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LOU DOBBS TONIGHT

Arab Firm Agrees to Delay Takeover of U.S. Ports; Scrap CFIUS?; Pete King Interview; Lucy Duncan Scheman Interview; Army Chief Warrant Officer Ray Johnson Is Returning To War Four Decades After Vietnam

Aired February 24, 2006 - 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, news, debate and opinion for Friday, February 24.
Live in New York, Lou Dobbs.

LOU DOBBS, CNN ANCHOR: Good evening, everybody.

Tonight, the Bush White House drawing a new strategy, trying to end the political outrage over the Dubai Ports deal and to deflect charges that the administration failed to preserve national security in the review process in the government. We'll be going live to the White House for the latest.

And then, is it time to scrap the highly secretive committee at the center of this controversy? CFIUS, the one that views foreign takeovers of U.S. assets, critics saying the Committee on Foreign Investments is a relic of the past that puts commerce ahead of national security. We'll have a special report.

And my guest tonight, one of the foremost congressional critics of the Dubai deal, the chairman of the Homeland Security Committee, Congressman Pete King. He'll give us his thoughts about the delay in the ports deal.

And I'll be talking with three of the country's top political analysts about the impact of the deal. Is it a good deal? Is it a deal that critics say has been nothing less than a political disaster for the White House? Or is it an opportunity for the Democratic Party?

All of that and more coming up here.

We begin tonight with a coordinated effort by the White House and Dubai Ports World to end the storm of political protest over the sale of major U.S. port operations. Dubai Ports World says it will delay completion of the deal to allow Congress more time to address lawmakers' concerns about national security. The White House, which pushed for the delay, welcomed the announcement, of course. But after a series of major political missteps, there is no indication that the administration's new strategy will succeed.

Dana Bash reports from the White House -- Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, Lou, that is certainly an open question, but Dubai Ports World's decision to delay taking over operations of those six ports was, CNN understands, the result of quiet but certainly tough efforts by this administration to try to put the brakes on what was an escalating, and what is an escalating political nightmare.

(BEGIN VIDEOTAPE)

BASH (voice-over): The delay to buy more time, informed sources tell CNN, came after private White House appeals to allies like former Congressman Vin Weber, a lobbyist who represents the United Arab Emirates.

It delays a remarkable political confrontation with ramifications well beyond the ports controversy -- a Republican president threatening a veto if the Republican leadership in Congress tried to block the port deal.

But a senior administration official admits they are not out of the woods yet. Sources involved in talks with the White House and the companies tells CNN Mr. Bush may have no choice but to accept a longer government review of whether the deal poses security risks. So far the administration is digging in, saying it will try to convince Congress, the 14 agency panel that approved the deal, did extensive vetting.

FRANCES TOWNSEND, WHITE HOUSE HOMELAND SECURITY ADVISER: There was no need for an additional 45 days or an investigation.

BASH: But that won't fly with key members of Congress and others who say the White House did not follow the law. An attorney who helped write it, agrees.

PATRICK MALLOY, INTERNATIONAL TRADE LAW EXPERT: If it's a government- owned corporation which is doing the acquisition of the American company, the law says that there's a mandatory investigation.

BASH: Bush officials recognize they're up against something else: raw emotion, especially from their own.

SCOTT REED, REPUBLICAN STRATEGIST: This is going to have some ramifications, not only nationally but also on the local level now in each one of these port towns. The politics has gotten almost out of control.

BASH: The president is suddenly the bad guy of talk radio.

UNIDENTIFIED MALE: Why should we have a Middle Eastern dictatorship, or company associated with a dictatorship, controlling our ports?

UNIDENTIFIED MALE: And it's going to quite possibly -- and maybe even probably -- cost the Republicans the next election.

BASH: That is exactly why you saw what amounted to a Republican stampede to break with a president they see as weak and on the wrong side of what they said was their winning issue -- security. And privately, congressional Republican sources say many are reveling in the split because it was a long time coming, the result of years of what some called Bush arrogance and neglect.

UNIDENTIFIED MALE: The problem is a lot of this administration has taken congressional relations to be an oxymoron.

(END VIDEOTAPE)

BASH: And we're learning more about, in this particular case, how the problems did stem from basic information flow inside the White House. We reported earlier this week that the president did not know about this deal until it was approved by that panel. The White House now says it was actually a week ago yesterday, Thursday, that the president was told by his chief of staff about the decision by the panel to let this deal go through -- Lou.

DOBBS: Dana, thank you very much.

Dana Bash from the White House.

The Dubai Ports deal is not the first time Congress has blocked or tried to block the sale of a major U.S. seaport facility on national security grounds. Eight years ago, Congressman Duncan Hunter, the chairman of the House Armed Services Committee, was successful in his effort to block an attempt by the Clinton administration that would have allowed a communist Chinese shipping company to have taken over assets in Long Beach, California. The Long Beach port, of course, is very close to major U.S. military installations on the West Coast.

Congressman Hunter said the shipping line is nothing less than a branch of the Chinese military, saying the shipping line carried all of the Chinese military's cargo on demand and without question. In the years since, of course, that very same company has managed to take over assets at our ports.

Congressional critics of the Dubai Ports deal says the White House and Dubai Ports World have failed to ease their concerns about national security. A bipartisan group of senators say they will introduce legislation this coming Monday to suspend the deal and to order that additional 45-day review that is mandated by the CFIUS legislation.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice over): Dubai Ports World says it's delaying taking over terminal operations at six U.S. ports, but it will go forward with the acquisition of Peninsular and Oriental Steam Navigation Company next week. How can the company have it both ways? Because it says it will segregate P&O's U.S. operations while it engages in further consultations with the Bush administration and, as appropriate, congressional leadership.

But some in Congress are not buying this latest tactic.

SEN. ROBERT MENENDEZ (D), NEW JERSEY: This is simply a smoke screen that will have the public believe that the deal's been put on hold and that Congress will act and have the time to act. The reality is, we still have only to March the 2nd.

SYLVESTER: Business experts say once the deal goes through, it will be a lot harder for Congress to unravel. University of Maryland professor Peter Morici adds, "Separating the U.S. ports does not change the shape of the deal."

PROF. PETER MORICI, UNIVERSITY OF MARYLAND: I think it's an effort to buy some time. It's an effort to distract criticism. I don't think it's substantive. I don't believe that by segregating the operations you can allay our basic security concerns.

UNIDENTIFIED GROUP: Goodbye, Dubai! Goodbye, Dubai!

SYLVESTER: Most lawmakers are still in their home districts this week, hearing from angry constituents. But congressional members are facing a lobbying blitz by the White House and DPW. Former congressman Thomas Downey and Raymond McGrath are among the hired guns. And former senator Bob Dole has been tapped to help craft the lobbying strategy.

LARRY NOBLE, CENTER FOR RESPONSIVE POLITICS: This is a deal worth billions of dollars. And they'll easily spend well into the millions of dollars for this.

SYLVESTER: Despite the massive lobbying push, lawmakers seem adamant about one thing: there needs to be at least a 45-day formal review that's mandatory whenever there's a national security concern.

(END VIDEOTAPE)

SYLVESTER: And the states where these ports are based also want to review the sale. New Jersey governor Jon Corzine filed a federal lawsuit and sent a letter today asking other governors to sign on. There are also lawsuits filed by the Port Authority of New York and New Jersey, and a separate lawsuit in Miami -- Lou.

DOBBS: Lisa, thank you very much.

Lisa Sylvester.

Just weeks before seeking approval for this ports deal, the United Abe Emirates sent a $100 million gift to the United States. The United Arab Emirates sent that money to this country on September 21 of last year to help the victims of Hurricane Katrina.

The cash, in fact, arrived just about four weeks before Dubai Ports World approached U.S. officials about the deal to take over P&O and to consummate the ports deal. The gift, nearly four times, by the way, as big as all of the other international donations combined. The Bush administration insists there is no connection between that gift and the ports deal.

Some leading members of Congress tonight say the secretive committee that approved the Dubai deal should be reformed or scrapped altogether. The Committee on Foreign Investments allowed the deal to proceed despite serious and well-documented national security concerns. Critics say it's time to find a much better way to protect our national security.

Christine Romans reports.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice over): An overhaul of the so-called CFIUS process is now a top priority in Congress. Senate Banking Committee chairman Richard Shelby has long been a critic of the process and now says the Dubai deal is proof CFIUS doesn't work.

"From Treasury's perspective, the process with respect to the Dubai transaction worked perfectly. From the Banking Committee's perspective, it failed miserably."

His powerful Banking Committee takes up the issue first thing when Congress resumes.

Another long-time critic, Senator James Inhofe, "The CFIUS process is broken and must be fixed."

Critics call it a relic and a rubberstamp.

KEVIN L. KEARNS, U.S. BUSINESS & IND. COUNCIL: We've had 1,500- plus cases, and no one knows what happened. No one knows whether the foreign acquisition -- acquiring companies sucked the life out of the American companies, took their technology, closed them down. There's no follow-up.

ROMANS: The U.S. China Commission last year told Congress it was time for a CFIUS overhaul.

RICHARD D'AMATO, U.S. CHINA COMMISSION: They have operated in extreme secrecy. Congress has not been able to conduct the kind of oversight because it's been shut out of this process. So what we're recommending is to reform the process, take -- take it out of Treasury and put it into an agency that cares more about national security.

ROMANS: Especially, he says, at a time when China has a trillion U.S. dollars to buy up U.S. strategic assets.

The Treasury Department today defended CFIUS. "The CFIUS process has worked well to protect the national security concerns that arise when a foreign company is proposing to purchase a U.S. asset." But Treasury admitted, "The law as it exists makes communication difficult as CFIUS is required to protect the confidentiality of its reviews."

(END VIDEOTAPE)

ROMANS: The Treasury Department said today it respects these concerns of Congress, it has made improvements, and it wants to work with Congress to protect national security. But members of Congress and a lot of critics say successive administrations have kept his process so secretive, moved it so quickly to pass all of these deals, that they have made congressional oversight absolutely irrelevant.

DOBBS: But let's keep this in absolute accurate perspective. The fact is, Congress has been very eager to have this burden of responsibility for international trade pushed over to the White House and the administration, and each of these departments, and for years have been blatantly negligent in carrying out their duties under the Constitution. This is a lazy Congress, and not until there is a political firestorm do we see them want to assert their responsibilities, not just their rights, their responsibilities of oversight.

And let's be clear. This administration and the Clinton administration so committed to international trade, so-called free trade, that national security often be damned.

ROMANS: Kevin Kearns today told me -- he said Congress members are now saying there's gambling at the casino. He said Congress built that casino.

DOBBS: Absolutely.

Christine Romans, thank you very much.

Still ahead here, security experts say this nation is completely ignoring the terrorist threat at our ports, and we're living, they say, on borrowed time. We'll have a special report for you on our nation's port security breakdown.

Also tonight, outrage from the rank and file. The Teamsters Union speaking out against the Dubai port deal.

And the U.S. national security giveaway, why commercial interests are taking complete dominance over the national interests.

All of that and more coming up.

(COMMERCIAL BREAK)

DOBBS: President Bush this week assured the American public that our nation's ports are secure. The president saying port security will not be compromised in the least by the Dubai Ports deal, should it go through. Many of our nation's maritime security experts, however, say the president couldn't be further from the truth.

Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice over): The president of the International Longshore Warehouse Union has this simple, harsh assessment of port security...

JAMES SPINOSA, PRESIDENT ILWU: We feel that the ports are really, if you really want to get down to it, are much more unsafe today in some cases than they are prior to 9/11. TUCKER: According to him, simple procedures like validation that containers have not been unsealed are no longer routine. Manifest checks are no longer done on the dock by dock workers. Only 5 percent of containers are ever x-rayed to determine if their contents are as they are listed.

Why? Security costs money. It can slow the flow of commerce. And we need that flow to move, creating a security compromise.

JERRY HULTIN, FMR. NAVY UNDERSECRETARY: If you think about the supply of food in America, that the -- when you think large volumes, we need a lot of food coming in by import to feed America. And that warehouses about seven days to 14 days worth of food. After that, spoilage, just the pure volume, says there's not enough food to distribute.

TUCKER: We choose expedience over security.

And then there's the question of background checks. Unlike at the airports, there is no one agency in charge of ports. Every seaport is responsible for conducting its background checks.

Sometimes there are holes. Some of the more recent holes include, from March of last year through this month, 125 illegal aliens were arrested at the Port of Jacksonville. Last October, seven illegal aliens were arrested in Oakland working in a bonded warehouse.

Not even the Navy can get it right. There have been numerous busts of illegal aliens working for contractors doing work on naval bases just in the past year.

(END VIDEOTAPE)

TUCKER: One security expert that we spoke with warns that as airport security has been tightened, it's created the need for terrorists to find new ports of entry into the United States. This year's entry -- this year's budget for port security is $2 billion. We're spending $4.5 billion, Lou, for airport security.

DOBBS: Remarkable. Absolutely remarkable. And the money that has been spent, of course, since September 11 to upgrade the security at our nation's airports simply leaves port security with the -- with the most minimal amount of money. And yet, nearly every, every terrorism expert, every security expert says ports are the most likely point of entry for a nuclear weapon, a dirty bomb.

TUCKER: Right.

DOBBS: Bill Tucker.

Thank you, sir.

In our poll tonight, a simple question: Do you believe that Congress should limit ownership and operation of America's strategic infrastructure assets to the U.S. government, local and state governments, and U.S. companies? Cast your vote at loudobbs.com. We'll have the results here later.

A reminder today of the radical Islamist terrorist threat to critically important facilities all over the world. Terrorists in eastern Saudi Arabia attacked the world's biggest oil processing installation. Suicide bombers and two cars broke through the outer security perimeter, killing three guards and wounding 10 others in doing so. But the Saudi guards inside that facility opened fire on the vehicles, causing the terrorists' cars, two of them, to explode.

This is the first major terrorist attack against an oil installation in Saudi Arabia, the world's largest oil exporter.

The hard-working rank and file at our nation's ports are completely against this Dubai Ports deal. These Teamsters workers know better than anyone else how the deal will compromise the nation's port security. They say they were out in force -- they were out in force today in 20 cities across the country to protest this deal.

The president says Americans should not worry about port security. If the deal goes through, these Teamsters who actually work at the port say we should all worry.

The Bush administration has never met a foreign investment it didn't like, even if these foreign investments put American lives at risk. Americans are wondering tonight when our elected leaders will stop listening to big business friends and put the national interests ahead of commercial interests.

Kitty Pilgrim has the report.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice over): Members of both parties in both chambers of Congress have condemned the port deal as putting trade before national security, fed up with the ultra-secret review process.

FRANK GAFFNEY, CENTER FOR SECURITY POLICY: The Committee on Foreign Investment in the United States can no longer be run by an interested party, an agency of the government, the Treasury Department, whose job it is to promote foreign investment in the United States. It has driven the decisions that this organization has made in favor of investments, even ones that don't make sense from a national security point of view.

PILGRIM: Congressman Sherrod Brown of Ohio today said he will introduce legislation to make sure national security comes before commercial interests in all trade agreements.

REP. SHERROD BROWN (D), OHIO: I think some people in the Bush White House have over time been almost obsessed with these trade agreements, and now that obsession with these trade agreements has trumped our national security. PILGRIM: The legislation says countries with histories of terrorism or that pose potential national security risks should publicly and loudly set off alarm bells in the approval process. Something that did not happen in the review of Dubai Ports World.

BROWN: What we should do is, every trade agreement should be conditioned on starting off with a national security component.

PILGRIM: New legislation calls for a congressional oversight committee for trade security, requiring both parties in both chambers of Congress to appoint commissioners. That commission would do a yearly security review of trade agreements.

(END VIDEOTAPE)

PILGRIM: Now, Brown suggests that countries that have a history of tight controls on terrorism would face fewer hurdles, but still should be reviewed. And the legislation that will be introduced next week does not cut off economic dealings with the rest of the world, but it does require that deals be scrutinized a lot more thoroughly -- Lou.

DOBBS: Again, some context. Congress, as well as the previous -- this administration and the previous Democratic administration, all are culpable here. Congress in 1976, with fast-track authority, relegated much of its responsibility to oversee these trade deals, nearly all of it, to the White House. And so there, again, this is a tremendous blame here on both parties over a quarter of a century.

PILGRIM: What you're seeing here are people hearing from their constituents, and then maybe stepping forward to take the high ground a little bit late.

DOBBS: And interestingly, as we look at what is going on over the course of past five years, it now appears that real wage is adjusted for inflation. And this period of burgeoning international trade at any cost have actually declined about 3 percent. More than 3 percent over the course of that time.

Kitty, thank you.

Kitty Pilgrim.

Still ahead, Congressman Pete King, chairman of the House Homeland Security Committee, a fierce opponent of the Dubai Ports deal, is our guest.

And a White House struggling to regain public support for its Dubai deal. Three of our nation's most respected political commentators join me to assess the damage to the White House and the national security threat to this country.

Stay with us.

(COMMERCIAL BREAK) DOBBS: Dubai Ports tonight hopes Congress will cave in, comply now that it's agreed to delay its U.S. port takeover. Congressman Pete King is the chairman of the House Homeland Security Committee. He joins us and says he will not ease up on the Dubai Ports issue one bit, even with this delaying tactic, as he sees it.

What is -- what is it going to be, the direction you think we'll take there as a nation? Is it not simply Dubai?

(BEGIN VIDEOTAPE)

REP. PETE KING (R), NEW YORK: First we have to deal with Dubai. It has to be a full investigation.

My concern is that with this cooling-off period, some of the energy or some of the drive that's in this issue may dissipate, and then at that stage, they'll try to ram this deal through. That's why I say we have to have a full investigation, and not allow any further action until the investigation is completed.

As far as the future, I think we very much have to look into the whole question of, I believe, providing incentives for American companies to be able to do the work at our vital infrastructure, including ports, including bridges, including tunnels, and including, you know, telecommunications, the whole gamut, which now becomes subjected to possible terrorist attack.

DOBBS: You're talking about some loss of energy here. Senators Menendez, Clinton and Schumer have made it clear there won't be any diminishment at all of their energy going forward. Are we going to see the issue of national security at our ports break along partisan lines and see the Congress, even though insulted by the president's veto threat and the tone -- the patronizing tone he took, frankly, with the Congress, are we going to see you all sort of fall in line here on the Republican side and the Democrats move forward on a national security issue? Which this clearly is.

KING: Yes. I certainly hope not. I don't see this as a partisan issue at all. To me, it's an American issue.

I'm just saying, human nature being what it is, sometimes once the pressure is released it's hard to get the energy level back again. So that's why I am making it as clear as I can that, while I welcome the delay, there has to be than just delay. There has to be a full investigation, because once the investigation starts, then that sets, you know, something in motion that can't be stopped.

And then once the investigation is concluded, then we'll have facts to work from. If we're just talking about waiting and waiting, then that's when something can sneak through.

DOBBS: Do you and other Republicans want to go into the November elections having approved a deal in which a foreign government is owned -- a company is taking ownership of operating contracts at terminals in six of our major ports? KING: Lou, I don't want to sound holier than thou. I am really not thinking of the elections. I have lost too many friends and neighbors and constituents on September 11 even to be thinking about the elections.

Having said that, it certainly to me is not going to help us politically, and it shouldn't, because, you know, we have said we are the party of homeland security. We are the ones who can wage this war against terrorism. And certainly, unless there's an absolutely clean bill of health, which I think is going to be hard to find, to me, it's going to be hard to justify this contract. But I don't want to prejudge it.

DOBBS: But it's Karl Rove and this White House that's made it clear that the war on terror will be the focal point of the Republican Party as it seeks to retain its leadership in the House and the Senate. I'm not injecting politics. Karl Rove, this White House is.

Do you want to go into this election in November having decided to turn over critical infrastructure assets to a company owned by a foreign government?

KING: No. But having said that, if this investigation -- and I'm not prejudging anything -- turns out that this company is entirely clean, we will have to decide then how are we going to deal with foreign companies coming in. Because right now there's no American company to do the ports.

That's my concern. If there was an American company standing by, I would say yes.

DOBBS: Congressman Pete King, chairman of the House Homeland Security Committee, thank you.

KING: Lou, thank you.

(END VIDEOTAPE)

DOBBS: Taking a look now at some of your thoughts.

Charlie in Texas said, "Ever heard of the President's Day sale? How about the Worst President's Day sale? Today's special, our ports and national security. But wait, buy both, we'll throw in our borders for free."

And Scott in Wisconsin, "Lou, what do you expect? Bush doesn't know the difference between legal and illegal when they walk across the border of his home state. How would you expect him to know the difference between the U.K. and Dubai?"

Michael in New York, "Lou, if the Bush administration is not concerned with illegals and port security, why don't we let foreign nationals provide presidential security? Everything else is outsourced, so let's go for it."

David in Louisiana, "Apparently nothing is illegal or at the very least unethical when our government and multinational business interests are one and the same."

Steve in Massachusetts, "It seems incredible that the president could be unaware of the UAE deal then days later be willing to put the full weight of his office behind it."

Send us your thoughts at loudobbs.com. We'll have many more of your thoughts coming up here later in the broadcast. And you can take a look at the timeline of how the Dubai ports deal actually developed at our Web site loudobbs.com.

Still ahead, our politically savvy viewers sound off on the Dubai ports deal. And can the political fortunes of the Bush administration worsen? Three of the country's top political analysts join me.

And in this week's heroes, the story of a 58-year-old Vietnam vet. Nothing's going to stop him from returning to battle. Heroes, coming up.

(COMMERCIAL BREAK)

DOBBS: President Bush and the White House this week had repeatedly said the American people will be, quote, "comforted" that our ports are secure once they learn more about the deal with the emirates.

Well, the president may have his work cut out for him. We've asked you your opinion on a number of important issues related to this deal this week. Tens of thousands of you from all around the country responding, one thing is very clear, the American people simply do not trust their officials on this deal.

Monday we asked, if the U.S. government is turning over operation of some of our major ports to a UAE company and doing nothing to secure our borders, should we simply disband our Homeland Security Department? With our tongue firmly in cheek, 94 percent saying yes.

Tuesday, Tony Fratto, chief spokesman for the Treasury Department, said politics should not play a role in the review process. We asked, do you believe national security should play a role in the national security review process? Ninety-four percent saying yes.

Wednesday, do you feel more or less confident because the president says he didn't know about the port deal until members of Congress objected after the deal was approved? Ninety-eight percent of you said less confident.

Last night the question, do you believe the Bush administration puts commercial interests ahead of the national interest as a matter of general policy? Thousands and thousands of people, by the way, voting on this, and again, the result overwhelming, 97 percent replying in the affirmative.

One thing is clear from these polls that constantly remind me unscientific, but to me compelling, it's clear the American people do understand the issues, and they think this ports deal is a very bad idea.

Joining me now, three of the sharpest political minds in the country. In New York here, Joe Klein of "Time Magazine"; Ed Rollins, former White House political director under President Reagan; and from Durham, North Carolina, tonight David Gergen, former adviser to four presidents.

Good to have you all with us.

David, we ended last week, when all of us were confronted with the inexplicable issues that the White House had managed to create. You said they were tired. What are they this week?

DAVID GERGEN, FMR. PRESIDENTIAL ADVISER: Exhausted.

DOBBS: Well, as they quite ought to be.

GERGEN: Well, you know, I think we've all been stunned by the club-footedness of the administration. They may have a good argument. They've got a better argument than I think people thought on the merits, but they've handled it in such a club-footed way that they've lost another week of trying to get back on the ground.

And there is a poll out today, a real poll by Rasmussen, which says that by 64-17, Americans oppose this deal. And for the first time ever, the Americans give the Democrats in Congress a slight edge over President Bush on whom they trust more on national security. So this has cost them a lot. And it's just been mishandled.

DOBBS: Ed Rollins, how could they do this? Because the old expression, good policy makes good politics. The policy here is highly suspect.

ED ROLLINS, FMR. W.H. POLITICAL DIRECTOR: Right.

DOBBS: The process that was employed not to be too skeptical, flawed. And the result is as David says.

ROLLINS: First, they haven't communicated with the Congress. And they have this arrogant attitude, the White House has, for a year, that the Congress is going to do anything they want them to do. And I think they totally underestimated this issue.

And even with the delay at this point in time, it's not going away. I mean, these members have been back home for the last ten days. They're getting the daylights beat out of them. And the line is drawn in the sand. They think this is bad. And they don't think it's going to get better.

And equally as important, as more and more people find out what crappy security we have in these ports -- the Coast Guard. They keep throwing out -- the Coast Guard protects us. The Coast Guard is an agency that I have great respect for, but it's been cut back and cut back and cut back. And it has ships that don't sail. They have a real retention problem with their officers and their troops.

And people are going to find out how inadequate the ports really are. And that's going to hurt them even worse.

DOBBS: We've been reporting on that here. And the fact is, that the ports have been so neglected.

JOE KLEIN, TIME MAGAZINE: Well, homeland security has been neglected. I mean, the decision was made from the very start...

(CROSSTALK)

KLEIN: A decision was made at the very start right after September 11th by the Bush administration, that we couldn't defend ourselves at home completely, that the best strategy was to go after the terrorists abroad.

Consequently, homeland security's been forgotten. You know, what Ed said is absolutely right. I spent yesterday talking to Republicans who had been out in their districts, and they're shell shocked at this point. This is a real important...

DOBBS: Did you actually talk to their constituents and see what the will of the people is? We're all shell shocked at that.

KLEIN: They're shell shocked at the vehemence of the reaction. This is a demarcation point. From now on, it's every man and woman Republican office holder for themselves in the Congress. And what this may well mean is that if things in Iraq keep on going on south, the president's going to lose Republican support for the war in Iraq as well.

DOBBS: David, I asked Congressman Pete King, do you and your colleagues want to go into November having approved the Dubai ports deal? And while initially trying to massage the response, he said, clearly, no. What's the likely outcome?

GERGEN: I think we said here last week that this deal won't stand. It won't last. I think they are going to have to find some way out of it. What surprised I think several of us on this show tonight is that the president boxed himself in right from the beginning.

It's understandable to me that he didn't know about the deal, that he had 12 different agencies review it, the inner agency process. Sometimes those things do not go high up in the White House. Even though somebody should have flagged it, of course.

But I understand. I think he was telling the truth when he said he didn't know. But once he did know, it's just -- it's so obvious politically, and Ed Rollins would say this, instantaneously. You know, the president should have said, hey, I didn't know about this. I'm going to put some flags up and stop it until I understand it. And then he could have worked his way out of it.

DOBBS: Go ahead.

KLEIN: If the deal does go down, though, there are consequences as well. Dubai, since September 11th, has been our strongest Arab ally in the region, I'm told, by various intelligence sources.

They've tightened up their banking system. They've turned over al Qaeda people that we were looking for. And they're doing covert action at our behest, at, you know, the peril of their own security. And that's going to pay.

ROLLINS: There's only 2.5 million people. And the bottom line is, we have been their protectant, and they act like they're doing us a lot of favors. The truth of the matter is...

DOBBS: This administration is acting like, my God, how can we possibly survive if Dubai gets upset with us?

ROLLINS: It's our ships and our planes and what have you. The terrorism...

KLEIN: It's not just Dubai, it's all Muslims. If we seem to have a different set of rules...

DOBBS: OK. Then throw away national security interests, disband the whole concept of homeland security. I mean it's absurd.

KLEIN: We're conflating two issues. National security is one issue, and we agree on that one. But what we're talking about here is a deal to manage ports.

DOBBS: No, we're talking about a deal here that is national security based. It is fundamental, and the suggestion that to appease a Muslim PR campaign or some element of the war on terror that requires to ignore national security here but to embrace on another level, because it's a commercial interest. I mean, it makes no sense.

David Gergen?

GERGEN: Listen, I believe Joe, that if the president said, I want to delay this, let me look into it, and the he had gone privately to the UAE, he could have worked out a deal that they could have gracefully withdrawn. We could have paid them some money for whatever. You know, there wouldn't of had to have been exchange of favors in some way.

But those things happen frequently when an American president has to go to somebody and say, look, this is embarrassing me at home. I need this for my politics. They would understand that.

Now, they have been put in a situation because this has been so elevated, that if it doesn't go down -- Ed, you're right -- it is going to be embarrassing for our relationship with Dubai. That's one more political consequence of mishandling it from the start.

DOBBS: But there is something utterly absurd, and I'm hearing it from so many quarters, that if they don't go ahead with this deal, there will be a negative, somehow -- in the Middle East, where radical Islamists dominate, the Wahhabis are driving the Arab street, and do you think they're going to be looking at this? No, this is a simple deal. I mean, this is -- we put together -- we rejected China in 1998. That certainly tore up the relationship, didn't it?

KLEIN: Look, as we're about to find out, there isn't a unanimity in the Arab street, in the Middle East. There's going to be a war of Sunnis against Shiites in Iraq.

GERGEN: Right.

KLEIN: We are in peril of offending billions of people in this world.

(CROSSTALK)

KLEIN: Yes, I do. And if you want to change the rules, for who can buy U.S. infrastructure, that's fine. But you don't change the rules in midstream. And this is going to cause us problems. If you want to change the rules, that's fine. But there are consequences to this.

ROLLINS: The consequences also are not the Mideast consequences, it's the Midwest and two coasts that surround it.

KLEIN: Absolutely. But politically we're all in agreement.

(CROSSTALK)

ROLLINS: This is a serious political issue that Republicans going into an election -- which they are petrified, whether they should be or not, but they are -- and they see this thing driving and they see this administration has lost its rudder. So they're never going to believe these guys have the political instincts that they once thought they did.

DOBBS: David, does Congress roll over, do what the -- Congress -- the Republican leadership in both Houses roll over, do the rank and file fall in line in the Republican Party and let this White House determine the outcome here?

GERGEN: No, I don't think they roll over. Hastert and Frist are already out there against the president on this. They just can't roll over.

ROLLINS: This is a major turning point.

GERGEN: I do think it's major point. I think your point is right about that, but I do think Joe Klein, that if this had been done quietly, you could have bent the rules and they would have -- the Dubai would have understood it, and we wouldn't have this black eye in the Arab world. We are going to get a black eye with this thing, but that's how we've got to do it.

(CROSSTALK)

DOBBS: Surely you guys are joking. We have 150,000 troops in Iraq. We have -- if the Arab world, as you put it, this street, could be more aligned against the United States, what is this phony sensitivity, if I may -- faux sensitivity, when in point in fact, the reality is ...

KLEIN: You're calling this sensitivity phony, Lou? Come on.

DOBBS: It is absolutely phony.

KLEIN: Look, there are -- you have to exist within diplomatic rules. And for us to put down, broadly put down, the entire Muslim world ...

DOBBS: Excuse me ...

(CROSSTALK)

KLEIN: ... when there are vast number of moderates, when our security is at -- our national security is at stake ...

(CROSSTALK)

DOBBS: May I remove us just a moment from this rather patronizing and, I think, condescending view of the Arab world? What if we said to the government of Dubai and the United Arab Emirates, you know, we're sorry, this isn't working. But we've sort of come to our senses in this country, and we've made a decision that is in our national interests.

We're still great friends. We're going to still do business with you. We're still going to be partners in the war on terror. And we're still going to protect your interests, by the way. What in the world is so difficult about a leader standing there and saying that?

KLEIN: Look, this is a debate we're going to have in this country. And the rules may well change and they maybe should change. But to do it in the way that this has been done, to send the message that we're sending, you cannot guarantee me that we're not creating more militants, more -- and more problems for ourselves.

DOBBS: I'm sorry. At its best, this is a messy democracy. And by golly, people are really talking to the representatives. And for the first time that I've heard -- I don't know about you, Ed -- our representatives are actually listening to working men and women, people back home. Isn't that a good thing, Ed?

ROLLINS: I think it's very positive think. I think equally as important -- I mean, the only issue I would make to my friend Joe, the State Department and others have to worry about the international stuff.

Right now, the American public today is extremely concerned about security. They have been sensitized over the last three or four years and they think their administration has lost the way and is basically compromising security. And that's the issue.

(CROSSTALK) DOBBS: David, you get the last word here.

GERGEN: Silver lining. All this focus on the insecurity we have at our ports. A year from now they'll be better protected. Everybody is going to have to work on this in Congress. And that is a good thing.

That's the only silver lining I can see for this. Otherwise it's been handled so badly, that we're going to get our relationships hurt, but we're going to cancel the deal.

DOBBS: I'm going to add one silver lining, David.

GERGEN: OK.

DOBBS: You know, we're learning a lot more, us regular folks who don't happen to live in the beltway, about how things are being done in the beltway. And we're learning a lot more about security at our ports. And the end result is -- makes me feel pretty good about democracy, this particular one.

Joe Klein, David Gergen, Ed Rollins, as always, thanks for being here.

Still ahead, how the Dubai ports deal could affect our military's ability to ship equipment overseas. My guest, one of the leading experts on port security. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Lucy Duncan Scheman is president and chief executive officer of security consulting firm Safe Ports, Inc. She joins us here tonight. Nice to have you here.

LUCY DUNCAN SCHEMAN, PRESIDENT, CEO, SAFE PORTS INC.: Good to be here, sir.

DOBBS: Bottom line. Does this make sense from a security point of view in your judgment?

SCHEMAN: No. Not at all.

DOBBS: And why is there this misconception that seems to be abroad, that the deal should be just sort of patched up and go ahead?

SCHEMAN: I think that the largest issue is that it caught us all by surprise. You know, it was being debated for a long time in the U.K., in terms of the purchase. But by the time it got to the newspapers here, thanks to your show, people really were caught off guard. And now people are trying to play catchup. And I think that ...

DOBBS: Do we need to be playing catchup? Is there, even irrespective of the merits of this issue, we have a huge security problem in our ports, don't we?

SCHEMAN: Yes, we do. Yes, we do.

DOBBS: Should those key infrastructure assets, should be managed by U.S. firms? The U.S. government?

SCHEMAN: Well, let's walk through it. The aviation industry ...

DOBBS: Make it a quick walk.

SCHEMAN: Well, the aviation industry took, what, a lot of money, something like $700 million that's only been on ports versus $20 billion on the aviation industry. So when we look at our ports, we're not spending money on security on ports yet.

That's the big misnomer. We're putting in very basic infrastructure, not enough people, not enough assets. So the fact that we have foreign ownership of ports, 80 percent of our ports are already in foreign hands.

DOBBS: Well, let's say that again. Out of all the terminals at our ports, 80 percent of already in foreign hands.

SCHEMAN: Correct. Correct. So we are talking about something that's already happened. It's a fait accompli. What we are doing new is we're looking at a foreign government having control of very important port assets.

DOBBS: And the issue, the distinction the president did not choose to make the distinction when asked about a UAE company and a British company. The British company, a public company, not associated with the British government. The Dubai Ports World owned by a government.

SCHEMAN: Correct.

DOBBS: The idea that this country, four years after September 11th, has wide open borders, and this administration refuses to secure them.

SCHEMAN: Right. Absolutely.

DOBBS: That we have ports that we're only watching about 4 percent of those containers being inspected.

SCHEMAN: About 1 percent.

DOBBS: It's 1 percent?

SCHEMAN: It's a lot less than 4. And the equipment that is used to even look at the containers is antiquated equipment. We haven't updated our equipment in years.

DOBBS: One last question. With 80 percent of control of those terminals in the hands of foreign companies, the ships that we would need, should there be a war, and should China, for example, or another major -- another country with significant shipping assets, if they decided to pull their ships out of our use, how would we move the material around?

SCHEMAN: We'd be stuck. We'd be stuck. We'd be totally stuck. We do not have U.S. shipping anymore. So what is there to fill in the gap? You don't have U.S. shipping. U.S. port terminals are foreign- owned.

DOBBS: And the United States, while our leaders talk about a dangerous dependency on foreign oil, have left us absolutely vulnerable in terms of shipping and ports.

Lucy, thank you very much for being here.

SCHEMAN: Than you so much.

DOBBS: Come back soon as we...

SCHEMAN: I look forward to it.

DOBBS: ... explore this and get far deeper into it.

SCHEMAN: I look forward to it. There's a lot more there.

Thank you, sir.

DOBBS: Lucy, thank you.

Coming up at the top of the hour here on CNN, "THE SITUATION ROOM" and Wolf Blitzer -- Wolf.

BLITZER: Thanks very much, Lou. We're looking forward to having Lou Dobbs himself in "THE SITUATION ROOM" with us. He's going to be debating Congressman Darrell Issa on the ports deal. An important debate coming up.

Also, other stories we're watching, including getting ready to let the good times roll in New Orleans. We're there live for tonight's parade. And are some highly classified documents the key to Scooter Libby's defense in the CIA leak case? There are new developments. Find out what Libby's lawyers argued in court today -- Lou.

DOBBS: Wolf, thank you. I'm back.

The story of a Vietnam vet about to fight for his country once again. "Heroes" is coming up next. Stay with us.

(COMMERCIAL BREAK)

DOBBS: In "Heroes" tonight, the story of Army Chief Warrant Officer Ray Johnson, who's returning to war nearly four decades after serving in Vietnam. Barbara Starr with his story.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): As Ray Johnson leaves for Iraq, there's the familiar uniform, the usual hugs and tears. But look closely. His face is etched by the years.

CWO RAY JOHNSON, ARMY NATIONAL GUARD: I knew eventually my turn would come. It didn't matter what age.

STARR: Fifty-eight-year-old Ray Johnson flew Huey helicopters 37 years ago in Vietnam. Now, he is headed back into combat, this time in northern Iraq.

R. JOHNSON: Since I'm a Black Hawk instructor and everything, you know, I've trained a lot of helicopter pilots in my years in the service, and now my number's come up, so, you know, I feel that I must serve.

STARR: We met him last year, flying for the Maryland State Police, but always a member of the Army National Guard.

R. JOHNSON: As long as I signed up, and, you know, received the benefits, I felt that whenever they need me, where they need me, I had to pay back.

DIANE JOHNSON, SOLDIER'S WIFE: Because at this stage in our lives, we've been talking about retirement. And it never occurred to me that Ray could go to war again after almost 40 years.

R. JOHNSON: Go get us a hot dog, OK?

STARR: A few weeks ago, Johnson went to Georgia, to say goodbye to his four children and five grandchildren. He managed to squeeze in two school basketball games.

R. JOHNSON: I don't know if they have these in Baghdad.

CATHY COOK, SOLDIER'S DAUGHTER: I'll be behind him 100 percent. I don't like the idea of him going, but I'll be here for him.

STARR: What does it say that the stretched U.S. Army is sending Vietnam veterans and grandfathers off to war?

ASHLEY JOHNSON, SOLDIER'S SON: It's a sign that they're doing an excellent job of continuing to train the people that they've trained in the past.

COOK: I wish they'd leave the grandfathers home, to be here for the basketball games for the grandchildren. I don't like it. I don't think it's right.

STARR (on camera): We know Ray Johnson is not the first Vietnam veteran to serve in Iraq. The Army cannot say exactly how many who learned their combat skills so long ago in the jungles of Southeast Asia are now serving in combat in the deserts of Iraq.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

DOBBS: Chief Warrant Officer Johnson ships out tomorrow. We wish him and all our heroes in uniform all the very best.

We'll be right back.

(COMMERCIAL BREAK)

DOBBS: More of your thoughts now. Melanie in California: "When the president says 'trust me' when it comes to the UAE, is he getting his information from the same people who said the invasion of Iraq would be a slam dunk?"

And Francine in Florida: "I believe all powers that be are selling the USA down the river. Just look at Dole and Albright, diligently applying lipstick to the same pig."

Bobby in Georgia: "Lou, I'm confused. We invade a country that had nothing to do with 9/11, and then sell control of our ports to a country that did. What's up with that?"

Rich in Massachusetts: "Mr. Dobbs, keep up the good work. You must be doing something right if the UAE embassy wants to shut you up."

We love hearing from you. Send us your thoughts at loudobbs.com.

The results of our poll tonight: Only 97 percent of you say the Congress should limit ownership and operation of America's strategic infrastructure assets to the U.S. government and U.S. companies.

Thanks for being with us tonight. Please join us here Monday when among my guests will be Senator Carl Levin, and the governor of Arizona, Janet Napolitano. We hope you'll be with us as well.

For all of us here, we wish you a very pleasant weekend. Thanks for watching. Good night from New York. "THE SITUATION ROOM" with Wolf Blitzer begins now -- Wolf.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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