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CNN IN THE MONEY

Is the U.S. Better Protected Against a Terrorist Attack?

Aired August 7, 2004 - 13:00   ET

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


JACK CAFFERTY, CNN ANCHOR, IN THE MONEY: Thanks, coming up on "IN THE MONEY," take it easier. We'll tell you which parts of the fight against terrorism are actually working. And the news is better than you might expect.
Plus the hottest thing on four wheels. Check out some of the contenders for the 2005 car of the year. And swim at your own risk. We'll find out whether American beaches are fit for a dip this summer. All that and more coming up right after this quick check of the headlines.

DEBORAH FEYERICK, CNN CORRESPONDENT: After two days of intense violence, the U.S. military says fighting in Iraq's Najaf area has died down. Iraq's interim prime minister blames the violence there on quote, bandits and gangs trying to hide behind Shiite cleric Muqtada al-Sadr. Iyad Allawi says he's been getting positive messages from the al-Sadr side and doesn't believe the Najaf fighters are part of al-Sadr's Mehdi Army.

With parts of the U.S. already on a heightened alert, anti- terrorism officials say they have more reason for concern. There's been a drop off in intercepted communications between suspected terrorists. Intelligence officials are trying to figure out why.

Police are still searching for the killer of six people who were found in a house in Deltona, That's near Florida. That's near Orlando I should say. A news conference on the investigation is coming up at 2:00 Eastern. CNN will have live coverage.

John Kerry and John Edwards are on the campaign trail in the southwest today. The Democrat ticket is expected to hold a rally in Colorado in about 45 minutes. They're also making stops in Nevada, New Mexico and Arizona this weekend.

President Bush is taking a break from campaigning. He's relaxing at his family estate in Kennebunkport, Maine, where he is expected to attend his nephew's wedding later today. I'm Deborah Feyerick at CNN center in Atlanta. More news at the bottom of the hour.

IN THE MONEY begins right now. Keeping you informed, CNN, the most trusted name in news.

CAFFERTY: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY, searching for the silver lining. The fight against terrorism stretches from Afghanistan all the way to Wall Street. We'll find out whether it's actually making you safer.

Plus, tallied up or singled out? Some Arab Americans are angry about the way Washington handled their census numbers. We'll see if it's profiling or just a sensible precaution.

And in deep, you can't always tell whether a beach is clean or dirty on looks alone. Sometimes you have to taste the water. We'll look at the state of the water that America is swimming in. Joining me today a couple of IN THE MONEY veterans, CNN correspondent Susan Lisovicz and "Fortune" magazine editor at large Andy Serwer.

The job's report that came out yesterday was in a word terrible. The whisper number was as high as 300,000. Consensus was around 220,000. We get 32,000 jobs. That's not good news for the administration. That's not good news for the economy and it puts a real squeeze on the Federal Reserve that's going to go into a meeting next week and decide what to do about interest rates.

ANDREW SERWER, "FORTUNE" MAGAZINE: And I think the real troubling thing you guys is that this is the fourth month now where job creation has dropped. In other words, it peaked in March and we've been going down bumpety bumpety bump down the stairs. The question was in June it was much less than anticipated. People were calling it a soft patch, OK, we're going to pick back up again. This reinforces the notion the economy and the recovery seems to be running out of steam.

SUSAN LISOVICZ, CNN CORRESPONDENT: The interesting thing, one of the many interesting things about this report is that the employment rate edged down actually. Now why is that? As if there's two reports that are the fuel for these, for these numbers. I talked to the Labor Secretary Elaine Chao right afterwards and she said the households survey, which was the number drawn upon for lowering the unemployment rate was much more optimistic, but guess what economists and investors look at? It's the payroll reports.

CAFFERTY: Trying to make good news out of that jobs report is trying to make, like trying to make chicken salad out of chicken something else, 32,000 new jobs. If I'd been the administration, I don't know if I'd let Elaine Chao or anybody else out in public to talk about it.

LISOVICZ: It's the lowest number, it's the lowest number this year.

CAFFERTY: It's terrible. It's just awful and the political implications are not insignificant for the White House and for the John Kerry...

SERWER: It will be interesting I think mostly, Jack, to see how John Kerry and his people treat this. I think what's going to happen is the president is simply going to stay away from it, but how can John Kerry use it? Can he get any traction off of lower growth? It is not a decline; it's lower growth, slightly complicated in nuance. It would be interesting to see how he goes.

LISOVICZ: And also remember, we're at a time when the stock market is very weak, the Nasdaq down 9 percent year to date. Oil prices at record highs and the Fed meeting on Tuesday. There's a lot of confusion right now.

CAFFERTY: Stay tuned. On all those happy notes, we'll go on to talk about something else.

This week's warning about terrorist attacks on financial institutions here in the United States kicked up the usual complaints about the alert system: too vague, too scary and this time too old by a mile, as in some of the data dated back a long time. But for all the grief the homeland security people get on these things, there are still some things going right in the fight against terrorism. In case you've forgotten what they are, Daniel Byman is here to help us remember. He's a senior fellow with the Saban Center for Middle East Policy at the Brookings Institution down in Washington, D.C. He's also assistant professor at Georgetown University's Edmund A. Walsh School of Foreign Service. Welcome. Nice to have you with us.

DANIEL BYMAN, SABAN CENTER, BROOKINGS INST.: Thank you for having me.

CAFFERTY: Why should I be encouraged? In light of all these warnings about the Prudential Center in Newark and the IMF and the World Bank down in Washington and the stock exchange in the CitiCorp building here in New York City. Why should I feel good about the war on terrorism?

BYMAN: Well, there a couple things that have gone well as well as several things that have gone poorly. Most important, we're paying more attention to the terrorism problem and as a result, it's harder for any terrorist to operate in the United States. There are still gaps. There are still vulnerabilities but it's much harder than it was on September 10th, 2001.

The second thing is a change in al Qaeda. They've been hit hard after September 11th, losing their sanctuary in Afghanistan and having many people arrested overseas and we've seen more of that this week. As a result, the organizations had to work more with local groups and while there are large local groups in Europe, parts of Asia, Africa, there aren't strong local groups in the United States so the U.S. homeland, if not exactly safe, is relatively safer than it was several years ago.

LISOVICZ: OK. We can appreciate that, Daniel, but if you're growing your base overseas, isn't it just a matter of time? I mean, this is an open country and that is one of the many things that makes living here great, but you cannot protect our borders. You cannot protect our ports 24/7. It's just simply impossible. So if the cause is growing, the organization is weak, right now, isn't it going to change? Won't it get stronger?

BYMAN: Certainly the danger is going to remain over time and as recruits flock into al Qaeda, it's going to be lethal. The real thing to think about whether it can conduct the sophisticated large-scale attacks on the U.S. homeland as it did on September 11th. Perhaps it can, but it's much harder for the organization to do so. There are, of course, going to be attacks on Americans and perhaps on U.S. soil in the years to come. The question is how many and what scale. We may be safer in relative terms even though the attacks continue.

SERWER: Daniel, it's an interesting situation that you're in because you're trying to prove a negative in measuring in your business, if you will, is very difficult. If there are zero attacks, did we foil 100? Did we foil two? We don't know. Even if there is one, did we foil 10? Very complicated stuff, I think. But I want to ask you, what can we do to better understand al Qaeda?

BYMAN: We need to understand the organization's weaknesses, as well as strengths. This is an organization that has changed significantly since September 11th. It's devolving much more power down to local groups. Its leadership, to some degree, is on the run. But as you pointed out, the cause is growing stronger and the next steps we need to focus on aren't just on how to hammer the organization and weaken it because we've been making a little progress on that. The real next steps are how to stem the flow of recruits, how to make overall the cause less attractive to people who want to kill Americans.

CAFFERTY? How do you do that?

BYMAN: Very tough question. Part of it is simply recognizing the problem and trying to change our image abroad. Some of that is public diplomacy. Some of that may involve broader policy changes. Part of that is directly engaging the Muslim world. A lot of criticism the United States gets overseas is that it simply disregards the Muslim world and that is something that needs to change, as well. Part of it may also be political change, that many of the reasons that people flock to al Qaeda's banners is they see the United States as being behind a number of repressive governments and to some degree, that is a valid criticism. We need to be sure that we pick our friends, as well as being careful about our enemies.

LISOVICZ: And what about our enemies in Iraq? Is it your opinion that the sympathizers there have grown in number since U.S. troops moved in?

BYMAN: Certainly Iraq has been both a magnet for jihadists and has also generated considerable anger that's increased recruitment. This is, along with the Arab-Israeli dispute, one of the great issues that is hurting America's image in much of the world and not surprisingly terrorists are playing this for all it's worth to try to make America look bad.

SERWER: So Daniel, If I'm understanding you correctly the war in Iraq is a mistake?

BYMAN: That goes too far. We didn't go to war in Iraq as far as I'm concerned primarily out of concerns about terrorism but more about concerns about weapons of mass destruction. All that after the fact has been blown away. What we need to focus on now is what condition are we going to leave Iraq in? If we leave it weak, if we leave it prone to civil war, that may make the problem of terrorism worse. So in some ways, we're damned either way. We need to make sure the country is stable, but by staying there, we increase the problem of terrorism. My view is we make a strong, short-term effort to try to increase stability in the country and then hopefully, rather quickly, are able to draw down our forces while still backing the government that is established. But that's a very tricky balance to keep.

CAFFERTY: That's a pretty ambitious goal, too. That's assuming that that new government is able to provide security for itself and for the country, which it's a long way from being able to do now. That assumes they're able to get some sort of elections off the ground by the first of next year that are not corrupted by the folks who would certainly like to do that. Is it realistic to think that that country a year from now is going to be what we envision it being or is that just a pipe dream?

BYMAN: It's a pipe dream that it's going to be what we had hoped a year ago. But it is realistic to hope it can be better, that it can be somewhat stable, that the government can be somewhat representative and we can live with that. What we cannot live with is an Iraq that plunges into civil war, an Iraq that becomes a breeding ground for the type of radicalism that we try to fight before we went into the country. And you're right, that's exceptionally difficult and it's going to require not only a lot of patience, but a lot of resources and probably lives on the U.S. part. But the alternatives are quite messy and unpleasant, as well.

CAFFERTY: All right. We're going to have to leave it there. Daniel Byman, the senior fellow at the Saban Center for Middle East studies at the Brookings Institution in Washington, D.C.. Thank you for being with us. I appreciate it.

BYMAN: My pleasure.

CAFFERTY: All right. Now, we're going to take a break, ring the cash register and make a dollar or two for the home office but we shall return and coming up on the other side, counted out. Find why some Arab Americans say their census numbers wound up in the wrong hands. Plus, selling Martha Stewart. We'll tell you how her company's fortunes are changing now that she's headed for the joint.

And hot bodies and heavy metal, take a look at some of the contenders for car of the year 2005. We'll be back after this.

(COMMERCIAL BREAK)

CAFFERTY: There was word this week that the Homeland Security Department received detailed information on Arab Americans from the Census Bureau. While U.S. officials deny this has anything to do with law enforcement or racial profiling, my next guest is concerned. Jean AbiNader, director of the Arab American Institute, a nonprofit advocacy group has questions about why this data was released and what it is to be used for. Welcome to our program. Nice to have you with us. What concerns you most about this?

JEAN ABINADER, DIR, ARAB AMERICAN INST: Well, I think it's just like the credit card company when you sign up with a credit card or an airline card, they have these little boxes that says, yes, I agree or I don't agree to share my information or have other people use that information to send me offers. And the Census Bureau collects this data, essentially, to find out where people are in this country so it can make sure that there's a good division of social services for different communities. And so all of a sudden, they now turn that information around and give it to DHS for purposes which we're still not really clear about I think is a real betrayal of public trust and that's the issue here. It's not the giving up the numbers. They're publicly available, you can even get them on our Web site.

CAFFERTY: Right.

ABINADER: The issue is the information is gathered for one purpose and all of a sudden it's being used for something else. We stop the data mining issue a year ago in the Senate and here we are and have it coming up again. We've got to face this.

SERWER: Jean, broader question here regarding surveillance of Arab Americans and Muslims in the United States by the FBI and other security groups, how can that balance be achieved do you think? In other words, if the FBI is going to look at various mosques say in Albany or in Buffalo and purportedly find things, how can they protect civil liberties at the same time?

ABINADER: I think the issue is one of getting the community involved in it. We've said that from the beginning and we've set up joint task forces with the FBI all through the United States. You can find them in the metropolitan Washington area. You can find them in Florida. You can find them in Philadelphia and other areas. We've sat down with them and said, OK, what is it that you need and how can the community cooperate? It's these projects coming in out of left field that are the real problem because on the one hand, the best kind of policing is one that is done in cooperation with the community because that's most likely to lead to kinds of leads that people can use. But this thing of kind of surreptitiously going around and doing stings and setting up other kinds of operations doesn't help build confidence with the community that the FBI is actually trying to protect all Americans, including Arabs and Muslims.

LISOVICZ: And Jean, the "Financial Times" had a recent article that said that there's a growing number of Arab American voters who are opposing the president in key battleground states. What kind of base do Arab voters have in the first place?

ABINADER: Well, actually there are about 1.3 million registered Arab American voters in the United States. There's probably another 3 million registered American Muslim voters in the United States and they care concentrated in key urban areas. Right now we're doing polling every several months in the key battleground states of Michigan, Florida, Ohio and Pennsylvania. In those states Arab- Americans alone control 1 to 3 percent of the vote. So they are significant players in those areas. And more than that though I think the point here is one of inclusion versus exclusion. Either Arab- Americans are going to be part of this country and going to be entitled to the full protection and rights under the constitution as any other American or we're going to go back to this system of figuring out people might as well be wearing numbers. Right now the numbers are the zip codes.

CAFFERTY: Wait a second, I think maybe that's a little over the top and the reason I suggest that is going back to something you said at the very beginning of the interview. This is public information that is available on the Web site. What's the difference between somebody compiling it and handing it to the Department of Homeland Security and then simply going on the Web site themselves and getting the information?

ABINADER: Exactly and that's our point. If they wanted the information, they could even come to us and get the information. But instead some according to them, mid-level bureaucrat decided that because they wanted bilingual signs in airports where people needed to see the signs in Arabic they need this information by zip code. The reality is that's not what they needed. What they needed to know is where Arabic speakers are. That's a different question than who the Arab-Americans are.

CAFFERTY: But it's front line (ph) information.

ABINADER: The issue is how the information is being used, not the fact that there is the information. The information on credit card companies is widely available, as well. That doesn't mean that people have the right to go in and use that information to send me spam or send me messages that I don't want on my Internet. So let's be frank here. The issue is as you said, how do you balance national security and how do you balance a person's civil liberties? Now I'm saying that the best way to do that is to work with the effected communities to make sure that we have workable solutions and not ones that impose burdens on different communities in different ways.

SERWER: Jean, you know, interesting situation, obviously, in World War II with Japanese citizens were interned, no cases of anti- American acts by those Japanese citizens I believe was ever found. Is that the same situation here or do you believe there is a small, tiny segment perhaps, of Arabs and Muslims living in the United States who are plotting against the government who are anti-U.S. government?

ABINADER: Well, we certainly have had some convictions already that weren't necessarily people plotting against the United States but, for example, the convictions in Virginia where people supposedly plotting against places in Pakistan. So, I think there are a hard core just like there are among other groups of radicals or fanatics who think that they can carry out whatever their extremist political programs are in a safe haven called the United States, whether they're directed toward the United States or other countries and this is troubling to us. I think the best way for the Arab-American and American Muslim community to help the U.S. government is to work in partnerships as we've been promoting to find out who the people are who are recruiting, for example, people to go overseas or who are trying to raise money for purposes that aren't really clear to the community.

LISOVICZ: Right and that sounds like a perfect sensible idea and how is that going? ABINADER: We think it is going very well. As I said, we have been working on this for more than two and a half years and if you talk to the FBI director. If you talk to the assistant attorney general for civil rights, if you talk to DHS, you'll find that we have committees with all these organizations trying to continue to upgrade the relationships and the information gathering and helping each other out in terms of making this a safer country. As I said, what the problem is when these things come out of left field.

I mean take for example when this story broke on Friday, people were calling us. We didn't know anything about it. We couldn't respond to it and we're the organization that works with the Census Bureau on data about the Arab-American community. So when I said this story to my 16-year-old daughter she said to me, well, dad, tell them where you are and so she created this for me. It says, can you find me now? And then on the front she put the zip code. I mean, we've got nothing to hide. That's the whole point here. If they want to know where we are and who we are and what we want to do, come and talk to the community and we'll continue this cooperation.

SERWER: All right. Interesting perspective Thanks for that. Jean AbiNader, managing director of the Arab-American Institute. Thanks.

ABINADER: Thank you.

SERWER: The Madison Avenue crowd has something to show you. We'll be back after the break.

Coming up, tell it to the boss. We'll have the stats on Martha Stewart's company now that she's been sentenced to prison.

Also ahead, keeping your head above water. We'll check the state of America's beaches this summer. Find out if you'd swim in the results.

Plus, identity crisis. See if you can guess the face behind the facial hair on our fun site of the week.

(COMMERCIAL BREAK)

LISOVICZ: Now, let's take a look at the week's top stories in our money minute. Oil prices continue to rewrite the record books this week. Tight supplies and surging demand pushed prices up to a series of intra-day highs and some analysts now say oil could hit $50 a barrel by the end of this year.

The Securities and Exchange Commission has slapped a fine on Halliburton. The agency ordered the oil services giant to pay a $7.5 million fine for changing its accounting practices. The SEC says the change allowed the company to report 1998 profits that were 46 percent higher than they would have been without the change.

And more American workers are getting raises this year. A new survey shows 87 percent of employees nationwide will get a pay hike this year, up from 83 percent in 2003. But don't go out and buy that Cadillac just yet. The studies showed companies are planning on average raises of just 3.5 percent.

SERWER: Whether you're making bundt cakes or license plates, you probably heard of our stock of the week, oh that's cruel. Martha Stewart Living Omnimedia shares took a hit this week after the company reported a Los of 39 cents a share in the second quarter. Company officials blame the loss on a drop in ad revenues tied to Martha Stewart's quote, personal legal situation, isn't that nice?

Last month Stewart was sentenced to five months in prison for lying about a stock sale. Shares in Martha Stewart Living Omnimedia have seen plenty of highs and lows over the past year and that makes the stock our, the company stock of the week. Of course, you know, it has been all over the place, there are speculators in this stock that came in after she was sentenced and drove the price of the stock up.

We've been talking about how Martha Stewart needs to put this all behind her. So far she's doing an excellent job of not doing that, dragging things out and I think this is really going to, over the long term, hurt her because you know, it's not so much is she a crook or not. I just think that she has to really get back to making her products because some people are saying, is Martha Stewart over? I mean, is she getting tired out there?

LISOVICZ: One thing you hear over and over again is the market hates uncertainty and what is Martha Stewart's situation? It's uncertain. She's appealing the verdict. There could be a new trial. So what does that do? It just prolongs the uncertainty. In the meantime they continue to cut employees and cut the mail order catalog. As someone who gets a lot of catalogs, that was a pretty good one.

CAFFERTY: She was sentenced to five months in jail. If she'd gone in the day she was sentenced, she would be three and a half months away from getting out now. That's 100 days and the prison part of it would have been over. The next part is sitting in her mansion doing house arrest for five months but has access obviously to all the communications she needs to start running her company again.

So it's a big mistake to maybe just not go ahead and do the five months and get it over with and go on down the road and get back in business. The question we always have to ask though on this program about the stock of the week is, do you buy this stock here given the fact that, at least, she is getting somewhere near the end of the road on all this legal stuff.

SERWER: This is where you get to the whole thing about Martha Stewart is going to come back because she always has. She's really tough. But I really wonder about this now and I've kind of changed my mind about this because I do think she will come back, but I'm wondering if the bloom isn't off the rose. You see this company, our company "Time" magazine and Time Warner company coming out with real simple --

LISOVICZ: ... which is a great success.

SERWER: And has taken a lot of market share away from Martha Stewart. There are a lot of copy cats out there. That's what the media business is all about, copying someone else's idea. She's not the new fresh idea, the new kid on the block any more. The longer she's doing this legal stuff, the less time she has to focus on her business and boy, she better do that so I would avoid the whole thing.

LISOVICZ: I agree with you 100 percent. She is a pioneer in the business. She put out a great magazine and nothing succeeds like success. You had Oprah Winfrey, real simple and others borrowing her layout. You have a food network on now. So there's not just one personality who owns the food and hospitality area and Iron Chef and Emeril (UNINTELLIGIBLE) everyone in between doing it. It's a much more competitive landscape in other words.

CAFFERTY: And the competition isn't going to jail.

SERWER: Yes.

LISOVICZ: Correct.

CAFFERTY: They're all going to be out there competing.

SERWER: And the whole thing about real simple, Martha Stewart the magazine is always so complicated. How to guild your curtains and all this stuff and real simple is sort of like and again, owned by her company, but just do stuff simple. Some of that stuff was just crazy.

LISOVICZ: It found an audience.

CAFFERTY: You make bundt cakes or license plates.

SERWER: Somehow I have a feeling we're going to be talking about this lady and her company again, don't you?

LISOVICZ: Yes.

SERWER: Up ahead on IN THE MONEY, the pump versus the plug. We'll look at the hybrids and other hot models that could wind up as car of the year.

Plus in the swim, some American beaches look great, but others make you want to call housekeeping about Davy Jones' locker. Find out whether the beach scene is looking cleaner this year.

And not by the hair of his chiny chin chin. So how good you are at telling a man by the beard he wears.

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