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Lou Dobbs Tonight
American Hostage Beheaded in Iraq; Kerry Outlines Iraq Plan
Aired September 20, 2004 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: From (ph) an American in Iraq. Radical Islamist terrorists cut off the head of an American hostage, and President Bush and Senator Kerry make Iraq the central issue of their campaigns.
(BEGIN VIDEO CLIP)
SEN. JOHN KERRY (D-MA), PRESIDENTIAL NOMINEE: If we do not change course, there is the prospect of a war with no end in sight.
GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: Today my opponent continued his pattern of twisting in the wind.
(END VIDEO CLIP)
DOBBS: And tonight, from the Pentagon, Jamie McIntyre reports insurgents have seized the initiative in Iraq.
And what is the role of France, Russia and China in Iraq? Astonishing new evidence that radical Islamist terrorists are killing American troops in Iraq with weapons from those countries. My guest tonight is the author of "Treachery," Bill Gertz.
A dramatic retreat and apology by Dan Rather and CBS News. Rather and CBS admit they made a mistake in their story about President Bush's military service. Nearly everybody in Arizona want people to show proof of U.S. Citizenship. But incredibly, many Arizona political and business leaders want illegal aliens to have the same rights as citizens.
(BEGIN VIDEO CLIP)
JULIE PACE, ARIZONA CHAMBER OF COMMERCE: It was easy for the Chamber and the business community to come out and say, This bill is not worth it.
(END VIDEO CLIP)
DOBBS: Tonight, Tamar Jacoby of the Manhattan Institute, Arizona Representative Linda Gray join us to debate this critically important immigration issue.
ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, September 20. Here now for an hour of news, debate and opinion is Lou Dobbs.
DOBBS: Good evening. Radical Islamist terrorists today beheaded an American hostage in Iraq, on a day that President Bush and Senator Kerry both put Iraq at the forefront of their campaigns. Senator Kerry said Iraq has become a haven for terrorists. President Bush said the United States must show resolve and determination.
We begin our coverage tonight with a cold-blooded murder of the American hostage in Iraq. Walter Rodgers reports.
(BEGIN VIDEOTAPE)
WALTER RODGERS, CNN CORRESPONDENT (voice-over): The militant Islamist group calling itself Unification in Jihad released this video showing Eugene Armstrong on his knees, blindfolded, helpless, his hands bound, moments before the execution. Five hooded Muslim militants stand behind him. One reads a statement, promising two other hostages will be killed. The killings will resume again in 24 hours, they say, unless their demands are met: Release all Iraqi women prisoners, or the next American, Jack Hensley (ph), will be beheaded, followed by the British subject, Kenneth Bigly (ph).
The hooded man reads a statement saying he is carrying out God's law. Then he saws off Armstrong's head with a knife as the dying man screams in pain. The three civilians lived in this house in an upscale Baghdad neighborhood until last Thursday, when they were kidnapped early in the morning. Their Iraqi overnight guard disappeared, did not come to work, leaving them for the kidnappers.
(END VIDEOTAPE)
Armstrong's body was recovered by the Iraqi police. Seven other Western hostages remain in the hands of these kidnappers, 10 Turks, as well. If the kidnappers are true to their words, Jack Hensley will be executed by this time tomorrow night, another American slated to be beheaded -- Lou.
DOBBS: Walt Rodgers reporting live from Baghdad.
Senator John Kerry today launched his most aggressive attack on President Bush's Iraq policy since the beginning of his campaign. Senator Kerry proposed a four-part plan to bring American troops home within four years. Senator Kerry blasted President Bush for what he called "colossal failures in Iraq." Bob Franken reports.
(BEGIN VIDEOTAPE)
BOB FRANKEN, CNN CORRESPONDENT (voice-over): The Kerry campaign called this an important speech on Iraq, that importance certainly magnified by the timing, right before President Bush comes to this city for an address to the United Nations.
KERRY: The president should convene a summit meeting of the world's major powers and of Iraq's neighbors in week in New York, where many leaders will attend the U.N. General Assembly.
FRANKEN: An effort, said Kerry, to regain international cooperation. It was part of a four-point plan the campaign presented as newly significant. The other parts: urgently expand the Iraqi security forces training program, a reconstruction program, steps to guarantee the promised elections can be held next year.
KERRY: George Bush has no strategy for Iraq. I do, and I have all along.
FRANKEN: A Bush campaign spokesman responded by saying that Kerry's strategy would make the world a far more dangerous place. But Kerry says the point is the president misled and misleads the American people about what the Democrat calls "catastrophic miscalculations."
KERRY: His miscalculations were not the equivalent of accounting errors. They were colossal failures of judgment. And judgment is what we look for in a president.
FRANKEN (on camera): The judgment that Kerry is trying to influence with his tougher tone is the one that the voters will make in just six weeks. Bob Franken, CNN, New York.
(END VIDEOTAPE)
DOBBS: President Bush immediately launched a counterattack against Senator Kerry. He accused Senator Kerry of "twisting in the wind" on Iraq. Tomorrow, President Bush will deliver a major foreign policy speech to the United Nations here in New York. With us, senior White House correspondent John King with a report -- John.
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: And Lou, the president is hoping that speech to the United Nations once again rallies public support, if not world support, behind his Iraq policy. As for what happened in the campaign today, a familiar strategy from the president. Every time his Iraq policy comes under attack from Senator Kerry, the president responds -- and you see him here campaigning in New Hampshire -- by saying essentially that Senator Kerry is debating himself, that he does not have a consistent policy of his own.
(BEGIN VIDEO CLIP)
BUSH: Today my opponent continued his pattern of twisting in the wind with new contradictions of his old positions on Iraq. He apparently woke up this morning and has now decided, No, we should not have invaded Iraq, after just last month saying he still would have voted for force, even knowing everything we know today. Incredibly, he now believes our national security would be stronger with Saddam Hussein in power, not in prison.
(END VIDEO CLIP)
KING: Now, the president seizing on what he says are contradictions in Senator Kerry's case. Senator Kerry today saying the United States is not safer for going to war in Iraq. Mr. Bush saying he in the past has said the United States is safer. Senator Kerry criticizing the reconstruction effort. President Bush saying he has no right to criticize that effort because he voted against the funding for reconstruction. So the president hoping to make the case that the voters focus on what he says are the inconsistencies with Senator Kerry. But Lou, the policy is under fire, not just from Democrats, four Republican senators over the weekend accusing this White House of mishandling the military planning, some even using the word "incompetence" in Iraq, a political challenge for the president.
DOBBS: Principally among them, Senator Richard Lugar and Senator John McCain. John, does it appear now that the Iraq policy will be the at forefront of these campaigns for some time?
KING: It'll be at the forefront of the campaign. Senator Kerry -- many Democrats think Senator Kerry did dig his own hole within inconsistent statements, by moving left, if you will, faced with the pressure from Howard Dean in the primaries there, hoping now he can try to make this debate not about his positions in the past, but about the president's administration of Iraq now. Democrats are hoping that. Republicans say the flip-flop label will be very hard to shake, but the senator apparently is going to keep on this message.
DOBBS: John King, senior White House correspondent. Thanks for being here.
As John reported, the president is facing growing criticism of his Iraq policy. The beheading of an American hostage today, Eugene Armstrong, is the latest in a series of dramatic insurgent attacks and murders in Iraq. Some security experts say the insurgents have now seized the initiative in this war. Senior Pentagon correspondent Jamie McIntyre reports.
(BEGIN VIDEOTAPE)
JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: In Iraq, terrorists brutally behead another kidnapped American citizen on the same day an influential Sunni cleric was gunned down in Baghdad. It's just the latest evidence that insurgents are escalating their campaign of intimidation in advance of January elections and succeeding in making the U.S. military's goal of putting Iraqis in charge of their own security difficult, if not impossible.
GEN. GEORGE JOULWAN, U.S. ARMY (RET.), FORMER SUPREME NATO COMMANDER: Look at the conditions that they're trying to train this force under. I mean, policemen are getting killed. Those that support Americans are being attacked. There is no secure environment in Iraq to allow all this to take place.
MCINTYRE: The Pentagon admits it overestimated the capabilities of some 200,000 Iraqi security forces months ago and says only half that number, roughly 100,000, are really ready for action. A recent report card issued by the independent Center for Strategic and International Studies finds the U.S. effort in Iraq falling short in five key areas. On security, it concludes Iraqi "forces are still not up to the task." On governance, Iraqis remain "starkly pessimistic" and "corruption is rampant." Lack of economic opportunity is "fueling security problems" and "leading to entrenched frustration," while basic services, such as power and sewage services, are "worse than under Saddam." And social wellbeing is on a "downward trend," with "less access to education and health care" in recent months. It's not so much the failing grades as the trend that worries the experts.
BATHSHEBA CROCKER, CSIS: It is not the feeling that things can't turn around, but rather that we're not yet on the right path and that we need to be looking at some changes in U.S. policy.
(END VIDEOTAPE)
MCINTYRE: Meanwhile, the White House is accusing its critics of looking only at the dark clouds and not at the silver lining of progress that has been made over the last 18 months. Still, the White House conceding today these are very difficult times both for the U.S. troops and the Iraqis they are trying to provide freedom to, and they say they will not let terrorists shake the will of the United States -- Lou.
DOBBS: Thank you very much, Jamie McIntyre, our senior Pentagon correspondent.
Still ahead here, Dan Rather and CBS admit they made a mistake in their reporting of President Bush's service in the National Guard. We'll have the latest for you. And in Arizona, a controversial ballot measure that would stop illegal aliens from enjoying the privileges of U.S. citizenship without responsibility. And incredibly, many Arizona state officials are fighting against this measure. We'll have the story, a special report and a debate on the issue.
The presidential candidates blast each other today on the war in Iraq, while their campaigns finalize the terms for what most assume now will be three face-to-face debates. We'll be talking about that and a great deal more with four of this country's top political journalists.
All of that and a great deal more, and your thoughts, as well, still ahead here tonight.
(COMMERCIAL BREAK)
DOBBS: Dan Rather and CBS News today dramatically reversed course and admitted they made a mistake in their reporting on President Bush's National Guard service. CBS said it cannot prove the authenticity of documents it used in a story that questioned the president's service in the National Guard more than three decades ago. CBS said it was wrong to go on air with a story that it could not substantiate. Jeanne Meserve reports.
(BEGIN VIDEOTAPE)
JEANNE MESERVE, CNN CORRESPONDENT (voice-over): From Dan Rather, the face of CBS News, an admission of mistaken judgment.
DAN RATHER, ANCHOR, "CBS EVENING NEWS": I made a mistake. I didn't dig hard enough, long enough, didn't ask enough of the right questions. And I trusted a source who changed his story. It turns out he'd misled us. MESERVE: In a separate statement, CBS identified Bill Burkett as the source of the documents, saying he admits he deliberately misled CBS about their origins. The White House pounced on the revelation that Burkett was CBS's source.
SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: He is someone who has been discredited in the past for telling things that simply were not true and someone who's had a lot of contacts and involvement with Democrats.
MESERVE: Burkett, a former National Guardsman, made allegations earlier this year that Bush supporters had purged potentially damaging information from President Bush's military records.
BILL BURKETT, FORMER TEXAS NATIONAL GUARDSMAN: And the bottom line to that was, Make sure there wasn't anything there that would embarrass the governor.
MESERVE: The documents which CBS says Burkett provided were allegedly written by Lieutenant Colonel Jerry Killian, who died 20 years ago. They were first revealed on "60 Minutes" September 8.
RATHER: One of the Killian memos is an official order to George W. Bush to report for a physical. Mr. Bush never carried out that order.
MESERVE: Within hours of the broadcast, questions about the documents' authenticity began to surface. For a week, Rather and his network stood by the story, though on September 15, they aired an interview with the former secretary of Jerry Killian, who called the documents fake. And CBS acknowledged for the first time there were legitimate questions.
ANDREW HEYWARD, CBS NEWS PRESIDENT: Enough questions have been raised that we're going to redouble our efforts to answer those questions.
(END VIDEOTAPE)
MESERVE: Today's admissions by CBS are by no means the end of the story. It is still unclear who created the documents and why. One additional thing. Sources tell CNN that Burkett, in conversations with CBS, told network representatives it was their responsibility to make sure the documents were authentic before they aired them. Lou, back to you.
DOBBS: Jeanne, to make certain documents are authentic seems to be rather straightforwardly obvious for anyone in our craft. The bottom line is here that, one, the documents were fake, and two, their principal source lied. Is that correct?
MESERVE: Well, that -- that's making some assumptions that I'm not quite willing to make here. We haven't heard from Mr. Burkett yet, to hear his version of the events and hear how things may have transpired. We aren't certain they're forgeries at this point in time, we're just not certain they're authentic, either. So there's still a lot of unanswered questions here, Lou.
DOBBS: Yes, more than a week after the story was broadcast. Jeanne Meserve, thank you very much.
That brings us to the subject of tonight's poll. Whom do you think the retracted the CBS story damages most, Dan Rather, Senator John Kerry or President Bush? You may vote at cnn.com/lou. We'll have the results later in the broadcast.
Also later here, we'll have more on this dramatic retreat by Dan Rather and CBS News, what it could mean for the election of our presidents, and our panel of top political analysts will be joining us next.
In "Broken Borders" tonight, we begin a series of special reports on the politics of illegal immigration. A proposed ballot measure in Arizona would block illegal aliens from voting and using state services. It's a measure that most Arizona voters overwhelmingly support, but several high-ranking Arizona state officials are fighting, and fighting hard, to defeat the measure. Casey Wian reports from Phoenix, Arizona.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): The Arizona desert has become the gateway to America for millions of illegal aliens. Many residents say they've had their fill of border crossers crowding their streets, schools and jails and draining taxpayer resources. So it's no wonder that Proposition 200, dubbed Protect Arizona Now, has overwhelming support. It seeks to stop illegal aliens from receiving state and local welfare benefits. It would require proof of citizenship to register to vote and a photo ID to cast a ballot in Arizona.
KATHY MCKEE, PROTECT ARIZONA NOW: As citizens, we can't put the military on the border, despite the fact that 80 percent of the people in this country want it. We can't sanction employers because only the federal government -- and we can't deport people. That's also in the federal government. What we can do and we are doing is we are getting our state constitution enforced and our state's statutes enforced.
WIAN: Protect Arizona Now would also make it a criminal offense for state and local government workers to fail to report illegal aliens who apply for welfare benefits. An "Arizona Republic" poll found 66 percent of registered voters support Proposition 200, while only 15 percent oppose it. Republicans favor the plan by 8 to 1, Democrats 3 to 1.
Yet many of the state's business and political leaders, including the governor, both U.S. senators and the Arizona Chamber of Commerce are fighting the initiative. They claim it's poorly written, would invite lawsuits and costs too much.
JULIE PACE, ARIZONA CHAMBER OF COMMERCE: First of all, it's just a bad bill. So it was easy for the Chamber and the business community to come out and say, This bill is not worth it. I think we're seeing a lot of protest vote on this bill, as opposed to the substance of this bill.
WIAN (on camera): Some Arizona business leaders are worried that Proposition 200 could cause a repeat of what happened during the mid- 1990s, when the state lost convention business because of its refusal to recognize a holiday for Martin Luther King, Jr.
(voice-over): Opponents of the bill have accused supporters of racism and trying to make criminals out of government workers. Supporters call those claims scare tactics and say they're confident Proposition 200 will hold up on election day and in court. Casey Wian, CNN, Phoenix, Arizona.
(END VIDEOTAPE)
And coming up next, two very different views on this controversial proposal in Arizona. And Dan Rather and CBS admitting they were wrong about documents accusing President Bush of shirking his National Guard duties. We'll have much more on the fallout, the White House reaction. I'll be talking about the prospects of the presidential candidates. More of the country's leading political journalists join me next.
And Iraqi insurgents attack American troops with weapons supplied by American allies, the focus of a new book by "Washington Times" national security correspondent Bill Gertz. He's our guest tonight. All of that and a great deal more, including your thoughts, still ahead here tonight.
(COMMERCIAL BREAK)
ANNOUNCER: LOU DOBBS TONIGHT continues. Here now, for more news, debate and opinion, Lou Dobbs.
DOBBS: Neither President Bush nor Senator Kerry wants to talk much about a national immigration policy in this country during the election. In Arizona, it's quite a different story. A controversial proposal is on the ballot in Arizona that would block illegal aliens from voting and using state services.
My guests tonight disagree sharply on Arizona's Proposition 200. Tamar Jacoby says the measure would cost Arizona taxpayers millions of dollars. It will do nothing, she says, to stop illegal aliens from crossing the border into the state. She's a senior fellow at the Manhattan Institute, author of "Reinventing the Melting Pot."
Linda Gray says Arizona cannot afford to pay for any more social services for illegal aliens. She's education chair for Arizona's House of Representatives, a candidate for the state Senate, and joins us tonight from Phoenix.
Welcome to you both. Let me turn to you, Representative. How important is this proposition, and how much support do you believe it now has in Arizona?
LINDA GRAY, ARIZONA STATE HOUSE: I believe it has a wide support, with 66 percent in a poll that says that they support Protect Arizona Now. This all came about because of a voter ID bill that I had that passed the House and Senate and that the governor vetoed. People were very upset with the veto, and because of that, I think that is why we have Protect Arizona Now. That has two issues. It brings together the voter ID and recognizing that you have to be a citizen to vote, and also for welfare fraud.
And I think it will cut down on the costs for taxpayers in Arizona because if those coming across the border want to have the welfare benefits, it won't be available for undocumented persons here in Arizona.
DOBBS: Tamar, Arizona has one of the largest populations of illegal aliens. It is now the principal crossing point from Mexico for illegal aliens into our country. What's wrong with what Representative Gray says?
TAMAR JACOBY, MANHATTAN INSTITUTE: The problem is it's not going to stop anyone from coming. It's not going to stop a single immigrant. It's not going to repeal the laws of international laws of supply and demand that draw immigrants. It's not going to do anything on the border. And most immigrants don't use welfare or they're not eligible for welfare, and they don't try to vote. So it's just going to create a lot of bureaucracy at the state level and not stopping anyone from doing anything.
DOBBS: What do you say, Representative?
GRAY: We have 60,000 illegals who are on Access (ph), which is our medical benefit here in Arizona. We have 160,000 children in Arizona that are English-language learners that, because of judicial activism, will cost the taxpayer another $2,000 per student for the English-language learner. These are costs that the taxpayers have to pick up. I believe that (UNINTELLIGIBLE). And we're also looking at voter fraud. Why is it that in Arizona, the last election, I had this card that appeared on my door that says...
DOBBS: If you could hold that up -- I'm sorry, Representative -- just to show us...
GRAY: OK.
DOBBS: Yes?
GRAY: It says, "Know your rights when you go to vote." And the No. 1 right that it says in here that you should know is that you do not have to show ID when you go to vote. Now, to me, that's an open invitation, Go ahead and get away with it with it...
DOBBS: Who produced...
GRAY: ... because nobody's going to ask.
DOBBS: I'm sorry. Just -- who produced the flyer that you're holding?
GRAY: On the back side, you have the Democratic Party slate. And Janet Napolitano was running for governor then, and she's the one who vetoed the voter ID bill.
JACOBY: Well, of course, you have to prove ID to register to vote. And the illegal immigrants who come through Arizona...
(CROSSTALK)
DOBBS: Tamar, Tamar, Tamar! She just showed you that it's not, apparently, required in Arizona.
JACOBY: It is not required to show any ID when you go in to vote.
GRAY: Well, it just can't be true. I mean, it can't be true.
DOBBS: OK. OK, let's assume that Representative Gray, who inhabits the state, is an elected official in the state...
JACOBY: You have to...
DOBBS: ... knows something about it.
JACOBY: You have to prove who you are...
DOBBS: So let me -- so let's get to the point...
JACOBY: ... to register to vote.
DOBBS: OK.
JACOBY: But the point is...
DOBBS: May I? May I?
JACOBY: ... illegal immigrants...
DOBBS: May I?
JACOBY: Illegal immigrants...
DOBBS: Tamar, Tamar...
JACOBY: ... trooping through the state don't stop to vote.
DOBBS: May I? May I? If I may? Why would it not stop illegal aliens, at least slow it down, if you...
(CROSSTALK)
DOBBS: Please, I haven't finished the question, Tamar -- If they are denied state services and have to provide identification to vote and to take on state services?
JACOBY: Because people don't walk through the desert in the Arizona at the risk of death to vote. They don't walk through the desert at the risk of death to get welfare benefits. They come to work, and this is not going to stop anyone from coming to work. DOBBS: Let me...
JACOBY: It's not going to take away the motive...
DOBBS: Linda Gray, you get the last word.
JACOBY: ... that brings them here.
GRAY: Well, I would certainly disagree with that. When you have your high school students, who are getting pregnant to be able to get assistance here in Arizona, that is a benefit and a cost to the taxpayers. They do come, and they do get benefits here in Arizona.
DOBBS: Tamar Jacoby, I'm going to give you the last word, if you'll be succinct. How would you end the practice of illegal aliens crossing our borders, then?
JACOBY: Make more of the immigration flow legal, a guest worker program...
DOBBS: I see.
JACOBY: ... as the representatives John McCain, Jeff Flake (ph) and Jim Colby (ph) from Arizona propose.
DOBBS: OK. Tamar Jacoby, Linda Gray, representative Gray, thank you very much. Tamar, thank you very much.
GRAY: Thank you.
DOBBS: Turning now to some of your thoughts on the issue of "Exporting America" and the middle-class squeeze, Jennifer D'Sa of San Jose, California -- "I started working at age 16, several decades ago, worked my way through college and saved to become a home owner. I've worked to raise two sons, now in college, which I'm paying for. I love this country so much, but I have never seen a time when our people were so pained with the state of the job market. I am still looking, after many, many months."
And John Mahlow of Okemos, Michigan -- "I am a high school student that values your war on outsourcing as more than heroic. These professors who claim that this is just a phase in the global economy have never lived with one parent unemployed and the other barely hanging in, due to the outsourcing of manufacturing jobs."
We love hearing from you. Send us your thoughts at loudobbs@cnn.com, and please send us your name and address. Each of you whose e-mail is read each evening on this broadcast receives a few copy of my new book, "Exporting America."
Senator John Kerry today launched his most aggressive attack yet on the president's Iraq policy. Senator Kerry accused the Bush administration of, quote, "colossal failures of judgment, arrogance and outright incompetence," end quote. For his part, President Bush says Senator Kerry has a pattern of "twisting in the wind." Joining me now to assess these attacks and what they represent in the direction of the campaigns, four of the country's top political journalists. From Washington, Ron Brownstein, national political correspondent, "Los Angeles Times," Jay Carney, "Time" magazine's deputy Washington bureau chief, Tom DeFrank, Washington bureau chief for "The New York Daily News," and here in New York, John King, senior White House correspondent.
Thank you all for being here. Ron, this -- does this mark a decided change in, first, the priority of Iraq in this campaign for both candidates, and a change in tone?
RON BROWNSTEIN, "THE LOS ANGELES TIMES": Yes, and yes. Look, John Kerry over the spring and summer, as we've talked about many times on this show, Lou, had a strategy in which he felt that he more had to reassure people that he could be a credible commander-in-chief, than persuade them to fire President Bush.
Obviously that wasn't working. He now trails in all the polls and post-Republican Convention, he's moved toward a much more aggressive critique of President Bush across. We saw last week on Iraq the first stage in which Senator Kerry said that the policy was failing. This week he moved beyond that and argued I think explicitly for the first time, challenged President Bush's argument that the war in Iraq is central to advancing the war on terrorism.
Senator Kerry said, no. That, in fact, it has set back our goals on the war on terror. Moving himself closer to arguments by people like Wesley Clark and Richard Clarke earlier in the year.
DOBBS: Jay, the idea that Senator Kerry is in fact, depending on which poll one looks at, but on balance, running significantly behind the president at this point in time, can he make up this ground with this new strategy in your judgment?
JAY CARNEY, "TIME": Well, I think the message, Lou, is effective. It's the most articulate and clear message he's had on Iraq. And the problem of course is that the messenger is imperfect and he's haunted by his past statements and equivocations on what he would do if he were president with Iraq and what he has done in terms of authorizing a president to go to war and then voting against the 87 billions to fund it.
Now can it work? I think it's the only chance he has, because Iraq is not going away, and it is one area where a substantial section of the public has a lot of reservations about where the president is leading the country.
And the more we see the chaotic situation in Iraq appear on our television screens and in our newspapers, the more a message like this could resonate. So heading into the debates, I think, it was probably the smartest thing he could do. And as a John Kerry speech goes, this was one of his better ones.
DOBBS: Tom DeFrank, the idea that we would report again the beheading of an American hostage by radical Islamist terrorists in Iraq, the muted reaction, frankly, from Washington from all quarters and the inability of U.S. forces in Iraq to either avenge such cold- blooded murder, or to preserve stability and security in the lives of Americans and Iraqis, at what point does the American electorate focus on those issues?
TOM DEFRANK, "THE NEW YORK DAILY NEWS": Well, I think the electorate is focusing on these issues now, Lou. It's just I think there has been a reverse effect here. I believe that these horrible events have helped the president. His numbers have gone up. There's a guy I know very close to the president, very close to the campaign, who has been fretting for a year that Iraq was the greatest potential danger. This was a guy who once said that Kerry can't beat us, but Iraq can. This individual now believes as recently as last week that Iraq has become a political plus for the president.
I mean, I agree with my colleagues that as Kerry's speeches go, this one is pretty good and he's probably doing about the best that he can. But I don't think it's resonating yet. And I believe some cataclysmic event, God forbid, in Iraq, like a Beirut bombing, something like the 1983 Beirut bombing, I think Bush still has the upper hand politically in Iraq despite all the mayhem, despite all the chaos that we see every night.
DOBBS: John, would you agree with that perspective?
KING: I agree with Tom's assessment as how the campaigns look, but can Senator Kerry make this about the incumbent I think is the critical issue. The Bush campaign about his credentials to be commander-in-chief. And many Democrats are scratching their heads.
They see a beheading today. They see the insurgency. They see a political transition that is in doubt at best. And they say, why are the American people not saying, this is incumbent's fault, because this was the incumbent's war?
But the Bush campaign has been very clever strategically in saying that before you even think about ousting President Bush, Senator Kerry is not qualified to be commander-in-chief.
And they have also succeeded in making Iraq part of the broader war on terror to most Americans. If the American people separate the two, then the president could be in trouble.
BROWNSTEIN: Lou, could I jump in there?
DOBBS: Sure.
BROWNSTEIN: I think what John is saying is very important because a number of factors have conspired to produce this sort of paradoxical result that the president's standing on Iraq improving even as conditions have deteriorated.
The handover of power, put an Iraqi face on the crisis back last June. There has been less media attention over the summer. And also, as John suggested, the president, especially at his convention, had enormous success at tying Iraq to the long-term war on terror by arguing the only way we're going to reduce that threat is by democratizing the Middle East. And this was the beachhead toward that.
Now I think the one question we all have to ask ourselves as we're watching these poll numbers, though, are we seeing the lag from all of that over the summer, and is there potentially another turn here before Election Day? Because in the past, Lou, public opinion on Iraq has been very sensitive to events. And the events in Iraq have been both discouraging and getting a lot more coverage in the last few weeks.
So I'm not sure we've seen the last turn in this debate. I am sure that it is critical to the overall outcome, because I think as Iraq goes, to a large extent, the president's fate heads in that direction as well.
DOBBS: Jay Carney, the issues that are not being discussed with great vigor in this campaign include, of course, immigration policy. Your publication, in point of fact, with a cover story reporting 3 million illegal aliens entering this country.
The issues of an aging infrastructure as Congress is -- at least the leadership in Congress is trying to deal with an almost $300 billion highway that is bogged down with pork.
Are the real issues moving to the forefront, admittedly today, Iraq taking front and center, what is your judgment?
CARNEY: Well, I think there is only so much room for so many issues to be discussed, and Iraq is so big and so defining for this president and so important to the country because it's our biggest war since Vietnam and we've lost more than a thousand soldiers.
So John Kerry's efforts to shift the debate to other subjects away from Iraq, when he didn't really want to really talk about Iraq, failed. And I think to the extent that Iraq dominates the news, it's going to dominate the campaign.
I think issues like immigration, neither candidate wants to touch because neither candidate wants to alienate the Hispanic vote, which could be very important in a lot of key states.
DOBBS: The idea that Dan Rather had to tonight retract a story, apologized to his viewers and to everyone else for making that mistake. Tom, how important is it? Who is -- and this is what our polling our viewers tonight, but in your judgment, who is the big loser in this, besides obviously Dan Rather and CBS News?
DEFRANK: Well, it's -- we're all diminished in this business, Lou. It's a dark day for the network of Cronkite and Murrow and Collingwood, but it really hurts us all. It hurts the reputation of the press and it is nothing -- we all ought to feel miserable about it because it's a very bad development for our business.
DOBBS: As John King and I have discussed here, I have a distaste for dealing with issues 35 years old. And there is a certain arrogance in it that we all could come up with something that has not been turned over in the course of that time.
John, your final thoughts on this state of this industry and as a result of the CBS?
KING: Well, it's sad for the industry, as Tom said, I think it reflects poorly on all of us and that is a shame. I think ironically this was a strategy, apparently leaking these documents designed to destroy or hurt President Bush, and most now believe that he is at least benefited, perhaps benefited from this, and at least drawn neutral.
The more time we talking about this, what happened 35 years ago and whether these documents are real or fraud, is less time talking about whether it's immigration, the economy, or what some would call the chaos in Iraq.
DOBBS: I won't leave any of you with the opportunity to react or rebut about what I am about to say, but perhaps we should in our fear of events like this, perhaps constraint ourselves to the issues and not distant history. None of you want to react to that bald statement by me, I am sure. Ron Brownstein, Jay Carney, Tom DeFrank, John King, thank you all for being here.
A reminder now to vote in the poll. Whom do you think the retracted CBS story damages most? Dan Rather? Senator Kerry? President Bush? Please cast your vote at cnn.com/lou.
We'll have the results for you a little later in the broadcast.
Coming up next here, arming the enemy. A new book reports our allies of secretly sold weapons to al Qaeda and radical Islamist terrorists in Iraq. Bill Gertz, author of "Treachery" joins me.
And "Exporting America," the state of Indiana has made a bold decision on a multimillion dollar contract and is trying to turn outsourcing around.
Indiana's governor, Joseph Kernan, is my guest. Please stay with us.
(COMMERCIAL BREAK)
DOBBS: My next guest says allies of this country including Russia and France, have in fact armed radical Islamist terrorists in Iraq and he says our allies have turned a blind eye to arm sales to rogue regimes and state sponsors of terrorism in Iraq, Iran, North Korea, and Syria. Bill Gertz is the author of the new book entitled "Treachery: How America's Friends and Foes Are Secretly Arming Our Enemies." He's also the defense and national security reporter for the "Washington Times" and joins us tonight from Washington, D.C.
Bill, good to have you here.
These are explosive charges that in particular, Russia and France and China have provided such substantial armaments to those who are fighting us, insurgents and radical Islamists terrorists in Iraq. Were you surprised by what you unearthed?
BILL GERTZ, AUTHOR, "TREACHERY": Yes, this is kind of the inside story of what we had seen bits and pieces of in the past. But the Pentagon did an assessment after the major combat operations and found that huge amounts of foreign weapons had come in to Iraq oftentimes after the 1991 arms embargo. And they found that the Russians, Chinese and French were the main suppliers. The bottom line, weapons were used against our forces in combat, and are continuing to be used against troops and Iraqis by the insurgents today.
DOBBS: In tonnage terms you put in rather stark relief the scale of the armaments that are available to those who would harm the United States and the Iraqi people approaching a million tons in armament. That's extraordinary.
GERTZ: Yes, the country is literally awash in weapons. They keep finding new ammunition in weapons, depots all over the country. In the beginning, they didn't even have enough soldiers to protect them. What they did is they took bulldozers and bulldozed the front entrances. Still, some of the insurgents are looting those facilities and using the armaments.
DOBBS: Based on what you report in the book, how does one even view France as an ally?
GERTZ: Well, I think the case of France, you have to look back at their history. Jacques Chirac basically created Saddam Hussein. He was in hock to the French for 4 billion in arms and I think that negatively influenced France in helping Saddam stay in power. We learned from Tariq Aziz after the war that Saddam didn't believe the U.S. would invade because he was told by French and Russian government officials that they were going to block any action in the United Nations.
DOBBS: And some rather conflicted signals as well from representatives of the United States government in all fairness, Bill. The idea also that the United States supported Saddam Hussein for a great number of years as well.
GERTZ: Well, I looked into that. I have a chapter in the book on the United States. And it's basically a myth that we armed them. What the United States did do was supply agricultural credits to the tune of about $500 million which freed up other money for Saddam to buy all of these weapons. But so far as weapons go, there weren't -- practically no U.S. weapons. Some that were taken from Iran during the Iran-Iraq war.
DOBBS: The support that was provided for Iraq, nonetheless, in the Iraqi-Iranian war created that opportunity for mixed signals. I think you would acknowledge that, and in fact have. But the issue now of Iran seeking to weaponize its nuclear (UNINTELLIGIBLE) material the role of our allies in blocking that effort, the president will be in this city tomorrow to address that among other things with the United Nations. Your thoughts?
GERTZ: This is a huge, huge problem. I think it's on par with the nuclear crisis in North Korea. The Iranians have missiles that can range throughout the Middle East and southern Europe and they're working to get a nuclear warhead. That's kind of the Holy Grail in proliferation terms. Earlier this year in Libya, they uncovered Chinese language documents that were given to Pakistan showing how to make a small nuclear warhead. Officials are now trying to figure out if those same documents that went through this nuclear supplier network were passed on to Iran and North Korea.
DOBBS: Bill Gertz, thanks for being with us. Bill Gertz is the author of the new book, "Treachery: How America's Friends and Foes Are Secretly Arming Our Enemies." Bill, good to have you with us.
GERTZ: Thanks very much.
DOBBS: Still ahead here, one governor creates opportunity in his state saying no to outsourcing Indiana jobs. Indiana's Governor Joseph Kernan is my guest next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: In "Exporting America" tonight the state of Indiana taking a bold stand, trying to protect its local business to build jobs, to create jobs, rather than kill them. Indiana's Governor Joseph Kernan has canceled a contract with an Indiana outsourcing firm and he created instead what he calls Opportunity Indiana. It's a program aimed at giving Indiana companies and employees more state government business. Joining me now from Indianapolis is Governor Joseph Kernan. Good to have you here.
Governor, you canceled a contract with an Indiana outsourcing firm, canceling about $15 million in state business which as I recall was for a state unemployment agency as incredibly as that was. Have you ended the state's outsourcing efforts altogether?
GOV. JOSEPH KERNAN (D), INDIANA: No. What we have done is through Opportunity Indiana created the chance for Indiana companies to be successful in getting bids to do work with the state following the cancellation of that contract which I did on the basis that the way the bids were actually designed had excluded any Indiana firms from being successful. We went out, we now have about 4,000 companies that have signed up to do work with the state. On this particular contract, we've had two pre-bid conferences with Indiana companies to talk about how we might structure the bid packages in order to maximize opportunity. And what we've done is taken that one contract for $15 million and broken it into five separate pieces, the first of which will be going out for bid for in October.
DOBBS: That's great. Governor, why don't you bring the hammer down, and you and the state legislature say, that's it. That you're sick and tired of outsourcing. It's destructive of American jobs. You want to hire Indiana citizens, Americans for those jobs, with Indiana taxpayer money?
KERNAN: Well, I agree with all of that, Lou. And that's why we've taken the steps that we have. We have as well put in some preferences for Indiana businesses in order to help them be successful. What we don't want to do is to limit ourselves -- to build walls around Indiana, permit us to be able to do work with other states. And it is the goal, to do everything that we possibly can here in Indiana, and that's the purpose of the steps that we've taken that have been very aggressive and so far have been very successful.
DOBBS: All right. Your state, your economy, how would you characterize it right now?
KERNAN: Better than our neighbors. A little bit better than the country. But we are still not seeing the kind of growth that we had anticipated we would coming out of the recession.
DOBBS: The idea that you've got to Buy Indiana campaign going. I don't think anyone in any state is offended by that. There is a Buy California, Buy New York program as well. As you try to be as, I guess as diplomatic as possible, as sensitive as possible, to both economic and political realities, is the fact of the matter that more Indiana companies, American companies are succeeding in doing business with your state government than before?
KERNAN: No. In fact, as a part of Opportunity Indiana, Buy Indiana, we have just awarded a contract to a company from Kokomo, Indiana, for our office supplies for the next two years that was being provided by a company that was based in Idaho. Our goal is to make sure that every Indiana company that wants to do business with us, that has a good or a service that they can sell has the maximum chance to be successful in doing business with the state. As well as to encourage Indiana companies to buy from each other.
DOBBS: Excellent. Governor Joe Kernan, thanks for being here.
KERNAN: Thanks, Lou. Good to be with you.
Tonight's thought is on America.
"Americanism means the virtues of courage, honor, justice, truth, sincerity and hardihood -- the virtues that made America. The things that will destroy America are prosperity at any price, peace at any price, safety first instead of duty first, the love of soft living and the get-rich-quick theory of life." Those the words of President Theodore Roosevelt. It's amazing how often we quote that fellow on this broadcast.
Still ahead, the first criminal trial is under way in the landmark case of corporate greed, and I'm sure we could use a Teddy Roosevelt quote with that one as well. He said a lot of things right. We'll have a full report for you next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The Dow, the Nasdaq, the S&P all down on the day. The Dow off 80 points. And as the first Enron trial gets under way, Wall Street's top regulator is blasting corporate ethics, or lack of them, and pay. Joining me now, Christine Romans -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, senior executives need better ethics. SEC chief Bill Donaldson told "The Financial Times" today, "good values are set at top and all too often that concept doesn't exist at American companies."
Case in point, excessive CEO pay. Donaldson says corporate America still has a long way to go. Those comments come on the first day of the first Enron criminal trial. It's a case against two Enron executives and four former Merrill Lynch bankers. It focuses on the sham transaction to sell power generating barges in Nigeria, but Wall Street is holding its breath for what this trial tells us about just how far Wall Street bankers will go and how far they went to help Enron burnish its books.
At the same time, Citigroup shares fell today on concerns that if Citigroup has to be ethical, its growth will slow.
DOBBS: Wait, wait, wait. Say that again?
ROMANS: If Citigroup has to be ethical, its growth will slow. Believe it or not. Japanese authorities ordered Citi to shut down its private bank in Japan on money laundering concerns, and a Merrill Lynch analyst said now is not the time to buy those shares, because "balancing growth and ethics will be a long, hard process for Citigroup."
DOBBS: That is an extraordinary statement. And again, SEC chief, Bill Donaldson, he's getting it right. And doing his job as well as anyone could ask. Christine Romans, also doing your job as well as anyone could ask. Thank you.
ROMANS: Thanks.
DOBBS: Still ahead, the results of our poll and a preview of what is ahead tomorrow. Please stay with us.
(COMMERCIAL BREAK)
DOBBS: The results of our poll tonight: 62 percent of you say the retracted CBS story damages Dan Rather and CBS the most.
Thanks for being with us. Please join us here tomorrow. Democratic vice presidential candidate, Senator John Edwards, joins me, as does independent presidential candidate Ralph Nader. They'll both be here. We hope you will too.
For all of us here, good night from New York. "ANDERSON COOPER 360" 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
Aired September 20, 2004 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: From (ph) an American in Iraq. Radical Islamist terrorists cut off the head of an American hostage, and President Bush and Senator Kerry make Iraq the central issue of their campaigns.
(BEGIN VIDEO CLIP)
SEN. JOHN KERRY (D-MA), PRESIDENTIAL NOMINEE: If we do not change course, there is the prospect of a war with no end in sight.
GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES: Today my opponent continued his pattern of twisting in the wind.
(END VIDEO CLIP)
DOBBS: And tonight, from the Pentagon, Jamie McIntyre reports insurgents have seized the initiative in Iraq.
And what is the role of France, Russia and China in Iraq? Astonishing new evidence that radical Islamist terrorists are killing American troops in Iraq with weapons from those countries. My guest tonight is the author of "Treachery," Bill Gertz.
A dramatic retreat and apology by Dan Rather and CBS News. Rather and CBS admit they made a mistake in their story about President Bush's military service. Nearly everybody in Arizona want people to show proof of U.S. Citizenship. But incredibly, many Arizona political and business leaders want illegal aliens to have the same rights as citizens.
(BEGIN VIDEO CLIP)
JULIE PACE, ARIZONA CHAMBER OF COMMERCE: It was easy for the Chamber and the business community to come out and say, This bill is not worth it.
(END VIDEO CLIP)
DOBBS: Tonight, Tamar Jacoby of the Manhattan Institute, Arizona Representative Linda Gray join us to debate this critically important immigration issue.
ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, September 20. Here now for an hour of news, debate and opinion is Lou Dobbs.
DOBBS: Good evening. Radical Islamist terrorists today beheaded an American hostage in Iraq, on a day that President Bush and Senator Kerry both put Iraq at the forefront of their campaigns. Senator Kerry said Iraq has become a haven for terrorists. President Bush said the United States must show resolve and determination.
We begin our coverage tonight with a cold-blooded murder of the American hostage in Iraq. Walter Rodgers reports.
(BEGIN VIDEOTAPE)
WALTER RODGERS, CNN CORRESPONDENT (voice-over): The militant Islamist group calling itself Unification in Jihad released this video showing Eugene Armstrong on his knees, blindfolded, helpless, his hands bound, moments before the execution. Five hooded Muslim militants stand behind him. One reads a statement, promising two other hostages will be killed. The killings will resume again in 24 hours, they say, unless their demands are met: Release all Iraqi women prisoners, or the next American, Jack Hensley (ph), will be beheaded, followed by the British subject, Kenneth Bigly (ph).
The hooded man reads a statement saying he is carrying out God's law. Then he saws off Armstrong's head with a knife as the dying man screams in pain. The three civilians lived in this house in an upscale Baghdad neighborhood until last Thursday, when they were kidnapped early in the morning. Their Iraqi overnight guard disappeared, did not come to work, leaving them for the kidnappers.
(END VIDEOTAPE)
Armstrong's body was recovered by the Iraqi police. Seven other Western hostages remain in the hands of these kidnappers, 10 Turks, as well. If the kidnappers are true to their words, Jack Hensley will be executed by this time tomorrow night, another American slated to be beheaded -- Lou.
DOBBS: Walt Rodgers reporting live from Baghdad.
Senator John Kerry today launched his most aggressive attack on President Bush's Iraq policy since the beginning of his campaign. Senator Kerry proposed a four-part plan to bring American troops home within four years. Senator Kerry blasted President Bush for what he called "colossal failures in Iraq." Bob Franken reports.
(BEGIN VIDEOTAPE)
BOB FRANKEN, CNN CORRESPONDENT (voice-over): The Kerry campaign called this an important speech on Iraq, that importance certainly magnified by the timing, right before President Bush comes to this city for an address to the United Nations.
KERRY: The president should convene a summit meeting of the world's major powers and of Iraq's neighbors in week in New York, where many leaders will attend the U.N. General Assembly.
FRANKEN: An effort, said Kerry, to regain international cooperation. It was part of a four-point plan the campaign presented as newly significant. The other parts: urgently expand the Iraqi security forces training program, a reconstruction program, steps to guarantee the promised elections can be held next year.
KERRY: George Bush has no strategy for Iraq. I do, and I have all along.
FRANKEN: A Bush campaign spokesman responded by saying that Kerry's strategy would make the world a far more dangerous place. But Kerry says the point is the president misled and misleads the American people about what the Democrat calls "catastrophic miscalculations."
KERRY: His miscalculations were not the equivalent of accounting errors. They were colossal failures of judgment. And judgment is what we look for in a president.
FRANKEN (on camera): The judgment that Kerry is trying to influence with his tougher tone is the one that the voters will make in just six weeks. Bob Franken, CNN, New York.
(END VIDEOTAPE)
DOBBS: President Bush immediately launched a counterattack against Senator Kerry. He accused Senator Kerry of "twisting in the wind" on Iraq. Tomorrow, President Bush will deliver a major foreign policy speech to the United Nations here in New York. With us, senior White House correspondent John King with a report -- John.
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: And Lou, the president is hoping that speech to the United Nations once again rallies public support, if not world support, behind his Iraq policy. As for what happened in the campaign today, a familiar strategy from the president. Every time his Iraq policy comes under attack from Senator Kerry, the president responds -- and you see him here campaigning in New Hampshire -- by saying essentially that Senator Kerry is debating himself, that he does not have a consistent policy of his own.
(BEGIN VIDEO CLIP)
BUSH: Today my opponent continued his pattern of twisting in the wind with new contradictions of his old positions on Iraq. He apparently woke up this morning and has now decided, No, we should not have invaded Iraq, after just last month saying he still would have voted for force, even knowing everything we know today. Incredibly, he now believes our national security would be stronger with Saddam Hussein in power, not in prison.
(END VIDEO CLIP)
KING: Now, the president seizing on what he says are contradictions in Senator Kerry's case. Senator Kerry today saying the United States is not safer for going to war in Iraq. Mr. Bush saying he in the past has said the United States is safer. Senator Kerry criticizing the reconstruction effort. President Bush saying he has no right to criticize that effort because he voted against the funding for reconstruction. So the president hoping to make the case that the voters focus on what he says are the inconsistencies with Senator Kerry. But Lou, the policy is under fire, not just from Democrats, four Republican senators over the weekend accusing this White House of mishandling the military planning, some even using the word "incompetence" in Iraq, a political challenge for the president.
DOBBS: Principally among them, Senator Richard Lugar and Senator John McCain. John, does it appear now that the Iraq policy will be the at forefront of these campaigns for some time?
KING: It'll be at the forefront of the campaign. Senator Kerry -- many Democrats think Senator Kerry did dig his own hole within inconsistent statements, by moving left, if you will, faced with the pressure from Howard Dean in the primaries there, hoping now he can try to make this debate not about his positions in the past, but about the president's administration of Iraq now. Democrats are hoping that. Republicans say the flip-flop label will be very hard to shake, but the senator apparently is going to keep on this message.
DOBBS: John King, senior White House correspondent. Thanks for being here.
As John reported, the president is facing growing criticism of his Iraq policy. The beheading of an American hostage today, Eugene Armstrong, is the latest in a series of dramatic insurgent attacks and murders in Iraq. Some security experts say the insurgents have now seized the initiative in this war. Senior Pentagon correspondent Jamie McIntyre reports.
(BEGIN VIDEOTAPE)
JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: In Iraq, terrorists brutally behead another kidnapped American citizen on the same day an influential Sunni cleric was gunned down in Baghdad. It's just the latest evidence that insurgents are escalating their campaign of intimidation in advance of January elections and succeeding in making the U.S. military's goal of putting Iraqis in charge of their own security difficult, if not impossible.
GEN. GEORGE JOULWAN, U.S. ARMY (RET.), FORMER SUPREME NATO COMMANDER: Look at the conditions that they're trying to train this force under. I mean, policemen are getting killed. Those that support Americans are being attacked. There is no secure environment in Iraq to allow all this to take place.
MCINTYRE: The Pentagon admits it overestimated the capabilities of some 200,000 Iraqi security forces months ago and says only half that number, roughly 100,000, are really ready for action. A recent report card issued by the independent Center for Strategic and International Studies finds the U.S. effort in Iraq falling short in five key areas. On security, it concludes Iraqi "forces are still not up to the task." On governance, Iraqis remain "starkly pessimistic" and "corruption is rampant." Lack of economic opportunity is "fueling security problems" and "leading to entrenched frustration," while basic services, such as power and sewage services, are "worse than under Saddam." And social wellbeing is on a "downward trend," with "less access to education and health care" in recent months. It's not so much the failing grades as the trend that worries the experts.
BATHSHEBA CROCKER, CSIS: It is not the feeling that things can't turn around, but rather that we're not yet on the right path and that we need to be looking at some changes in U.S. policy.
(END VIDEOTAPE)
MCINTYRE: Meanwhile, the White House is accusing its critics of looking only at the dark clouds and not at the silver lining of progress that has been made over the last 18 months. Still, the White House conceding today these are very difficult times both for the U.S. troops and the Iraqis they are trying to provide freedom to, and they say they will not let terrorists shake the will of the United States -- Lou.
DOBBS: Thank you very much, Jamie McIntyre, our senior Pentagon correspondent.
Still ahead here, Dan Rather and CBS admit they made a mistake in their reporting of President Bush's service in the National Guard. We'll have the latest for you. And in Arizona, a controversial ballot measure that would stop illegal aliens from enjoying the privileges of U.S. citizenship without responsibility. And incredibly, many Arizona state officials are fighting against this measure. We'll have the story, a special report and a debate on the issue.
The presidential candidates blast each other today on the war in Iraq, while their campaigns finalize the terms for what most assume now will be three face-to-face debates. We'll be talking about that and a great deal more with four of this country's top political journalists.
All of that and a great deal more, and your thoughts, as well, still ahead here tonight.
(COMMERCIAL BREAK)
DOBBS: Dan Rather and CBS News today dramatically reversed course and admitted they made a mistake in their reporting on President Bush's National Guard service. CBS said it cannot prove the authenticity of documents it used in a story that questioned the president's service in the National Guard more than three decades ago. CBS said it was wrong to go on air with a story that it could not substantiate. Jeanne Meserve reports.
(BEGIN VIDEOTAPE)
JEANNE MESERVE, CNN CORRESPONDENT (voice-over): From Dan Rather, the face of CBS News, an admission of mistaken judgment.
DAN RATHER, ANCHOR, "CBS EVENING NEWS": I made a mistake. I didn't dig hard enough, long enough, didn't ask enough of the right questions. And I trusted a source who changed his story. It turns out he'd misled us. MESERVE: In a separate statement, CBS identified Bill Burkett as the source of the documents, saying he admits he deliberately misled CBS about their origins. The White House pounced on the revelation that Burkett was CBS's source.
SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: He is someone who has been discredited in the past for telling things that simply were not true and someone who's had a lot of contacts and involvement with Democrats.
MESERVE: Burkett, a former National Guardsman, made allegations earlier this year that Bush supporters had purged potentially damaging information from President Bush's military records.
BILL BURKETT, FORMER TEXAS NATIONAL GUARDSMAN: And the bottom line to that was, Make sure there wasn't anything there that would embarrass the governor.
MESERVE: The documents which CBS says Burkett provided were allegedly written by Lieutenant Colonel Jerry Killian, who died 20 years ago. They were first revealed on "60 Minutes" September 8.
RATHER: One of the Killian memos is an official order to George W. Bush to report for a physical. Mr. Bush never carried out that order.
MESERVE: Within hours of the broadcast, questions about the documents' authenticity began to surface. For a week, Rather and his network stood by the story, though on September 15, they aired an interview with the former secretary of Jerry Killian, who called the documents fake. And CBS acknowledged for the first time there were legitimate questions.
ANDREW HEYWARD, CBS NEWS PRESIDENT: Enough questions have been raised that we're going to redouble our efforts to answer those questions.
(END VIDEOTAPE)
MESERVE: Today's admissions by CBS are by no means the end of the story. It is still unclear who created the documents and why. One additional thing. Sources tell CNN that Burkett, in conversations with CBS, told network representatives it was their responsibility to make sure the documents were authentic before they aired them. Lou, back to you.
DOBBS: Jeanne, to make certain documents are authentic seems to be rather straightforwardly obvious for anyone in our craft. The bottom line is here that, one, the documents were fake, and two, their principal source lied. Is that correct?
MESERVE: Well, that -- that's making some assumptions that I'm not quite willing to make here. We haven't heard from Mr. Burkett yet, to hear his version of the events and hear how things may have transpired. We aren't certain they're forgeries at this point in time, we're just not certain they're authentic, either. So there's still a lot of unanswered questions here, Lou.
DOBBS: Yes, more than a week after the story was broadcast. Jeanne Meserve, thank you very much.
That brings us to the subject of tonight's poll. Whom do you think the retracted the CBS story damages most, Dan Rather, Senator John Kerry or President Bush? You may vote at cnn.com/lou. We'll have the results later in the broadcast.
Also later here, we'll have more on this dramatic retreat by Dan Rather and CBS News, what it could mean for the election of our presidents, and our panel of top political analysts will be joining us next.
In "Broken Borders" tonight, we begin a series of special reports on the politics of illegal immigration. A proposed ballot measure in Arizona would block illegal aliens from voting and using state services. It's a measure that most Arizona voters overwhelmingly support, but several high-ranking Arizona state officials are fighting, and fighting hard, to defeat the measure. Casey Wian reports from Phoenix, Arizona.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): The Arizona desert has become the gateway to America for millions of illegal aliens. Many residents say they've had their fill of border crossers crowding their streets, schools and jails and draining taxpayer resources. So it's no wonder that Proposition 200, dubbed Protect Arizona Now, has overwhelming support. It seeks to stop illegal aliens from receiving state and local welfare benefits. It would require proof of citizenship to register to vote and a photo ID to cast a ballot in Arizona.
KATHY MCKEE, PROTECT ARIZONA NOW: As citizens, we can't put the military on the border, despite the fact that 80 percent of the people in this country want it. We can't sanction employers because only the federal government -- and we can't deport people. That's also in the federal government. What we can do and we are doing is we are getting our state constitution enforced and our state's statutes enforced.
WIAN: Protect Arizona Now would also make it a criminal offense for state and local government workers to fail to report illegal aliens who apply for welfare benefits. An "Arizona Republic" poll found 66 percent of registered voters support Proposition 200, while only 15 percent oppose it. Republicans favor the plan by 8 to 1, Democrats 3 to 1.
Yet many of the state's business and political leaders, including the governor, both U.S. senators and the Arizona Chamber of Commerce are fighting the initiative. They claim it's poorly written, would invite lawsuits and costs too much.
JULIE PACE, ARIZONA CHAMBER OF COMMERCE: First of all, it's just a bad bill. So it was easy for the Chamber and the business community to come out and say, This bill is not worth it. I think we're seeing a lot of protest vote on this bill, as opposed to the substance of this bill.
WIAN (on camera): Some Arizona business leaders are worried that Proposition 200 could cause a repeat of what happened during the mid- 1990s, when the state lost convention business because of its refusal to recognize a holiday for Martin Luther King, Jr.
(voice-over): Opponents of the bill have accused supporters of racism and trying to make criminals out of government workers. Supporters call those claims scare tactics and say they're confident Proposition 200 will hold up on election day and in court. Casey Wian, CNN, Phoenix, Arizona.
(END VIDEOTAPE)
And coming up next, two very different views on this controversial proposal in Arizona. And Dan Rather and CBS admitting they were wrong about documents accusing President Bush of shirking his National Guard duties. We'll have much more on the fallout, the White House reaction. I'll be talking about the prospects of the presidential candidates. More of the country's leading political journalists join me next.
And Iraqi insurgents attack American troops with weapons supplied by American allies, the focus of a new book by "Washington Times" national security correspondent Bill Gertz. He's our guest tonight. All of that and a great deal more, including your thoughts, still ahead here tonight.
(COMMERCIAL BREAK)
ANNOUNCER: LOU DOBBS TONIGHT continues. Here now, for more news, debate and opinion, Lou Dobbs.
DOBBS: Neither President Bush nor Senator Kerry wants to talk much about a national immigration policy in this country during the election. In Arizona, it's quite a different story. A controversial proposal is on the ballot in Arizona that would block illegal aliens from voting and using state services.
My guests tonight disagree sharply on Arizona's Proposition 200. Tamar Jacoby says the measure would cost Arizona taxpayers millions of dollars. It will do nothing, she says, to stop illegal aliens from crossing the border into the state. She's a senior fellow at the Manhattan Institute, author of "Reinventing the Melting Pot."
Linda Gray says Arizona cannot afford to pay for any more social services for illegal aliens. She's education chair for Arizona's House of Representatives, a candidate for the state Senate, and joins us tonight from Phoenix.
Welcome to you both. Let me turn to you, Representative. How important is this proposition, and how much support do you believe it now has in Arizona?
LINDA GRAY, ARIZONA STATE HOUSE: I believe it has a wide support, with 66 percent in a poll that says that they support Protect Arizona Now. This all came about because of a voter ID bill that I had that passed the House and Senate and that the governor vetoed. People were very upset with the veto, and because of that, I think that is why we have Protect Arizona Now. That has two issues. It brings together the voter ID and recognizing that you have to be a citizen to vote, and also for welfare fraud.
And I think it will cut down on the costs for taxpayers in Arizona because if those coming across the border want to have the welfare benefits, it won't be available for undocumented persons here in Arizona.
DOBBS: Tamar, Arizona has one of the largest populations of illegal aliens. It is now the principal crossing point from Mexico for illegal aliens into our country. What's wrong with what Representative Gray says?
TAMAR JACOBY, MANHATTAN INSTITUTE: The problem is it's not going to stop anyone from coming. It's not going to stop a single immigrant. It's not going to repeal the laws of international laws of supply and demand that draw immigrants. It's not going to do anything on the border. And most immigrants don't use welfare or they're not eligible for welfare, and they don't try to vote. So it's just going to create a lot of bureaucracy at the state level and not stopping anyone from doing anything.
DOBBS: What do you say, Representative?
GRAY: We have 60,000 illegals who are on Access (ph), which is our medical benefit here in Arizona. We have 160,000 children in Arizona that are English-language learners that, because of judicial activism, will cost the taxpayer another $2,000 per student for the English-language learner. These are costs that the taxpayers have to pick up. I believe that (UNINTELLIGIBLE). And we're also looking at voter fraud. Why is it that in Arizona, the last election, I had this card that appeared on my door that says...
DOBBS: If you could hold that up -- I'm sorry, Representative -- just to show us...
GRAY: OK.
DOBBS: Yes?
GRAY: It says, "Know your rights when you go to vote." And the No. 1 right that it says in here that you should know is that you do not have to show ID when you go to vote. Now, to me, that's an open invitation, Go ahead and get away with it with it...
DOBBS: Who produced...
GRAY: ... because nobody's going to ask.
DOBBS: I'm sorry. Just -- who produced the flyer that you're holding?
GRAY: On the back side, you have the Democratic Party slate. And Janet Napolitano was running for governor then, and she's the one who vetoed the voter ID bill.
JACOBY: Well, of course, you have to prove ID to register to vote. And the illegal immigrants who come through Arizona...
(CROSSTALK)
DOBBS: Tamar, Tamar, Tamar! She just showed you that it's not, apparently, required in Arizona.
JACOBY: It is not required to show any ID when you go in to vote.
GRAY: Well, it just can't be true. I mean, it can't be true.
DOBBS: OK. OK, let's assume that Representative Gray, who inhabits the state, is an elected official in the state...
JACOBY: You have to...
DOBBS: ... knows something about it.
JACOBY: You have to prove who you are...
DOBBS: So let me -- so let's get to the point...
JACOBY: ... to register to vote.
DOBBS: OK.
JACOBY: But the point is...
DOBBS: May I? May I?
JACOBY: ... illegal immigrants...
DOBBS: May I?
JACOBY: Illegal immigrants...
DOBBS: Tamar, Tamar...
JACOBY: ... trooping through the state don't stop to vote.
DOBBS: May I? May I? If I may? Why would it not stop illegal aliens, at least slow it down, if you...
(CROSSTALK)
DOBBS: Please, I haven't finished the question, Tamar -- If they are denied state services and have to provide identification to vote and to take on state services?
JACOBY: Because people don't walk through the desert in the Arizona at the risk of death to vote. They don't walk through the desert at the risk of death to get welfare benefits. They come to work, and this is not going to stop anyone from coming to work. DOBBS: Let me...
JACOBY: It's not going to take away the motive...
DOBBS: Linda Gray, you get the last word.
JACOBY: ... that brings them here.
GRAY: Well, I would certainly disagree with that. When you have your high school students, who are getting pregnant to be able to get assistance here in Arizona, that is a benefit and a cost to the taxpayers. They do come, and they do get benefits here in Arizona.
DOBBS: Tamar Jacoby, I'm going to give you the last word, if you'll be succinct. How would you end the practice of illegal aliens crossing our borders, then?
JACOBY: Make more of the immigration flow legal, a guest worker program...
DOBBS: I see.
JACOBY: ... as the representatives John McCain, Jeff Flake (ph) and Jim Colby (ph) from Arizona propose.
DOBBS: OK. Tamar Jacoby, Linda Gray, representative Gray, thank you very much. Tamar, thank you very much.
GRAY: Thank you.
DOBBS: Turning now to some of your thoughts on the issue of "Exporting America" and the middle-class squeeze, Jennifer D'Sa of San Jose, California -- "I started working at age 16, several decades ago, worked my way through college and saved to become a home owner. I've worked to raise two sons, now in college, which I'm paying for. I love this country so much, but I have never seen a time when our people were so pained with the state of the job market. I am still looking, after many, many months."
And John Mahlow of Okemos, Michigan -- "I am a high school student that values your war on outsourcing as more than heroic. These professors who claim that this is just a phase in the global economy have never lived with one parent unemployed and the other barely hanging in, due to the outsourcing of manufacturing jobs."
We love hearing from you. Send us your thoughts at loudobbs@cnn.com, and please send us your name and address. Each of you whose e-mail is read each evening on this broadcast receives a few copy of my new book, "Exporting America."
Senator John Kerry today launched his most aggressive attack yet on the president's Iraq policy. Senator Kerry accused the Bush administration of, quote, "colossal failures of judgment, arrogance and outright incompetence," end quote. For his part, President Bush says Senator Kerry has a pattern of "twisting in the wind." Joining me now to assess these attacks and what they represent in the direction of the campaigns, four of the country's top political journalists. From Washington, Ron Brownstein, national political correspondent, "Los Angeles Times," Jay Carney, "Time" magazine's deputy Washington bureau chief, Tom DeFrank, Washington bureau chief for "The New York Daily News," and here in New York, John King, senior White House correspondent.
Thank you all for being here. Ron, this -- does this mark a decided change in, first, the priority of Iraq in this campaign for both candidates, and a change in tone?
RON BROWNSTEIN, "THE LOS ANGELES TIMES": Yes, and yes. Look, John Kerry over the spring and summer, as we've talked about many times on this show, Lou, had a strategy in which he felt that he more had to reassure people that he could be a credible commander-in-chief, than persuade them to fire President Bush.
Obviously that wasn't working. He now trails in all the polls and post-Republican Convention, he's moved toward a much more aggressive critique of President Bush across. We saw last week on Iraq the first stage in which Senator Kerry said that the policy was failing. This week he moved beyond that and argued I think explicitly for the first time, challenged President Bush's argument that the war in Iraq is central to advancing the war on terrorism.
Senator Kerry said, no. That, in fact, it has set back our goals on the war on terror. Moving himself closer to arguments by people like Wesley Clark and Richard Clarke earlier in the year.
DOBBS: Jay, the idea that Senator Kerry is in fact, depending on which poll one looks at, but on balance, running significantly behind the president at this point in time, can he make up this ground with this new strategy in your judgment?
JAY CARNEY, "TIME": Well, I think the message, Lou, is effective. It's the most articulate and clear message he's had on Iraq. And the problem of course is that the messenger is imperfect and he's haunted by his past statements and equivocations on what he would do if he were president with Iraq and what he has done in terms of authorizing a president to go to war and then voting against the 87 billions to fund it.
Now can it work? I think it's the only chance he has, because Iraq is not going away, and it is one area where a substantial section of the public has a lot of reservations about where the president is leading the country.
And the more we see the chaotic situation in Iraq appear on our television screens and in our newspapers, the more a message like this could resonate. So heading into the debates, I think, it was probably the smartest thing he could do. And as a John Kerry speech goes, this was one of his better ones.
DOBBS: Tom DeFrank, the idea that we would report again the beheading of an American hostage by radical Islamist terrorists in Iraq, the muted reaction, frankly, from Washington from all quarters and the inability of U.S. forces in Iraq to either avenge such cold- blooded murder, or to preserve stability and security in the lives of Americans and Iraqis, at what point does the American electorate focus on those issues?
TOM DEFRANK, "THE NEW YORK DAILY NEWS": Well, I think the electorate is focusing on these issues now, Lou. It's just I think there has been a reverse effect here. I believe that these horrible events have helped the president. His numbers have gone up. There's a guy I know very close to the president, very close to the campaign, who has been fretting for a year that Iraq was the greatest potential danger. This was a guy who once said that Kerry can't beat us, but Iraq can. This individual now believes as recently as last week that Iraq has become a political plus for the president.
I mean, I agree with my colleagues that as Kerry's speeches go, this one is pretty good and he's probably doing about the best that he can. But I don't think it's resonating yet. And I believe some cataclysmic event, God forbid, in Iraq, like a Beirut bombing, something like the 1983 Beirut bombing, I think Bush still has the upper hand politically in Iraq despite all the mayhem, despite all the chaos that we see every night.
DOBBS: John, would you agree with that perspective?
KING: I agree with Tom's assessment as how the campaigns look, but can Senator Kerry make this about the incumbent I think is the critical issue. The Bush campaign about his credentials to be commander-in-chief. And many Democrats are scratching their heads.
They see a beheading today. They see the insurgency. They see a political transition that is in doubt at best. And they say, why are the American people not saying, this is incumbent's fault, because this was the incumbent's war?
But the Bush campaign has been very clever strategically in saying that before you even think about ousting President Bush, Senator Kerry is not qualified to be commander-in-chief.
And they have also succeeded in making Iraq part of the broader war on terror to most Americans. If the American people separate the two, then the president could be in trouble.
BROWNSTEIN: Lou, could I jump in there?
DOBBS: Sure.
BROWNSTEIN: I think what John is saying is very important because a number of factors have conspired to produce this sort of paradoxical result that the president's standing on Iraq improving even as conditions have deteriorated.
The handover of power, put an Iraqi face on the crisis back last June. There has been less media attention over the summer. And also, as John suggested, the president, especially at his convention, had enormous success at tying Iraq to the long-term war on terror by arguing the only way we're going to reduce that threat is by democratizing the Middle East. And this was the beachhead toward that.
Now I think the one question we all have to ask ourselves as we're watching these poll numbers, though, are we seeing the lag from all of that over the summer, and is there potentially another turn here before Election Day? Because in the past, Lou, public opinion on Iraq has been very sensitive to events. And the events in Iraq have been both discouraging and getting a lot more coverage in the last few weeks.
So I'm not sure we've seen the last turn in this debate. I am sure that it is critical to the overall outcome, because I think as Iraq goes, to a large extent, the president's fate heads in that direction as well.
DOBBS: Jay Carney, the issues that are not being discussed with great vigor in this campaign include, of course, immigration policy. Your publication, in point of fact, with a cover story reporting 3 million illegal aliens entering this country.
The issues of an aging infrastructure as Congress is -- at least the leadership in Congress is trying to deal with an almost $300 billion highway that is bogged down with pork.
Are the real issues moving to the forefront, admittedly today, Iraq taking front and center, what is your judgment?
CARNEY: Well, I think there is only so much room for so many issues to be discussed, and Iraq is so big and so defining for this president and so important to the country because it's our biggest war since Vietnam and we've lost more than a thousand soldiers.
So John Kerry's efforts to shift the debate to other subjects away from Iraq, when he didn't really want to really talk about Iraq, failed. And I think to the extent that Iraq dominates the news, it's going to dominate the campaign.
I think issues like immigration, neither candidate wants to touch because neither candidate wants to alienate the Hispanic vote, which could be very important in a lot of key states.
DOBBS: The idea that Dan Rather had to tonight retract a story, apologized to his viewers and to everyone else for making that mistake. Tom, how important is it? Who is -- and this is what our polling our viewers tonight, but in your judgment, who is the big loser in this, besides obviously Dan Rather and CBS News?
DEFRANK: Well, it's -- we're all diminished in this business, Lou. It's a dark day for the network of Cronkite and Murrow and Collingwood, but it really hurts us all. It hurts the reputation of the press and it is nothing -- we all ought to feel miserable about it because it's a very bad development for our business.
DOBBS: As John King and I have discussed here, I have a distaste for dealing with issues 35 years old. And there is a certain arrogance in it that we all could come up with something that has not been turned over in the course of that time.
John, your final thoughts on this state of this industry and as a result of the CBS?
KING: Well, it's sad for the industry, as Tom said, I think it reflects poorly on all of us and that is a shame. I think ironically this was a strategy, apparently leaking these documents designed to destroy or hurt President Bush, and most now believe that he is at least benefited, perhaps benefited from this, and at least drawn neutral.
The more time we talking about this, what happened 35 years ago and whether these documents are real or fraud, is less time talking about whether it's immigration, the economy, or what some would call the chaos in Iraq.
DOBBS: I won't leave any of you with the opportunity to react or rebut about what I am about to say, but perhaps we should in our fear of events like this, perhaps constraint ourselves to the issues and not distant history. None of you want to react to that bald statement by me, I am sure. Ron Brownstein, Jay Carney, Tom DeFrank, John King, thank you all for being here.
A reminder now to vote in the poll. Whom do you think the retracted CBS story damages most? Dan Rather? Senator Kerry? President Bush? Please cast your vote at cnn.com/lou.
We'll have the results for you a little later in the broadcast.
Coming up next here, arming the enemy. A new book reports our allies of secretly sold weapons to al Qaeda and radical Islamist terrorists in Iraq. Bill Gertz, author of "Treachery" joins me.
And "Exporting America," the state of Indiana has made a bold decision on a multimillion dollar contract and is trying to turn outsourcing around.
Indiana's governor, Joseph Kernan, is my guest. Please stay with us.
(COMMERCIAL BREAK)
DOBBS: My next guest says allies of this country including Russia and France, have in fact armed radical Islamist terrorists in Iraq and he says our allies have turned a blind eye to arm sales to rogue regimes and state sponsors of terrorism in Iraq, Iran, North Korea, and Syria. Bill Gertz is the author of the new book entitled "Treachery: How America's Friends and Foes Are Secretly Arming Our Enemies." He's also the defense and national security reporter for the "Washington Times" and joins us tonight from Washington, D.C.
Bill, good to have you here.
These are explosive charges that in particular, Russia and France and China have provided such substantial armaments to those who are fighting us, insurgents and radical Islamists terrorists in Iraq. Were you surprised by what you unearthed?
BILL GERTZ, AUTHOR, "TREACHERY": Yes, this is kind of the inside story of what we had seen bits and pieces of in the past. But the Pentagon did an assessment after the major combat operations and found that huge amounts of foreign weapons had come in to Iraq oftentimes after the 1991 arms embargo. And they found that the Russians, Chinese and French were the main suppliers. The bottom line, weapons were used against our forces in combat, and are continuing to be used against troops and Iraqis by the insurgents today.
DOBBS: In tonnage terms you put in rather stark relief the scale of the armaments that are available to those who would harm the United States and the Iraqi people approaching a million tons in armament. That's extraordinary.
GERTZ: Yes, the country is literally awash in weapons. They keep finding new ammunition in weapons, depots all over the country. In the beginning, they didn't even have enough soldiers to protect them. What they did is they took bulldozers and bulldozed the front entrances. Still, some of the insurgents are looting those facilities and using the armaments.
DOBBS: Based on what you report in the book, how does one even view France as an ally?
GERTZ: Well, I think the case of France, you have to look back at their history. Jacques Chirac basically created Saddam Hussein. He was in hock to the French for 4 billion in arms and I think that negatively influenced France in helping Saddam stay in power. We learned from Tariq Aziz after the war that Saddam didn't believe the U.S. would invade because he was told by French and Russian government officials that they were going to block any action in the United Nations.
DOBBS: And some rather conflicted signals as well from representatives of the United States government in all fairness, Bill. The idea also that the United States supported Saddam Hussein for a great number of years as well.
GERTZ: Well, I looked into that. I have a chapter in the book on the United States. And it's basically a myth that we armed them. What the United States did do was supply agricultural credits to the tune of about $500 million which freed up other money for Saddam to buy all of these weapons. But so far as weapons go, there weren't -- practically no U.S. weapons. Some that were taken from Iran during the Iran-Iraq war.
DOBBS: The support that was provided for Iraq, nonetheless, in the Iraqi-Iranian war created that opportunity for mixed signals. I think you would acknowledge that, and in fact have. But the issue now of Iran seeking to weaponize its nuclear (UNINTELLIGIBLE) material the role of our allies in blocking that effort, the president will be in this city tomorrow to address that among other things with the United Nations. Your thoughts?
GERTZ: This is a huge, huge problem. I think it's on par with the nuclear crisis in North Korea. The Iranians have missiles that can range throughout the Middle East and southern Europe and they're working to get a nuclear warhead. That's kind of the Holy Grail in proliferation terms. Earlier this year in Libya, they uncovered Chinese language documents that were given to Pakistan showing how to make a small nuclear warhead. Officials are now trying to figure out if those same documents that went through this nuclear supplier network were passed on to Iran and North Korea.
DOBBS: Bill Gertz, thanks for being with us. Bill Gertz is the author of the new book, "Treachery: How America's Friends and Foes Are Secretly Arming Our Enemies." Bill, good to have you with us.
GERTZ: Thanks very much.
DOBBS: Still ahead here, one governor creates opportunity in his state saying no to outsourcing Indiana jobs. Indiana's Governor Joseph Kernan is my guest next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: In "Exporting America" tonight the state of Indiana taking a bold stand, trying to protect its local business to build jobs, to create jobs, rather than kill them. Indiana's Governor Joseph Kernan has canceled a contract with an Indiana outsourcing firm and he created instead what he calls Opportunity Indiana. It's a program aimed at giving Indiana companies and employees more state government business. Joining me now from Indianapolis is Governor Joseph Kernan. Good to have you here.
Governor, you canceled a contract with an Indiana outsourcing firm, canceling about $15 million in state business which as I recall was for a state unemployment agency as incredibly as that was. Have you ended the state's outsourcing efforts altogether?
GOV. JOSEPH KERNAN (D), INDIANA: No. What we have done is through Opportunity Indiana created the chance for Indiana companies to be successful in getting bids to do work with the state following the cancellation of that contract which I did on the basis that the way the bids were actually designed had excluded any Indiana firms from being successful. We went out, we now have about 4,000 companies that have signed up to do work with the state. On this particular contract, we've had two pre-bid conferences with Indiana companies to talk about how we might structure the bid packages in order to maximize opportunity. And what we've done is taken that one contract for $15 million and broken it into five separate pieces, the first of which will be going out for bid for in October.
DOBBS: That's great. Governor, why don't you bring the hammer down, and you and the state legislature say, that's it. That you're sick and tired of outsourcing. It's destructive of American jobs. You want to hire Indiana citizens, Americans for those jobs, with Indiana taxpayer money?
KERNAN: Well, I agree with all of that, Lou. And that's why we've taken the steps that we have. We have as well put in some preferences for Indiana businesses in order to help them be successful. What we don't want to do is to limit ourselves -- to build walls around Indiana, permit us to be able to do work with other states. And it is the goal, to do everything that we possibly can here in Indiana, and that's the purpose of the steps that we've taken that have been very aggressive and so far have been very successful.
DOBBS: All right. Your state, your economy, how would you characterize it right now?
KERNAN: Better than our neighbors. A little bit better than the country. But we are still not seeing the kind of growth that we had anticipated we would coming out of the recession.
DOBBS: The idea that you've got to Buy Indiana campaign going. I don't think anyone in any state is offended by that. There is a Buy California, Buy New York program as well. As you try to be as, I guess as diplomatic as possible, as sensitive as possible, to both economic and political realities, is the fact of the matter that more Indiana companies, American companies are succeeding in doing business with your state government than before?
KERNAN: No. In fact, as a part of Opportunity Indiana, Buy Indiana, we have just awarded a contract to a company from Kokomo, Indiana, for our office supplies for the next two years that was being provided by a company that was based in Idaho. Our goal is to make sure that every Indiana company that wants to do business with us, that has a good or a service that they can sell has the maximum chance to be successful in doing business with the state. As well as to encourage Indiana companies to buy from each other.
DOBBS: Excellent. Governor Joe Kernan, thanks for being here.
KERNAN: Thanks, Lou. Good to be with you.
Tonight's thought is on America.
"Americanism means the virtues of courage, honor, justice, truth, sincerity and hardihood -- the virtues that made America. The things that will destroy America are prosperity at any price, peace at any price, safety first instead of duty first, the love of soft living and the get-rich-quick theory of life." Those the words of President Theodore Roosevelt. It's amazing how often we quote that fellow on this broadcast.
Still ahead, the first criminal trial is under way in the landmark case of corporate greed, and I'm sure we could use a Teddy Roosevelt quote with that one as well. He said a lot of things right. We'll have a full report for you next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The Dow, the Nasdaq, the S&P all down on the day. The Dow off 80 points. And as the first Enron trial gets under way, Wall Street's top regulator is blasting corporate ethics, or lack of them, and pay. Joining me now, Christine Romans -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, senior executives need better ethics. SEC chief Bill Donaldson told "The Financial Times" today, "good values are set at top and all too often that concept doesn't exist at American companies."
Case in point, excessive CEO pay. Donaldson says corporate America still has a long way to go. Those comments come on the first day of the first Enron criminal trial. It's a case against two Enron executives and four former Merrill Lynch bankers. It focuses on the sham transaction to sell power generating barges in Nigeria, but Wall Street is holding its breath for what this trial tells us about just how far Wall Street bankers will go and how far they went to help Enron burnish its books.
At the same time, Citigroup shares fell today on concerns that if Citigroup has to be ethical, its growth will slow.
DOBBS: Wait, wait, wait. Say that again?
ROMANS: If Citigroup has to be ethical, its growth will slow. Believe it or not. Japanese authorities ordered Citi to shut down its private bank in Japan on money laundering concerns, and a Merrill Lynch analyst said now is not the time to buy those shares, because "balancing growth and ethics will be a long, hard process for Citigroup."
DOBBS: That is an extraordinary statement. And again, SEC chief, Bill Donaldson, he's getting it right. And doing his job as well as anyone could ask. Christine Romans, also doing your job as well as anyone could ask. Thank you.
ROMANS: Thanks.
DOBBS: Still ahead, the results of our poll and a preview of what is ahead tomorrow. Please stay with us.
(COMMERCIAL BREAK)
DOBBS: The results of our poll tonight: 62 percent of you say the retracted CBS story damages Dan Rather and CBS the most.
Thanks for being with us. Please join us here tomorrow. Democratic vice presidential candidate, Senator John Edwards, joins me, as does independent presidential candidate Ralph Nader. They'll both be here. We hope you will too.
For all of us here, good night from New York. "ANDERSON COOPER 360" is next.
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