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PAULA ZAHN NOW

Chaos in Iraq; Bush, Kerry Battle Over Economy

Aired April 7, 2004 - 20:00   ET

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


PAULA ZAHN, CNN ANCHOR: Good evening. Thanks so much for joining us tonight. I'm Paula Zahn.
It is Wednesday, April 7, 2004.

(BEGIN VIDEOTAPE)

ZAHN (voice-over): The Pentagon says things are not spiraling out of control in Iraq, but some U.S. troops may have to stay there longer than expected. What will it take to bring the chaos under control?

It is the No. 1 priority for American voters, the economy. Candidates Bush and Kerry battle it out. But whose plan is best for your wallet?

You lose your job to someone overseas and then you're asked to train your replacement. Tonight, you'll meet two angry workers who had to do just that.

Are you trying to lose weight? We're going to introduce you to a man who has spent the last three months investigating all of the popular diets to see which ones fare the best.

(END VIDEOTAPE)

ZAHN: All that ahead tonight, but, first, here's what you need to know right now.

Prosecutors in the Martha Stewart case are asking a federal judge to reject Stewart's bid for a new trial. The defense claims one of the jurors lied on his jury questionnaire.

In Utah, prosecutors have actually dropped a murder charge against a mother who allegedly refused a cesarean section and delivered a stillborn. Under a plea agreement, Melissa Ann Rowland pleaded guilty today to two charges of child endangerment. She is not expected to serve any jail time.

The wife of Enron's former chief financial officer will stand trial in June. A judge has rejected a plea agreement that would have given Lea Fastow less prison time than federal guidelines recommend. Fastow is accused of conspiracy and filing a false tax report.

"In Focus" tonight, the war in Iraq. The U.S. military says it has taken the fight to the enemy to restore order in Fallujah and to destroy the Mahdi Army, the armed followers of the Shiite cleric al- Sadr. Secretary of Defense Rumsfeld says the coalition is facing a test of will and it will meet that test, even though it is not in control of every city in Iraq. And he says some American troops who are expecting to go home soon may stay longer.

Team coverage tonight, from Baghdad, senior international correspondent Walter Rodgers, from the Pentagon tonight, senior Pentagon correspondent Jamie McIntyre.

We begin tonight with Walt Rodgers.

Good evening, Walter.

WALTER RODGERS, CNN SR. INTERNATIONAL CORRESPONDENT: Hello, Paula.

There has been an appeal for calm here from Iraq's most influential cleric, the Grand Ayatollah Ali al-Sistani. He called on both the Americans and the Iraqi insurgents to ratchet down the violence of which there has been more than a little. In Fallujah, day three, the dogs of war have been let loose, this as U.S. Marines try to wrestle control of that town of 200,000 away from the Iraqi insurgents.

Some of the insurgents had taken refuge in a mosque, using it to fire on the oncoming Marines. The Marines called in an airstrike, two-500 pound bombs knocking down a perimeter wall for the Marine assault. Outrage among many Muslims. Eyewitnesses say at least 40 people around the mosque were killed. The U.S. military said when the insurgents turned the mosque into a fortress, shooting from it, they forfeited their right to refuge and the mosque became a legitimate military target under the rules of the Geneva Convention. The mosque itself suffered only minor damage.

In Ramadi, scene of an Iraqi assault on several government buildings last night, Marines retook control of that building at the cost of 12 Marine lives. Marines say at least 18 Iraqi insurgents were killed. Both Ramadi and Fallujah are in the so-called Sunni Triangle. In Baghdad, more fighting tonight in the so-called Sadr City. The U.S. military is preparing for a major onslaught there -- Paula.

ZAHN: Walt Rodgers, thanks for the update.

This afternoon, Defense Secretary Donald Rumsfeld assessed the situation in Iraq.

Senior Pentagon correspondent Jamie McIntyre was there. He has more on what happened.

Hi, Jamie.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Hi, Paula.

Well, Rumsfeld's appearance here in the Pentagon briefing room, along with the joint chiefs chairman, occurred several hours after the top commander of U.S. forces in Iraq, General John Abizaid, briefed President Bush, the rest of the national security team, insisting that the U.S. aggressive strategy of going after those forces that are opposing the U.S. was going to work, was going to produce results.

Shortly after that, Rumsfeld appeared here in the briefing room to insist that the situation in Iraq is under control and that the U.S. is going to persevere.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: We're facing a test of will. And we will meet that test. It is also a test of the will of the Iraqi people who seek freedom and the chance to live a decent life. And we're determined to prevail.

(END VIDEO CLIP)

MCINTYRE: Now, despite being locked in urban combat that has produced heavy us casualties over the last couple of days and fighting across the country, the Pentagon today insisted that it is dealing with a relatively small number of people which it described as thugs and assassins.

(BEGIN VIDEO CLIP)

GEN. RICHARD MYERS, JOINT CHIEFS CHAIRMAN: I think it is also important to remember what this is not. And it is certainly not a popular uprising or movement supported by the majority of Iraqis. It is not that at all.

(END VIDEO CLIP)

MCINTYRE: Now, Pentagon sources say that General Abizaid has not yet requested any additional troops to go to Iraq. But what he is planning to do, sources say -- and this was pretty much confirmed by the Pentagon today -- is holding on to some of the troops that were scheduled to rotate out after one year.

Sources say that quick-reaction forces from the Army's 1st Cavalry Division and elements from the 1st Armored Division are being shifted to hot spots in Iraq instead of packing for home. The Pentagon did make essentially a promise to those troops, they would only are to serve one year. But the Pentagon says, when it comes to military necessity, that trumps its goal of putting more predictability in the lives of the troops -- Paula.

ZAHN: Jamie McIntyre, thank you so much.

Major Curtis Hill is with the 3rd Marine Aircraft Wing now fighting in Fallujah. He joins by phone with the view from the battlefield.

Thank you so much for being with us, sir.

First of all, what are the Marines up against? How dangerous is their mission?

MAJ. CURTIS HILL, 3RD MARINE AIRCRAFT WING: Well, Paula, from where I'm at -- and I'm at an air base a significant distance away from the battle -- but the indications are that there is some strong fighting down there. And we have lost Marines.

And that impacts all of us out here. And our hearts go out to the families of those Marines that we have lost in this fight. But it looks like it is going to be a -- it is going to be a tough fight down there. But I'm sure we're going to pull this one out. We're going to win.

ZAHN: Major Hill, how does that affect the morale of the troops that remain deployed, knowing that they've lost so many of their own?

HILL: Well, it is something that strikes hard at us. We feel that each Marine is our brother or our sister. But we're over here, we have a job to do. And we're focused on it. And we're going keep going.

ZAHN: Marines have been going door to door in Fallujah. They've been taking heavy fire from insurgents. Describe to us whether these Marines feel they were prepared for this kind of combat that they're now engaged in.

HILL: Well, the Marines that are actually on the ground in Fallujah are from the 1st Marine Division. And that's -- although we all belong to 1st Marine Expeditionary Force, that is actually a separate unit from who I belong to. And I really couldn't talk to what their thoughts and their feelings are.

ZAHN: Well, we appreciate your joining us. It is such a tense time for all the troops over there. Major Curtis Hill, thank you very much for your time tonight and good luck to you, sir.

HILL: Thank you.

ZAHN: Now a look at how the situation is being handled, where it might be headed. Fawaz Gerges is a professor of international affairs at Sarah Lawrence College here in New York. And CNN analyst Ken Pollack is a senior fellow at the Brookings Institution.

Welcome to both of you.

KENNETH POLLACK, CNN ANALYST: Thank you.

ZAHN: How dicey is the security situation there now, Ken?

POLLACK: Well, clearly, we have got some serious problems in a number of towns inside of Iraq.

I would actually say that what we have been focusing on in the last few reports, the fighting out of Fallujah or Ramadi, much less a concern than what is going on in southern Iraq. The fighting in Fallujah and Ramadi, that's the Marines going in and finally pacifying towns that probably should have been pacified 12 months ago. Of much greater concern are the rising of Muqtada al-Sadr and his Mahdi Army in southern Iraq. And I think that's really taken the administration by surprise. I don't think they realized how many supporters Muqtada actually has.

ZAHN: Why do you think they were caught off-guard?

POLLACK: Well, I think that the rhetoric all along has been that Muqtada al-Sadr is a marginal figure. And that's absolutely true.

And what General Myers said is also true, that, as best we can tell, the vast majority of Iraqis don't necessarily support him. But my sense of what has been going on is that, over the past several months, you have had more Iraqis growing more frustrated with the reconstruction, becoming more unhappy with the U.S. presence and, as a result, more people moving into Muqtada's camp. And I think that it was below everyone's radar screen.

ZAHN: Fawaz, let's talk a little bit about the potential joining of forces that you're seeing between Shiite and Sunni militants. What are the ramifications of that?

FAWAZ GERGES, SARAH LAWRENCE COLLEGE: Well, we can't actually, Paula, make definite statements about any kind of joint Sunni-Shiite operation, joint operation so far, even though some reports (UNINTELLIGIBLE) in "The Washington Post" and "New York Times" mentioned it.

But I think it is a possibility. Let's remember that Iraqi Shiites and Sunnis can reclaim the historical experience in the 1920s when both jointly resisted the British occupation. And of all Shiite clerics, Paula, al-Sadr is one of the most popular clerics among religious Sunnis. At the conference months ago, dozens of Iraqi Sunnis praised, sang the praise of Muqtada al-Sadr and said he was a solid, unique bridge between the Shiite and Sunni communities.

And here I fear to what extent, to what extent, Paula, does the escalation in U.S. military strategy bring about, you might say, the unification of ranks of dissatisfied forces on both sides, the Shiites and Sunnis?

ZAHN: You raise an interesting point.

Yet, Ken, the U.S. military at this point doesn't think it has any other option but that. Does it?

POLLACK: Well, that's certainly what the military's feeling is. And given how they proceeded, I think that they're right. I think that you can certainly question whether this was the right moment to be taking on Muqtada al-Sadr's forces, especially given the fact that we have got Lakhdar Brahimi in Iraq right now, the U.N. representative, trying desperately to negotiate some kind of new interim governmental arrangement there. You can argue that maybe this wasn't the right timing.

But, having started down this path, yes, I think that the military is going to have to finish its job, but we need to have a political and economic dimension to this as well.

GERGES: I fear, Paula, that it seems to me we have two crises here, one military and one political crisis.

I fear that the occupying power in Baghdad, the American occupying power, is losing sight of the potential political and religious repercussions of its actions on making and on bringing wide support for a peaceful, democratic Iraq and also on undermining American goals in the larger Muslim world.

ZAHN: Well, what are you suggesting Fawaz? Are you suggesting pulling out altogether?

GERGES: I'm suggesting that a fundamental rethinking of American strategy is urgently needed. And what we need to think about is basically the logic of unilateral American power in Iraq must be replaced with the logic of international legitimate authority under the leadership of the United Nations and with the participation of the entire international community, including Arab and Muslim states.

Paula, the big question on the table is the following. Have the American forces been able to provide security for Iraq and Iraqis, let alone for themselves? And the question is, the situation remains very volatile. Attacks continue. Hundreds of Iraqi and American lives have been lost. And in fact there is no legitimate Iraqi political authority to whom we will transfer power to at the end of June.

ZAHN: Well, that's also an issue that is widely debated. And we'll have to move on to that on another night.

Ken Pollack, Fawaz Gerges, thank you both.

POLLACK: Thank you, Paula.

ZAHN: Condoleezza Rice will swear to tell the truth to the 9/11 Commission tomorrow. Will that produce facts or fireworks?

His boss told him he had to lose weight and show it all on TV. An investigation looks at the battle of the bulge and which diets really work.

And a milestone at the crossroads of the world. Times Square celebrates 100 years.

(COMMERCIAL BREAK)

ZAHN: This time tomorrow, we will all be dissecting the words of National Security Adviser Condoleezza Rice. Tomorrow morning, she'll testify before the 9/11 Commission.

Well, tonight, senior White House correspondent John King looks at what is at stake for one of the president's closest advisers.

(BEGIN VIDEOTAPE)

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT (voice-over): She is Condi to him, Dr. Rice to others, so close a friend and adviser that her credibility will without a doubt reflect on his.

PETER HART, DEMOCRATIC POLLSTER: She was a rising star and I think she's a fallen star at this stage. She started out with a sense of credibility, a sense of purpose. And now I think people are wondering, is she telling the truth?

KING: Consider this 9/11 snapshot an illustration of Rice's case that she had the direct line to the president and that former deputy Richard Clarke's judgments are warped because of his distance from the decision-makers. Given the damming portrait painted by Clarke, Rice's testimony to the 9/11 Commission is in many ways a rebuttal.

KAREN HUGHES, BUSH-CHENEY CAMPAIGN ADVISER: I think that's particularly important now that they've seen the facts in a what I would think of somewhat a distorted perspective.

KING: Rice says Clarke is wrong to assert Bush White House all but ignored the terrorist threat. But her major speeches in that period contained no mentions of al Qaeda or terrorism. And critics suggest she didn't listen enough to Clarke's warnings because he had such a prominent role in the Clinton White House.

Not so, says Rice. On July 5, 2001, she personally told Clarke to warn the Federal Aviation Administration and other agencies about a spike in intelligence suggesting possible attacks. That was a busy period on the world stage, improving ties with Russia and selling a controversial missile defense plan the major focus for Mr. Bush at his first G8 Summit in Italy in mid-July.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, NATIONAL SECURITY ADVISER: But it is only six months. And these are complicated and complex issues and they will take some time.

(END VIDEO CLIP)

KING: Summit security was extraordinary in part because of intelligence, some of it from CIA, suggesting terrorists might try to hijack a plane and crash it into the meetings. Yet, to this day, Rice says until 9/11 she personally could not have imagined terrorists using planes as weapons here in the United States. Why not is one of the critical questions now for a witness who knows the world will be watching.

HART: There is no sense of an authority. She knows all the facts like a very smart schoolgirl. You're not sure that you're getting the broader policy implications.

KING: Exceeding expectations is a constant in her story, a university provost and accomplished concert pianist, at 49, among the closest friends and closest advisers to a president defined by crisis, now facing a credibility challenge and a performance like no other.

John King, CNN, the White House.

(END VIDEOTAPE)

ZAHN: To give us now a look at how Condoleezza Rice may respond when pressed tomorrow, we turn to someone who has known her for 20 years.

Leslie Gelb, former president of the Council on Foreign Relations and former State Department official, joins us now.

Good to see you.

LESLIE GELB, FORMER PRESIDENT, COUNCIL ON FOREIGN RELATIONS: Paula.

ZAHN: What is Condoleezza Rice going to have the most trouble with tomorrow?

GELB: The record. Basically, her testimony goes up against a pretty clear record that the administration did not put fighting terrorism at the top of its national security agenda.

Basically, I think she's in the awful task of an avenging angel trying to rewrite history. And she has got to explain why the president himself told Bob Woodward anti-terrorism was not among his top priorities, or Paul O'Neill or the former chairman of the Joint Chiefs of Staff or even Don Rumsfeld saying that the Defense Department was looking elsewhere, or to look at Condi Rice's own speeches before 9/11, those given and those not given. Anti-terrorism was not at the top of the list.

ZAHN: She's also expected to get hit pretty hard on the whole issue of her not being able to imagine jets being used as weapons and being rammed into buildings, although we are told she was told of that possibility at the president's first G8 Summit.

GELB: Well, I don't know whether she was directly informed of this possibility by the CIA.

But the notion that there would be attacks here in the United States, that they could involve commercial airliners, those had been afoot for more than a decade. I was on the Hart-Rudman Commission. And four years before 9/11, we were saying, based on intelligence briefings, that there would be major terrorist attacks against American cities. It was not news to people. They just weren't doing very much about it, Paula.

ZAHN: We know that Condoleezza Rice has been briefed and they've been rehearsing some of her answers. She'll open up with a prepared statement. How you to expect her to handle the heat?

GELB: That's a good question. They say that this is not part of her calculations today. But I think it is the major strategic decision she has to make, whether or not she'll continue to play the role of the warrior princess, avenging angel, to try it tear down Clarke, Richard Clarke, and all the other detractors, or whether she'll try to find some ground more consistent with the record and less vulnerable for her personally. ZAHN: There are key members that are on the 9/11 Commission who actually believe 9/11 could have been prevented. Would Condoleezza Rice be lying tomorrow if she says it is simply not the case, that there was no way for them to be able to predict exactly what was going to hit the United States and therefore they couldn't prevent it?

GELB: Sure.

I don't know whether it could have been prevented. And I don't think the commission will be able to know. I think what they're saying is that if a number of steps had been taken, we would have been able to deal with the consequences of the attack much better. But to actually say we could have caught it, stopped it, that's a big leap.

ZAHN: Les Gelb, thank you for spending some time with us.

GELB: Sure.

ZAHN: We appreciate it.

Want to lose weight? A TV journalist puts his own battle to lose weight on TV. He'll tell us which diet worked for him.

And the new face of outsourcing. What if you were asked to train the person who will do your job, but cheaper? You'll going to meet two women who had to do just that.

(COMMERCIAL BREAK)

ZAHN: Just about everybody out there wants to lose a few pounds these days. But what if your boss asked you to lose the weight and asked you to record the process for everyone to see? That's what happened to documentary filmmaker Steve Talbot, who discovered his extra pounds weren't as harmless as he thought.

(BEGIN VIDEO CLIP, "DIET WARS")

UNIDENTIFIED FEMALE: You're getting close to the level of being obese.

STEVE TALBOT, FILMMAKER: Ouch. I got to say, I don't feel bad. I feel pretty good. But what are the health things that I should worry about?

UNIDENTIFIED FEMALE: Right. Well, that's a good question.

TALBOT: Dr. Robinson (ph) then proceeded to list a series of horrible diseases I might contract.

Nearly 55 years old and I just had been told I was on the verge of obesity. I had heard the statistic that two-thirds of Americans are overweight. I just never realized I was one of them.

(END VIDEO CLIP)

ZAHN: Now Talbot's search for the perfect weight loss plan is the subject of that new documentary called "Diet Wars." It airs tomorrow on the PBS series "Frontline." He joins us tonight from San Francisco.

Good to see you, Steve.

TALBOT: Hi, Paula. How are you?

ZAHN: I'm fine. Thanks.

Let's put all the health issues aside. If someone is looking for the quick fix, the maximum number of pounds lost quickly, which diet should they choose according to your investigation?

TALBOT: Well, I'm going back off from that, because there is no perfect diet.

What I found is that any diet, any sensible diet, all the big ones that are out there, Ornish, Atkins, Pritikin, South Beach, they'll all work. If you stick to the plan, follow that diet, you're going to lose weight. The tricky thing is, how do you keep that weight off?

ZAHN: Yes, that's been the problem for centuries now, hasn't it?

TALBOT: That's right.

ZAHN: So you're not willing to go out on a limb tonight and say that one of these diets is the quicker way to go?

TALBOT: No. I think that different diets work for different people.

I myself did what I called the "Frontline" diet, which is having a television crew follow you around all the time. And when you reach for that piece of chocolate cake, there is the crew in your face. But I did a version of the South Beach diet. We had to pick something very quickly. I had a couple of months to work on this project. And my own modified version of that worked for me. I lost 10 pounds in the first two shock-and-awe phase, as they say it.

And then I eventually lost 15 pounds in the period we were doing the documentary. I've gone on to lose three or four more pounds. Now I'm in a race with Tommy Thompson, the only Bush Cabinet official who is taking the national obesity crisis seriously. He is my exact height, 5'11. He also was 210 pounds when he started dieting. He's telling everybody to diet in his own department, trying to get America on a crusade to lose weight. And he and I both lost 15 pounds. So, Tommy Thompson, I'm going for 180 pounds. I'll meet you on the Mall for a weigh-in.

ZAHN: Oh, what a challenge. We'll weigh you in on this show.

Let's talk about some of the health concerns associated with these diets.

TALBOT: Sure. ZAHN: I know you examined the high-fat, no-carb camp, the low- fat, carb-eating side of all of this. What do the experts tell you?

TALBOT: Well, I'll tell you, it is hard to find neutral sources on this, Paula. We went to all the diet gurus and talked to them. And, you know, a lot of them are very reasonable people.

There has been a huge controversy. So much money is at stake; $40 billion is what we Americans spend every year on dieting, diet books, diet programs, diet food. So there is big money to be made. And these guys go at it hammer and tong. The USDA tried to get them all together a couple of years ago to work out a consensus. It turned into a food fight.

So, trying to get these guys to agree, there is too much money at stake. But there is a kind of emerging consensus that, you know, not all fats are bad. There are good fats. Not all carbohydrates are bad. There are good carbs. So you can work out a diet, a long-term diet, a long-term healthy eating plan that is pretty balanced. And I hate to say this, because moderation, self-control never sold diet books, but that's the long-term answer, small portions or medium portions, not the huge mega-portions Americans are being force-fed.

(CROSSTALK)

TALBOT: And exercise. Get up off the couch and walk. Unfortunately, it's been what my wife has been telling me for years, you know. I just wasn't listening.

ZAHN: Well, look at everything you've dropped and you're probably going make that 180 pound at the great American weigh-in. Good luck, Steve. Thanks for sharing this with us tonight.

TALBOT: OK.

ZAHN: "Diet Wars" airs tomorrow on PBS at 9:00 p.m. Eastern time.

American voters say the economy is their No. 1 concern. And that was Democrat John Kerry's target today. We'll contrast his tax plan with the president's.

And we're going meet two American workers who say when they were laid off, they were told to train their overseas replacements, the insult to injury of outsourcing.

Also, a century celebration for an American icon, New York City's Times Square.

(COMMERCIAL BREAK)

ZAHN: Welcome back. Here is what you need to know right now. The Pentagon says some U.S. troops may have to stay in Iraq longer because of the increased violence there. Troops are battling Iraqi fighters on multiple fronts. The most intense of which is in Fallujah. Coalition forces say they killed 30 enemy combatants there. Rush Limbaugh's lawyers say prosecutors should not be allowed to see his medical records. They told a three-judge panel today that police violated his privacy last November when they used a search warrant to seize the records. Officials are investigating claims Limbaugh used prescriptions from multiple doctors to get drugs.

An unusual move from the Supreme Court that will allow the public to hear broadcasts of oral arguments in some upcoming cases. The court will release tapes of reported arguments in three terrorism related cases and one concerning the Bush administration's energy policy.

On to the issue of the economy. Polls show the economy is the top priority for American voters this year. And today Democrat John Kerry staked out his economic territory and blasted President Bush. National correspondent Kelly Wallace puts it in plain English tonight.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN NATIONAL CORRESPONDENT: After weeks of being painted by Republicans as a taxer and spender, John Kerry paints George Bush as a president who turned a $200 billion budget surplus into a $500 billion deficit.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: His record shows that we can't trust what he says. And no matter what he says now, the Bush policies will not reduce the deficit.

WALLACE: Seizing on what Kerry and his advisers believe may be one of the president's greatest vulnerabilities this year, the senator touts a plan to cut the deficit in half in four years. To do that, he proposes a pay as you go system, paying for new programs with spending cuts or tax increases, scaling back campaign promises on education, cutting corporate subsidies and eliminating Mr. Bush's tax cut for Americans earning more than $200,000 a year.

KERRY: I acknowledge the truth, the top 2 percent will pay more than they do today. Everyone else in America will get a tax cut under a Kerry administration.

WALLACE: But the Bush-Cheney campaign says Kerry has yet to explain how he'll pay for all his programs without raising taxes on the middle class. And GOP lawmakers say his votes in the Senate tell the real story.

SEN. RICK SANTORIUM (R), PENNSYLVANIA: You can't walk away from a voting record that has repeatedly called for raising the taxes, increasing government spending to astronomical levels, and has absolutely complete disregard for the balancing of budgets.

WALLACE: But Kerry's advisers think they have the edge here. Pointing to recent national polls which show more Americans believe the president's economic policies have made the country less prosperous, not more so. Kelly Wallace, CNN, New York.

(END VIDEOTAPE) ZAHN: Time to get the administration's view now from Commerce Secretary Donald Evans. He joins us from Washington. Welcome, sir.

DONALD EVANS, U.S. COMMERCE SECRETARY: Thank you, Paula. Good to be with you.

ZAHN: Thank you. So Senator Kerry says President Bush has broken every promise he has made about cutting the deficit. He points to his coming into office with a $200 billion surplus. Now with a $500 billion deficit. He says if he's elected president, he'll cut the deficit in half in four years. What does the president plan to do if he's re-elected?

EVANS: Well, Paula, the president also is going to cut the deficit in half in the next several years. But I think what is important to point out is the president's policies are working. When you look at household wealth, it's at a record high, homeownership is at a record high, productivity is very high, but most importantly jobs, Paula. We continue to work on creating more jobs for Americans. The results are beginning to come in. We created over 500,000 jobs in the first quarter of 2004. Unemployment peaked at 6.6 percent. It is now down to 5.7 percent. So all of the economic trends are very, very positive.

ZAHN: But Mr. Secretary, in spite of the picture you're painting here tonight, take a look at this latest poll that CNN has conducted. Basically 55 percent of those polled disapproved of the president's handling of the economy. If what you're saying is true, why the disconnect here?

EVANS: Well, Paula, I'm not -- I'm not too concerned about polls. I'm concerned about results. I think the American people as they continue to see the results of this economy and understand that the policies that the president has been pursuing and implementing are now beginning to take hold, the household survey would say to you that we've created almost a million jobs. A payroll survey would say to you we've created over 750,000 jobs. And so now that the president's policies are being implemented and beginning to work their way into the economy, the results are very clear that this is a very, very strong economy.

ZAHN: What John Kerry is saying, that he would actually cut the president's tax cut on Americans earning more than $200,000 a year to help bring down the deficit. He said these tax cuts are what are in part fueling this deficit.

EVANS: What gets lost in this conversation, when the good senator talks about raising taxes on the rich or those that are making over $200,000, you know who that group is? Yes, it some families but it is also is small businesses all across America. You are going to be raising the taxes on small businesses across America who create 75 percent of the new jobs in America. So if you want to destroy jobs in this country, that's the way to do it, would be to raise taxes.

ZAHN: Secretary Evans, we have to leave it there tonight. Thank you very much for joining us. EVANS: Thank you, Paula.

ZAHN: Time to go to the Kerry campaign with one of his former rivals, Senator John Edwards who joins us from Washington. Welcome, Senator. Quick response to what Commerce Secretary Evans just had to say, basically that he believes as the economy continues to gain strength, that you will see the deficit come down and he doesn't agree with John Kerry's idea that you should nix tax cuts for people making more than $200,000 a year.

SEN. JOHN EDWARDS (D), NORTH CAROLINA: I'd say two things about that. One is do we really want to trust the president who has taken us from a $5 trillion projected surplus to a $5 trillion projected deficit? Most irresponsible fiscal president in the country's history. And the truth of the matter is he's done a remarkable thing. He's managed to take us to record deficits while losing millions of jobs. Usually spending money in tax cuts over the purpose of creating jobs. What John Kerry will do is very specific, get rid of tax cuts for people who make over $200,000 a year, give additional tax relief to middle class families, put real spending caps on discretionary spending, make sure we have pay as you go rules for entitlement spending and for tax cuts and crack down on corporate welfare.

ZAHN: Even though that may be John Kerry's plan, there is a widespread perception that if elected, he will raise taxes. Take a look at this latest poll done which basically shows that 58 percent of Americans believe John Kerry will raise their taxes. Now Republicans point to his voting record, argue that he has repeatedly voted for tax increases. How much. How much of a problem is this for the senator?

EDWARDS: It's not a problem for a simple reason. No. 1, you just pointed out when you were talking to the secretary, that over half of Americans think that President Bush is doing a poor job on the economy. That's because the American people have got good horse sense, they can see what is happening out there in the real world. As to Senator Kerry, if you earn under $200,000 a year, Senator Kerry will keep the tax cuts that you have plus $200 billion more in tax relief for middle class working families.

ZAHN: Is John Kerry willing to make a promise to Americans, read my lips, no new taxes?

EDWARDS: I think what John Kerry is willing to promise the American people is No. 1, he'll run the government in a responsible way. This president has been grossly irresponsible. And do not leave this debt to our children and grandchildren.

ZAHN: How odd is it for you to be on the John Kerry camp after going after him for many, many months in the campaign trail?

EDWARDS: It is actually -- John Kerry is a friend of mine. We were friends before the campaign. We're still very good friends and have been throughout the course of the campaign.

ZAHN: Come on. Wouldn't you rather be talking about your own economic plan tonight? EDWARDS: Yes, unfortunately the voters didn't agree with me about that. Now my choices are between John Kerry and George Bush. I think John Kerry will make a terrific president.

ZAHN: Senator John Edwards, thank you for your time tonight.

EDWARDS: Thanks, Paula.

ZAHN: Well, it's estimated that millions of kids are in families with at least one gay parent. We're going to hear from a woman who knows exactly what that's like.

And adding insult to injury, American companies importing workers from overseas and then asking the people they replace to train them.

(COMMERCIAL BREAK)

ZAHN: Having their jobs sent overseas is only the beginning of the pain for many some American workers. Many are also having to train their replacements. According to a survey by the Washington Alliance of Technology Workers, almost 1 in 5 information technology workers has lost a job or knows someone who lost a job after training a foreign worker.

Joining us now are two people who say it happened to them. Patricia Fluno is in Orlando, Florida, Myra Bronstein is with us from Seattle tonight. Good to see both of you.

Myra, set the stage with us. It was a year ago, you and a number of your colleagues were called into a meeting, you were laid off. You say that during that meeting, not only were you told that you were going to be replaced by workers from India, but that you were going to be asked to train them when they arrived in several days. What was your reaction?

MYRA BRONSTEIN, LAID-OFF WORKER: Well, I would actually take issue with the word "asked." We were told that we had to train them in order to be eligible for severance and unemployment benefits. And so there was really no good alternative to that.

ZAHN: Your employer now, or former employer, WatchMark Comnitel, is saying that they didn't require you to train any new hires. Here is their statement. They say "statements previously made by Mrs. Bronstein that WatchMark said they would deny her severance package or unemployment benefits if she refused to train replacements is false. She voluntarily agreed to continue her employment with the company during this transition period."

BRONSTEIN: It wasn't voluntary. The alternatives were bad. If I quit, then I wouldn't be eligible for severance and unemployment benefits. If I refused to train my replacement, I wouldn't be eligible for severance and unemployment benefits there was no good alternative.

ZAHN: Patricia, you had a similar experience a couple of years ago. How hard was that for you? PATRICIA FLUNO, LAID-OFF WORKER: It was terrible. I felt absolutely thrown away. When I was first starting my career, company loyalty was important. It was important to learn about the company's goods and services. And that just doesn't seem to matter anymore. It was humiliating.

ZAHN: Let's read a statement from your former company, Siemans Corporation. They said "the outsourcing resulted in the elimination 12 positions, Siemens helped 5 of those effected employees find comparable jobs elsewhere at Siemens."

Did the company reach out to help you at all in the transition?

FLUNO: No. There was another Siemens company in Orlando and they did send our resumes to that Siemens company. But in terms of widespread assistance, they did not offer anything.

ZAHN: And just a final thought on what it was like to actually train the person you knew who was taking your job.

FLUNO: Again, I felt thrown away. Labor now is a commodity. It is to be purchased at the cheapest price. Pens, pencils and people, they're all the same now. It is humiliating.

ZAHN: You two show certainly show us a different face of outsourcing and a more personal face than we have seen before. Patricia Fluno, Myra Bronstein, thank you for sharing your stories with us tonight.

FLUNO: Thank you.

ZAHN: What is it like to grow up with a gay parent? We're going hear one woman's story about mom, dad and dad's partner.

And then a few square blocks of seeing it all, everything from sleaze to victory. A look back at Times Square 100 years.

(COMMERCIAL BREAK)

ZAHN: Gay marriage has been making headlines lately with opponents saying it would be bad for families. You might be surprised to learn that millions of kids, maybe as many as 10 million, are already being raised by at least one gay parent, some are adopted, others are born through artificial insemination and still others grew up in a gay family after mom or dad divorced and take gay partner.

That is at case with our next guest who has written a new book all about what it is like to grow up with a gay parent. It is called "Families Like Mine." Author Abigail Garner joins us. Thank you for being with us tonight. So you had two fathers as well as a mother.

ABIGAIL GARNER, AUTHOR: Right, I was 5 years old when my father came out as gay. At that point, he repartnered and he's been with my other father, Russ, for the past 26 years.

ZAHN: At what point in your life, did you realize that that was a different situation?

GARNER: I was fortunate enough that having my father come out when I was 5, I knew that he was gay before I had internalized all the messages that said that being gay was bad. Because homophobia is something that we learn at a young age. I hadn't learned it yet. That was a gift for me.

ZAHN: So, you never resented it?

GARNER: No.

ZAHN: Was it hurtful at any point in your life, particularly when you had to deal with other people's perceptions of what your home life was?

GARNER: There was a point I started to get the messages that, well, I always heard gay people were deviant, that they were going to make their children be confused. And I realize there was a conflict with what I knew my father, how I knew my father and his partner being very loving parents, that didn't make sense with the messages I was hearing about how terrible this home life would be.

ZAHN: Was it confusing to you as you tried to determine what your own sexual identity was?

GARNER: That's often a question that people get because children in these families are often asked, at a young age, I was 9, other kids I talked to in my book

ZAHN: You were asked at the age of 9 whether you were heterosexual or...

GARNER: Right. There the sense of entitlement, because the myth is that gay parents make gay babies. So the question is always is your dads gay are you to. This is an intense pressure that was put on me as well as other kids that I've interviewed that we -- they always say are you gay if your parents are gay?

ZAHN: And you say you are heterosexual.

GARNER: That was a tough situation to be in fourth or fifth grade and being expected to talk about my sexual orientation before most kids have to consider it at all.

ZAHN: What has been the biggest challenge for you as you've dealt with this unusual family arrangement?

GARNER: My biggest challenge is what I also have seen with dozens of kids that I've talked to for this book and beyond -- through my Web site. That our biggest challenge is not having gay parents, that's not the problem. It is dealing with the discrimination and prejudice that we have to face as a result of that.

ZAHN: Was there ever a point in your life where you wished you could have reversed everything to make your life simpler? GARNER: You know, I have always considered having a gay father to be a gift because I look at the world differently. I think I am more open minded and I'm really appreciative of that. I have -- I think I'm more empathetic to people with differences and that's a gift to me.

ZAHN: And yet, it was not easy for you in school when were asked to draw a picture of what your family was like.

GARNER That's a perfect example where there are certain situations we take for granted for people that have a mom or a dad. Where if there are two moms or dads in the situations there are situations where the son or daughter has to come out about coming from a gay family. The first day of kindergarten you draw a picture of your family and talk about it. Well, that 5-year-old is outing themselves and their family, hopefully there's going to be a supportive teacher and classmates that are going to be supportive about it as well.

ZAHN: Message that comes through loud and clear in your book.

Abigail Garner, thank you for dropping by tonight.

GARNER: Thank you.

ZAHN: It may not be new year's eve but Times Square is getting ready for a huge celebration. 100 years of everything from Vaudeville to MTV.

(COMMERCIAL BREAK)

ZAHN: In the city that never sleeps it is the lights that are always on. New York Times Square, one of the world's most famous crossroads turns 100 tomorrow. While, the square's neon lights have been bright for some time. Its history has had some dim moments.

Jason Carroll takes a look.

(END VIDEO CLIP)

UNIDENTIFIED MALE: Greetings from times square.

JASON CARROLL, CNN CORRESPONDENT (voice-over): Times Square is like an aging star. Like being the center of attention, enjoys being flashy and knows if a few face-lifts can erase years of hard core partying so well known, so much confusion over its name.

UNIDENTIFIED FEMALE: It took a lot of time to build the square.

UNIDENTIFIED MALE: Fell in love with the screens I guess.

UNIDENTIFIED FEMALE: Oh my god, we need Lisa (ph). She'll know, she's full of worthless trivia.

CARROLL: Is she from New York?

UNIDENTIFIED FEMALE: No, she's from Massachusetts.

CARROLL: She didn't know historian James Traa (ph) does.

UNIDENTIFIED MALE: Times Square got the name because the building behind us right there.

CARROLL: The name changed from Long Acre Square after the New York Times moved here 100 years ago, since then it evolved. From a turn of the century show girl spot to the '40s where Broadway lit the way for World War II sailers to find new girlfriends. To darker days of crime and the '60s and '70s, even diehard New Yorkers stayed away. It was peep shows and porn characterized in movies like "Taxi Driver".

UNIDENTIFIED FEMALE: This is a dirty movie.

CARROLL: Now instead of drug deals, it is Disney. Instead of tawdry women, it is MTV's TRL.

CARSON DAILY, HOST TRL: Is this Dick Clark's birthday or this Time Square's birthday.

CARROLL: There is always the naked cowboy but adult entertainment moved on one block west.

UNIDENTIFIED MALE: It's real hard now to get good porn.

CARROLL: Gerald Thompson (ph), jokes about his toys.

UNIDENTIFIED MALE: And a lot moves faster than I do. And you know, it definitely works.

CARROLL: He laughs about the days when going to Times Square to get toys didn't mean Toys-R-Us. It is cleaner, safer, but has Times Square lost its edge.

HARVEY FIRESTEIN, ACTOR: Drama and traffic! It is always going to be New York, kids, no matter what you do to it, it is always going to be New York.

CARROLL: Happy 100th. May the next century be just as exciting.

Jason Carroll, CNN, New York.

(END VIDEOTAPE)

ZAHN: And that wraps item for all of us here this evening. Thanks so much for being with us tonight. Tomorrow, National Security Advisor Condoleezza Rice goes before the 9/11 Commission. CNN will have live coverage beginning at 9:00 a.m. Eastern time.

And then we would love for you to join us tomorrow night for our special report at 8:00 p.m. Eastern. We will spend the hour digging deeper into Rice's testimony and the 9/11 investigation. Hope you'll join us then. Thanks again for being with us tonight. Have a good night "LARRY KING LIVE" is next.

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


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