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LOU DOBBS TONIGHT

Tragic Helicopter Collision in Baghdad; Mass Grave Found; Spying Uproar; China Was Aggressive In 2005; U.S. Trains Illiterate Afghan Soldiers; Wars Prompt Young Veterans To Run For Office; NSA Spying Is A Mess For White House

Aired December 27, 2005 - 18:00   ET

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


CHRISTINE ROMANS, CNN ANCHOR: Good evening, everyone.
Tonight, the U.S. military suffers another setback in Iraq. A tragic midair helicopter collision in the skies over Baghdad as new insurgent violence rages on the ground.

The White House tonight refusing to comment on specifics of its secret surveillance program a full four days after damaging new reports in the press.

Wildfires, rockslides, heavy rain and blizzards. Dangerous weather is threatening millions in the last days of 2005. A live report coming up.

Plus, new moves tonight to kill our country's dangerous random visa lottery system. Will our country be a safer place without it? We'll have a special report

And a look back at Arnold's awful year, 2005, the political equivalent of a box office bust.

And an exclusive. Becky Diamond's live with our troops in Afghanistan.

We begin tonight in Iraq, where the death toll for U.S. troops has risen yet again after a tragic helicopter collision in Baghdad. The Pentagon says tonight that two U.S. soldiers died when U.S. Apaches collided in midair. Sixty-one U.S. troops have now lost their lives in Iraq this December.

Despite the hope of this month's elections, December turning into yet another month of substantial loss for our U.S. military overseas.

Jamie McIntyre is live at the Pentagon with the details.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Well, Christine, at this point, U.S. military authorities believe the latest deaths are attributable to an accident. Two Apache helicopters on night patrol last night apparently escorting another aircraft clipped each other, briefly collided in the air.

One of the helicopters crashed to the ground, burst into flame, killing the two U.S. Army soldiers who were on board that Apache attack helicopter. The second helicopter was able to get back to its base in Taji, northwest of Baghdad.

No indication of hostile fire in this incident. The last time two U.S. helicopters collided back in 2003, 17 soldiers were killed. Those Black Hawks were under fire. But again, at this point, the cause of this accident is under investigation. No indication of hostile fire.

The deaths come, as you said, as violence has flared up again in Iraq, particularly over the last few days when U.S. soldiers have died both in rocket-propelled grenade attacks and also roadside bombs. But the primary target has been Iraqi police forces.

Explosions rocked Baghdad, particularly yesterday, but also today, again, aimed at the Iraqi security forces which the U.S. believes the key to the eventual withdrawal of U.S. troops. And as you said, it was hoped that this election back on December 15 would perhaps take some of the steam out of the Sunni-backed insurgency. Instead, it seems that after a brief lull, the attacks have resumed with full force -- Christine.

ROMANS: And Jamie, this Apache accident sort of underscores how important this is as a means of transportation in this country, because the roads are so dangerous.

MCINTYRE: That's right. And these helicopters, while they weren't transport helicopters, these were combat helicopters with two- person crews. They were on a mission, we're told, to escort helicopters that were used to transport U.S. troops that were rotating into Iraq.

So, again, a very dangerous mission. They have to watch for threats on the ground, they have to be aware of what's happening in the air. And also, we don't know whether weather might have been a factor as well.

ROMANS: All right. Jamie McIntyre at the Pentagon.

Thanks, Jamie.

Also in Iraq, a gruesome discovery and a blunt reminder of the brutality Iraqis faced every day under the regime of Saddam Hussein. Workers in the town of Karbala today discovered a mass grave where the bodies of Saddam opponents appeared to have been buried more than a decade ago. The discovery comes on a day of new political tensions in Iraq.

Arwa Damon reports from Baghdad.

ARWA DAMON, CNN PRODUCER: Good evening, Christine.

A gruesome find for construction workers laying a water pipeline in the southern city of Karbala, and a reminder of Iraq's history under Saddam Hussein. As they were digging, they uncovered the skulls and bones that have been identified to be about at least 20 bodies of Shia who were killed in Iraq's 1991 uprising against Saddam Hussein. Now, countrywide, at least 30,000 Shia were believed to have been massacred, and officials say that some 300 mass graves have been uncovered since the fall of Saddam Hussein's regime.

On the political front this morning, 2,000 to 3,000 demonstrators took to the streets in Baghdad, protesting the preliminary results of Iraq's December 15 elections, alleging voter fraud. Now, the demonstration was organized by an alliance made up of at least 30 political parties, and they are demanding a revote. They're saying if their demands are not met, they will boycott the results of the elections and they will possibly even boycott Iraq's still to be formed parliament.

Now, that demonstration was peaceful, but 30 miles to the north, in the city of Baquba, a not so peaceful demonstration as about 700 students took to the streets there, again denouncing the preliminary results of Iraq's December 15 elections, carrying banners saying "Out, out, Iran. Baghdad will be free."

Now, there, as they made their way through central Baquba to the governor's compound, Iraqi police tried to stop them from getting close to the compound. Pushing and shoving started to happen, skirmishes. Iraqi police firing into the air, and about 10 students detained -- Christine.

ROMANS: All right. Arwa Damon.

Thank you.

As 2005 ends, the bush administration is still trying to win long-term commitments from its allies to rebuild and secure Iraq. It remains a major challenge.

In a victory for the Bush administration, the Polish government said today that it will seek permission to keep its troops in Iraq for another year, but two other members of the coalition of the willing today announced that their troop withdrawals are now complete.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): Today, there are half as many non-U.S. coalition forces than there were at the start of the Iraq war. For now, Poland remains a strong ally in Iraq. But at home, some Poles are unhappy that 17 have died with too few rewards. For example, easier access to U.S. visas or contracts for Polish companies rebuilding in Iraq.

But Poland remains in President Bush's coalition of the willing, a coalition some say is weakening. Even though U.S. forces have borne the brunt of the fatalities, 98 British troops have been killed, 26 Italians, 18 from Ukraine, and 13 from Bulgaria. Both those countries now pulling their troops out of Iraq.

Fulfilling Ukrainian President's Viktor Yushchenko's pledge to withdraw, today Ukraine's Ministry of Defense proclaimed, "Not a single Ukrainian soldier remains on Iraqi soil." In Bulgaria, the defense ministry today said it had completed its own military pullout from Iraq.

(END VIDEOTAPE)

ROMANS: And Hungary and Moldova left earlier this year.

Here at home, the White House tonight is refusing to comment on the full extent of its domestic spying program four days after reports that the program is much more widespread than originally thought.

Dana Bash is traveling with the president in Crawford, Texas, tonight.

Hi, Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Hi, Christine.

Well, the president was out of sight at his ranch here in Crawford, Texas, enjoying some of his favorite pastimes there, biking and clearing brush. But meanwhile, as you said, the White House is still refusing to confirm the reports that the National Security Agency is collecting and analyzing large amounts of information known as data mining with the help of U.S. telephone and Internet companies. That was first reported over the weekend by "the "New York Times"."

But the White House today was very insistent that Mr. Bush's 2002 directive allowing the NSA to conduct domestic violence is limited to terror suspects. White House spokesman Trent Duffy saying, "This is a limited program. This is not about monitoring phone calls designed to arrange Little League practice or what to bring to a potluck dinner. These are designed to monitor calls from very bad people to very bad people who have a history of blowing up commuter trains, weddings and churches."

And Christine, in talking to intelligence experts familiar with this program, they lament the fact that any of this, but particularly the data mining aspect, has become public. They say it's like giving battle plans to the enemy. But that is not going to go over, certainly with Democrats, even some Republicans well, because they say that is besides the point. They say this is, in their view, a violation of privacy, maybe even a violation of the law, and they're going to press, particularly in the Senate, the White House in hearings, I should say, congressional hearings early next year on this issue -- Christine.

ROMANS: And that's a question. Eventually, will the White House have to start addressing these questions more specifically and in full when Congress does hold those hearings?

BASH: That's an open question. And another question is, how much of it will be open?

ROMANS: Right.

BASH: I talked to Senator Patrick Leahy, the ranking Democrat on the Judiciary Committee, yesterday. He said that they are pushing to have as much of it in public view as possible. But as we've been talking about, this is highly, highly classified, so unclear how much or any of this will be in the public view or how much of it will be behind closed doors.

ROMANS: All right. Dana Bash, traveling with the president.

Thanks, Dana.

Coming up later on the broadcast, I'll talk with an attorney who says the only outrage about domestic wiretapping is that anyone at all would be outraged by it.

Still ahead, dangerous weather moves into the Northwest. Millions are in the path of this storm. We'll have that story and all the dramatic pictures.

Then, the visa lottery program is set to disappear, but will getting rid of this random immigration program make this country a safer place? Our special report on that coming up.

Now, 2005 has not been kind to California Governor Arnold Schwarzenegger. Can he rebound for the all-important reelection year? We'll have a live report from California next.

(COMMERCIAL BREAK)

ROMANS: People in Texas and Oklahoma are fleeing their homes because of fast-moving wildfires. A statewide disaster declaration has been announced in Texas by Governor Rick Perry after 73 wildfires broke out across that state.

Several homes near Arlington were engulfed, and fires are threatening several other homes and buildings. Dry conditions and wind gusts of up to 40 miles per hour are fueling the fires. Texas Army National Guard helicopters have been deployed, and Governor Perry has requested the assistance of the U.S. Forest Service.

In Oklahoma, the largest fire has burned through a square mile in Mustang, just west of Oklahoma City. Several homes were damaged. Three people suffered minor injuries.

All along the West Coast, people are bracing for a different kind of threat. A massive storm system is expected to slam into the coast, bringing heavy rain and flooding.

Rusty Dornin is live in Fort Point, California, with the latest -- Rusty.

RUSTY DORNIN, CNN CORRESPONDENT: Well, the rain is nothing new, Christine. We've been waterlogged here for about the past week. But this new series of storms is going to bring gusty winds and a lot more rain.

It's very warm. They refer to them as the pineapple expresses, and they sort of just blast across northern California when we get them. We're expecting anywhere from three to five.

Right now it's not raining. The wind has been picking up. Of course we are at the Golden Gate Bridge, where we've been watching a lot of surfers go out. They're expecting some huge waves to be coming in by tonight.

It's low tide right now. You can't really tell that the waves are getting big. But they're expecting waves 20 to 25 feet high by tonight and tomorrow.

Now, of course that's great for the surfers, but it does cause problems for the tourists and that sort of thing. They're walking along here. When they get some of these waves that they call sneakers, that can wash along the roadway, so you can have the concern that people can get washed away out into the bay, into the sea.

Up in the Sierra, there has been snowstorms for the past few days. More expected. The snow is expected to go down 5,000 feet.

This is the sort of very wet, heavy snow, though, which does cause still a lot of runoff in the rivers in the Sierra. So they say that the rivers in California's central valley also have been surging over the last few days, anywhere from 10 to 20 feet.

So the entire Pacific Northwest, we're going to be walloped over the next few days. You can only expect that you're going to start hearing about some mudslides, because what happens is the soil just gets too waterlogged and pretty soon the mud starts sliding, of course, especially in areas where they've had fire over the past year -- Christine.

ROMANS: All right. Rusty Dornin, Fort Point, California.

Thanks, Rusty.

Heavy rains being blamed for a series of rockslides in Vermont. Several huge boulders came crashing down onto a residential street in Montpelier. The rocks and the dirt fell from a 60-foot cliff, pulling down power lines and trees all along the way.

More than 50 people were evacuated from their homes. No one was injured.

U.S. Border Patrol officials have begun a massive new illegal alien crackdown on the U.S. border with Mexico. Officials have launched Operation Streamline Two, a multi-agency enforcement operation targeting a 205-mile sector along the Rio Grande near Del Rio, Texas.

This area is a high-traffic corridor for illegal alien smuggling. The aim of the operation is to catch, jail, prosecute and ultimately deport illegal aliens trying to enter this country. U.S. Customs and Border Protection official, the Justice Department, the U.S. Marshal Service and the Border Patrol all taking part in this operation.

Tonight the fight continues to plug a gaping loophole in our nation's immigration system. Critics say the U.S. system for handing out green cards is ludicrous and so fraught with abuse that it gives terrorists a virtual open invitation to enter this country.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): July 2002, a gunman opens fire at the Los Angeles International Airport, killing two and wounding four others. He's identified as Hesham Mohamed Hadayet, whose wife had won a green card through the visa lottery program. Critics say the system that grants 50,000 green cards every year to foreigners has been exploited by terrorists.

REP. ROBERT GOODLATTE (R), VIRGINIA: It is a program that gives green cards to people not based upon family reunification, not based upon an employer needing somebody to fill a job skill, where they can't find a U.S. citizen, but simply based upon pure luck. So it's an unfair program. It's a security risk. And it is just plain crazy.

SYLVESTER: Representative Robert Goodlatte is a former immigration lawyer. He introduced an amendment to the House Immigration Reform Bill to end the visa lottery system. It passed by a 2-1 margin, with 57 Democrats siding with Republicans.

During the House debate, supporters of the program, including Representative Sheila Jackson Lee, argued the lottery makes it easier for people from non-industrialized countries to emigrate.

REP. SHEILA JACKSON LEE (D), TEXAS: This program is a program that has improved and it works internationally to bring in our developing nations as friends of the United States.

SYLVESTER: But the inspector general for the Department of State found the system is subject to abuse. People will sign up multiple times, even though it's against the rules.

Criminal background checks are not extensive enough. And the Center for Immigration Studies says winning visa numbers are sold to terrorists, leaving the United States more vulnerable to a national security threat.

MARK KRIKORIAN, CENTER FOR IMMIGRATION STUDIES: The visa lottery standards are so low, and the requirements for people are so obviously vulnerable to fraud, that there's really no way to mend it. It has to be ended.

(END VIDEOTAPE)

SYLVESTER: The House passed the Immigration Reform Bill before the holiday recess, and the legislation included the amendment to end the visa lottery system. The Senate is expected to work on its version of the bill when it returns, and Representative Goodlatte is confident that his proposal, with strong bipartisan support, will ultimately be included in any final legislation -- Christine.

ROMANS: All right. Lisa Sylvester.

Thanks, Lisa.

And that brings us to tonight's poll. Do you believe eliminating the annual visa lottery program would help curb illegal immigration? Cast your vote at LouDobbs.com, and we'll bring you those results later in the broadcast.

Health officials are warning about a new strain of the flu virus. It's called the A California strain, and it's crowding emergency rooms all over the western United States. The CDC says the virus first emerged in Santa Clara County, California, last year. Since then, it has caused a large spike in the number of flu cases in San Diego and Los Angeles.

The virus has also spread to other states, with Utah reporting the worst outbreak so far.

The flu outbreak in California isn't the only challenge facing Governor Arnold Schwarzenegger. The governor is about to enter the year of his reelection campaign, enter it with dwindling public support.

Bill Schneider reports from Los Angeles.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Think President Bush had problems this year? So did his fellow Republican, California Governor Arnold Schwarzenegger.

Bush is saddled with an increasingly unpopular war. Schwarzenegger, who got elected in 2003 as a centrist, also declared war on labor unions, special interests, and the Democratic legislature in California.

Schwarzenegger's enemies fought back.

ROSE ANN DEMORO, CALIFORNIA NURSES ASSOCIATION: Teachers joined, firefighters joined, the police joined when Arnold attacked them.

SCHNEIDER: They handed the governor a blistering defeat in last month's special election.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I should have also listened to my wife, who said to me, "Don't do this."

SCHNEIDER: So now the governor is trying to move back to the center. He appointed the former executive director of the state Democratic Party as his chief of staff. He's trying to make pace with the unions.

SCHWARZENEGGER: Also, we'll get together and contact all the union leaders and let them know that I want to work with them and that I'm not anti-union.

SCHNEIDER: He's reaching out to Democrats by supporting major new public work spending on...

SCHWARZENEGGER: Infrastructure that we need: the growing population, the challenges of building more classrooms in the schools and more highways and freeways, and so on.

SCHNEIDER: Now the governor has got problems with his fellow Republicans, who don't like the new spending or the outreach to Democrats. Unlike Bush, Schwarzenegger is facing reelection next year. As of late October, the majority of California voters said they were not inclined to reelect him.

(END VIDEOTAPE)

SCHNEIDER: The center is usually a very good place to be politically, unless you discover that both sides don't trust you. In which case, it can get pretty lonely -- Christine.

ROMANS: He's got some time, though. What are Schwarzenegger's prospects at this point, you think, for reelection?

SCHNEIDER: Well, a lot of Democrats were hoping that they could get a celebrity candidate like Rob Reiner or Warren Beatty to challenge him. But they say they're not running.

Two Democrats are running, two officer holders, state treasurer Phil Angelides, state controller Steve Westly. Never heard of them? Neither have most Californians.

Can an unknown beat an outsized personality like Arnold Schwarzenegger? Maybe, because you know Californians have elected governors several times who were called boring white men: George Deukmejian, Pete Wilson, Gray Davis. Each of them got elected twice. So it can happen.

ROMANS: All right. Thanks so much. Bill Schneider.

SCHNEIDER: Sure.

ROMANS: Just ahead tonight, war on the middle class, rising fears that yet another cheap foreign labor market could put even more Americans out of work. And this labor market is closer to home. Our special report is next.

And red star rising. The threat of China's fast-growing military and economy became evident this year. So why isn't the White House doing anything about it? The author of "China Inc." will be our guest.

Stay with us.

(COMMERCIAL BREAK)

ROMANS: It's estimated as many as 800,000 American service jobs were lost this year due to corporate outsourcing. Now there's a new term and a new fear gripping our nation's middle class. It's called nearsourcing. And if our nation's multinationals have their way, it could lead to a new wave of middle class job losses.

(BEGIN VIDEOTAPE)

ROMANS (voice-over): Is Central America the new India? In Central America there are high hopes American companies will choose nearsourcing over outsourcing and move jobs to Central America instead of India or China.

JUAN CARLOS PEREIRA, PRONICARAGUA: You know, if you want to see us as the next India, you know, that's great. I mean, you know, for us, the idea is to create jobs, to create opportunities so that people don't have to emigrate and don't have to leave and find opportunities elsewhere.

ROMANS: His group, ProNicaragua, is compiling a list of Nicaraguans who speak fluent English, ready to match workers with nearsourced American jobs. He says nearsourcing is more attractive for some companies than outsourcing. Two and a half hours away from Miami by plane rather than halfway across the world.

PEREIRA: We think we can be competitive in areas like call centers and contact centers.

ROMANS: He hopes to bring to Nicaragua 4,000 new call center jobs over the next few years.

But Costa Rica leads the nearsourcing race in Central America, adding almost 25,000 jobs in the past two years, according to the Costa Rican Chamber of Commerce.

And research firm Datamonitor estimates call center work stations in Central America and Latin America will double to more than 730,000 in the next two years.

But India, many say, will always be the giant in IT. Wages are lower and the base of English speakers is larger.

PETER HAKIM, INTER-AMERICAN DIALOGUE: When you're talking about sort of what might be called the knowledge industry, distance plays a much less important role. In manufacturing and production, then it plays a bigger role. And I think that Central America has a certain advantage with manufacturing compared to perhaps the Chinas and Indias.

ROMANS: Even then, he says nearsourcing to Central America will be too small to be felt by American workers.

(END VIDEOTAPE)

ROMANS: But that doesn't necessarily soothe American workers. After all, not long ago, China was simply an emerging market with virtually no exports to this country at all and no threat to the American worker.

Tomorrow we'll have a special report on the exporting of American jobs in 2005 and corporate America's rush to invest in cheap foreign labor markets instead of the United States.

Coming up, a live exclusive report from Afghanistan on serious new challenges for U.S. troops.

As 2005 ends, new fears are surfacing about the extent of China's economic and military might. I'll talk to the author of a provocative new book on the communist Chinese threat.

And defending the White House secret spying operation. I'll talk to an attorney who co-wrote a strong defense of this controversial program in today's "New York Time."

(COMMERCIAL BREAK)

ROMANS: In a moment, we'll talk with one author who says the White House is asleep at the wheel when it comes to China.

But first, here's some other stories we're following tonight.

A serial rape suspect is back in jail in Miami after he escaped a week ago today. Reynaldo Rapalo was arrested last night posing as a homeless illegal alien. He's accused of sexually assaulting seven women and girls in a Miami neighborhood over a two-year period. He's expected to go on trial next year.

Sources tell CNN New York transit workers have reached a tentative contract deal with the Metropolitan Transit Authority. Union leaders are expected to meet today to consider the deal. Talks resumed last week after the union agreed to call off a three-day transit strike that crippled New York City.

And former Major League Baseball pitcher Jeff Reardon has been arrested for allegedly robbing a jewelry store in Florida. Police say Reardon apologized after he was arrested and blamed the incident on medication he's taking for depression. Reardon's son died last year of a drug overdose.

Six companies in China have been sanctioned for passing materials used for weapons of mass destruction to Iran. The State Department imposed those sanctions Friday on the six Chinese government-run companies, as well as two Indian firms and one Austrian company.

According to a State Department official, there was credible information that the companies had "transferred equipment and technology with the potential of making a material contribution to WMD or cruise or ballistic missile systems."

This latest news yet another indication that China assists countries that support international terrorism. The U.S. government considers Iran a state sponsor of terrorism and suspects Iran is continuing efforts to acquire nuclear weapons and other weapons of mass destruction.

We've reported extensively on this program in the past year on the rise of China, a communist country flexing its military muscle, competing for strategic energy assets, and luring American companies to hire its cheap labor force. Tonight, a look back at some of China's most aggressive moves in 2005, and warnings from Congress that the Bush administration is not keeping a watchful enough eye on the red star rising in the east. Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN ANCHOR (voice-over): The Chinese bicycle economy is no more. China is now an economic powerhouse, exporting its way to becoming a superpower. And that booming economy is sucking up oil assets around the world.

China consumes 6.5 million barrels of oil a day. But by the year 2025, that will more than double, and two-thirds of that oil will have to come from outside of China.

Some in Congress say that will ultimately put the United States in direct competition with China over oil.

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: It may end up before at a point where we can't stop it, where we are not only in competition, but on the verge of hostilities.

PILGRIM: China in its global grab for oil has befriended the reprehensible regime in Sudan, a country that supports genocide against its own people in Darfur. Yet China has invested $8 billion and sends workers to help build oil facilities in Sudan.

ROGER ROBINSON, U.S. CHINA ECON. SEC. REV. COMM: So long as you have China with upwards to 10,000 workers on the ground building a 900-mile pipeline, this is providing vital life support to the Khartoum regime.

PILGRIM: China is also making oil deals throughout Africa, Russia, the Middle East and Latin America.

REP. CHRIS SMITH (R-NJ), COMMITTEE ON INTERNATIONAL RELATIONS: In an octopus-like way, China is spreading its tentacles and forging friendships, where they ask no questions about human rights, but they then take these very valuable minerals, oil and the like; in exchange provide weapons and cash.

PILGRIM: China also made a bid for a U.S. oil company Unocal, but that generated blistering opposition in Congress.

DONALD STRASZHEIM, STRASZHEIM GLOBAL ADVISORS: So this potential purchase by a Chinese company that is heavily owned by the Chinese government, a communist -- nominally communist government -- is just simply the straw that broke the camel's back.

FRANK GAFFNEY, CENTER FOR SECURITY POLICY: I believe that what China is demonstrating by trying to buy this oil company is part of a very ambitious, long-term strategy, for supplanting the United States economically for sure, and possibly defeating us militarily.

PILGRIM: Public sentiments ran along the same lines when our viewers were asked, do you think the sale of Unocal to China threatens U.S. national security? Ninety-two percent said yes.

China's aggressive economic policies also damage U.S. business. Bootleg copies of just about any American product, from electronics to designer bags, are churned out of China with little regard for patents.

REP. BEN CARDIN (D), MARYLAND: They're taking our product and stealing it, literally, and not having -- and the government actually being part of that operation that allows a separate company to be set up just to pirate our product here in America.

PILGRIM: Meanwhile, China continues to export aggressively to the United States. The U.S. trade deficit with China ballooning this year to an estimated $200 billion.

REP. BERNIE SANDERS (I), VERMONT: There can be only one way to describe our current unfettered free trade policy with China and other countries, and that is that it is insane.

PILGRIM: When gently pressed by U.S. Treasury Secretary Snow and other administration officials to revalue their currency, Chinese officials were brusque, and U.S. officials did not press them.

REP. DANA ROHRABACHER (R), CALIFORNIA: The policies we have had to China in these last 20 years have created a Frankenstein monster that threatens not only the peace of the world, but threatens the prosperity of our people and the freedom of those who would seek freedom in China itself.

(END VIDEOTAPE)

PILGRIM: The most worrisome aspect of China's growth in power and aggression this year is its military shift. Earlier this year, China passed a law that authorizes the use of force against Taiwan, and it has the third largest defense budget in the world, with double- digit increases over the past decade in military buildup. The Bush administration has not been able to ignore this -- Christine.

ROMANS: Indeed, it's been quite a year for China and its bold, bold moves in 2005. Kitty, thanks so much.

That military threat that Kitty outlined is just one concern as China's power grows. Our next guest, Ted Fishman, is author of a book called "China, Inc." He says the rapid emergence of China is the most important change in the world today. Fishman is concerned about the political alliances China is forming, and says the Bush administration has no real policy to keep America competitive with China. Ted Fishman joins me tonight from Chicago. Welcome to the program.

TED FISHMAN, AUTHOR, "CHINA, INC.": Glad to be with you, Christine, thanks.

ROMANS: You say that the White House is essentially asleep at the wheel. At the same time, we know, Kitty has just laid out that China has a very well thought out and bold strategy, a national strategy -- the Chinese have said many times in many places that they make decisions based on what's best for the power structure in China. What are we doing in the United States?

FISHMAN: Well, China has a 50-year plan. They're about year 25. We have a hard time knowing what to say today or even tomorrow about China. You know, the president went to China, and he advanced almost no agenda items. Donald Rumsfeld went to China and he warned against the military buildup. Condoleezza Rice is in China and she's very diplomatic and makes nice.

John Snow says they're manipulating currency one day and then they're not manipulating currency the next. And we complain in Congress about all of the efforts China makes to restrict American trade with China, particularly our ability to sell things there, and yet the governors of every state, heads of every chamber -- big chamber of commerce in the United States go to China in a constant parade, saying let us do business with you, let us make it easy for you to do business with us.

There is about as mixed a message, as contradictory a message from the United States going to China as possible.

ROMANS: Meanwhile, human rights violations continue. The State Department's own human rights record reports on China show this year after year, yet American multinationals, as you point out, the trade missions, led by American governors and by members of Congress in some cases, continue.

What is this split personality we have? The goal, the national strategy of the United States, as stated by the State Department, is to, you know, foster democracy around the world, yet we are doing business as fast as we can with the largest communist power in the world?

FISHMAN: Yes, this is baffling. You know, China is surrounded by 16 democracies. Just to its south is Indonesia, which has had the largest popular direct election in the history of the planet. Shanghai, one city in China alone, got more foreign direct investment than all of Indonesia, the world's fourth largest country, because the dirty secret about China and American investment there is that corporate America likes an authoritarian government. They like the stability from authoritarian government. They like the government's ability to control labor there, and to keep the population focused on the bottom line and the bottom line only.

PILGRIM: And the communist power structure loves corporate America as much as corporate America loves the Chinese markets, because you have got 1.5 million people coming into the urban areas ready to work every single year, 1.5 million people at least. That drives wages down, down, down. What can the United States do to remain competitive, short of exporting all the jobs?

FISHMAN: You know, I was talking to an American manufacturer, and he said, you know, I make things in Wisconsin, and I have two choices -- either move everything to China or invest in real estate in Florida. You know, the options for American manufacturing is closing.

And one of the things that really hurts America is that the heart of our economy, the highest valued goods in our economy are now knowledge products. This was alluded to in your video package just before I came on, and we cannot get paid for our knowledge products in China, because they simply transfer there by fax, by e-mail, by stolen plans, where you get not only stolen DVDs but whole factory floors which mimic American production facilities.

Ninety percent of the software that runs businesses in China is pirated. American companies have to pay for that stuff. Chinese companies run that intellectual property for free. It's part of the low cost miracle. It stops us from selling them. Unless we have a solution to that, we don't have a solution to our trade deficit or to our China problem.

ROMANS: But why, Ted, do so many people when you start talking about these very serious issues with China, why do they suddenly start talking about how the United States has to be a proponent and an example of free trade, that free trade above all else is what -- it's not free trade with China, is it? Are we -- is it a level playing field?

FISHMAN: No, it's not a level playing field. You know, in the United States, we focus, almost fetishize the consumer. So anything that comes through free trade or what looks like free trade that lowers prices for the consumer, we cheer. But that hurts workers.

You know, in the United States, wages are going down in the heart of industrial America. In the Midwest, wages are down $6,000 or more a year, and yet consumers benefit from China only about $600 a year. And yet our trade policy focuses on the consumer, without focusing on the worker.

So when we talk about trade, we're talking about our experience in the store and not on the shop floor, and that might be the reverse of where we ought to be focusing now as China gets stronger.

ROMANS: And bottom line, China has a national strategy, well thought out, as you said, in the 25th year or something of a 50-year plan, and there's nothing wrong with having a national strategy. That's what a government is supposed to do.

Ted Fishman. "China, Inc." is the book. Thank you so much for joining us. Come back again soon.

FISHMAN: My pleasure. Thank you.

ROMANS: Still ahead, a new trend. Veterans of the war in Iraq running for public office. Former Lieutenant Colonel Tim Dunn is one of them. He'll be our guest and he'll tell us why he thinks he can't win the war unless major changes are made here.

And an exclusive live report out of Afghanistan. We'll tell you the big, yet simple reason why training an Afghan army is proving much more difficult than expected.

(COMMERCIAL BREAK) ROMANS: American troops fighting the war against radical Islamist terrorism in Afghanistan are facing a new challenge in training Afghan forces. CNN's Becky Diamond is embedded with the Florida National Guard in Afghanistan and joins us live via video phone with this exclusive report. Becky?

BECKY DIAMOND, CNN CORRESPONDENT (video phone): Good evening to you Christine. Well, a critical front in the war on terror is being fought here in Gardez. I'm at a forward operating base where soldiers from the 53rd brigade are helping to make the Afghan army operational.

They're really fighting here to help build a nation, focusing on the army. The ultimate goal is to get these forces in a capacity of operations where they're working on their own, independently of U.S. troops.

This would ultimately free up U.S. troops to redirect their activities elsewhere, either in Afghanistan or somewhere else. Now, soldiers are helping them with their weaponry, instilling some discipline in their ranks. But they say there are some challenges.

These soldiers are mostly illiterate. About 70 percent of enlisted soldiers here can't read or write. Also they say, many of the soldiers speak a separate language, so they need a translator for the translator for the translator.

But despite these challenges, the U.S. soldiers say that the Afghan soldiers understand what war is about. They very, very much want to build their country and they're up to the job. They're starting to go out on their own, staffing checkpoints, providing security.

And they also provide a critical presence in this area. This is a very remote area in Afghanistan, where the national government really doesn't exist. So they provide a security presence, a sense of law for the people in Afghanistan, and that's one hope in the war on terror that democratization will reach this area. Christine?

ROMANS: All right, Becky Diamond in Afghanistan. Thank you, Becky.

The wars in Afghanistan and Iraq have inspired a new group of young veterans to run for political office back home. My next guest is one of them. Lieutenant Colonel Tim Dunn has served with the Marines in both Iraq and Europe. He's now running for Congress as a Democrat in North Carolina, and he joins us tonight from Raleigh. Thanks for being with us.

LT. COL. TIM DUNN (D), CONGRESSIONAL CANDIDATE: Thanks, Christine. Great to be here.

ROMANS: The GOP holds both North Carolina Senate seats and I think seven of 13 congressional seats. Do you think your background in the military is going to help you as a Democrat in North Carolina?

DUNN: Absolutely. I think it's crucial, particularly in this environment, the political environment, that we have more veterans not only running, but serving in Congress. I think the experience that we bring to the political process is crucial.

The ability to plan, to look at a mission, to be able to execute that plan and to accomplish the mission. I think it will be very valuable, not only in running but also in serving in Congress.

ROMANS: In the meantime, your party has, some would say, not very clearly articulated what its plan and its outlook is for Iraq and for -- some are calling for a withdrawal. What do you plan to run on specifically about Iraq and the next move there?

DUNN: Well certainly, I'd like to first say that there's no one that would support the military and our servicemen and women in Iraq and Afghanistan more than someone such as myself that have served in Iraq.

But I see that there needs to be a clearly defined mission in this particular, in Iraq, in Afghanistan, where there's an instate. There's got to be a plan for a conflict termination, so to speak. Whereby we can look at what the objectives are and we can accomplish those objectives and the commanders on the ground will know what those objectives are by our civilian leadership.

ROMANS: Are we operating without a clearly defined objective and mission right now?

DUNN: Well, I hope that we are not. The perception is now, as we are going on and on in Iraq, that we have to be sure that there's a clearly defined objective. And I guess what I would propose as the administration has told us, that they want to stand down U.S. or coalition forces as the Iraqis stand up.

Well, this has not taken place at all yet. I mean even with the president's most recent proposal in that package, there was indication that there were 120, now 120 operational Iraqi battalions. Of those 120, apparently there are 40 that are now combat ready and operationally committed, working independently of U.S. or coalition forces.

Well it's time to look real closely now as these battalions stand up in Iraq. And we should be able to stand down the U.S. forces in Iraq. And I think we're seeing that, Christine, with the words from not only the administration, but from the secretary of defense in that they are looking toward now a planned withdrawal.

But we don't do it just on a timeline, we do it on what I would call, milestones or benchmark. Once that level of training that the Iraqi forces, the security forces can handle their situation in Iraq, then it's time to stand down our forces, because we have certainly committed substantial forces and substantial lives of all of the servicemen and women that have served there. Now it's time to look closely at what that in state, what that conflict termination is going to be and what it's going to look like.

ROMANS: Well Lieutenant Colonel Tim Dunn, thank you so much for joining us tonight.

DUNN: Thank you very much, Christine.

ROMANS: You're very welcome. A reminder now to vote in tonight's poll. We told you earlier how the new immigration bill passed by the House calls for the elimination of the annual Visa lottery program. Do you believe eliminating the lottery will help curb illegal immigration? You can cast your vote at LouDobbs.com. We'll bring you the results in just a few minutes.

Still ahead, should President Bush have wiretap worries on his mind? We'll talk to one man who says all this talk about the president eavesdropping is overstepping -- and overstepping his bounds is simply nonsense.

(COMMERCIAL BREAK)

ROMANS: In the space of less than two weeks, the Bush administration's secret U.S. spying program has become another major domestic mess for the White House. It all began Friday, December 16th, when the "New York Times" published its story on this NSA surveillance operation targeting Americans.

The very next day, President Bush admitted the program's existence calling it crucial to saving U.S. lives. That Sunday, former White House council, John Dean, who served under President Nixon, said Bush's actions constitute an impeachable offense.

Four days ago the "New York Times" reported the NSA operation was wider than anyone previously thought. And today, the "New York Times," two former Justice Department lawyers came out to defend the program, saying the president's surveillance operation is completely justified, and completely within the president's legal authority.

Attorney David Rivkin, the co-author of the "New York Times" piece joins me tonight from Washington. He says the only thing outrageous about the president's surveillance policy is the outrage from its critics. David Rivkin served in the Justice Departments in both the Reagan and George H. W. Bush administrations. Welcome to the program, sir.

DAVID RIVKIN, ATTORNEY: Nice to be with.

ROMANS: I will point out it is bipartisan outrage, you say this outrage is not justified. Why?

DAVID RIVKIN, FMR. JUSTICE DEPT. ATTORNEY: First of all, nomenclature is very important, it is not a domestic spying program. That indeed is done with either criminal warrants or FISA warrants. This is collection of battlefield intelligence.

This collection effort is directed only at situations where a member of al Qaeda or an affiliate organization is communicating with somebody in the United States. This is no different than listening to the Japanese or German military codes. This is the use of the commander-in-chief power to give intelligence about the very people who attacked us on September 11. Not for purposes of criminal prosecution, but for purposes of making sure we don't get attacked again.

ROMANS: The White House today is saying it is not listening in to people planning soccer pot luck lunches plans. That they are listening in on al Qaeda members and people who blow up churches and the like. Why all this outrage, and why not just go, as you point out, to the FISA court, the court that gives these secret warrants from such taps. Why didn't the president just go there in 2002?

RIVKIN: As for the outrage, I think there is an unfortunate tendency I've seen in other areas dealing with detention, interrogation of captured enemy combatants and other aspects, where you have, in some sense it's bipartisan but it doesn't make it right. A bipartisan assault on presidential powers.

I think the framers wanted the executive to exercise speed and dispatch and nothing is needed more than speed and dispatch and secrecy in a time of war, and particularly in this war.

As to why not FISA? Let's leave the law aside. The President has plenary power to engage in war and surveillance, every president since FISA was enacted has asserted it. Every court that has looked at it acknowledged it. Leave all that aside.

Why not FISA? Simple. Speed, and quite frankly because FISA court is not a rubber stamp. FISA court would not approve many of the warrants precisely because this is not a question of guilt or innocence of a given American. An American may have absolutely no idea that the person he or she is communicating with is a member of al Qaeda.

There is no probable cause to believe he is an agent of al Qaeda. But the fact that he or she is getting a call from an al Qaeda member, provides a window if you will. An opportunity to look inside and see what's going on. The FISA framework doesn't work for this particular problem.

ROMANS: Isn't it true FISA almost always approves these wiretaps. Sometimes, in less than 200 cases out of 20,000 they've asked for some kinds of changes. Why not go, and at least go through the courts and get the approval just to show that it's just not arrogance or indifference to the law?

RIVKIN: It's not an arrogance of power. This is one of the most famous square pegs in the round holes. First of all FISA has rejected, if you look at statistics published recently, have rejected or modified close to 200 requests since 2001.

Number two, many times requests are not made because the executive branch knows they would not be granted. The point here is this, this is not for purposes of criminal prosecution, this is not to establish any kind of criminal cause. Let's say have you an American who happened to go to school many years ago where somebody is an al Qaeda member, and that al Qaeda is calling him or her purely for social purposes to let off steam.

For a serious intelligence operative, being able to listen to the stream of information may give a sense of the enemy's spirit. Where the person is calling from. You will never get a FISA warrant in that situation, because the American citizen involved is nothing more than a conduit. He is an innocent bystander.

That's not how FISA or the criminal warrant statute are supposed to work. My bottom line is this, if we cannot get this information, we're not going to be able to win this war, just like we wouldn't have won World War II without listening to German or Japanese communications and breaking the code.

In this war, intelligence gathering is even more important. Again, everything is discussed in terms of spying on Americans. It has nothing to do with that.

ROMANS: All right. David Rivkin. We have to leave it there. Thank you so much for your perspective.

RIVKIN: Pleasure.

ROMANS: Tomorrow this broadcast will have a very different perspective on the NSA surveillance debate. We'll talk with the senior legal counsel for the ACLU, that's tomorrow.

Still ahead the results of our poll tonight and our nightly tribute to our troops.

(COMMERCIAL BREAK)

ROMANS: Finally tonight, our nightly tribute to our troops.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This is Lieutenant Colonel John McLauren (ph) in Kabul, Afghanistan, wishing a very Merry Christmas to my wife and two boys Brian and Daniel in Wichita Fall, Texas.

UNIDENTIFIED FEMALE: Hi my name is Sergeant Erica Chita (ph). I'm stationed here in Kabul, Afghanistan. I'd like to say Merry Christmas and Happy New Year to all my family back in Arlington, Georgia.

UNIDENTIFIED MALE: Hi, my name is Specialist Keenan Winkle (ph). I'm with the First Battalion, 101st Aviation in Tikrit, Iraq. I wanted to say Happy Holidays to my wife, Leslie, and my son, Jonathan, in Clarksville, Tennessee.

UNIDENTIFIED FEMALE: Hi, I'm Specialist Angelie Andino (ph) with 401st CA Batallion (ph) at Fort Courage in Mosul, Iraq. I'd like to say Happy Holidays to my family and to my little boy, Dalyn (ph) in Atlanta, Georgia. I love you guys and I miss you and I'll see you soon.

UNIDENTIFIED MALE: Master Sergeant Antonio Underwood with the 172nd Strike Brigade at Fort Courage in Mosul, Iraq. I'd like to say a Happy Holidays to my family, Lawanda (ph), Jasmine, Antonio in North Carolina. Hey, I'll be home soon. Y'all stay safe. Love you

(END VIDEO CLIP)

ROMANS: That's our show tonight. "THE SITUATION ROOM" starts right now.

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