Hundreds of millions in sanctions against the United States. They go into effect Monday. The man who pulled the trigger, European Union trade commissioner Pascal Lamy joins me. Please stay with us.


DOBBS: Federal Reserve Chairman Alan Greenspan so far has won little support for his proposal to cut the federal deficit and to cut future Social Security benefits. My next guest says a better plan would be to end what he calls tax breaks for the rich. David Cay Johnston is the author of the book "Perfectly Legal, The Covert Campaign To Rig Our Tax System To Benefit The Super Rich And Cheat Everybody Else." And he joins us tonight from Portland, Oregon. Good to have you here, David

Thank you, Lou.

DOBBS: This is class warfare stuff in a campaign year like this, as you well know. Let's back it up. What do you mean that the rich are being subsidized by Social Security of all things?

DAVID CAY JOHNSTON, AUTHOR, "PERFECTLY LEGAL": Well, in 1983 Alan Greenspan persuaded the Democrats who were in charge of Congress to overtax us on Social Security, that is to collect taxes in advance rather than on pay as you go system. The promise was that we would use the excess taxes to pay off the federal debt which was then about a trillion dollars. We have now paid 1.8 trillion dollars in excess Social Security taxes. This year the government will collect -- if you make $50,000, about $7,500 from you. It only needs 5,000 to pay current benefits. That other $2,500 wasn't used to pay off the federal debt, which is now 7 trillion dollars, instead it is being used to finance tax cuts for the super rich.

DOBBS: We're putting up a graph right now which goes to the -- to that issue. Precisely what you're talking about. Now, why in the world would FICA be limited at $87,000 of earnings, taxing -- taxation on $87,000? Why not carry that straightforwardly through for everyone at higher levels?

JOHNSTON: Well, it's limited to the 90 percent of wages in the country. And the theory is that that's as high a benefit as the government is going to pay. So your benefit caps out, that's why the tax stops. If we simply had a pay as you go tax and it stopped at that end, Lou, I don't think there would be an issue. Since we were told you have to pay in advance. Of course a tax paid in advance costs you a lot more than when you can defer off into the future. That you are going to pay in advance for the benefits.

And now that money has not been spent to pay off the debt. Now Mr. Greenspan says you are not going to get those benefits but we should not raise taxes on those that make millions of dollars a year. It seems to me what Senator Daniel Patrick Moynihan predicted in 1983 has come true. He said this was thievery and the middle class were going to have their pockets picked by the rich.

DOBBS: Indeed, with that analysis that is what is happening. And the middle class at this point, hardworking men and women in this country are no longer being surprised by some of the pressures, forces that are working against them. What is your best judgment for a solution?

JOHNSTON: Well, in the case of Social Security, if we were to go back to pay as you go, people making $50,000 a year would have $48 a week more in their pocket, particularly if we took it all out of the side paid by the worker. So we cut that in half, and the max instead being dollar for dollar by your employer, it would be two dollars to one dollar. People earning $50,000 would have $48 a week more in their pocket. They could choose whether to save that money or whether to spend that money. But it would be their money and their choice.

DOBBS: I'm sorry, go ahead.

JOHNSTON: It would also mean, however, that the federal government would either be spending vastly more than it is taking in, a couple hundred billion dollars a year. We would either have to deal with that or raise taxes on people who have higher incomes. DOBBS: Let's put the graph up. We have a graphic of this from your book that we want to show you maxing Social Security taxes per person doing exactly what David suggested. This is a remarkable -- to look at the income growth from 1970 to 2000, for the bottom, if you will, 99 percent of this country versus the top 100 -- one percent, is staggering. I follow these trends rather carefully but I had no idea of the discrepancy there.

JOHNSTON: If you chart, Lou, the increase in income for the bottom 99 percent of Americans over that 30-year period, for each dollar that each person got in increased income, and the average was $2,700, less than a hundred dollars a year, you made it one inch high for the top one-one-hundredth of 1 percent, or 27,000 people, it is 625 feet high. 625 feet to one inch.

DOBBS: And the solution is there, the fact that Alan Greenspan, the fed chairman would raise the issue, I think, is commendable. The suggestion in my opinion that the first solution should be sought is to cut the benefits of future retirees is reprehensible. What is your reaction?

JOHNSTON: Well, we can choose in America, if you want, to have a system in which the middle class and the upper middle class, people making $30,000 to $500,000 a year subsidize people who make millions of dollars. And if Americans want to vote for that they should do it.

I just don't think, Lou, that Americans would have gone for this if they had known what is happening. And since it was Mr. Greenspan who said pay your tax in advance and now he says, no, we're not going to give you the benefits, but we can't raise taxes on the rich. That seems to me morally troubling.

DOBBS: Let me ask the question that everyone listening and watching -- listening to and watching you right now wants to know, that $1.7 trillion in extra collections on Social Security, where is their money?

JOHNSTON: We spent it. We spent it on tax cuts for the super rich. In 1993, the 400 highest income people in America paid 30 cents on the dollar in income taxes. By 2000 they were down to paying 22 cents on the dollar. Had the Bush cuts been in effect they would have paid 17 cents on the dollar. Everybody else in America went from 13 cents up to 15. So the super rich in America have more of their money after taxes and everybody else has less.

DOBBS: David, do you ever share with people your political affiliation?

JOHNSTON: Well, as a matter of public record. I'm a registered Republican.

DOBBS: I just wanted to get it on the record, but I wanted to be sure that was okay with you. David Cay Johnston your presence here tonight is greatly appreciated. We thank you. I want to say I don't often do this. I would like to say to our viewers that his book, "Perfectly Legal," is definitely worth your read. This is a complex issue, but what he reveals in that book is amazing, as you just heard part of it. David Cay Johnston. The book is "Perfectly Legal." Thank you for being with us.

JOHNSTON: Thank you, Lou.

DOBBS: Let's take a look at some of your thoughts about Social Security in particular.

Larry McDonald of San Miguel, California, "of course we have to consider cutting Social Security payments, we're busy sending thousands upon thousands of jobs overseas that would have paid into the system and helped keep it afloat."

Bill Hausinger of San Jose, California, "it sounds like the best way to fix Social Security, maybe even improve it, is to do away with the outrageous retirement benefits of legislators and dump that money into Social Security and they can draw the same benefits as everyone else."

Bob Goldberg of New Orleans, "Lou, it seems ironic that while U.S. jobs are being sent overseas our schools are floundering to provide the basics of education which would give potential workers the ability to compete in the global marketplace."

Amelia of Hartford, Connecticut, "when a few thousand gay people get marriage licenses, our president acts with a proposal with a Constitutional amendment. When a few million people lose their jobs, there's just a lot of talk about free trade, but no action."

And Lilly of Little Rock, Arkansas suggests, "if Bush wants to protect marriage why doesn't he propose an amendment banning divorce."

We love hearing from you, e-mail us your thoughts at

I would like to recommend two columns in leading newspapers today that I think you might enjoy. One from "New York Times" columnist Thomas Friedman who says in that column, outsourcing thousands and thousands of white collar jobs to India is basically good things, because Indians buy some American products.

The other by "Los Angeles Times" columnist Pat Morrison. She has a humorous take on the frightening realities of, what we call in this broadcast, exporting America.

In his column, "What Goes Around," Friedman says, "Although the United States has lost some service jobs to India, total exports from U.S. companies to India have grown to $4.1 billion in 2002."

Get it? We send them jobs and they buy our products. But what Thomas Friedman failed to point out to his readers, I'm sure it's just a simple lapse, is that our trade deficit with India at the same time has soared to $8 billion.

In contrast, Morrison's column in "The Los Angeles Times" entitled "A Labor Problem Made in the USA." says, "My nouns and pronouns are now made in Indonesia." She writes verbs and adverbs in Mexico, adjectives in China..." and so on.

I think you'll find both of those columns highly amusing certainly for very different reasons. I know I did.

My next guest says the European Union will begin imposing hundreds of thousands of dollars against U.S. imports this coming Monday. European Union Trade Commissioner, Pascal Lamy today told congressional leaders the sanctions will end as soon as they block billions of dollars in tax breaks for U.S. companies exporting.

Pascal Lamy joins me now from our studios in Washington, D.C.. Good to have you with us.


DOBBS: This was a remarkable decision, the European Union enjoys a $94 billion surplus as of last year with the United States. And you seem intent to disturb what seems like a very good deal for the European Union.

LAMY: No, that's not the story, Lou. The story is that U.S. companies as you said, through tax breaks, have an advantage which is an export subsidy. And we litigated this in the WTO and the umpire of both trade has said that the U.S. subsidiaries were illegal and they have to be removed.

And in order to do that Congress has to pass the legislation that repeals these tax breaks and we've been entitled in order to incentivize Congress to pass this legislation, to put together trade sanctions which will start at a low rate, I mean sort of 15 million during the next month and then will increase in order to make sure that compliance comes.

It's a question of abiding by the rules. And as I said today, I mean, the day, the necessary legislation will be passed by Congress, these sanctions will disappear.

DOBBS: Mr. Lamy, that's obviously very coercive. It considered by the World Trade Organization, I quite understand that. But what I don't quite understand, and I'm sure that many others don't, as well, is why if we have some sort of advantage in our trade with the European Union, how is it we have so cleverly engineered a $94 billion deficit with the E.U.?

Well, I mean how much big deficit would you like us to have? How much of a surplus would the European Union want?

LAMY: I'm not running the EU's trade policy with an eye on the deficit or on the surplus. We have surpluses here. We have deficits there. It depends on the comparative advantage and our competitive position.

What we all have to do is to abide by WTO rules that create a level playing field and that provide export subsidiaries, because it is a comparative advantage which you are not entitled to have which will be the impact on the U.S. balance -- trade balance, I don't know. And I'm not doing this to increase the trade surplus. I'm doing this so that our companies can compete on an equal footing with U.S. companies.

DOBBS: Mr. Commissioner, I quite understand that you -- that a trade balance or deficit is a matter of serendipity whether it's a European Union or China. And the United States seems so limited in its ability to produce and to compete that we manage to achieve a half trillion dollar trade deficit.

And so I can understand why the European Union would be essential with the advantage we're taking with the rest of the world. I don't know how big a surplus they would like to run with us. Maybe that will happen. But politicians in this country, politicians in Europe are saying to you, pressing those issue an imposing those sanctions Monday could well break the WTO, aren't they?

LAMY: I don't agree with that. We've had sanctions from the U.S. and we still have sanctions from the U.S. on -- which the case we lost the WTO before. We put WTO compliance legislation. We have this presently to the tune of 120 million a year. And it's not a trade war. It's just something which is there and it's not -- I mean, when you compare this to overall trade relationship we have, we exchange 1 billion Euro transatlantic a day. The volume of trade which will be hit by a 5 percent tariff is 300 million. So, it's not what we call to a trade war.

DOBBS: If it raises to 17 percent without action by Congress and there's likely there won't be action by Congress in an election year it could rise well above that, though, could it not?

LAMY: Lou, that's not what I was told on the Hill. I mean I spend the whole day on the Hill. I talk to the chairs of the various committees on the Senate and in the Congress, and in the House, and they told me as, by the way the U.S administration has told me, that they want a repeal to happen as soon as possible and...

DOBBS: Did they give you a time frame?

LAMY: From what I understand it's more a matter of weeks than a matter of months, which is good news.

DOBBS: Well, that is encouraging. What I wonder, though, is as you set -- concerns about these unfair advantages with the United States takes, I just wonder how big a deficit the United States might have?

I know you don't worry about trade balance or trade deficits but the European Union tends to run pretty even trade balance of -- pretty much a trade balance, not a deficit or surplus. The United States has a persistent stubborn, chronic, cumulative trade debt is that is amazing. And many people in this country, including myself are concerned about it, as you know.

If we were not cheating, as you suggest, how large a deficit do you think we might have?

LAMY: Well, I think -- the U.S. Trade deficit I agree with you is huge. And it's for the moment sustainable because it's financed by the rest of the world. I mean we all export capital to the U.S. in order to balance this trade deficit which the U.S. has, and by the way, this has started having rather strong impact on the relative values of the Euro vis-a-vis the Dollar.

DOBBS: Absolutely.

LAMY: Which all sort of economic textbook will tell you that's what happens. And this will lead to a rebalancing, the only problem being that a number of Asian currencies are also back to the dollar which is a problem for us. But I think in the medium and long-term I agree with you, this needs to be addressed. It is not medium and long-term sustainable.

DOBBS: Pascal Lamy, European Union trade commissioner. I want to thank you are one of the few government officials who has acknowledged the importance of a trade deficit and trade balance and its impact. For that I commend you, sir, if I may. And I thank you for the opportunity to spend some time with you and illuminate the issue.

Thank you, sir.

LAMY: Thank you, Lou, good night.

DOBBS: Coming up next, rebel fighter in Haiti are warning an attack on the capital city is coming.

I'll be joined next by General David "Grange on Point," please stay with us.


DOBBS: Tonight the United States has given its clearest signal yet that President Aristide of Haiti will have to resign. Secretary of State Colin Powell questioned where Aristide can continue to serving in the face of the rising opposition in Haiti. That rebellion has resulted in the deaths of 60 people. It began three weeks ago. The United States says it has no plans, however, to intervene in the rebellion.

And that is the subject of "Grange on Point" tonight. Should the United States take military action to end the violence in Haiti?

General Grange joins me now. General, this is -- we have 50 U.S. Marines have that have been dispatched. Haiti is certainly within the sphere of influence.

What should the United States do and the U.S. Military?

BRIG GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: I think the U.S. Military has a good chance it will get involved fit turns to total anarchy. No doubt in my mind American G.I.s will go in. We started the issue of Aristide. We are going to have to complete that commitment if it's required. So, I think there are people on stand by and it will happen if need be.

DOBBS: You think the troops are already under alert to be ready to go?

GRANGE: Well, from my experience I believe so. And the way things look, I hope so.

DOBBS: And, general, how large a force do you think would be required should the president make that decision?

GRANGE: Not a large force but a rapid deploying force. There's some available to do so.

DOBBS: General David Grange, as always, it's good to have you with us.

GRANGE: My pleasure thank you.

DOBBS: Coming up next, the results of our poll tonight. Please stay with us.


DOBBS: The results of "Tonight's Poll." The question, what offends you most?

Seven percent of said Howard Stern, 13 percent said corporate pornography, 29 percent said government standards of decency, 16 percent said gay marriage, 36 percent said opposition to gay marriage.

And finally tonight we want to send congratulations to one of our correspondents, Peter Viles and his wife Stacey (ph). They welcomed their first baby today, Campbell Duke Viles (ph) born 12:57 p.m. weighing a solid 8 pounds. Our congratulations to Peter, Stacey and, to Campbell, we say welcome.

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

Tomorrow New York City Department of Education Chancellor John Klein said to have the toughest job in education, joins us. Also tomorrow David Denby on his new book "American Sucker."

For all us here good night from New York. "ANDERSON COOPER" is coming up next.


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