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Lou Dobbs Tonight
Preliminary Report on Oil-for-Food Shows High Level Corruption; Bush Pitches Social Security Plan to Americans;
Aired February 03, 2005 - 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.
ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, February 3. And here now for an hour of news, debate and opinion is Lou Dobbs.
LOU DOBBS, HOST: Good evening.
Tonight, the first definitive evidence that the multibillion- dollar United Nations oil-for-food scandal reached the top levels of the U.N.'s management. An interim report on the scandal says the U.N. official in charge of the oil-for-food program sought and took bribes from Saddam Hussein's government.
Tonight, U.N. Secretary-General Kofi Annan announced he will discipline that official. There's no word yet on whether or not Annan himself was involved in this scandal.
Senior United Nations correspondent Richard Roth is here with the report -- Richard.
RICHARD ROTH, CNN CORRESPONDENT: Lou, he was the man in charge of the United Nations oil-for-food office. But according to the initial findings by Paul Volcker's probers, he was kind of a fox using the henhouse.
Benon Sevan, a 30-year U.N. employee, is accused by Volcker of a grave conflict of interest, by pursuing oil deals for his own personal benefit. Sevan and the Arab oil Middle East company is charged with standing to profit more than a million dollars.
The first report by Volcker on the $64 billion program says Sevan also received cash payments totaling $160,000, which he claimed he received from his aunt, who recently died in his homeland of Cyprus.
Paul Volcker says the Iraqis thought they were buying influence in allocating oil rights to Sevan.
Now Sevan, in a printed statement, has said that the Volcker panel succumbed to political pressure and now seeks to scapegoat him. He says Volcker needed a smoking gun and there is none. Quote, "Mr. Sevan never took a penny."
As for the disciplinary proceedings maybe some time next week, but there's really not really much the U.N. could do. He's getting a dollar a year to cooperate with the probe. But nestled in that Paul Volcker news conference, he said Mr. Sevan is not exactly now forthcoming regarding subsequent follow-up interviews. DOBBS: Not forthcoming: uncooperative, one can take that to mean. Volcker, how confident is he that he'll be able to pursue effectively his investigation, because he lacks, as we all know, subpoena power and has met, by his own words, some resistance within the U.N.?
ROTH: He said he's not worried about the lack of the subpoena power because he says he's getting good cooperation from countries overseas and various aspects of the U.S. government, and he hopes to have overlapping information with the U.S. attorney's office. And that's may be where the criminal part of this comes in, because Volcker is not going to be criminally charging Sevan or others.
Benon Sevan talked to me -- excuse me, Paul Volcker talked to me in this interview today about Benon Sevan and his role.
(BEGIN VIDEO CLIP)
ROTH: Is it fair to say, then, that the man who is running the oil-for-food program for the U.N. was corrupt?
PAUL VOLCKER, INDEPENDENT INVESTIGATOR: We don't know whether he got any money out of it. The investigation is continuing. But he certainly put himself in a position where he was conflicted.
ROTH: He wasn't getting it for UNICEF.
VOLCKER: I don't know that he's getting money at all. That's the subject of investigation.
ROTH: Who lost out in this case? I mean, should a taxpayer feel, when they hear million-dollar scandal, what was their cost?
VOLCKER: I think the real cost for this program was suspicion, concern that has arisen around the United Nations that impairs the effectiveness of that organization.
(END VIDEO CLIP)
ROTH: Yes. It is incredibly curious: Paul Volcker still says it's not a bribe. But in his findings, he says Sevan looked to get oil barrels, oil sales, almost everything but that, but he says it's not a bribe.
DOBBS: Paul Volcker, while a distinguished banker and central banker, has a legendary reputation for not always being completely declarative in his utterances. So some interpretation is always required.
An interpretation on where we go from here. Kofi Annan, his son implicated? Where do we head?
ROTH: Still being investigated. It will be several months more. He's not ruled out anything. He said Secretary-General Annan and the son cooperative in separate interviews, but so far he's not willing to list any type of proof of anything about those gentlemen at all. DOBBS: And Richard Roth, our senior U.N. correspondent, will continue to follow this story carefully. And we thank you. Good to see you, Richard.
In Iraq, two U.S. Marines were today killed in combat in Al Anbar province west of Baghdad. The U.S. military gave no details of how the Marines were killed.
Insurgents also killed at least 26 Iraqis in a series of other attacks over the past 24 hours. The insurgents 'targets include an Iraqi police convoy. It was attacked in western Baghdad. One Iraqi police officer was killed in that attack, three others were wounded.
President Bush today took his campaign to overhaul our Social Security system directly to the American people after his State of the Union address. President Bush believes voters will help him win over skeptical members of Congress, including a rising number of lawmakers within his own party.
Senior White House correspondent John King is traveling with the president and has our report.
(BEGIN VIDEOTAPE)
JOHN KING, CNN CORRESPONDENT (voice-over): Wheels down Fargo. Stop one in the Social Security sales pitch that will quickly test the president's second term political clout.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm going to travel our country, speaking as plainly as I can about a problem that I see.
KING: Five states in two days: North Dakota, Montana, Nebraska, Arkansas and Florida. All share this: Mr. Bush won them on the way to reelection, but all have Democratic senators who oppose the president's Social Security plan.
SEN. BYRON DORGAN (D), NORTH DAKOTA: The president is saying, let's borrow $1 to $3 trillion, stick it in the stock market, cut Social Security benefits and somehow that will be good? Most people, I think, will understand that doesn't add up.
KING: Revamping Social Security is the most ambitious domestic challenge of the Bush presidency. One urgent goal is to convince politically powerful older voters, anyone over age 55, that the Bush plan would not touch their benefits.
BUSH: For those of you who've received your check or are about to receive your check, not one thing will change.
KING: Another hurdle is rebutting Democrats who say the private investments accounts Mr. Bush wants for younger accounts would destroy a program designed as a guaranteed government safety net.
JOHN SNOW, TREASURY SECRETARY: These would be safe investment vehicles. They would -- wouldn't be allowed to go out to the Las Vegas and play the wheels or go to the racetrack.
KING: Protests in Fargo underscore why Republicans are nervous. Mr. Bush says the debate must consider trimming benefits and raising the retirement age.
(on camera) Touching Social Security has long been deemed political suicide. So Mr. Bush's enormous first challenge before there can be any negotiations about how to change the program, is turning public opinion to the point where doing nothing is deemed a greater political risk.
(voice-over) It's a tough sell, but Air Force One draws attention and local news coverage a member of Congress can only envy.
Mr. Bush compares the Democratic opposition to the first term vows he would never win sweeping tax cuts, but even allies concede this fight will be tougher and test the depth of what the president likes to call the political capital earned by winning reelection.
(END VIDEOTAPE)
KING: And Mr. Bush now speaking here in Great Falls, Montana, the second stop of this day. He will move on to Omaha, Nebraska, tonight.
When I spoke to the treasury secretary this morning, Lou, he said this is like a presidential campaign. Mr. Bush will be traveling. Large crowds, especially here at this event in Montana. The cabinet will be traveling as well, very much like the campaign, in that not only are Bush supporters but also Bush critics in this debate preparing to spend and spend and spend on television ads, as well -- Lou.
DOBBS: And spending, of course, will be one of the key issues within the entire matter of Social Security revamping, if not reform.
John King, I would like you, as well as our audience, to take a look at another president who talked about privatizing Social Security. This obviously not the first time it's been brought up. And, if you will, we'll all go back to January of 1999 and President Bill Clinton.
(BEGIN VIDEO CLIP)
BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I propose that we make the historic decision to invest the surplus to save Social Security. I propose that we commit 60 percent of the budget surplus for the next 15 years to Social Security, investing a small portion in the private sector, just as any private or state government pension would do. This will earn a higher return and keep Social Security sound for 55 years.
(END VIDEO CLIP)
DOBBS: Well, we've used up, John King, five years of that period of time. And of course, have not privatized anything. What is the White House reaction to the fact that this is, frankly, an echo of President Bill Clinton?
KING: The policy proposals are a bit different, Lou. But the White House is certainly saying that President Clinton tried to show leadership on this issue, and now President Bush is trying to show leadership on this issue.
One of the things President Clinton had on the table back in those days was even more dramatic. He wanted the government to put the money in stocks and bonds and for the government to manage those accounts.
Many Democrats were against that idea, but of course you had a Democratic president at the time, which is one key difference here. Democrats protect Social Security. They view it as their program.
And another key difference, of course, is the federal government was running a huge surplus at the time, so it was an easier debate, if you will, politically. You were not spending -- you were not talking of Social Security running out of money. You were talking about a government that was awash in money.
So Democrats say when Mr. Bush cites Mr. Clinton, he's taking Mr. Clinton out of context because Bill Clinton did say this about the surplus. He said don't spend it on tax cuts until you take care of Social Security.
But the Bush team certainly thinks they can use those remarks by President Clinton to make the case that this should have been dealt with long ago and that this president will force the Congress to deal with it now -- Lou.
DOBBS: John King, our senior White House correspondent. Thank you.
That brings us to the subject of our poll tonight: "Do you believe President Bush will succeed in revamping Social Security?" Yes or no. Cast your vote at LouDobbs.com. We'll have the results coming up later in the broadcast.
During last night's State of the Union, President Bush also tried to ease widespread concern that he is failing to address the immigration crisis facing this country. President Bush sounded like he was talking tough on this critical issue. But the harsh reality is that the Bush administration is taking almost no action to protect this country from the invasion of illegal aliens or to provide border security.
Casey Wian reports from Los Angeles.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): It's been more than a year since President Bush first proposed reforming the nation's immigration system. He repeated the broad outlines of his plan during his State of the Union address. GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It is time for an immigration policy that permits temporary guest workers to fill jobs Americans will not take, that rejects amnesty, that tells us who is entering and leaving our country and that closes the border to drug dealers and terrorists.
WIAN: Congress in December authorized hiring 2,000 additional Border Patrol agents in the upcoming fiscal year. Agents in the field say they're badly needed, especially given the alarming number who are coming under fire from drug and alien smugglers.
In the 261-mile stretch of border known as the Tucson sector, there were 81 assaults against Border Patrol agents in the past four months, including nine shootings. That's twice as many as the same period last year.
But recently retired Homeland Security Secretary Tom Ridge called plans to hire 2,000 additional Border Patrol agents fool's gold, and departing Border Patrol Security Chief Asa Hutchinson says funding issues within the department will prevent the president from filling all but a relative handful of those calls.
Meanwhile, the closest the Democratic response came to border or immigration issues was this:
REP. NANCY PELOSI (D-CA), MINORITY LEADER: As we strive to close the gaps in our security here at home, we must do more to show -- more to show our great strength as well as our greatness. We must extend the hand of friendship to our neighbors in Latin America.
WIAN: Latin America continues to send its poor to the United States. Southern border apprehensions are up 14 percent so far this fiscal year. In a written statement, President Bush's Homeland Security secretary nominee told a Senate confirmation panel that border security will be improved by a guest worker program. Michael Chertoff added he's a strong supporter of the plan.
(END VIDEOTAPE)
WIAN: But, of course, there are plenty of opponents to the idea in the president's own party, and few in Congress seem ready to bring the president's immigration reform plans to a vote any time soon -- Lou.
DOBBS: It's a remarkable situation in which the Democrats are calling for open borders and the president is talking about what is effective amnesty. And the Homeland Security secretary nominee saying he's perfectly happy with the situation.
Casey Wian.
Thank you, sir.
Coming up next, forcing China to play fair. A plan, believe it or not, to save American jobs.
(COMMERCIAL BREAK)
DOBBS: The advertising industry is the latest to export American jobs to cheap foreign labor markets. One of this country's largest advertising agencies is now shipping creative work to teams in India, teams that are paid a fraction of what their American counterparts are paid.
Kitty Pilgrim has the story.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN BUSINESS CORRESPONDENT (voice-over): The jeans are American. The commercial is produced in India. Banerjee Advertising is based in New York, but the founder of the company is increasingly outsourcing the production of some of his commercials to India.
DAVE BANERJEE, FOUNDER, BANERJEE & PARTNERS: There are three things inevitable, unavoidable -- death, taxes and outsourcing.
PILGRIM: The way it works is the commercials are thought up in New York, but produced, shot and finished in their office in Bangalore. The owner defends the practice.
BANERJEE: And it just happened to be way cheaper than America because we are getting global talents and their cost of living is so much lower. Even they're happy to work at, you know, half the cost or even less.
PILGRIM: Madison Avenue is the traditional home of the American media and advertising business, and, although based in New York, many U.S. advertising firms are global, with branches in major cities around the world.
The common wisdom is commercials produced in a country sell well to consumers in that country because of cultural subtleties, and that's why advertising veterans are skeptical commercials produced abroad will strike just the right note in America.
TIM MELLORS, PRESIDENT, GREY WORLDWIDE NORTH AMERICA: The problem with this idea is it's saying, well, we'll have some of the ideas here, and then we'll get a group of people in Bangalore or other parts of India to actually come up with the creative work. My feeling there is that it's driven by one thing -- price. It's about cheapness.
PILGRIM: Grey Global nurtures their creative talent in New York and finds outsourcing splits creative execution away from the creative idea, something that they feel diminishes the effectiveness of the ad.
(END VIDEOTAPE)
PILGRIM: Now since the beginning of advertising, there have been people trying to undercut and reduce costs in building commercials. But ad experts say that in the competitive marketplace, a well-placed commercial can do more for the bottom line than saving on production costs -- Lou.
DOBBS: And the fellow says the only certainty in life -- death, taxes and outsourcing.
PILGRIM: Outsourcing. That was his philosophy.
DOBBS: I hope that's a brilliant American attitude. We should point out that even though Levi's is an American company, they produce those jeans outside this country.
Thank you very much, Kitty.
Kitty Pilgrim.
Well, lawmakers on Capitol Hill tonight are taking action to put a stop to China's unfair trade practices. At least they're trying. Senator Chuck Schumer of New York and Senator Lindsey Graham of South Carolina today proposed legislation that would impose a 27 percent tariff on Chinese goods imported into this country.
Lisa Sylvester reports from Washington.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT (voice-over): When it comes to China's currency advantage, two prominent senators are sick and tired of waiting for the Bush administration to act.
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: And as we fiddle, Rome is burning. We're losing jobs unfairly.
SEN. CHARLES SCHUMER (D), NEW YORK: And so we're tired of verbiage. We're tired of timetables without specific dates and specific numbers. And it's time to act.
SYLVESTER: Senators Charles Schumer and Lindsey Graham have proposed a 27-1/2 percent tariff on goods imported from China to take effect in six months unless China revalues its currency. China has been artificially pegging its currency to the dollar so that its goods are cheaper on the world market.
The result has been a $160 billion U.S.-China trade deficit and the loss of scores of American jobs. The Bush administration has taken the soft-handed approach, using diplomacy, but patience is running thin for some on Capitol Hill, as evident in a U.S.-China Commission hearing today.
RICHARD D'AMATO, U.S.-CHINA COMMISSION: The Chinese know a warning when they see it. It's whether or not the administration is going to be serious. If the administration was serious and the Chinese thought there was going to be penalties, the administration was going to put on, the Chinese would move.
SYLVESTER: Retailers say the proposed tariff will mean higher prices for consumers. ERIK AUTOR, NATIONAL RETAIL FEDERATION: Were it to come into law, it would be the U.S. consumer that would be paying the 27.5 percent duty. It's essentially a tax. It's a sales tax on American consumers.
SYLVESTER: But many lawmakers believe that most Americans, if given the choice of low prices at the store or their jobs, they would choose jobs.
(END VIDEOTAPE)
SYLVESTER: When asked if the tariffs would be considered a trade violation, Schumer and Graham said they welcome the Chinese to take their case before the World Trade Organization. Maybe then, they say, China will be forced to refigure its currency rate -- Lou.
DOBBS: Not only the difficult and complex relationship with China, but also the extraordinary subordinate position the United States puts itself in vis-a-vis the World Trade organization. My, oh, my, what will the WTO think of it all.
Lisa, thank you very much.
Lisa Sylvester.
Next here, why a growing list of companies now say they won't be doing business in one member state of the axis of evil.
(COMMERCIAL BREAK)
DOBBS: The Iranian government today blasted President Bush's State of the Union address, saying the president called Iran the world's primary state sponsor of terror and that's unacceptable. Iran supreme leader said the White House is trying to bring down the Islamic Republic, an effort he says will fail.
All of this comes as another U.S. company announces it will not do business in Iran. General Electric says conditions there are simply now too uncertain.
Bill Tucker reports.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN FINANCIAL CORRESPONDENT (voice-over): In the face of mounting political pressure, General Electric is ending its business ties with Iran. GE, Halliburton and ConocoPhillips have been doing business in Iran for years under the cover of foreign subsidiaries they own and control.
Had any done business directly with Iran, they would have been breaking United States law. The use of foreign subsidiaries made it legal. It's a distinction lost on some powerful people.
SEN. FRANK LAUTENBERG (D), NEW JERSEY: When they drill for oil in Iran, it means that Iran will have more revenues to give to Hamas and Hezbollah and Islamic Jihad. These are terrible organizations, and their mission is to kill Americans. How can they -- how can a CEO look in the mirror in the morning and say, OK, I don't care, I'm going to go ahead and do my business?
TUCKER: General Electric is the most recent to make the announcement, the company citing what it calls "the uncertain conditions in Iran." It says it will no longer take orders, but it will fulfill outstanding contracts.
New York City Comptroller William Thompson, who controls $82 billion in city employee pension funds, had been actively encouraging GE to pull out of Iran, and he welcomed the news, saying that he is glad General Electric is agreeing with what he's maintained all along, "that doing business with nations supporting terrorism is bad for the bottom line." Thompson and others argue that investors should take their money out of companies doing business with terrorist states.
FRANK GAFFNEY, CENTER FOR SECURITY POLICY: Don't put your money or your state pension fund's money into businesses that partner with America's enemies. That's the point.
(END VIDEOTAPE)
TUCKER: Senator Lautenberg will be introducing a new bill in the next few weeks to close the loophole which has allowed companies to skirt the sanctions law, Lou. Lautenberg wants to redefine that law so that it not only includes American companies but their foreign subsidiaries as well.
DOBBS: Speaking of the letter of the law and changing it, there isn't a single CEO of a single corporation doing business in Iran through a foreign subsidiary or otherwise that didn't understand what the law required and its intent. It's another example of the low standards that corporate America has come to embrace, and, hopefully, the loopholes can be closed.
Bill Tucker.
Thank you.
Next, a leading senator calls for an exit strategy for American troops in Iraq.
(COMMERCIAL BREAK)
DOBBS: In a moment, the exit strategy for U.S. troops in Iraq. I'll be talking with the ranking Democrat on the Senate Armed Services Committee.
But, first, these developments tonight.
Alberto Gonzales officially sworn in as this country's new attorney general less than an hour ago. The Senate confirmed his nomination tonight, a 60-36 vote, the vote largely partisan, 35 Democrats voting against Gonzales. Many objected to his role in creating Bush administration policies on the handling of foreign terrorist suspects.
A Justice Department report tonight says the FBI has wasted millions and millions of dollars and years of work on a computer system that doesn't work. The new system was supposed to help the FBI better manage criminal and terrorism investigations in cases. The report blames bad planning at the FBI for the problems. The $170 million project may now be scrapped altogether.
And spectacular pictures tonight of lava from Hawaii spilling into the ocean in at least two new locations. As the lava hits the water, it creates an incredible scene with huge plumes of steam, as you see here. Crowds have been flocking to the sight since the fiery show began earlier this week.
The Senate Armed Services Committee today held hearings on our current military operations in both Iraq and Afghanistan. Senator Carl Levin is the ranking Democrat on that committee, and today, he said it's essential we develop an exit strategy for U.S. troops in Iraq.
He joins us tonight from Capitol Hill. Senator Levin, good to have you with us.
SEN. CARL LEVIN (D), MICHIGAN: Good to be with you, Lou.
DOBBS: Is this, in your judgment, the correct time for a public declaration of an exit strategy in Iraq?
LEVIN: Well, we needed an exit strategy going in. You always want to have an exit strategy whenever you go into combat, so that's long overdue.
What is not appropriate at this time, as far as I'm concerned, would be to specify when we leave and what the draw-down of troops would be. But what the circumstances are that would allow us to leave should be set out and, as a matter of fact, they're long overdue.
DOBBS: The president, as you know, has said that, when Iraqi forces are able to take over the duties of U.S. forces now in Iraq, that would be the appropriate time and condition for a withdrawal. Is that satisfactory to you?
LEVIN: It will be satisfactory, subject to a couple things.
First, we should have discussions with the new government in Iraq when it's created in the next few months as to how to achieve that.
Secondly, we've got to expedite and accelerate that process.
Third, we've got to be honest about what the capability of the Iraqi forces are. There has not been straight answers on that subject. And that was really the issue today at the hearing at the Armed Services Committee, because the administration has been using a figure of 135,000 trained and equipped Iraqi forces, and that's a massive exaggeration. It perhaps is one-third of that. But we've got to be honest about what our challenges are ahead. We want to be hopeful. We want to be optimistic. We want to leave a stable Iraq. But we've got to be realistic as to what these hurdles are that have to be jumped.
DOBBS: Deputy Defense Secretary Paul Wolfowitz told your committee today that he felt that about 15,000 troops could be drawn down and withdrawn from Iraq, no timetable on that. Does that seem just about right to you?
LEVIN: Well, I don't know what that means, if he didn't put a timetable on it. I would hope a lot more troops would be withdrawn over time than that. But, without a timetable, it's not a particularly meaningful statement.
DOBBS: Well, speaking of perhaps not meaningful statements today, Paul Volcker, leading the investigation, the U.N.'s own investigation, came forward and said that there were irreconcilable conflicts of interest there. You, Senator Norm Coleman calling for investigations there.
How satisfied are you with the pace of the Volcker investigation? And what is your view right now on what should be done here, along with the U.S. attorney investigating the oil-for-food scandal?
LEVIN: I think that his investigation is going very well, and it's very thorough. And it's obviously producing some very significant findings, including apparently a significant conflict of interest on the part of one U.N. employee. Not a surprise, given the previous reports.
But, nonetheless, more evidence, apparently, has been produced. What he also has said is something which we've got to look into, which is, why is it that the United States, Britain and other countries looked the other way when Saddam Hussein was selling oil openly to Jordan and to Turkey? And most of the illicit revenue, so-called, that Saddam got from oil sales that were in violation of the U.N. sanctions, came not from these kickbacks, not from illicit sales that were kind of smuggling stuff, but from these major open sales to our allies, which we knew about and looked the other way. And that's what Volcker also talked about in his report is that policy.
DOBBS: Talking about looking the other way and -- Senator, this question arises because of G.E.'s public statement that it's withdrawing its business from Iran. Many people surprised that it was doing business there through a subsidiary, or not, as is Halliburton -- as was Halliburton, ConocoPhillips.
Why has the United States Congress and the Bush administration failed to take note of the fact that American companies are dealing with a country that, as the president says, and certainly the Congress has acquiesced in, the principal state sponsor of terrorism?
LEVIN: It beats me. And it's worthy of a significant oversight.
I think Congress has fallen down in oversight responsibilities of this administration. The Republicans control both houses. It's difficult to look into an administration of the same party, regardless of what the party is in office.
But it's been very -- it's been like pulling teeth to get significant oversight in this Congress of failures of the administration. And I was -- I think this is one area which requires -- it demands and cries out for an oversight hearing.
DOBBS: Senator Carl Levin. Good to have you with us.
LEVIN: Good being with you, Lou.
DOBBS: Top generals today rallied around one of this country's most highly decorated warriors who declared, quote, "It's a hell of a hoot," end quote to fight in combat and shoot the enemy. Lieutenant General James Mattis made the comments earlier this week during a panel discussion in San Diego, California.
(BEGIN VIDEO CLIP)
LT. GEN. JAMES MATTIS, U.S. MARINES: Actually, it's a lot fun to fight them, you know? It's a hell of a hoot. It's fun to shoot some people. I'll be right up front with you, I like brawling.
(END VIDEO CLIP)
DOBBS: The commandant of the U.S. Marine Corps, General Mike Hagee, today said, quote, "I have counseled General Mattis about his remarks. And he agrees he should have chosen his words more carefully."
General Hagee described General Mattis as one of this country's bravest and most experienced leaders. Those comments were echoed by another top Marine general today.
(BEGIN VIDEO CLIP)
GEN. PETER PACE, JOINT CHIEFS VICE CHAIRMAN: The last three times that that general has been in combat, when he was leading Marines in Afghanistan, and the two times that he led his division in Iraq, his actions and those of his troops clearly show that he understands the value of proper leadership and the value of human life.
(END VIDEO CLIP)
DOBBS: Well, there are some who would say that the hard truth is that the news would have been, if this general had said almost anything else, and those same people would say that this country needs leaders like General Mattis in wartime and in peace, in point of fact.
A few unscripted comments should under no circumstances, in my opinion, overshadow the dedicated service of General Mattis and our troops in the war in Iraq and the global war on terror.
And the commandant of the Marine Corps, General Hagee, in my estimation, deserves great credit for supporting his leaders.
Joining me now is General David Grange.
General, you're one of the most decorated general staff members in the country's military history. You've read what General Mattis said. What's your reaction?
BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, I think what the general said was inappropriate at the forum where he said those words. However, those are the kind of words that you tell your troopers before they go into a place like Fallujah, where they have to be focused on killing the enemy. And if you do anything less than that, then you put their lives at stake. They must be focused. And that's probably where he did most of that type of talking in the past.
DOBBS: General, when you hear the -- and I'm going to style it this way -- the clucking around these comments, and the people are so offended about a general, a Marine general, saying something like this, how do you react? I mean, what's your visceral reaction, a combat veteran, a highly decorated one, with -- commanding men over a long period of time in wartime?
GRANGE: Well, I mean, it doesn't bother me a whole lot. I don't think the general meant everything he said in some of those words, because I truly don't believe that he personally likes to kill people. I haven't met anybody that really likes to kill people. I do know of a lot of people that enjoy combat, the leading, the excitement, the responsibility of leading soldiers in that type of environment.
And so, you know, I take it a little bit different. I think that he's a great leader. His troops love him. And he's the kind of guy you need in a place like Fallujah, if you want to win.
DOBBS: There is an almost an immediate impulse, it seems to me today, in this country today, when someone says something like this, for whatever his reasons, perhaps jocularly, perhaps just simply misstating his thoughts, or saying precisely what he thought.
There is a P.C. orthodoxy that says we can't have room for people who say something beyond the convention or the, if you will, the optimum. Even the military has reached that level.
I have to ask you. General Hagee, the Marine Corps commandant, standing up quickly, counseling General Mattis, as they put it, and then backing him up 100 percent. Doesn't that make you feel pretty good?
GRANGE: It makes you feel very good. You know, you want your chain of command to back up your leaders. Look at Patton in World War II. He said a few things that people didn't like too well, and he was the best fighting general they had.
DOBBS: Well, we thank one of the best fighting generals we've had, Dave Grange. Thanks for being here. We appreciate your thoughts. GRANGE: My pleasure.
DOBBS: Next, a prominent conservative senator on why he says Social Security is in crisis.
(COMMERCIAL BREAK)
DOBBS: The president today began a five-state tour to try to convince the American people his so-called Social Security reforms are necessary in a time of crisis. Many voters are skeptical about the president's proposals to allow workers to set up personal retirement accounts, or private Social Security accounts. President Bush will end his day in Omaha, Nebraska. Dana Bash is already there and has our report.
(BEGIN VIDEOTAPE)
DANA BASH, CNN CORRESPONDENT (voice-over): Omaha, Nebraska, the heart of the conservative Midwest, home to trading giant AmeriTrade, Fortune 500 companies like Union Pacific, Berkshire-Hathaway, and its oracle, Warren Buffett. It seems an ideal place for the president to sell his plan for workers to divert some of Social Security into private accounts.
(on screen): But hundreds of Omaha residents have also seen investments go south. This was a home base for Enron. The building is now empty.
(voice-over): Former employees like Larry Moore call it simply the collapse. These letters brought word more than 60 percent of his retirement savings was gone.
LARRY MOORE, FMR. ENRON EMPLOYEE: It is our most sincere wish that payments under the deferral plans could continue. However, under bankruptcy law, the payments must be stopped.
NYDRA KARLEN, FMR. ENRON EMPLOYEE: Fleet Activity Center. This is Nydra. How may I help you?
BASH: Nydra Karlen lost $340,000 in her Enron 401(k) and had to get a part-time job. She's not destitute, she says, but almost retired and now counting on Social Security.
KARLEN: There were things I had planned for the grandkids I can't do.
BASH: Nydra and Larry share psychological scars of losing retirement money in Enron. But they differ on whether younger workers should be able to invest some Social Security in the private sector. Larry worries about market swings.
MOORE: Right now, I'm operating on about half of what I expected to. And it would be a lot less than that if Social Security hadn't been constant.
BASH: Nydra likes the president's idea. KARLEN: But if you look at the market over the whole, based on, you know, 50 years, you're going to see a huge difference between that and what you'd get from Social Security.
BASH: The stock market does yield an average 10 percent return. The Social Security Trust Fund, about one tenth of that. But Larry asks, what if the market tanks at the wrong time?
MOORE: If you're at an age where five years from now I'll be retiring and the market begins one of its long downward slumps, you have to have some mechanism in place.
BASH: Neither see an imminent Social Security crisis, but both want the issue addressed. Nydra does not want her kids paying more.
KARLEN: Are we going to take 20, 30 percent when there's only two workers for every retiree?
BASH: What about the younger generation the president keeps talking about saving Social Security for? We asked the 35-year-old manager here at Vidlak's.
ERIK LINHARDT, VIDLAK'S: If Social Security is not going to be there, which I don't think it will be, then I think it's, you know -- you're a 50-50 gamble either way.
BASH: And either way, perhaps the president's biggest second term challenge. Dana Bash, CNN, Omaha, Nebraska.
(END VIDEOTAPE)
DOBBS: My guest tonight strongly supports the president's plans for Social Security reform. He's supported the idea of personal savings accounts for a decade now.
And joining us from Capitol Hill is Senator Rick Santorum. He's chairman of the Social Security Subcommittee and member of the Senate Finance Committee, as well as chairman of the Senate Republican Conference.
Good to have you with us, Senator.
SEN. RICK SANTORUM (R), PENNSYLVANIA: Thank you, Lou. It's good to be with you.
DOBBS: The president said we're in crisis, we're going to be bankrupt, the Social Security system is going to be bankrupt by 2042. The Democrats, you could hear them shouting, "No." You could hear them very well.
SANTORUM: Yes.
DOBBS: That doesn't square up with the analysis, either of the Congressional Budget Office, as recently as Monday, as you know. Why the press for this right now? SANTORUM: Well, what we do know are a couple of things. Number one, whether it's the Congressional Budget Office or Social Security, we begin to pay out more in benefits than we take in in Social Security taxes in the year 2018 or 2020. But sometime in the next 13- 15 years, we're going to start to -- instead of having Social Security revenues help fund a surplus that hides the deficit, it's going to add dramatically to the deficit to the tune of $200 to $300 billion in about 25 to 30 years.
That's a big burden for general government to have this huge transfer to Social Security at the time when Medicare costs are going up the like. So there's a real need, a real problem, from a cash-flow point of view that's going to hit us rather shortly. And what the president is suggesting is that what we have to do is prepare for that now instead of waiting until we get to that point where we're in real trouble, and we have to raise taxes and cut benefits at that point.
DOBBS: Senator, just to play devil's advocate here, and also to express a little of my personal viewpoint on this at the same time, the fact is that each year we have been watching these projections on the point at which outgo will exceed the revenue of the Social Security system. We've seen them keep going further and further into the odd years.
Secondly, the idea of -- and you focus on this yourself -- about $13 trillion in unfunded liabilities of the Social Security system. Well, the Medicare system is double that.
SANTORUM: Yes.
DOBBS: If we're going to take on issues, why not take on the larger and -- or at least both -- and get honest about both programs?
SANTORUM: Yes. You know, Lou, that's a great question. And, you know, we really should look at both of those programs. Let me tell you why I believe we're starting with Social Security. Because it's the one that you can actually fix and do so without a great deal of pain.
You can do it in a way, using personal retirement accounts, to help finance the long-term problems in Social Security. The problem with Medicare, candidly, is it's just a much harder fix. I mean, you're looking at, I would argue, real pain.
And there's also one difference. We really don't know the effect of medical technology and a whole lot of other things that impact Medicare, where really Social Security is pretty much -- you know, is a pretty flat curve, if you will, as to how much change is going to be in the system. Medicare, we just don't know the dynamics of the healthcare market and what it's going to mean on cost in the future.
DOBBS: In terms of the future on Social Security itself, Senator, as you well know, there is great debate about whether or not -- the president bluntly stated "bankrupt in 2042." The out years have pushed as much as a decade beyond that. With other assumptions, you can move another three or four decades. SANTORUM: Or you can move it up another couple of decades.
DOBBS: Exactly.
SANTORUM: I mean, that's the mid-term course. I mean, there's worse case...
DOBBS: But in point of fact, isn't it true, whether one talks about private accounts or not, we're talking about as much as -- as little as three-quarters of a trillion dollars, if I can style it that way, to about $2 trillion indebtedness that will be added over a ten- year period in transition costs if these reforms as they're now articulated were to be put in effect. How in the world can we afford that?
SANTORUM: Well, I would say, how can't we afford it? And the reason I say that, Lou, is because, if you look at any of the deficit projections going out past 10, 15 years, and you look at the tremendous growth in Medicare and other health programs, you look at interest costs, you look at other spending, deficit projections in the future look much worse than they do now. And one of the ways to get a handle on that is to pre-fund our liability, reduce the government guaranteed benefit out there as a result, because people aren't paying in as much directly to the system -- therefore, the benefit isn't going to be as much -- and rely upon personal retirement accounts that make up the difference in that benefit.
DOBBS: I'm got to leave it with me scratching my head, Senator, how those...
SANTORUM: I'll come back, and we'll talk again.
DOBBS: Please do. And then we can talk about some other issues that we need to take care of, like record trade deficits, 28 consecutive years of them, immigration reform. You guys don't even want to talk about immigration now. What's wrong?
SANTORUM: Well, the president talked about it last night, and, you know, he has a program that, you know, hopefully we can attract some bipartisan support and...
DOBBS: Are you there now? Are you fully on board with the president on what he's saying?
SANTORUM: I'm not fully on board, but, look, I believe we have to document workers. And one thing I also believe is we can't do amnesty.
DOBBS: You need to come back so we can do some more talking. Now we got something to talk about, Senator.
SANTORUM: All right, Lou.
DOBBS: Senator Rick Santorum, thanks for being here.
SANTORUM: Thank you. DOBBS: Next, a critic of President Bush says Social Security is a problem much smaller than the president wants you to believe.
(COMMERCIAL BREAK)
DOBBS: My guest has been one of the most vocal critics of President Bush and his plan to reform Social Security. Paul Krugman is columnist for "The New York Times," professor of economics in international affairs at Princeton. And it's good to have you with us.
PAUL KRUGMAN, PROFESSOR OF ECONOMICS: Good to be on.
DOBBS: A crisis, we have to get it fixed. Why don't you buy that?
KRUGMAN: Mild long-run shortfall. You know, any number that you do on Social Security, it ends up being three times or five times as big for the tax cuts. You know, leave aside Medicare, but just the tax cuts. CBO estimate of the Social Security shortfall over 75 years is 0.4 percent of GDP. The tax cuts, the Bush tax cuts, are 2 percent. Why is this the crisis? And the really important thing is the privatization -- whatever they're calling it now, the latest euphemism...
DOBBS: "Personalization."
KRUGMAN: Right. You can get your benefit cuts in any color you want, right? But they don't address the problem. I mean, whatever the problem you think is -- there was a briefing by a senior administration official yesterday, a background briefing, in which he conceded, well, actually, the privatization is net neutral in its effect on the long-run budget. Now, I would say actually net negative, but he conceded that this has nothing to do with the problem.
DOBBS: It buffaloes me completely. And you're the economics professor. You tell me how you fix a problem without raising taxes, or cutting benefits, or extending the age at which you're eligible.
KRUGMAN: My version of this is you can, you know, private accounts will solve whatever you think the problem is if they go along with big benefit cuts, which is like saying that you can kill sheep with witchcraft as long as you also feed them arsenic. I mean, it's really -- it's completely irrelevant. They're using this as a blind, and they themselves admit it, when you push them hard on it.
DOBBS: All right. You're the hard analyst, the economic expert. You tell me. Is Social Security in need of reform in the next five years?
KRUGMAN: No. I mean, given what's been happening -- remember, if you look over the last seven years, the date of Trust Fund exhaustion has been receding about two years a year.
DOBBS: Right. KRUGMAN: So the prudent thing would actually be to say, well, let's look at it. Let's think about some plans, but let's see if those estimates keep on improving.
DOBBS: And the idea that we would be able to put private accounts in, which would effectively -- everyone talks about 4 percent, but let's talk about it in other terms, because the total money, we're talking about pulling a third of the money out of the system itself.
KRUGMAN: Right. You're building up enormous debt. And what they say is, well, OK, it doesn't matter, because we're going to make it up in lower benefit payments. But that savings is 50 years away.
DOBBS: Because we're going to make it up in what?
KRUGMAN: Lower benefit payments.
DOBBS: Ah.
KRUGMAN: But that savings -- you know, what -- you're taking on cold, hard debts. You're taking on bonds issued to the bank of Japan, the reserve bank of China, and you're saying it doesn't matter, because whoever is running the United States in 2050 is going to spend less money on Social Security.
DOBBS: Isn't this constant with the entire, sort of, faith-based economics that's abroad, not only in Washington and the Bush administration, but in academia, too. Because we have economists saying these huge trade deficits, and $4 trillion in external debt, and $8 trillion national debt, they don't matter.
KRUGMAN: It's harder...
DOBBS: There is a whole "it doesn't matter" crowd now that sort of grabbed the center of economic thought.
KRUGMAN: If you showed me our numbers, as shares of GDP, and didn't tell me what the country was, I'd say, "Argentina." That's what we look like.
DOBBS: Absolutely. And a host of reasons to be concerned.
KRUGMAN: Yes.
DOBBS: Social Security not preeminent in your judgment at all?
KRUGMAN: Fifth or so on my list of priorities of things to worry about. Way down there.
DOBBS: Come back soon, we'll get through to numbers one through four.
KRUGMAN: OK. Have a good time.
DOBBS: Paul Krugman. Good to have you with us. Still ahead, we'll have the results for you of tonight's poll and a preview of what's ahead tomorrow. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Now the results of our poll tonight. Ninety-four percent of you do not believe that President Bush will succeed in revamping Social Security, or, if you prefer, reforming Social Security. Six percent of you say he will.
We'll see. Thanks for being with us tonight. Please join us here tomorrow, when I'll be talking with one Democrat who will pay a key role in the president's push for Social Security reform.
Also tomorrow, our special report, "Protect America Now." A national effort to crack down on illegal aliens. We'll have the full story for you.
And, anything to save a dollar. Corporate America, rushing to ship jobs off-shore again without considering the risk. Our special report, "Exporting America," as well. Please join us.
For all of us here, thanks for being with us. 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 February 3, 2005 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, February 3. And here now for an hour of news, debate and opinion is Lou Dobbs.
LOU DOBBS, HOST: Good evening.
Tonight, the first definitive evidence that the multibillion- dollar United Nations oil-for-food scandal reached the top levels of the U.N.'s management. An interim report on the scandal says the U.N. official in charge of the oil-for-food program sought and took bribes from Saddam Hussein's government.
Tonight, U.N. Secretary-General Kofi Annan announced he will discipline that official. There's no word yet on whether or not Annan himself was involved in this scandal.
Senior United Nations correspondent Richard Roth is here with the report -- Richard.
RICHARD ROTH, CNN CORRESPONDENT: Lou, he was the man in charge of the United Nations oil-for-food office. But according to the initial findings by Paul Volcker's probers, he was kind of a fox using the henhouse.
Benon Sevan, a 30-year U.N. employee, is accused by Volcker of a grave conflict of interest, by pursuing oil deals for his own personal benefit. Sevan and the Arab oil Middle East company is charged with standing to profit more than a million dollars.
The first report by Volcker on the $64 billion program says Sevan also received cash payments totaling $160,000, which he claimed he received from his aunt, who recently died in his homeland of Cyprus.
Paul Volcker says the Iraqis thought they were buying influence in allocating oil rights to Sevan.
Now Sevan, in a printed statement, has said that the Volcker panel succumbed to political pressure and now seeks to scapegoat him. He says Volcker needed a smoking gun and there is none. Quote, "Mr. Sevan never took a penny."
As for the disciplinary proceedings maybe some time next week, but there's really not really much the U.N. could do. He's getting a dollar a year to cooperate with the probe. But nestled in that Paul Volcker news conference, he said Mr. Sevan is not exactly now forthcoming regarding subsequent follow-up interviews. DOBBS: Not forthcoming: uncooperative, one can take that to mean. Volcker, how confident is he that he'll be able to pursue effectively his investigation, because he lacks, as we all know, subpoena power and has met, by his own words, some resistance within the U.N.?
ROTH: He said he's not worried about the lack of the subpoena power because he says he's getting good cooperation from countries overseas and various aspects of the U.S. government, and he hopes to have overlapping information with the U.S. attorney's office. And that's may be where the criminal part of this comes in, because Volcker is not going to be criminally charging Sevan or others.
Benon Sevan talked to me -- excuse me, Paul Volcker talked to me in this interview today about Benon Sevan and his role.
(BEGIN VIDEO CLIP)
ROTH: Is it fair to say, then, that the man who is running the oil-for-food program for the U.N. was corrupt?
PAUL VOLCKER, INDEPENDENT INVESTIGATOR: We don't know whether he got any money out of it. The investigation is continuing. But he certainly put himself in a position where he was conflicted.
ROTH: He wasn't getting it for UNICEF.
VOLCKER: I don't know that he's getting money at all. That's the subject of investigation.
ROTH: Who lost out in this case? I mean, should a taxpayer feel, when they hear million-dollar scandal, what was their cost?
VOLCKER: I think the real cost for this program was suspicion, concern that has arisen around the United Nations that impairs the effectiveness of that organization.
(END VIDEO CLIP)
ROTH: Yes. It is incredibly curious: Paul Volcker still says it's not a bribe. But in his findings, he says Sevan looked to get oil barrels, oil sales, almost everything but that, but he says it's not a bribe.
DOBBS: Paul Volcker, while a distinguished banker and central banker, has a legendary reputation for not always being completely declarative in his utterances. So some interpretation is always required.
An interpretation on where we go from here. Kofi Annan, his son implicated? Where do we head?
ROTH: Still being investigated. It will be several months more. He's not ruled out anything. He said Secretary-General Annan and the son cooperative in separate interviews, but so far he's not willing to list any type of proof of anything about those gentlemen at all. DOBBS: And Richard Roth, our senior U.N. correspondent, will continue to follow this story carefully. And we thank you. Good to see you, Richard.
In Iraq, two U.S. Marines were today killed in combat in Al Anbar province west of Baghdad. The U.S. military gave no details of how the Marines were killed.
Insurgents also killed at least 26 Iraqis in a series of other attacks over the past 24 hours. The insurgents 'targets include an Iraqi police convoy. It was attacked in western Baghdad. One Iraqi police officer was killed in that attack, three others were wounded.
President Bush today took his campaign to overhaul our Social Security system directly to the American people after his State of the Union address. President Bush believes voters will help him win over skeptical members of Congress, including a rising number of lawmakers within his own party.
Senior White House correspondent John King is traveling with the president and has our report.
(BEGIN VIDEOTAPE)
JOHN KING, CNN CORRESPONDENT (voice-over): Wheels down Fargo. Stop one in the Social Security sales pitch that will quickly test the president's second term political clout.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm going to travel our country, speaking as plainly as I can about a problem that I see.
KING: Five states in two days: North Dakota, Montana, Nebraska, Arkansas and Florida. All share this: Mr. Bush won them on the way to reelection, but all have Democratic senators who oppose the president's Social Security plan.
SEN. BYRON DORGAN (D), NORTH DAKOTA: The president is saying, let's borrow $1 to $3 trillion, stick it in the stock market, cut Social Security benefits and somehow that will be good? Most people, I think, will understand that doesn't add up.
KING: Revamping Social Security is the most ambitious domestic challenge of the Bush presidency. One urgent goal is to convince politically powerful older voters, anyone over age 55, that the Bush plan would not touch their benefits.
BUSH: For those of you who've received your check or are about to receive your check, not one thing will change.
KING: Another hurdle is rebutting Democrats who say the private investments accounts Mr. Bush wants for younger accounts would destroy a program designed as a guaranteed government safety net.
JOHN SNOW, TREASURY SECRETARY: These would be safe investment vehicles. They would -- wouldn't be allowed to go out to the Las Vegas and play the wheels or go to the racetrack.
KING: Protests in Fargo underscore why Republicans are nervous. Mr. Bush says the debate must consider trimming benefits and raising the retirement age.
(on camera) Touching Social Security has long been deemed political suicide. So Mr. Bush's enormous first challenge before there can be any negotiations about how to change the program, is turning public opinion to the point where doing nothing is deemed a greater political risk.
(voice-over) It's a tough sell, but Air Force One draws attention and local news coverage a member of Congress can only envy.
Mr. Bush compares the Democratic opposition to the first term vows he would never win sweeping tax cuts, but even allies concede this fight will be tougher and test the depth of what the president likes to call the political capital earned by winning reelection.
(END VIDEOTAPE)
KING: And Mr. Bush now speaking here in Great Falls, Montana, the second stop of this day. He will move on to Omaha, Nebraska, tonight.
When I spoke to the treasury secretary this morning, Lou, he said this is like a presidential campaign. Mr. Bush will be traveling. Large crowds, especially here at this event in Montana. The cabinet will be traveling as well, very much like the campaign, in that not only are Bush supporters but also Bush critics in this debate preparing to spend and spend and spend on television ads, as well -- Lou.
DOBBS: And spending, of course, will be one of the key issues within the entire matter of Social Security revamping, if not reform.
John King, I would like you, as well as our audience, to take a look at another president who talked about privatizing Social Security. This obviously not the first time it's been brought up. And, if you will, we'll all go back to January of 1999 and President Bill Clinton.
(BEGIN VIDEO CLIP)
BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I propose that we make the historic decision to invest the surplus to save Social Security. I propose that we commit 60 percent of the budget surplus for the next 15 years to Social Security, investing a small portion in the private sector, just as any private or state government pension would do. This will earn a higher return and keep Social Security sound for 55 years.
(END VIDEO CLIP)
DOBBS: Well, we've used up, John King, five years of that period of time. And of course, have not privatized anything. What is the White House reaction to the fact that this is, frankly, an echo of President Bill Clinton?
KING: The policy proposals are a bit different, Lou. But the White House is certainly saying that President Clinton tried to show leadership on this issue, and now President Bush is trying to show leadership on this issue.
One of the things President Clinton had on the table back in those days was even more dramatic. He wanted the government to put the money in stocks and bonds and for the government to manage those accounts.
Many Democrats were against that idea, but of course you had a Democratic president at the time, which is one key difference here. Democrats protect Social Security. They view it as their program.
And another key difference, of course, is the federal government was running a huge surplus at the time, so it was an easier debate, if you will, politically. You were not spending -- you were not talking of Social Security running out of money. You were talking about a government that was awash in money.
So Democrats say when Mr. Bush cites Mr. Clinton, he's taking Mr. Clinton out of context because Bill Clinton did say this about the surplus. He said don't spend it on tax cuts until you take care of Social Security.
But the Bush team certainly thinks they can use those remarks by President Clinton to make the case that this should have been dealt with long ago and that this president will force the Congress to deal with it now -- Lou.
DOBBS: John King, our senior White House correspondent. Thank you.
That brings us to the subject of our poll tonight: "Do you believe President Bush will succeed in revamping Social Security?" Yes or no. Cast your vote at LouDobbs.com. We'll have the results coming up later in the broadcast.
During last night's State of the Union, President Bush also tried to ease widespread concern that he is failing to address the immigration crisis facing this country. President Bush sounded like he was talking tough on this critical issue. But the harsh reality is that the Bush administration is taking almost no action to protect this country from the invasion of illegal aliens or to provide border security.
Casey Wian reports from Los Angeles.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): It's been more than a year since President Bush first proposed reforming the nation's immigration system. He repeated the broad outlines of his plan during his State of the Union address. GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It is time for an immigration policy that permits temporary guest workers to fill jobs Americans will not take, that rejects amnesty, that tells us who is entering and leaving our country and that closes the border to drug dealers and terrorists.
WIAN: Congress in December authorized hiring 2,000 additional Border Patrol agents in the upcoming fiscal year. Agents in the field say they're badly needed, especially given the alarming number who are coming under fire from drug and alien smugglers.
In the 261-mile stretch of border known as the Tucson sector, there were 81 assaults against Border Patrol agents in the past four months, including nine shootings. That's twice as many as the same period last year.
But recently retired Homeland Security Secretary Tom Ridge called plans to hire 2,000 additional Border Patrol agents fool's gold, and departing Border Patrol Security Chief Asa Hutchinson says funding issues within the department will prevent the president from filling all but a relative handful of those calls.
Meanwhile, the closest the Democratic response came to border or immigration issues was this:
REP. NANCY PELOSI (D-CA), MINORITY LEADER: As we strive to close the gaps in our security here at home, we must do more to show -- more to show our great strength as well as our greatness. We must extend the hand of friendship to our neighbors in Latin America.
WIAN: Latin America continues to send its poor to the United States. Southern border apprehensions are up 14 percent so far this fiscal year. In a written statement, President Bush's Homeland Security secretary nominee told a Senate confirmation panel that border security will be improved by a guest worker program. Michael Chertoff added he's a strong supporter of the plan.
(END VIDEOTAPE)
WIAN: But, of course, there are plenty of opponents to the idea in the president's own party, and few in Congress seem ready to bring the president's immigration reform plans to a vote any time soon -- Lou.
DOBBS: It's a remarkable situation in which the Democrats are calling for open borders and the president is talking about what is effective amnesty. And the Homeland Security secretary nominee saying he's perfectly happy with the situation.
Casey Wian.
Thank you, sir.
Coming up next, forcing China to play fair. A plan, believe it or not, to save American jobs.
(COMMERCIAL BREAK)
DOBBS: The advertising industry is the latest to export American jobs to cheap foreign labor markets. One of this country's largest advertising agencies is now shipping creative work to teams in India, teams that are paid a fraction of what their American counterparts are paid.
Kitty Pilgrim has the story.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN BUSINESS CORRESPONDENT (voice-over): The jeans are American. The commercial is produced in India. Banerjee Advertising is based in New York, but the founder of the company is increasingly outsourcing the production of some of his commercials to India.
DAVE BANERJEE, FOUNDER, BANERJEE & PARTNERS: There are three things inevitable, unavoidable -- death, taxes and outsourcing.
PILGRIM: The way it works is the commercials are thought up in New York, but produced, shot and finished in their office in Bangalore. The owner defends the practice.
BANERJEE: And it just happened to be way cheaper than America because we are getting global talents and their cost of living is so much lower. Even they're happy to work at, you know, half the cost or even less.
PILGRIM: Madison Avenue is the traditional home of the American media and advertising business, and, although based in New York, many U.S. advertising firms are global, with branches in major cities around the world.
The common wisdom is commercials produced in a country sell well to consumers in that country because of cultural subtleties, and that's why advertising veterans are skeptical commercials produced abroad will strike just the right note in America.
TIM MELLORS, PRESIDENT, GREY WORLDWIDE NORTH AMERICA: The problem with this idea is it's saying, well, we'll have some of the ideas here, and then we'll get a group of people in Bangalore or other parts of India to actually come up with the creative work. My feeling there is that it's driven by one thing -- price. It's about cheapness.
PILGRIM: Grey Global nurtures their creative talent in New York and finds outsourcing splits creative execution away from the creative idea, something that they feel diminishes the effectiveness of the ad.
(END VIDEOTAPE)
PILGRIM: Now since the beginning of advertising, there have been people trying to undercut and reduce costs in building commercials. But ad experts say that in the competitive marketplace, a well-placed commercial can do more for the bottom line than saving on production costs -- Lou.
DOBBS: And the fellow says the only certainty in life -- death, taxes and outsourcing.
PILGRIM: Outsourcing. That was his philosophy.
DOBBS: I hope that's a brilliant American attitude. We should point out that even though Levi's is an American company, they produce those jeans outside this country.
Thank you very much, Kitty.
Kitty Pilgrim.
Well, lawmakers on Capitol Hill tonight are taking action to put a stop to China's unfair trade practices. At least they're trying. Senator Chuck Schumer of New York and Senator Lindsey Graham of South Carolina today proposed legislation that would impose a 27 percent tariff on Chinese goods imported into this country.
Lisa Sylvester reports from Washington.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT (voice-over): When it comes to China's currency advantage, two prominent senators are sick and tired of waiting for the Bush administration to act.
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: And as we fiddle, Rome is burning. We're losing jobs unfairly.
SEN. CHARLES SCHUMER (D), NEW YORK: And so we're tired of verbiage. We're tired of timetables without specific dates and specific numbers. And it's time to act.
SYLVESTER: Senators Charles Schumer and Lindsey Graham have proposed a 27-1/2 percent tariff on goods imported from China to take effect in six months unless China revalues its currency. China has been artificially pegging its currency to the dollar so that its goods are cheaper on the world market.
The result has been a $160 billion U.S.-China trade deficit and the loss of scores of American jobs. The Bush administration has taken the soft-handed approach, using diplomacy, but patience is running thin for some on Capitol Hill, as evident in a U.S.-China Commission hearing today.
RICHARD D'AMATO, U.S.-CHINA COMMISSION: The Chinese know a warning when they see it. It's whether or not the administration is going to be serious. If the administration was serious and the Chinese thought there was going to be penalties, the administration was going to put on, the Chinese would move.
SYLVESTER: Retailers say the proposed tariff will mean higher prices for consumers. ERIK AUTOR, NATIONAL RETAIL FEDERATION: Were it to come into law, it would be the U.S. consumer that would be paying the 27.5 percent duty. It's essentially a tax. It's a sales tax on American consumers.
SYLVESTER: But many lawmakers believe that most Americans, if given the choice of low prices at the store or their jobs, they would choose jobs.
(END VIDEOTAPE)
SYLVESTER: When asked if the tariffs would be considered a trade violation, Schumer and Graham said they welcome the Chinese to take their case before the World Trade Organization. Maybe then, they say, China will be forced to refigure its currency rate -- Lou.
DOBBS: Not only the difficult and complex relationship with China, but also the extraordinary subordinate position the United States puts itself in vis-a-vis the World Trade organization. My, oh, my, what will the WTO think of it all.
Lisa, thank you very much.
Lisa Sylvester.
Next here, why a growing list of companies now say they won't be doing business in one member state of the axis of evil.
(COMMERCIAL BREAK)
DOBBS: The Iranian government today blasted President Bush's State of the Union address, saying the president called Iran the world's primary state sponsor of terror and that's unacceptable. Iran supreme leader said the White House is trying to bring down the Islamic Republic, an effort he says will fail.
All of this comes as another U.S. company announces it will not do business in Iran. General Electric says conditions there are simply now too uncertain.
Bill Tucker reports.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN FINANCIAL CORRESPONDENT (voice-over): In the face of mounting political pressure, General Electric is ending its business ties with Iran. GE, Halliburton and ConocoPhillips have been doing business in Iran for years under the cover of foreign subsidiaries they own and control.
Had any done business directly with Iran, they would have been breaking United States law. The use of foreign subsidiaries made it legal. It's a distinction lost on some powerful people.
SEN. FRANK LAUTENBERG (D), NEW JERSEY: When they drill for oil in Iran, it means that Iran will have more revenues to give to Hamas and Hezbollah and Islamic Jihad. These are terrible organizations, and their mission is to kill Americans. How can they -- how can a CEO look in the mirror in the morning and say, OK, I don't care, I'm going to go ahead and do my business?
TUCKER: General Electric is the most recent to make the announcement, the company citing what it calls "the uncertain conditions in Iran." It says it will no longer take orders, but it will fulfill outstanding contracts.
New York City Comptroller William Thompson, who controls $82 billion in city employee pension funds, had been actively encouraging GE to pull out of Iran, and he welcomed the news, saying that he is glad General Electric is agreeing with what he's maintained all along, "that doing business with nations supporting terrorism is bad for the bottom line." Thompson and others argue that investors should take their money out of companies doing business with terrorist states.
FRANK GAFFNEY, CENTER FOR SECURITY POLICY: Don't put your money or your state pension fund's money into businesses that partner with America's enemies. That's the point.
(END VIDEOTAPE)
TUCKER: Senator Lautenberg will be introducing a new bill in the next few weeks to close the loophole which has allowed companies to skirt the sanctions law, Lou. Lautenberg wants to redefine that law so that it not only includes American companies but their foreign subsidiaries as well.
DOBBS: Speaking of the letter of the law and changing it, there isn't a single CEO of a single corporation doing business in Iran through a foreign subsidiary or otherwise that didn't understand what the law required and its intent. It's another example of the low standards that corporate America has come to embrace, and, hopefully, the loopholes can be closed.
Bill Tucker.
Thank you.
Next, a leading senator calls for an exit strategy for American troops in Iraq.
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DOBBS: In a moment, the exit strategy for U.S. troops in Iraq. I'll be talking with the ranking Democrat on the Senate Armed Services Committee.
But, first, these developments tonight.
Alberto Gonzales officially sworn in as this country's new attorney general less than an hour ago. The Senate confirmed his nomination tonight, a 60-36 vote, the vote largely partisan, 35 Democrats voting against Gonzales. Many objected to his role in creating Bush administration policies on the handling of foreign terrorist suspects.
A Justice Department report tonight says the FBI has wasted millions and millions of dollars and years of work on a computer system that doesn't work. The new system was supposed to help the FBI better manage criminal and terrorism investigations in cases. The report blames bad planning at the FBI for the problems. The $170 million project may now be scrapped altogether.
And spectacular pictures tonight of lava from Hawaii spilling into the ocean in at least two new locations. As the lava hits the water, it creates an incredible scene with huge plumes of steam, as you see here. Crowds have been flocking to the sight since the fiery show began earlier this week.
The Senate Armed Services Committee today held hearings on our current military operations in both Iraq and Afghanistan. Senator Carl Levin is the ranking Democrat on that committee, and today, he said it's essential we develop an exit strategy for U.S. troops in Iraq.
He joins us tonight from Capitol Hill. Senator Levin, good to have you with us.
SEN. CARL LEVIN (D), MICHIGAN: Good to be with you, Lou.
DOBBS: Is this, in your judgment, the correct time for a public declaration of an exit strategy in Iraq?
LEVIN: Well, we needed an exit strategy going in. You always want to have an exit strategy whenever you go into combat, so that's long overdue.
What is not appropriate at this time, as far as I'm concerned, would be to specify when we leave and what the draw-down of troops would be. But what the circumstances are that would allow us to leave should be set out and, as a matter of fact, they're long overdue.
DOBBS: The president, as you know, has said that, when Iraqi forces are able to take over the duties of U.S. forces now in Iraq, that would be the appropriate time and condition for a withdrawal. Is that satisfactory to you?
LEVIN: It will be satisfactory, subject to a couple things.
First, we should have discussions with the new government in Iraq when it's created in the next few months as to how to achieve that.
Secondly, we've got to expedite and accelerate that process.
Third, we've got to be honest about what the capability of the Iraqi forces are. There has not been straight answers on that subject. And that was really the issue today at the hearing at the Armed Services Committee, because the administration has been using a figure of 135,000 trained and equipped Iraqi forces, and that's a massive exaggeration. It perhaps is one-third of that. But we've got to be honest about what our challenges are ahead. We want to be hopeful. We want to be optimistic. We want to leave a stable Iraq. But we've got to be realistic as to what these hurdles are that have to be jumped.
DOBBS: Deputy Defense Secretary Paul Wolfowitz told your committee today that he felt that about 15,000 troops could be drawn down and withdrawn from Iraq, no timetable on that. Does that seem just about right to you?
LEVIN: Well, I don't know what that means, if he didn't put a timetable on it. I would hope a lot more troops would be withdrawn over time than that. But, without a timetable, it's not a particularly meaningful statement.
DOBBS: Well, speaking of perhaps not meaningful statements today, Paul Volcker, leading the investigation, the U.N.'s own investigation, came forward and said that there were irreconcilable conflicts of interest there. You, Senator Norm Coleman calling for investigations there.
How satisfied are you with the pace of the Volcker investigation? And what is your view right now on what should be done here, along with the U.S. attorney investigating the oil-for-food scandal?
LEVIN: I think that his investigation is going very well, and it's very thorough. And it's obviously producing some very significant findings, including apparently a significant conflict of interest on the part of one U.N. employee. Not a surprise, given the previous reports.
But, nonetheless, more evidence, apparently, has been produced. What he also has said is something which we've got to look into, which is, why is it that the United States, Britain and other countries looked the other way when Saddam Hussein was selling oil openly to Jordan and to Turkey? And most of the illicit revenue, so-called, that Saddam got from oil sales that were in violation of the U.N. sanctions, came not from these kickbacks, not from illicit sales that were kind of smuggling stuff, but from these major open sales to our allies, which we knew about and looked the other way. And that's what Volcker also talked about in his report is that policy.
DOBBS: Talking about looking the other way and -- Senator, this question arises because of G.E.'s public statement that it's withdrawing its business from Iran. Many people surprised that it was doing business there through a subsidiary, or not, as is Halliburton -- as was Halliburton, ConocoPhillips.
Why has the United States Congress and the Bush administration failed to take note of the fact that American companies are dealing with a country that, as the president says, and certainly the Congress has acquiesced in, the principal state sponsor of terrorism?
LEVIN: It beats me. And it's worthy of a significant oversight.
I think Congress has fallen down in oversight responsibilities of this administration. The Republicans control both houses. It's difficult to look into an administration of the same party, regardless of what the party is in office.
But it's been very -- it's been like pulling teeth to get significant oversight in this Congress of failures of the administration. And I was -- I think this is one area which requires -- it demands and cries out for an oversight hearing.
DOBBS: Senator Carl Levin. Good to have you with us.
LEVIN: Good being with you, Lou.
DOBBS: Top generals today rallied around one of this country's most highly decorated warriors who declared, quote, "It's a hell of a hoot," end quote to fight in combat and shoot the enemy. Lieutenant General James Mattis made the comments earlier this week during a panel discussion in San Diego, California.
(BEGIN VIDEO CLIP)
LT. GEN. JAMES MATTIS, U.S. MARINES: Actually, it's a lot fun to fight them, you know? It's a hell of a hoot. It's fun to shoot some people. I'll be right up front with you, I like brawling.
(END VIDEO CLIP)
DOBBS: The commandant of the U.S. Marine Corps, General Mike Hagee, today said, quote, "I have counseled General Mattis about his remarks. And he agrees he should have chosen his words more carefully."
General Hagee described General Mattis as one of this country's bravest and most experienced leaders. Those comments were echoed by another top Marine general today.
(BEGIN VIDEO CLIP)
GEN. PETER PACE, JOINT CHIEFS VICE CHAIRMAN: The last three times that that general has been in combat, when he was leading Marines in Afghanistan, and the two times that he led his division in Iraq, his actions and those of his troops clearly show that he understands the value of proper leadership and the value of human life.
(END VIDEO CLIP)
DOBBS: Well, there are some who would say that the hard truth is that the news would have been, if this general had said almost anything else, and those same people would say that this country needs leaders like General Mattis in wartime and in peace, in point of fact.
A few unscripted comments should under no circumstances, in my opinion, overshadow the dedicated service of General Mattis and our troops in the war in Iraq and the global war on terror.
And the commandant of the Marine Corps, General Hagee, in my estimation, deserves great credit for supporting his leaders.
Joining me now is General David Grange.
General, you're one of the most decorated general staff members in the country's military history. You've read what General Mattis said. What's your reaction?
BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, I think what the general said was inappropriate at the forum where he said those words. However, those are the kind of words that you tell your troopers before they go into a place like Fallujah, where they have to be focused on killing the enemy. And if you do anything less than that, then you put their lives at stake. They must be focused. And that's probably where he did most of that type of talking in the past.
DOBBS: General, when you hear the -- and I'm going to style it this way -- the clucking around these comments, and the people are so offended about a general, a Marine general, saying something like this, how do you react? I mean, what's your visceral reaction, a combat veteran, a highly decorated one, with -- commanding men over a long period of time in wartime?
GRANGE: Well, I mean, it doesn't bother me a whole lot. I don't think the general meant everything he said in some of those words, because I truly don't believe that he personally likes to kill people. I haven't met anybody that really likes to kill people. I do know of a lot of people that enjoy combat, the leading, the excitement, the responsibility of leading soldiers in that type of environment.
And so, you know, I take it a little bit different. I think that he's a great leader. His troops love him. And he's the kind of guy you need in a place like Fallujah, if you want to win.
DOBBS: There is an almost an immediate impulse, it seems to me today, in this country today, when someone says something like this, for whatever his reasons, perhaps jocularly, perhaps just simply misstating his thoughts, or saying precisely what he thought.
There is a P.C. orthodoxy that says we can't have room for people who say something beyond the convention or the, if you will, the optimum. Even the military has reached that level.
I have to ask you. General Hagee, the Marine Corps commandant, standing up quickly, counseling General Mattis, as they put it, and then backing him up 100 percent. Doesn't that make you feel pretty good?
GRANGE: It makes you feel very good. You know, you want your chain of command to back up your leaders. Look at Patton in World War II. He said a few things that people didn't like too well, and he was the best fighting general they had.
DOBBS: Well, we thank one of the best fighting generals we've had, Dave Grange. Thanks for being here. We appreciate your thoughts. GRANGE: My pleasure.
DOBBS: Next, a prominent conservative senator on why he says Social Security is in crisis.
(COMMERCIAL BREAK)
DOBBS: The president today began a five-state tour to try to convince the American people his so-called Social Security reforms are necessary in a time of crisis. Many voters are skeptical about the president's proposals to allow workers to set up personal retirement accounts, or private Social Security accounts. President Bush will end his day in Omaha, Nebraska. Dana Bash is already there and has our report.
(BEGIN VIDEOTAPE)
DANA BASH, CNN CORRESPONDENT (voice-over): Omaha, Nebraska, the heart of the conservative Midwest, home to trading giant AmeriTrade, Fortune 500 companies like Union Pacific, Berkshire-Hathaway, and its oracle, Warren Buffett. It seems an ideal place for the president to sell his plan for workers to divert some of Social Security into private accounts.
(on screen): But hundreds of Omaha residents have also seen investments go south. This was a home base for Enron. The building is now empty.
(voice-over): Former employees like Larry Moore call it simply the collapse. These letters brought word more than 60 percent of his retirement savings was gone.
LARRY MOORE, FMR. ENRON EMPLOYEE: It is our most sincere wish that payments under the deferral plans could continue. However, under bankruptcy law, the payments must be stopped.
NYDRA KARLEN, FMR. ENRON EMPLOYEE: Fleet Activity Center. This is Nydra. How may I help you?
BASH: Nydra Karlen lost $340,000 in her Enron 401(k) and had to get a part-time job. She's not destitute, she says, but almost retired and now counting on Social Security.
KARLEN: There were things I had planned for the grandkids I can't do.
BASH: Nydra and Larry share psychological scars of losing retirement money in Enron. But they differ on whether younger workers should be able to invest some Social Security in the private sector. Larry worries about market swings.
MOORE: Right now, I'm operating on about half of what I expected to. And it would be a lot less than that if Social Security hadn't been constant.
BASH: Nydra likes the president's idea. KARLEN: But if you look at the market over the whole, based on, you know, 50 years, you're going to see a huge difference between that and what you'd get from Social Security.
BASH: The stock market does yield an average 10 percent return. The Social Security Trust Fund, about one tenth of that. But Larry asks, what if the market tanks at the wrong time?
MOORE: If you're at an age where five years from now I'll be retiring and the market begins one of its long downward slumps, you have to have some mechanism in place.
BASH: Neither see an imminent Social Security crisis, but both want the issue addressed. Nydra does not want her kids paying more.
KARLEN: Are we going to take 20, 30 percent when there's only two workers for every retiree?
BASH: What about the younger generation the president keeps talking about saving Social Security for? We asked the 35-year-old manager here at Vidlak's.
ERIK LINHARDT, VIDLAK'S: If Social Security is not going to be there, which I don't think it will be, then I think it's, you know -- you're a 50-50 gamble either way.
BASH: And either way, perhaps the president's biggest second term challenge. Dana Bash, CNN, Omaha, Nebraska.
(END VIDEOTAPE)
DOBBS: My guest tonight strongly supports the president's plans for Social Security reform. He's supported the idea of personal savings accounts for a decade now.
And joining us from Capitol Hill is Senator Rick Santorum. He's chairman of the Social Security Subcommittee and member of the Senate Finance Committee, as well as chairman of the Senate Republican Conference.
Good to have you with us, Senator.
SEN. RICK SANTORUM (R), PENNSYLVANIA: Thank you, Lou. It's good to be with you.
DOBBS: The president said we're in crisis, we're going to be bankrupt, the Social Security system is going to be bankrupt by 2042. The Democrats, you could hear them shouting, "No." You could hear them very well.
SANTORUM: Yes.
DOBBS: That doesn't square up with the analysis, either of the Congressional Budget Office, as recently as Monday, as you know. Why the press for this right now? SANTORUM: Well, what we do know are a couple of things. Number one, whether it's the Congressional Budget Office or Social Security, we begin to pay out more in benefits than we take in in Social Security taxes in the year 2018 or 2020. But sometime in the next 13- 15 years, we're going to start to -- instead of having Social Security revenues help fund a surplus that hides the deficit, it's going to add dramatically to the deficit to the tune of $200 to $300 billion in about 25 to 30 years.
That's a big burden for general government to have this huge transfer to Social Security at the time when Medicare costs are going up the like. So there's a real need, a real problem, from a cash-flow point of view that's going to hit us rather shortly. And what the president is suggesting is that what we have to do is prepare for that now instead of waiting until we get to that point where we're in real trouble, and we have to raise taxes and cut benefits at that point.
DOBBS: Senator, just to play devil's advocate here, and also to express a little of my personal viewpoint on this at the same time, the fact is that each year we have been watching these projections on the point at which outgo will exceed the revenue of the Social Security system. We've seen them keep going further and further into the odd years.
Secondly, the idea of -- and you focus on this yourself -- about $13 trillion in unfunded liabilities of the Social Security system. Well, the Medicare system is double that.
SANTORUM: Yes.
DOBBS: If we're going to take on issues, why not take on the larger and -- or at least both -- and get honest about both programs?
SANTORUM: Yes. You know, Lou, that's a great question. And, you know, we really should look at both of those programs. Let me tell you why I believe we're starting with Social Security. Because it's the one that you can actually fix and do so without a great deal of pain.
You can do it in a way, using personal retirement accounts, to help finance the long-term problems in Social Security. The problem with Medicare, candidly, is it's just a much harder fix. I mean, you're looking at, I would argue, real pain.
And there's also one difference. We really don't know the effect of medical technology and a whole lot of other things that impact Medicare, where really Social Security is pretty much -- you know, is a pretty flat curve, if you will, as to how much change is going to be in the system. Medicare, we just don't know the dynamics of the healthcare market and what it's going to mean on cost in the future.
DOBBS: In terms of the future on Social Security itself, Senator, as you well know, there is great debate about whether or not -- the president bluntly stated "bankrupt in 2042." The out years have pushed as much as a decade beyond that. With other assumptions, you can move another three or four decades. SANTORUM: Or you can move it up another couple of decades.
DOBBS: Exactly.
SANTORUM: I mean, that's the mid-term course. I mean, there's worse case...
DOBBS: But in point of fact, isn't it true, whether one talks about private accounts or not, we're talking about as much as -- as little as three-quarters of a trillion dollars, if I can style it that way, to about $2 trillion indebtedness that will be added over a ten- year period in transition costs if these reforms as they're now articulated were to be put in effect. How in the world can we afford that?
SANTORUM: Well, I would say, how can't we afford it? And the reason I say that, Lou, is because, if you look at any of the deficit projections going out past 10, 15 years, and you look at the tremendous growth in Medicare and other health programs, you look at interest costs, you look at other spending, deficit projections in the future look much worse than they do now. And one of the ways to get a handle on that is to pre-fund our liability, reduce the government guaranteed benefit out there as a result, because people aren't paying in as much directly to the system -- therefore, the benefit isn't going to be as much -- and rely upon personal retirement accounts that make up the difference in that benefit.
DOBBS: I'm got to leave it with me scratching my head, Senator, how those...
SANTORUM: I'll come back, and we'll talk again.
DOBBS: Please do. And then we can talk about some other issues that we need to take care of, like record trade deficits, 28 consecutive years of them, immigration reform. You guys don't even want to talk about immigration now. What's wrong?
SANTORUM: Well, the president talked about it last night, and, you know, he has a program that, you know, hopefully we can attract some bipartisan support and...
DOBBS: Are you there now? Are you fully on board with the president on what he's saying?
SANTORUM: I'm not fully on board, but, look, I believe we have to document workers. And one thing I also believe is we can't do amnesty.
DOBBS: You need to come back so we can do some more talking. Now we got something to talk about, Senator.
SANTORUM: All right, Lou.
DOBBS: Senator Rick Santorum, thanks for being here.
SANTORUM: Thank you. DOBBS: Next, a critic of President Bush says Social Security is a problem much smaller than the president wants you to believe.
(COMMERCIAL BREAK)
DOBBS: My guest has been one of the most vocal critics of President Bush and his plan to reform Social Security. Paul Krugman is columnist for "The New York Times," professor of economics in international affairs at Princeton. And it's good to have you with us.
PAUL KRUGMAN, PROFESSOR OF ECONOMICS: Good to be on.
DOBBS: A crisis, we have to get it fixed. Why don't you buy that?
KRUGMAN: Mild long-run shortfall. You know, any number that you do on Social Security, it ends up being three times or five times as big for the tax cuts. You know, leave aside Medicare, but just the tax cuts. CBO estimate of the Social Security shortfall over 75 years is 0.4 percent of GDP. The tax cuts, the Bush tax cuts, are 2 percent. Why is this the crisis? And the really important thing is the privatization -- whatever they're calling it now, the latest euphemism...
DOBBS: "Personalization."
KRUGMAN: Right. You can get your benefit cuts in any color you want, right? But they don't address the problem. I mean, whatever the problem you think is -- there was a briefing by a senior administration official yesterday, a background briefing, in which he conceded, well, actually, the privatization is net neutral in its effect on the long-run budget. Now, I would say actually net negative, but he conceded that this has nothing to do with the problem.
DOBBS: It buffaloes me completely. And you're the economics professor. You tell me how you fix a problem without raising taxes, or cutting benefits, or extending the age at which you're eligible.
KRUGMAN: My version of this is you can, you know, private accounts will solve whatever you think the problem is if they go along with big benefit cuts, which is like saying that you can kill sheep with witchcraft as long as you also feed them arsenic. I mean, it's really -- it's completely irrelevant. They're using this as a blind, and they themselves admit it, when you push them hard on it.
DOBBS: All right. You're the hard analyst, the economic expert. You tell me. Is Social Security in need of reform in the next five years?
KRUGMAN: No. I mean, given what's been happening -- remember, if you look over the last seven years, the date of Trust Fund exhaustion has been receding about two years a year.
DOBBS: Right. KRUGMAN: So the prudent thing would actually be to say, well, let's look at it. Let's think about some plans, but let's see if those estimates keep on improving.
DOBBS: And the idea that we would be able to put private accounts in, which would effectively -- everyone talks about 4 percent, but let's talk about it in other terms, because the total money, we're talking about pulling a third of the money out of the system itself.
KRUGMAN: Right. You're building up enormous debt. And what they say is, well, OK, it doesn't matter, because we're going to make it up in lower benefit payments. But that savings is 50 years away.
DOBBS: Because we're going to make it up in what?
KRUGMAN: Lower benefit payments.
DOBBS: Ah.
KRUGMAN: But that savings -- you know, what -- you're taking on cold, hard debts. You're taking on bonds issued to the bank of Japan, the reserve bank of China, and you're saying it doesn't matter, because whoever is running the United States in 2050 is going to spend less money on Social Security.
DOBBS: Isn't this constant with the entire, sort of, faith-based economics that's abroad, not only in Washington and the Bush administration, but in academia, too. Because we have economists saying these huge trade deficits, and $4 trillion in external debt, and $8 trillion national debt, they don't matter.
KRUGMAN: It's harder...
DOBBS: There is a whole "it doesn't matter" crowd now that sort of grabbed the center of economic thought.
KRUGMAN: If you showed me our numbers, as shares of GDP, and didn't tell me what the country was, I'd say, "Argentina." That's what we look like.
DOBBS: Absolutely. And a host of reasons to be concerned.
KRUGMAN: Yes.
DOBBS: Social Security not preeminent in your judgment at all?
KRUGMAN: Fifth or so on my list of priorities of things to worry about. Way down there.
DOBBS: Come back soon, we'll get through to numbers one through four.
KRUGMAN: OK. Have a good time.
DOBBS: Paul Krugman. Good to have you with us. Still ahead, we'll have the results for you of tonight's poll and a preview of what's ahead tomorrow. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Now the results of our poll tonight. Ninety-four percent of you do not believe that President Bush will succeed in revamping Social Security, or, if you prefer, reforming Social Security. Six percent of you say he will.
We'll see. Thanks for being with us tonight. Please join us here tomorrow, when I'll be talking with one Democrat who will pay a key role in the president's push for Social Security reform.
Also tomorrow, our special report, "Protect America Now." A national effort to crack down on illegal aliens. We'll have the full story for you.
And, anything to save a dollar. Corporate America, rushing to ship jobs off-shore again without considering the risk. Our special report, "Exporting America," as well. Please join us.
For all of us here, thanks for being with us. Good night from New York. "ANDERSON COOPER 360" is next.
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