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CNN Live At Daybreak

Summit in Chile; Congressional Decision to Raise Government's Debt Ceiling

Aired November 19, 2004 - 06:00   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.


CAROL COSTELLO, CNN ANCHOR: A man on a mission -- President Bush prepares to make a case over North Korea's nuclear program at a meeting of Pacific Rim nations in Chile.
And more red ink. The U.S. House approves a measure raising the nation's debt ceiling by a whopping $800 billion.

And opening at a theater near you, these two lovable characters, and we do mean characters. Sponge Bob Square Pants and his pals hit the big screen.

It is Friday and you are watching DAYBREAK.

And good morning to you.

Thank you for waking up with us.

I'm Carol Costello.

Happy Friday. And boy, am I glad it's Friday.

Let's check out the latest headlines for you now.

Protesters demonstrate in Santiago, Chile ahead of President Bush's trip there today. The president leaves in a few hours for a 21-nation summit of Pacific Rim leaders. Topping his agenda, gathering support to halt North Korea's nuclear program.

The nation's debt ceiling is going up. The House of Representatives has approved raising the ceiling by $800 billion. Right now, it's $7.4 trillion. That's the national debt. It'll go to $8.2 trillion when President Bush signs the measure on Monday.

At the special meeting of the U.N. Security Council today in Kenya, Sudanese government officials and a rebel negotiator pledged to end 21 years of civil war by the end of the year.

And French President Jacques Chirac is in his final day of a state visit to Britain. It's part of a celebration marking the 100th anniversary of an agreement to end the colonial rivalry between France and Britain.

To the forecast center in Atlanta -- good morning, Chad.

CHAD MYERS, CNN METEOROLOGIST: Good morning, Carol.

You're not flying anywhere today, are you?

COSTELLO: No.

MYERS: Finally now, you get to stay in one city.

(WEATHER REPORT)

COSTELLO: Security is very tight in Chile this morning. President Bush will soon be on his way to attend the APEC summit. The summit is being held in Santiago, where demonstrators have been shouting "Get out of here, Bush! We don't want to be an American colony!" Four thousand police are on hand to control these protesters. The summit itself is expected to deal with dozens of trade issues.

But as CNN's Stan Grant reports, there are even more important issues on the agenda.

(BEGIN VIDEO TAPE)

STAN GRANT, CNN CORRESPONDENT (voice-over): U.S. President George W. Bush last met Asian leaders with the issue of North Korea's nuclear threat front and center. A year later, fears on the street of a drift to war. "I don't think there will be war," says this Seoul housewife, "but there is a concern because Kim Jong Il is cornered right now and so he's looking at all his options."

"I think there is a small chance of war, because the U.S. is hyper sensitive," says Kim Jukyung (ph), a university student.

UNIDENTIFIED MALE: The United States delegation returned to Beijing...

GRANT: The U.S. brought in China, South Korea, Japan and Russia to try to break the impasse. But North Korea has walked away from the talks. There are suspicions that the country, branded part of an axis of evil with Iran and Iraq, is increasing its nuclear arsenal.

BAN KI MOON, SOUTH KOREAN FOREIGN MINISTER: We do not say that we can fully trust the North Korean side. And the way they have behaved in the international community has been raising strong concerns.

GRANT: But Seoul believes Pyongyang will soon come back to the negotiating table. Outgoing U.S. Secretary of State Colin Powell, in South Korea and China recently, again stressed the preference for diplomacy over force. A nuclear armed North Korea also raises fears such weapons could fall into the hands of terrorists.

This bombing outside Australia's embassy in Jakarta the work of al Qaeda-linked Jemaah Islamiyah, underlines Southeast Asia as a hotbed of terrorist activity. Indonesia's newly elected president, Susilo Bambang Yudhoyono, pledging his support to President Bush's war on terror. Support, too, from Australia's John Howard. Recently reelected, Howard has previously drawn criticism for dubbing Australia "the U.S. deputy sheriff" in Asia. Along with countries like Japan, Australia also remains committed to keeping troops in Iraq.

JOHN HOWARD, AUSTRALIAN PRIME MINISTER: And the leadership that President Bush has given in the fight against terrorism around the world comes through very strongly.

GRANT (on camera): Also on the agenda, the rise of China, its ongoing tensions with Taiwan, its growing appetite for oil and trade surplus with the United States, all potential subjects for discussion when President Bush meets Asian leaders in Chile this weekend.

Stan Grant, CNN, Hong Kong.

(END VIDEO TAPE)

COSTELLO: On Capitol Hill, Republicans pushed a measure through Congress late last night to raise the government's debt limit by $800 billion. That will bring the total borrowing increases in Bush's first term to $2.25 trillion. That's more than all the debt the country accumulated from its founding through 1986.

It was time to kiss and make up on Capitol Hill. Senate Republicans now say they'll unanimously back Arlen Specter to be the next chairman of the Senate Judiciary Committee. Specter has been the getting of a political firestorm ever since he said it was unlikely Supreme Court nominees in favor of reversing "Row v. Wade" would win Senate confirmation. He's now toned that sentiment down.

All right, now we have Dick Uliano.

That's why I paused there a second ago.

Dick Uliano is from CNN Radio. He's a reporter there. He joins us this morning to talk more about the national debt -- Dick, take it away.

DICK ULIANO, CNN RADIO CORRESPONDENT: Carol, the House, late last night, voted narrowly to raise the government's debt ceiling. What does that mean? That means that by law, the government can borrow only so much money and basically, Carol, the government was in danger of defaulting this week or next because it's borrowed so much money. So the law makers took to the floors and argued it out and eventually decided to keep things going. They needed to boost borrowing by $800 billion.

The numbers are kind of boggling. So that raises the government's debt ceiling to $8.18 trillion. It's a number, it's kind of hard to get your arms around that. But that's the ceiling at which the government can borrow money. And that's what we need because the government is in so much debt -- Carol.

COSTELLO: Oh, you're not kidding, because of many, many things. It was a very narrow vote, though, wasn't it, Dick?

ULIANO: Very, very close, largely along party lines and that was the same way it came out earlier this week, on Wednesday, in the Senate, largely along party lines. You know, the Democrats blame the Republicans for this. They say, you know, it's the tax cuts that have caused this. And the Republicans, in turn, say no, it was the 2001 deficit. It was 9/11. It was terrorism. And, also, they say it was Democrats spending. So, you know, they argue back and forth.

But bottom line, we as Americans are in a lot of debt and up to $8.18 now is the authority to borrow. By the way, that's 70 percent of our entire U.S. economy.

COSTELLO: Wow!

Dick Uliano reporting live from Washington.

Thanks.

ULIANO: Sure.

COSTELLO: Troops still going building to building today. Today they are targeting mosques.

To CNN's Jane Arraf now in Falluja.

Do we have her live on the line?

JANE ARRAF, CNN CORRESPONDENT: We do.

Hello, Carol.

COSTELLO: Hello, Jane.

We...

ARRAF: We are near the center of Falluja and what we're seeing, Carol, for the first time are actual real live civilians. They're walking through the streets in very small groups, young men, some of them, carrying white flags so the soldiers and the Marines will not shoot them. They're telling us that they need food at home, that they've come out looking for help.

And we've just been, Carol, to what is starting to be the center of where Iraqi civilians will go to seek compensation. The Marines are just now cleaning out an old sports center. They're going to set it up to allow Iraqis, when they're allowed to come back to the city, to come and file claims for their damaged houses and for relatives who may have been hurt or killed.

There is a lot of damage in this city and one of the things that soldiers and Marines are finding as they continue to go through these sectors are things like what they discovered yesterday, entire factories devoted to building car bombs, as well as evidence that al Qaeda and Abu Musab al-Zarqawi have been operating in this region, their representatives -- Carol.

COSTELLO: You mentioned those things, Jane.

How big of a find was this for the U.S. military?

ARRAF: There are likely going to be similar finds. We have to remember that they've been targeting safe houses with air strikes for several weeks before this battle for Falluja actually started. But what they found that we were shown yesterday was significant because it did appear to be the center of operations for that neighborhood in the center of -- in a section of Falluja that was perhaps the most resistant stronghold. It's where the unit that we were with saw the fiercest fighting. And what it indicated was that Abu Musab al- Zarqawi did have lieutenants in that sector and that he and that the people who worked for Zarqawi, or pledged allegiance to him, also pledged allegiance to al Qaeda.

There's indications there of a link therein the form of documents, writings on the walls. And that pattern is starting to emerge throughout this city -- Carol.

COSTELLO: Fascinating.

Jane Arraf reporting live from Falluja this morning.

Does the so-called axis of evil revolve around the pursuit of nuclear weapons? As the president heads out to discuss the North Korean threat, is another one brewing in Iran?

Canton, Ohio -- it was one of the main battlegrounds during the election and even though the political events are long gone, the every day struggles are not. Later...

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Mermaid's magic and my one tail fin. I command the two of you to turn into men. Open your eyes.

(END VIDEO CLIP)

COSTELLO: Loving that Sponge Bob Square Pants heads to the big screen. Can he clean up at the box office and why do adults like to watch this cartoon so much? We'll get the psychology of Sponge Bob from our movie guru.

But first, here's a look at what else is making news this Friday morning.

(COMMERCIAL BREAK)

COSTELLO: Time now for a little "Business Buzz."

You may be heading home for Thanksgiving, but you may want to spend your next holiday in hot Miami. Here's a little stocking stuffer from American Airlines.

Carrie Lee tell us what it is, live from the NASDAQ site -- good morning, Carrie.

CARRIE LEE, CNN CORRESPONDENT: It sounds pretty good right about now, doesn't it, Carol?

COSTELLO: It does.

LEE: American Airlines offering cheap flights to take you to South Beach direct. AMR is slashing fares to and from Miami, its domestic hub. Now, what AMR is trying to do is compete with low fare carriers that have really dominated the Fort Lauderdale Airport. A lot of people bypassing Miami International and American wants that to change. So they're hoping to attract south Florida travelers who will once again to go Miami International.

Take a look at some of the fares, the old fares and now the new fares, and you can see quite a bit of a difference. From Miami to, say, St. Louis, it used to cost over $1,100. Now it's less than $300. Similar fare cuts for lax and LaGuardia. So a lot of big players in the airline industry have tried to move into low fare service.

American, though, is the biggest domestic carrier. It controls 20 percent of the domestic market. So some people thinking that if American is cutting fares like this, we could see other carriers do the same thing, try to stay competitive.

And low prices always good for consumers -- Carol.

COSTELLO: That's terrific. You're not kidding.

A quick look at the futures.

LEE: Yes, futures across-the-board looking pretty flat. Techs looking a bit weak. We did hear from Walt Disney, reporting profits last night, up $0.24 from the year ago period. Strength in its ESPN and ABC ad network space offsetting some weakness in its movie studio unit.

That's the latest.

COSTELLO: Carrie Lee live from the Nasdaq market site.

Thank you.

Your news, money, weather and sports.

It is 6:15 Eastern.

Here's what's all new this morning.

It's a case of every vote counts. Washington State still doesn't have a new governor. Election officials are getting ready to recount 2.8 million ballots. Right now, only 261 votes separate the two candidates.

The government is looking into the possibility of a new case of mad cow disease here in the United States. USDA officials are not saying where the animal was, just that it did not enter the food chain. In money news, former Viacom chief Mel Karmazin is now CEO of Sirius Satellite Radio. Karmazin was a casualty of the June management shakeup at Viacom. The news sent Sirius shares up 20 percent in after hours trading.

In culture, actor Robin Williams is being honored at the Golden Globe Awards in January. Williams, who has won five Golden Globes, will receive the Cecil B. DeMille award for career achievement.

In sports, Virginia Tech may have played its best game on the same day the coach's mother died. The Hokies rallied behind Coach Frank Beamer to dominate the University of Maryland 55-6. That is incredible. It's the sixth straight win for the 15th ranked Virginia Tech.

Wow -- Chad.

MYERS: Let me tell you, they looked better than number 15 last night. They looked phenomenal. They were unbeatable yesterday. I don't even know if USC could have beat them. They were so on their game. They had a mission for their coach and they accomplished it big time.

(WEATHER REPORT)

COSTELLO: Those are the latest headlines for you this morning.

Accusations levied against a nation that the U.S. sees as a potential threat. We'll take a closer look at Iran's nuclear intentions.

And a picture perfect community feeling an economic squeeze. What residents face when a storybook life unexpectedly ends.

(COMMERCIAL BREAK)

COSTELLO: A special "CNN PRESENTS" this Sunday is about despair, hope and strength. We heard a lot about Canton, Ohio during the presidential election and each time we visited we were intrigued. This is a city where manufacturing was king and life was very good. But today, Canton seems to be a dying town trapped in its past.

Take a look.

(BEGIN VIDEO TAPE)

W.R. "TIM" TIMKEN, CHAIRMAN, TIMKEN COMPANY: This bearing enables every wheel and shaft to turn with a minimum of friction. You'd ask yourself well, where is the Timken Company's town? This is where we started. This is where our headquarters are. And we've had a commitment to this area for the last 105 years. And in the process, we've provided jobs to generation after generation.

UNIDENTIFIED MALE: Timken says it's phasing out all three Canton area bearings plants. UNIDENTIFIED MALE: It kind of makes me disappointed in the Timken family. This is where they made all their money and now they're doing this.

TIMKEN: It is another case where the cost of employing a person got to be prohibitive in the competitive markets of today. The company cannot and never has had a relationship with the next generation. We take care of the people that are working for the Timken Company and will, and we take care of our retirees. But the next generation in Stark County that might have worked in our bearing facilities has got to prepare themselves for other work. They should be staying in school longer and learning new talents. The people right here in Stark County do know and realize that they're part of a modern, evolving, changing world.

(END VIDEO TAPE)

COSTELLO: Live to Atlanta now and the producers of "Company Town," Dave Timko and Emily Probst.

Welcome to you both.

EMILY PROBST, PRODUCER, "COMPANY TOWN": Good morning.

DAVE TIMKO, PRODUCER, "COMPANY TOWN": Good morning.

COSTELLO: You know, this is an interesting twist on the documentary. It has no reporter's voice. The piece is in the town's own words.

Why do it this way, Emily?

PROBST: This is a documentary where we wanted to hear from the people themselves. This is a town that's been in the headlines throughout the election and we did it purposely because we wanted them to tell their own story. To hear conversations with these people is to hear what's happening in this town in their own words. And Dave Timko pitched this story a long time before this town really heard about the mass layoffs in this town. And I think Dave can speak to why he chose those conversations and the people that we chose.

COSTELLO: Go ahead, Dave.

TIMKO: Well, generally, like you, Carol, I was born and raised in northeast Ohio and it was very natural, I think, when we started hearing rumors that these companies were thinking about laying folks off that we take our cameras there and hear from the residents whose lives would eventually be turned upside down. And I think what we ended up witnessing was the beginning stages of what would become a change, and a complete change in a way of life in Ohio.

COSTELLO: And you talk about that complete change of life. Tell us about the psychology behind this, because some people there still seem to think that manufacturing is going to come back and it's never going to. TIMKO: Yes, well, I mean it's -- I guess one way to refer to it is that people are stuck in the past. But as many times as you hear that in traveling around Canton, you hear that people are determined to do something about it, that there are changing agents in the area that are looking forward to a new way of life and, you know, what is the next big company that they can attract to their town to do something about it and to come back.

COSTELLO: Yes. See, the next big manufacturing town.

You know, it was interesting hearing a member of the Timken family talk. He doesn't really feel a sense of responsibility for the next generation.

Can you expound on that, Emily?

PROBST: Sure. He says that we're going to have to move on and what he's going to tell that next generation is they're not going to be able to depend on jobs if they only have a high school education. They're going to have to look for the job and go for a college education if they want to work for the Timken Company. They can't expect to have a secure future if they only have a high school education.

COSTELLO: Emily Probst, Dave Timko, thanks for joining DAYBREAK this morning.

TIMKO: Thank you.

PROBST: Thank you.

COSTELLO: And, by the way, you can watch the complete report of "CNN PRESENTS: COMPANY TOWN" Sunday night at 8:00 Eastern, 5:00 Central.

Howard Stern is on the attack again.

(BEGIN VIDEO CLIP)

HOWARD STERN, RADIO PERSONALITY: The death of the FCC interference. The death of the FCC. Down with the FCC!

(END VIDEO CLIP)

COSTELLO: Armed with strippers and freebies, the shock jock goes on the offensive, accusing the FCC of ruining radio and forcing him to pay the price of freedom.

And he may be a bit dorky, but everyone seems to love Sponge Bob. But will the love be felt all the way to the box office?

You are watching DAYBREAK.

(COMMERCIAL BREAK)

COSTELLO: And good morning to you. From New York, I'm Carol Costello.

Chad Myers down in Atlanta.

Now in the news, a bill raising the federal borrowing limit by $800 billion is on its way to President Bush's desk. The House gave final approval to the measure late last night. It'll raise the federal borrowing limit to nearly $8.2 trillion. President Bush is expected to sign the measure on Monday.

An FDA reviewer testified before Congress that as many as five other prescription drugs besides Vioxx may be unsafe for consumers. David Graham is credited with voicing concerns over Vioxx before it was pulled off the market.

Warring factions in Sudan have now signed an agreement promising to end that 21-year civil war there. They signed a deal in front of the U.N. Security Council, which held a rare meeting in Kenya.

French President Jacques Chirac is in the final day of a state visit to Britain. It's part of a celebration marking the 100th anniversary of an agreement to end the colonial rivalry between France and Britain.

To the forecast center now and Chad -- good morning.

MYERS: Good morning, Carol.

(WEATHER REPORT)

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 November 19, 2004 - 06:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: A man on a mission -- President Bush prepares to make a case over North Korea's nuclear program at a meeting of Pacific Rim nations in Chile.
And more red ink. The U.S. House approves a measure raising the nation's debt ceiling by a whopping $800 billion.

And opening at a theater near you, these two lovable characters, and we do mean characters. Sponge Bob Square Pants and his pals hit the big screen.

It is Friday and you are watching DAYBREAK.

And good morning to you.

Thank you for waking up with us.

I'm Carol Costello.

Happy Friday. And boy, am I glad it's Friday.

Let's check out the latest headlines for you now.

Protesters demonstrate in Santiago, Chile ahead of President Bush's trip there today. The president leaves in a few hours for a 21-nation summit of Pacific Rim leaders. Topping his agenda, gathering support to halt North Korea's nuclear program.

The nation's debt ceiling is going up. The House of Representatives has approved raising the ceiling by $800 billion. Right now, it's $7.4 trillion. That's the national debt. It'll go to $8.2 trillion when President Bush signs the measure on Monday.

At the special meeting of the U.N. Security Council today in Kenya, Sudanese government officials and a rebel negotiator pledged to end 21 years of civil war by the end of the year.

And French President Jacques Chirac is in his final day of a state visit to Britain. It's part of a celebration marking the 100th anniversary of an agreement to end the colonial rivalry between France and Britain.

To the forecast center in Atlanta -- good morning, Chad.

CHAD MYERS, CNN METEOROLOGIST: Good morning, Carol.

You're not flying anywhere today, are you?

COSTELLO: No.

MYERS: Finally now, you get to stay in one city.

(WEATHER REPORT)

COSTELLO: Security is very tight in Chile this morning. President Bush will soon be on his way to attend the APEC summit. The summit is being held in Santiago, where demonstrators have been shouting "Get out of here, Bush! We don't want to be an American colony!" Four thousand police are on hand to control these protesters. The summit itself is expected to deal with dozens of trade issues.

But as CNN's Stan Grant reports, there are even more important issues on the agenda.

(BEGIN VIDEO TAPE)

STAN GRANT, CNN CORRESPONDENT (voice-over): U.S. President George W. Bush last met Asian leaders with the issue of North Korea's nuclear threat front and center. A year later, fears on the street of a drift to war. "I don't think there will be war," says this Seoul housewife, "but there is a concern because Kim Jong Il is cornered right now and so he's looking at all his options."

"I think there is a small chance of war, because the U.S. is hyper sensitive," says Kim Jukyung (ph), a university student.

UNIDENTIFIED MALE: The United States delegation returned to Beijing...

GRANT: The U.S. brought in China, South Korea, Japan and Russia to try to break the impasse. But North Korea has walked away from the talks. There are suspicions that the country, branded part of an axis of evil with Iran and Iraq, is increasing its nuclear arsenal.

BAN KI MOON, SOUTH KOREAN FOREIGN MINISTER: We do not say that we can fully trust the North Korean side. And the way they have behaved in the international community has been raising strong concerns.

GRANT: But Seoul believes Pyongyang will soon come back to the negotiating table. Outgoing U.S. Secretary of State Colin Powell, in South Korea and China recently, again stressed the preference for diplomacy over force. A nuclear armed North Korea also raises fears such weapons could fall into the hands of terrorists.

This bombing outside Australia's embassy in Jakarta the work of al Qaeda-linked Jemaah Islamiyah, underlines Southeast Asia as a hotbed of terrorist activity. Indonesia's newly elected president, Susilo Bambang Yudhoyono, pledging his support to President Bush's war on terror. Support, too, from Australia's John Howard. Recently reelected, Howard has previously drawn criticism for dubbing Australia "the U.S. deputy sheriff" in Asia. Along with countries like Japan, Australia also remains committed to keeping troops in Iraq.

JOHN HOWARD, AUSTRALIAN PRIME MINISTER: And the leadership that President Bush has given in the fight against terrorism around the world comes through very strongly.

GRANT (on camera): Also on the agenda, the rise of China, its ongoing tensions with Taiwan, its growing appetite for oil and trade surplus with the United States, all potential subjects for discussion when President Bush meets Asian leaders in Chile this weekend.

Stan Grant, CNN, Hong Kong.

(END VIDEO TAPE)

COSTELLO: On Capitol Hill, Republicans pushed a measure through Congress late last night to raise the government's debt limit by $800 billion. That will bring the total borrowing increases in Bush's first term to $2.25 trillion. That's more than all the debt the country accumulated from its founding through 1986.

It was time to kiss and make up on Capitol Hill. Senate Republicans now say they'll unanimously back Arlen Specter to be the next chairman of the Senate Judiciary Committee. Specter has been the getting of a political firestorm ever since he said it was unlikely Supreme Court nominees in favor of reversing "Row v. Wade" would win Senate confirmation. He's now toned that sentiment down.

All right, now we have Dick Uliano.

That's why I paused there a second ago.

Dick Uliano is from CNN Radio. He's a reporter there. He joins us this morning to talk more about the national debt -- Dick, take it away.

DICK ULIANO, CNN RADIO CORRESPONDENT: Carol, the House, late last night, voted narrowly to raise the government's debt ceiling. What does that mean? That means that by law, the government can borrow only so much money and basically, Carol, the government was in danger of defaulting this week or next because it's borrowed so much money. So the law makers took to the floors and argued it out and eventually decided to keep things going. They needed to boost borrowing by $800 billion.

The numbers are kind of boggling. So that raises the government's debt ceiling to $8.18 trillion. It's a number, it's kind of hard to get your arms around that. But that's the ceiling at which the government can borrow money. And that's what we need because the government is in so much debt -- Carol.

COSTELLO: Oh, you're not kidding, because of many, many things. It was a very narrow vote, though, wasn't it, Dick?

ULIANO: Very, very close, largely along party lines and that was the same way it came out earlier this week, on Wednesday, in the Senate, largely along party lines. You know, the Democrats blame the Republicans for this. They say, you know, it's the tax cuts that have caused this. And the Republicans, in turn, say no, it was the 2001 deficit. It was 9/11. It was terrorism. And, also, they say it was Democrats spending. So, you know, they argue back and forth.

But bottom line, we as Americans are in a lot of debt and up to $8.18 now is the authority to borrow. By the way, that's 70 percent of our entire U.S. economy.

COSTELLO: Wow!

Dick Uliano reporting live from Washington.

Thanks.

ULIANO: Sure.

COSTELLO: Troops still going building to building today. Today they are targeting mosques.

To CNN's Jane Arraf now in Falluja.

Do we have her live on the line?

JANE ARRAF, CNN CORRESPONDENT: We do.

Hello, Carol.

COSTELLO: Hello, Jane.

We...

ARRAF: We are near the center of Falluja and what we're seeing, Carol, for the first time are actual real live civilians. They're walking through the streets in very small groups, young men, some of them, carrying white flags so the soldiers and the Marines will not shoot them. They're telling us that they need food at home, that they've come out looking for help.

And we've just been, Carol, to what is starting to be the center of where Iraqi civilians will go to seek compensation. The Marines are just now cleaning out an old sports center. They're going to set it up to allow Iraqis, when they're allowed to come back to the city, to come and file claims for their damaged houses and for relatives who may have been hurt or killed.

There is a lot of damage in this city and one of the things that soldiers and Marines are finding as they continue to go through these sectors are things like what they discovered yesterday, entire factories devoted to building car bombs, as well as evidence that al Qaeda and Abu Musab al-Zarqawi have been operating in this region, their representatives -- Carol.

COSTELLO: You mentioned those things, Jane.

How big of a find was this for the U.S. military?

ARRAF: There are likely going to be similar finds. We have to remember that they've been targeting safe houses with air strikes for several weeks before this battle for Falluja actually started. But what they found that we were shown yesterday was significant because it did appear to be the center of operations for that neighborhood in the center of -- in a section of Falluja that was perhaps the most resistant stronghold. It's where the unit that we were with saw the fiercest fighting. And what it indicated was that Abu Musab al- Zarqawi did have lieutenants in that sector and that he and that the people who worked for Zarqawi, or pledged allegiance to him, also pledged allegiance to al Qaeda.

There's indications there of a link therein the form of documents, writings on the walls. And that pattern is starting to emerge throughout this city -- Carol.

COSTELLO: Fascinating.

Jane Arraf reporting live from Falluja this morning.

Does the so-called axis of evil revolve around the pursuit of nuclear weapons? As the president heads out to discuss the North Korean threat, is another one brewing in Iran?

Canton, Ohio -- it was one of the main battlegrounds during the election and even though the political events are long gone, the every day struggles are not. Later...

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Mermaid's magic and my one tail fin. I command the two of you to turn into men. Open your eyes.

(END VIDEO CLIP)

COSTELLO: Loving that Sponge Bob Square Pants heads to the big screen. Can he clean up at the box office and why do adults like to watch this cartoon so much? We'll get the psychology of Sponge Bob from our movie guru.

But first, here's a look at what else is making news this Friday morning.

(COMMERCIAL BREAK)

COSTELLO: Time now for a little "Business Buzz."

You may be heading home for Thanksgiving, but you may want to spend your next holiday in hot Miami. Here's a little stocking stuffer from American Airlines.

Carrie Lee tell us what it is, live from the NASDAQ site -- good morning, Carrie.

CARRIE LEE, CNN CORRESPONDENT: It sounds pretty good right about now, doesn't it, Carol?

COSTELLO: It does.

LEE: American Airlines offering cheap flights to take you to South Beach direct. AMR is slashing fares to and from Miami, its domestic hub. Now, what AMR is trying to do is compete with low fare carriers that have really dominated the Fort Lauderdale Airport. A lot of people bypassing Miami International and American wants that to change. So they're hoping to attract south Florida travelers who will once again to go Miami International.

Take a look at some of the fares, the old fares and now the new fares, and you can see quite a bit of a difference. From Miami to, say, St. Louis, it used to cost over $1,100. Now it's less than $300. Similar fare cuts for lax and LaGuardia. So a lot of big players in the airline industry have tried to move into low fare service.

American, though, is the biggest domestic carrier. It controls 20 percent of the domestic market. So some people thinking that if American is cutting fares like this, we could see other carriers do the same thing, try to stay competitive.

And low prices always good for consumers -- Carol.

COSTELLO: That's terrific. You're not kidding.

A quick look at the futures.

LEE: Yes, futures across-the-board looking pretty flat. Techs looking a bit weak. We did hear from Walt Disney, reporting profits last night, up $0.24 from the year ago period. Strength in its ESPN and ABC ad network space offsetting some weakness in its movie studio unit.

That's the latest.

COSTELLO: Carrie Lee live from the Nasdaq market site.

Thank you.

Your news, money, weather and sports.

It is 6:15 Eastern.

Here's what's all new this morning.

It's a case of every vote counts. Washington State still doesn't have a new governor. Election officials are getting ready to recount 2.8 million ballots. Right now, only 261 votes separate the two candidates.

The government is looking into the possibility of a new case of mad cow disease here in the United States. USDA officials are not saying where the animal was, just that it did not enter the food chain. In money news, former Viacom chief Mel Karmazin is now CEO of Sirius Satellite Radio. Karmazin was a casualty of the June management shakeup at Viacom. The news sent Sirius shares up 20 percent in after hours trading.

In culture, actor Robin Williams is being honored at the Golden Globe Awards in January. Williams, who has won five Golden Globes, will receive the Cecil B. DeMille award for career achievement.

In sports, Virginia Tech may have played its best game on the same day the coach's mother died. The Hokies rallied behind Coach Frank Beamer to dominate the University of Maryland 55-6. That is incredible. It's the sixth straight win for the 15th ranked Virginia Tech.

Wow -- Chad.

MYERS: Let me tell you, they looked better than number 15 last night. They looked phenomenal. They were unbeatable yesterday. I don't even know if USC could have beat them. They were so on their game. They had a mission for their coach and they accomplished it big time.

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COSTELLO: Those are the latest headlines for you this morning.

Accusations levied against a nation that the U.S. sees as a potential threat. We'll take a closer look at Iran's nuclear intentions.

And a picture perfect community feeling an economic squeeze. What residents face when a storybook life unexpectedly ends.

(COMMERCIAL BREAK)

COSTELLO: A special "CNN PRESENTS" this Sunday is about despair, hope and strength. We heard a lot about Canton, Ohio during the presidential election and each time we visited we were intrigued. This is a city where manufacturing was king and life was very good. But today, Canton seems to be a dying town trapped in its past.

Take a look.

(BEGIN VIDEO TAPE)

W.R. "TIM" TIMKEN, CHAIRMAN, TIMKEN COMPANY: This bearing enables every wheel and shaft to turn with a minimum of friction. You'd ask yourself well, where is the Timken Company's town? This is where we started. This is where our headquarters are. And we've had a commitment to this area for the last 105 years. And in the process, we've provided jobs to generation after generation.

UNIDENTIFIED MALE: Timken says it's phasing out all three Canton area bearings plants. UNIDENTIFIED MALE: It kind of makes me disappointed in the Timken family. This is where they made all their money and now they're doing this.

TIMKEN: It is another case where the cost of employing a person got to be prohibitive in the competitive markets of today. The company cannot and never has had a relationship with the next generation. We take care of the people that are working for the Timken Company and will, and we take care of our retirees. But the next generation in Stark County that might have worked in our bearing facilities has got to prepare themselves for other work. They should be staying in school longer and learning new talents. The people right here in Stark County do know and realize that they're part of a modern, evolving, changing world.

(END VIDEO TAPE)

COSTELLO: Live to Atlanta now and the producers of "Company Town," Dave Timko and Emily Probst.

Welcome to you both.

EMILY PROBST, PRODUCER, "COMPANY TOWN": Good morning.

DAVE TIMKO, PRODUCER, "COMPANY TOWN": Good morning.

COSTELLO: You know, this is an interesting twist on the documentary. It has no reporter's voice. The piece is in the town's own words.

Why do it this way, Emily?

PROBST: This is a documentary where we wanted to hear from the people themselves. This is a town that's been in the headlines throughout the election and we did it purposely because we wanted them to tell their own story. To hear conversations with these people is to hear what's happening in this town in their own words. And Dave Timko pitched this story a long time before this town really heard about the mass layoffs in this town. And I think Dave can speak to why he chose those conversations and the people that we chose.

COSTELLO: Go ahead, Dave.

TIMKO: Well, generally, like you, Carol, I was born and raised in northeast Ohio and it was very natural, I think, when we started hearing rumors that these companies were thinking about laying folks off that we take our cameras there and hear from the residents whose lives would eventually be turned upside down. And I think what we ended up witnessing was the beginning stages of what would become a change, and a complete change in a way of life in Ohio.

COSTELLO: And you talk about that complete change of life. Tell us about the psychology behind this, because some people there still seem to think that manufacturing is going to come back and it's never going to. TIMKO: Yes, well, I mean it's -- I guess one way to refer to it is that people are stuck in the past. But as many times as you hear that in traveling around Canton, you hear that people are determined to do something about it, that there are changing agents in the area that are looking forward to a new way of life and, you know, what is the next big company that they can attract to their town to do something about it and to come back.

COSTELLO: Yes. See, the next big manufacturing town.

You know, it was interesting hearing a member of the Timken family talk. He doesn't really feel a sense of responsibility for the next generation.

Can you expound on that, Emily?

PROBST: Sure. He says that we're going to have to move on and what he's going to tell that next generation is they're not going to be able to depend on jobs if they only have a high school education. They're going to have to look for the job and go for a college education if they want to work for the Timken Company. They can't expect to have a secure future if they only have a high school education.

COSTELLO: Emily Probst, Dave Timko, thanks for joining DAYBREAK this morning.

TIMKO: Thank you.

PROBST: Thank you.

COSTELLO: And, by the way, you can watch the complete report of "CNN PRESENTS: COMPANY TOWN" Sunday night at 8:00 Eastern, 5:00 Central.

Howard Stern is on the attack again.

(BEGIN VIDEO CLIP)

HOWARD STERN, RADIO PERSONALITY: The death of the FCC interference. The death of the FCC. Down with the FCC!

(END VIDEO CLIP)

COSTELLO: Armed with strippers and freebies, the shock jock goes on the offensive, accusing the FCC of ruining radio and forcing him to pay the price of freedom.

And he may be a bit dorky, but everyone seems to love Sponge Bob. But will the love be felt all the way to the box office?

You are watching DAYBREAK.

(COMMERCIAL BREAK)

COSTELLO: And good morning to you. From New York, I'm Carol Costello.

Chad Myers down in Atlanta.

Now in the news, a bill raising the federal borrowing limit by $800 billion is on its way to President Bush's desk. The House gave final approval to the measure late last night. It'll raise the federal borrowing limit to nearly $8.2 trillion. President Bush is expected to sign the measure on Monday.

An FDA reviewer testified before Congress that as many as five other prescription drugs besides Vioxx may be unsafe for consumers. David Graham is credited with voicing concerns over Vioxx before it was pulled off the market.

Warring factions in Sudan have now signed an agreement promising to end that 21-year civil war there. They signed a deal in front of the U.N. Security Council, which held a rare meeting in Kenya.

French President Jacques Chirac is in the final day of a state visit to Britain. It's part of a celebration marking the 100th anniversary of an agreement to end the colonial rivalry between France and Britain.

To the forecast center now and Chad -- good morning.

MYERS: Good morning, Carol.

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