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LOU DOBBS TONIGHT

Iraq: 3 Years Later; Interview With Kevin Phillips

Aired March 20, 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 Monday, March 20.
Live in New York, Lou Dobbs.

LOU DOBBS, CNN ANCHOR: Good evening everybody.

Tonight, after three years of war and the loss of more than 2,300 American lives, President Bush declares there will be no retreat from Iraq.

We'll be live with reports at the White House in Washington.

Plus, a foreign company that could soon buy one of the last remaining U.S. port operators. Will they?

We'll have a special report on what appears to be a losing battle to keep critical American infrastructure in American hands.

And is the future of our democracy at risk? Author and former Republican strategist Kevin Phillips says America's threatened by radical religion, our dependence on oil, and exploding national and public debt. Kevin Phillips will be my guest.

All of that and more coming up right up.

We begin tonight with President Bush's strong defense of the war in Iraq. As the war now enters its fourth year, President Bush today declared the United States will stay in the fight until the fight is won. But President Bush also acknowledged errors in the early stages of this war.

Elaine Quijano reports tonight from the White House on the president's speech as he struggles to lift his sagging poll ratings. Jamie McIntyre, from the Pentagon, on the battle of Tal Afar. A battle the president says offers hope for the future.

We turn first to Elaine Quijano -- Elaine.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Lou, as people look back over the past three years, President Bush's speech today was part of a renewed effort by the administration to shape public opinion.

(BEGIN VIDEOTAPE) QUIJANO (voice over): With the Iraq war now entering its fourth year and polls showing low public support for his handling of the situation, President Bush acknowledged both the continued sectarian violence in Iraq and Americans unease.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The situation on the ground remains tense. And in the face of continued reports about killings and reprisals, I understand how some Americans have had their confidence shaken.

QUIJANO: Speaking before the City Club of Cleveland, the president again defended his Iraq strategy. This time, he zeroed in on the story of Tal Afar, a city in northern Iraq, citing it as an example of how he says Iraqi forces are playing an increasing role...

BUSH: Many Iraqi units conducted their own anti-terrorist operations and controlled their own battle space.

QUIJANO: ... how the U.S. learned from previous mistakes...

BUSH: It came only after much trial and error.

QUIJANO: ... and why insurgents and terrorists are losing their grip on the country's civilian population.

BUSH: The people of Tal Afar have shown that Iraqis do want peace and freedom. And no one should underestimate them.

QUIJANO: The president also addressed the Iraqis themselves, reiterating his position that U.S. forces will not leave prematurely.

BUSH: The United States will not abandon Iraq. We will not leave that country to the terrorists who attacked America and want to attack us again.

(END VIDEOTAPE)

QUIJANO: The president also took questions from the audience for about an hour. The members invited by the City Club of Cleveland. And in responding to one question about Iran, President Bush made clearly that any discussions between the U.S. and that country would be limited only to Iran's involvement in Iraq and not open to the larger issue of Iran's nuclear ambitions -- Lou.

DOBBS: Elaine, thank you.

Elaine Quijano.

In Iraq today, insurgents killed seven Iraqis in two bomb attacks in restaurants in Baghdad. More than 30 people were wounded.

Elsewhere in Baghdad, insurgents killed two Iraq police commandos. Two civilians were killed in a bomb attack on a police patrol. Two other people were wounded in the same attack.

President Bush today declared that the U.S. victory in Tal Afar gives him confidence that American strategy in Iraq is on the right track. American and Iraqi troops retook the city after it was controlled by insurgents for months. But U.S. troops still face major challenges trying to defeat insurgents in other parts of Iraq.

Jamie McIntyre has the report from the Pentagon.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT (voice over): For Americans anxious to hear how U.S. troops will ever be able to leave Iraq, President Bush had two words: Tal Afar. Mr. Bush cited the northern Iraqi town of 200,000 as a microcosm of Iraq's churning ethnic cauldron and claimed that last May, U.S.-backed Iraqi troops effectively cleared the former insurgent stronghold, employing a new strategy dubbed Clear, Hold and Build.

BUSH: The example of Tal Afar gives me confidence in our strategy, because in this city we see the outlines of the Iraq that we and the Iraqi people have been fighting for.

MCINTYRE: President Bush credited an up and coming U.S. Army commander, Colonel H. R. McMaster, with effectively routing the terrorists in Tal Afar by putting large numbers of Iraqi forces out front and backing them with American military muscle and expertise. But the question is whether Tal Afar is the template for long-term success in other parts of Iraq or merely a short-term victory that will slowly slip away once the U.S. pulls out.

COL. H. R. MCMASTER, U.S. ARMY: What we have in Tal Afar now is a very secure situation because Iraqi security forces are established throughout the city. And the army and police are working extraordinarily well together, and this is permanent security for the people of Iraq.

MCINTYRE: McMaster is also the author of "Dereliction of Duty," the seminal book on the military's responsibility to confront their civilian bosses when the strategy isn't working.

Over the weekend, the retired two-star general, Paul Eaton, writing in "The New York Times" opinion piece, called Defense Secretary Donald Rumsfeld incompetent and said he should step down. In "The Washington Post," Rumsfeld gave a spirited defense of the Iraq policy, writing, "Turning our backs on postwar Iraq would be the modern equivalent of handing postwar Germany back to the Nazis."

That drew fire from Rumsfeld's many critics. Democratic Congressman John Murtha called the comparison "irresponsible," noting U.S. troops in Germany were "facing no resistance," while arguing U.S. troops in Iraq are "caught in a civil war."

(END VIDEOTAPE)

MCINTYRE: And Lou, as we've noted on this program before, Colonel McMaster is the author of that book, "Dereliction of Duty," which took commanders during the Vietnam War to task for not providing their candid assessment of how things are going. When I talked to Colonel McMaster this afternoon, he insisted that his candid assessment is that the Iraq strategy is working -- Lou.

DOBBS: Jamie, thank you very much.

Jamie McIntyre from the Pentagon.

President Bush today reaffirmed U.S. determination to defend Israel if Iran ever attacks Israel. Officials from the United States, Europe, Russia and China today began new talks on Iran's nuclear program. The officials are trying to develop a long-term strategy for the United Nations to deal with the nuclear threat, but Iran's president today refused to back down.

The Iranian president declared Iran stands by its right, as he put it, to obtain nuclear technology whatever the consequences.

North Korea is also refusing to hold nuclear negotiations with the rest of the world. Six-nation talks on North Korea's nuclear program have been stalled since last November. Now communist China's blaming the United States for the delay. Beijing says the United States has been too hard on North Korea. In particular, over its money laundering and counterfeiting of U.S. currency.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice over): North Korea is expert at forging U.S. $100 bills, the best quality ever forged on the same kind of printing press used by the U.S. Treasury. The so-called super notes earn an estimated $1 billion a year in income for North Korea, along with money laundering, arms sales, trade in heroin, methamphetamine, and counterfeit U.S. pharmaceutical such as fake Viagra.

PETER BROOKES, HERITAGE FOUNDATION: North Koreans are well-known counterfeiters of American money. In fact, the North Korean super note is one of the reasons we had to change our $100 bill. There are billion dollars every year turned over by the North Koreans of American currency.

PILGRIM: But China is now saying the United States should let it go, ignore it in the interest of restarting nuclear negotiations with North Korea. China says those measures have "posed an obstacle" to the negotiations.

The China connection is close. In September 2005, the Treasury Department said a bank based in Macau, a special autonomous region in China, had been " a willing pawn for the North Korean government to engage in corrupt financial activities."

A State Department report on international narcotics control issued this month asserts, "The methamphetamine manufactured in North Korea now may be identified as Chinese-source, because ethnic Chinese criminal elements are working with North Korea in narcotics production and distribution abroad and within China." North Korea has been howling about the U.S. crackdown on its illegal activities, has denied the charge, and asks the U.S. Treasury Department to lift financial sanctions.

(END VIDEOTAPE)

PILGRIM: Now, China says the impasse on the nuclear talks with North Korea is because the United States should have a more flexible attitude. And China has also said there's a mutual lack of trust between the United States and North Korea, Lou. I wonder why.

DOBBS: Remarkable. Kitty, thank you very much.

Kitty Pilgrim.

There are new charges tonight that the United States for decades has put the interests of Israel ahead of the U.S. national interest. These charges are in a new study of the U.S.' relationship by two of the country's leading geopolitical academics.

Stephen Walt of Harvard University and John Mearsheimer of the University of Chicago in their study says, U.S. policy in the Middle East is driven almost entirely by domestic politics and the so-called Israel lobby. Critics call these charges baseless.

Still ahead here, 18 congressional candidates, one overriding issue, one office. A special report on how the illegal alien crisis is transforming California politics as well as national politics.

Also tonight, a new nightmare scenario for the United States. How President Bush's guest worker plan for illegal aliens can trigger a population explosion threatening the country.

And President Bush sees nothing wrong with America's growing reliance on foreign capital and investment. More of our nation is now up for sale. Americans are more reliant than ever on foreign imports.

We'll have that report and more coming right up.

(COMMERCIAL BREAK)

DOBBS: In San Diego, California, voters there have a field of 18 candidates to choose from in their upcoming special congressional primary. All candidates, both Republican and Democrat, have one overriding issue in common in this election. They all believe the illegal alien crisis in this country's out of control and being completely ignored by Washington.

Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice over): Eighteen candidates are seeking the San Diego-area congressional seat vacated by convicted bribe-taker Duke Cunningham. They include veteran politicians... BRIAN BILBRAY (R), CONGRESSIONAL CANDIDATE: I think America has waken up to the fact that illegal immigration is a threat to every neighborhood.

WIAN: ... a retired judge...

VICTOR RAMIREZ (R), CONGRESSIONAL CANDIDATE: If you wanted economic disincentive to people coming here illegally, you have to be prepared to have the will to forfeit the assets and the income of their work.

WIAN: ... business executives...

ERIC ROACH (R), CONGRESSIONAL CANDIDATE: And so we have to secure that border just like we have to secure our ports.

WIAN: ... a highway patrol sergeant...

JEFF NEWSOME (R), CONGRESSIONAL CANDIDATE: I'm the only candidate up here who's actually arrested an undocumented worker.

WIAN: ... even a former NFL player.

SCOTT TURNER (R), CONGRESSIONAL CANDIDATE: Yes, it costs a lot of money, and yes, it take a long time to complete, but you can't put a price tag on our safety and our security.

WIAN: They're all talking about illegal immigration and border security.

BILL MORROW (R), CALIF. STATE SENATOR: If you favor open borders, or if you're not anti-illegal immigration, you're not in this race.

WIAN (on camera): Even though the candidates in this district are running to replace a congressman who was kicked out of office in a major ethics scandal, illegal immigration is still the main issue with voters.

(voice over): A poll last week found voters here more concerned with illegal immigration than government ethics, health care, federal spending, even national security.

We have the "For Hire" sign out with one hand and then we have the "Keep Out" sign. And so people are very frustrated with it and they're demanding action.

WIAN: California's 50th congressional district is less than a 30-minute drive from the Mexican border.

PAUL KING (LIB), CONGRESSIONAL CANDIDATE: The real problem, though, is Mexico. You have a socialist oligarchy right next to the freest country in the world.

DELICIA HOLT (R), CONGRESSIONAL CANDIDATE: And until we place sanctions on that government and stop trading with that government, their people will continue to come here.

WIAN: Many candidates are touting their endorsement by minuteman groups, border patrol unions and law enforcement. Still, it's possible border issues won't decide the race.

HOWARD KALOOGIAN (R), CONGRESSIONAL CANDIDATE: Illegal immigration has to end. But because everybody has that same position, then I think it turns on who do you best believe is going to actually stick with that position and actually get something done about it?

WIAN: For a change.

(END VIDEOTAPE)

WIAN: The special election is in April, followed by an almost certain runoff in June. The attention San Diego candidates are paying to illegal immigration and border security could be a preview of what voters nationwide will hear in congressional campaigns this fall -- Lou.

DOBBS: Casey, thank you.

Casey Wian reporting from San Diego.

The Mexican government is using full-page newspaper ads to let Americans know where the government of Mexico stands on illegal immigration. The new ads, a message from Mexico about migration, appeared today in the additions of "The New York Times," "The Washington Post," and the "Los Angeles Times."

The advertisement lays out the Mexican government's basic principles on the issue.

First, the Mexican government calls illegal immigration a "migration phenomenon," saying it's a "shared responsibility of Mexico and the United States."

Next, the Mexican government acknowledges that if Mexicans can't find economic and social opportunities in their own countries -- their country, they will emigrate to the United States.

The ad then goes on to offer Mexico's recommendations for reforming U.S. immigration policy. It says, America should adopt a guest worker flam admits the "largest public number of workers and their families."

Also, "For a guest worker program to be viable, Mexico should participate in its design, management, supervision and evaluation."

These ads, the words and policy of the Mexican government, they were placed by the Texas public relations firm Allen & Company (ph). And according to its Web site, past Allen & Company (ph) clients include Mexican president Vicente Fox and one President George W. Bush when he was then governor of Texas.

Well, as Mexico attempts to influence this nation's immigration debate, new statistics show Mexican illegal aliens are making up an increasingly large share of the American workforce. A new study from the Pew Hispanic Center says one in every 15 workers in Texas is now an illegal alien from Mexico, which means 6.5 percent of the Texas workforce is undocumented, illegal.

Tonight, border security advocates are warning of a nightmare scenario for this country if Congress were to pass President Bush's immigration reform proposals. These advocates say the United States would see a population explosion that would literally transform the nation if the White House has its way.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice over): In 1950, there were 150 million people in the United States. Today, the number has doubled to 300 million.

Newcomers account for the swelling of the population. Congress is debating a guest worker program that would drastically increase the U.S. population above and beyond where it is today. It's sparking a debate: how many people are too many people?

ALAN KUPER, COMP. U.S. SUSTAINABLE POPULATION: This is not a hundred years ago when our population was about 70 million. We have to recognize that it's a really new ball game.

SYLVESTER: The Federation for American Immigration Reform, or FAIR, estimates that by year 2050, the U.S. population will hit 500 million if the guest worker program passes. If the United States sticks with the status quo, the population will increase to an estimated 450 million.

On the other hand, if the United States enforced its immigration laws and moderated legal immigration, the population would hit only 362 million. Depending on which policy the United States adopted, a difference in 138 million people.

It's significant when you consider how that will impact traffic, infrastructure, school sizes, energy supplies, the environment, and the availability of jobs. And the more people, the more polarized the country becomes into haves and have-nots.

JACK MARTIN, FAIR: The middle class in the United States is shrinking significantly. As the middle class shrinks, it no longer provides the same opportunity that it has historically for people or their children.

SYLVESTER: The states that would be impacted the most by a guest worker program, California, Arizona and Texas. They would more than double the number of people in the next five decades. Nevada's population would triple.

(END VIDEOTAPE) SYLVESTER: FAIR sent its report weeks ago to members of the Senate Judiciary Committee that is considering immigration reform, but it did not hear back from a single lawmaker -- Lou.

DOBBS: Thank you very much.

Lisa Sylvester from Washington.

Still ahead here, the United States was once a self-sufficient nation. The United States is now dangerously dependent on the outside world. A special report on the important parts of America that America has decided to give away or has already given away.

And new political problems for President Bush as the Iraqi war enters its fourth year. Three of the countries most extinguished (INAUDIBLE) will be with me here next.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: SSA Marine, it is one of the last remaining U.S.-owned port operators in this country. It says it's now exploring strategic alternatives. What that means is it's looking for a buyer, and that buyer isn't likely to be American. This is a stark reminder of just how dependent this country has become on foreign money, foreign management and operations.

Christine Romans has the story.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice over): What little is left of U.S.-run port operations may soon slip away. The largest U.S.-run port operator is looking for a suitor.

SSA Marine says it will not consider selling control of its U.S. operations to a foreign government. But a foreign company, that's all but assured. Eighty percent of U.S. port operations are in foreign hands, and that investment doesn't stop at our nation's ports.

Landmark buildings: The government of Dubai owns New York's Essex House Hotel and the Helmsley Building rising above Grand Central Station.

Military contracts: A Dutch company makes body armor for our troops and a French company supplies meals.

Critical infrastructure: European companies have substantial control over U.S. natural gas and electricity supplies. They run power plants and water treatment facilities.

FRANK CILLUFFO, HOMELAND SEC. POLICY INST.: There are some security implications we should be examining, and we want to make sure that security's not a footnote in some of our dealings with international businesses and international companies. ROMANS: Venezuela's radical president controls gasoline retailer Citgo, and from time to time threatens to cut off U.S. supplies.

JOHN PIKE, GLOBALSECURITY.ORG: President Chavez seems to be doing everything within his power to get on America's enemies' list. And at the same time, you have a Venezuelan-owned string of gas stations here in the United States that people are filling up their tanks every day and not evening thinking about it.

ROMANS: Almost a quarter of our oil refiners are owned by foreign companies and half of our government debt is foreign-owned.

(END VIDEOTAPE)

ROMANS: And then there's Westinghouse, a classic case of blurred lines between international commercial interests and national security. U.S. taxpayers are loaning the company $5 billion to build foreign nuclear reactors in China. In China, even though the company is majority owned by a British firm and is about to be sold to a Japanese company -- Lou.

DOBBS: That may be one of the most idiotic examples of a just confounded upside-down U.S. policy in international commerce as -- well, Dubai Ports World comes to mind as well.

Christine, thanks very much.

Christine Romans.

That brings us to the subject of our poll tonight. The question is, do you believe the low approval ratings for both the president and Congress are a result of poor communication or poor policies?

Please cast your vote at loudobbs.com. We'll have the results later here in the broadcast.

Time now to take a look at some of your thoughts.

Ted in Maine wrote in to say, "Lou, why is it they call the people in Washington our leaders when we all know that they are followers? They follow the money."

And Dan in Tennessee, "I'm willing to bet my $10 against a hole in a doughnut that all of your phones are tapped. Need I say why? Keep on keepin' on. Stay safe."

Thank you.

And John in California, "Lou, my neighbors are illegal aliens. They get welfare, food stamps, free education for their kids, economic assistance for the rent. They've been given legal driver's licenses, they just had a child at the local hospital for free, and they work off the books and pay no major taxes. I worked all my life and had to pay for all of the above. Lou, where did I go wrong?"

Thomas in Cincinnati, "Dear Lou, regarding the church and illegal immigration, if you want to get an accurate idea of the magnitude of this program and its extensive design, you should bring up the U.S. bishops Web site on www.usccb.org."

That's usccb.org.

"It doesn't miss a trick. I'm a practicing Catholic and do not agree with their position."

We'll have many more of your thoughts later here on the broadcast.

Coming up next, President Bush faces touch questions in Cleveland and in Washington. Our panel of political analysts takes a look at the White House message and the White House mess.

And Kevin Phillips joins me to talk about his brand new very- important book, "American Theocracy: The Peril and Politics of Radical Religion, Oil and Borrowed Money in the 21st Century."

You don't want to miss Kevin Phillips coming up here.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: As the U.S.-led war in Iraq has entered its fourth year, President Bush today in Cleveland, Ohio. There, he said he understands why many Americans have lost faith in the mission. President Bush said he will not abandon Iraq, however. And he does admit the conflict has tried America.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The last three years have tested our resolve. The fighting has been tough. The enemy we face has proved to be brutal and relentless.

(END VIDEO CLIP)

DOBBS: Former Republican Party strategist Kevin Phillips joins us here tonight. His new book is called "American Theocracy." It is a provocative indictment of the administration's foreign and economic policy, and examines, among other things, how the religious right is driving this administration's policy. Kevin, it is going good to have you with us.

KEVIN PHILLIPS, AUTHOR, "AMERICAN THEOCRACY": Nice to be here.

DOBBS: This is an indictment, clearly and straightforwardly. What drove you to the conclusions that you've reached?

PHILLIPS: Well, there are a lot of, I suppose, launching pads for this. But one, as many years ago I wrote a book called "The Emerging Republican Majority," was sort of the outline of the Republican coalition.

DOBBS: What was it, what, 37 years ago?

PHILLIPS: Ah. 1969 is when it was published. It started before the election. But what's happened to the Republican coalition in the last 10 years especially is it's been moved more and more towards religious yardsticks. People who go to church. People who favor religion defining government. People who have just a whole set of concerns that go beyond economics.

One of the reasons I think we have kind of screwed up economic politician in some ways is that a lot of Americans have stopped worrying about the economy because they're waiting for the second coming.

DOBBS: And you mean this quite literally?

PHILLIPS: I mean it quite literally.

DOBBS: You talk about 30 to 40 percent the electorate is caught up in scripture, exerting their influence, even power, over the White House and the Republican party. You're comfortable that it's that large a number of people, and that indeed that influence is felt that strongly within the White House?

PHILLIPS: Well, I think so. And it's partly because a considerable number of Republicans and conservatives and evangelicals believe that religion should guide politics and they have no hesitation about pushing their view on a whole host of issues. Whether it be the biblical aspect of the Middle East or science on the White House.

DOBBS: Kevin, your new book, a very important book, "American Theocracy," got off to a bang up start today because, when the president was being asked questions in Cleveland, this is -- I'd like to show you what happened there along with everyone watching and listening. If we could roll that.

(BEGIN VIDEO CLIP)

QUESTION: Do you believe this, that the war in Iraq and the rise of terrorism are signs of the apocalypse?

BUSH: I haven't really thought of it that way.

(END VIDEO CLIP)

DOBBS: The question was specifically about Kevin Phillips' new book, "American Theocracy," in which you postulate as we have just said, the influence of -- it's interesting. The answer by the president went on for five minutes. And as one of my colleagues said, a simple yes or no would have done it, it seemed to him. That isn't what we got.

PHILLIPS: He can't. A survey by "Newsweek" several years back found that 45 percent of American Christians believed in Armageddon, that it was coming. And about the same percentage thought the anti- Christ was already on Earth. Now, if you were to take the religious Christians, and the Republican coalition includes most of the religious Christians, you probably have about 55 percent of the Republican coalition that believes in this. He can't answer the question weather or not he believes in Armageddon or it's happening in the Middle East. He's damned if he does and damned if he doesn't.

DOBBS: As a matter of fact, the questioner went on to say, do you believe in this, and if not, why not. Literally, as you put it, he was damned if he did and damned if he didn't. We don't mean that in a sectarian way.

Let's turn to the other aspect of this. The influence, the capture, not only of this White House, but the country by debt. The financializaion, if you will, every word you wrote has a ring of truth to it in that we think of all the debt. We look at the explosion in Wall Street. We look at the explosion in financial instruments. What doesn't go away is that four and a half trillion dollars in trade debt.

Now we can go up to nine trillion dollars with ease because Congress has made it convenient for the treasury to do so. We have unfunded liabilities in Medicare and Medicaid. Trillions of dollars in Social Security. The impact on this country in monumental and it is lasting, isn't it?

PHILLIPS: Unfortunately, it's hard for me to see, short of some panic, that goes into a financial crisis, how you really lessen this and lessening it that way with the vulnerability of housing would be a disaster.

But what's happened in a nutshell is that since the 1970s, you have seen manufacturing in this country slide as a percentage of the GDP from a very large lead back then. And during the 1990s it was passed by financial services, the FIRE sector: finance, insurance and real estate. By 2003, you basically had 21 percent in the FIRE sector, GDP. And you had 13, 14 percent in manufacturing.

Now what's pushed up the roll of financial services in that sector is in most part, debt. In the sense of public, international, private, mortgage, credit cards, huge.

DOBBS: And I don't even dwell on the possibilities or the prospects for panic. Because one can hope against hope that we'll make policy adjustments. But what is clear is that our working men and women in this country, their families, our middle class is at huge risk here. And I have got to ask you. How hopeful are you that we can see this become once again become a government that represent the people who count, who make the country work?

PHILLIPS: I wish I could say I thought that would happen but if you look at two previous leading world economic powers, Britain, 100 years ago, and the Dutch after New Amsterdam, but they were considerable. In each case what happened was an erosion of actually making things, as the society shifted towards trading things and moving money around and all of that sort of stuff.

Once you start to make that transition, there doesn't seem to be any way to go back because you create an elite that is then a set of vested interest in the new way of doing things. And they don't much care whether or not they're still making steel in Sheffield, or in Pittsburgh.

DOBBS: We do have to one advantage. And that is a Constitution and 200 years of tradition and values that have served us well. Maybe it's -- I'm going to be an optimist, Kevin, and I know in your heart you want to be as well, or you couldn't have written such an important examination of the crisis that confronts us.

Kevin Phillips, the book is "American Theocracy." It's terrific -- it's an important read. We thank you for being here. Come back soon. Thank you.

Still ahead, we'll have more of your thoughts. And President Bush answers unscreened questions from the public. And I'll be talking with three of the countries' top political and legal analysts about -- well his message skills. Stay with us.

(COMMERCIAL BREAK)

DOBBS: President Bush on the road again today, Selling his policies in Iraq. President Bush appeared before the city club of Cleveland. It was one of the rare occasions where he confronted unscreened, even occasionally hostile questions from the public.

Joining me now to talk about the challenges facing the president, the Republican majority in Congress, and the nation, "Wall Street Journal" columnist John Fund; senior CNN legal analyst Jeffrey Toobin; Democratic strategist Hank Sheinkopf.

Hank, the idea that we're still in a sell mode in this country or a prospective buy mode I guess, the White House is on a campaign trail. What's your thought?

HANK SHEINKOPF, DEMOCRATIC STRATEGIST: They know that the Senate and the House are potentially at risk come this November, No. 1. No. 2, he's got to find a way to soften the blow that his fellow Republicans are feeling because of the war and because of the economic issues facing this country.

DOBBS: Jeffrey, your reaction to the president and to...

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: You know, I don't think he has a communications problem. I think he has a substance problem. The problem is, as Prime Minister Allawi -- former Prime Minister Allawi said, there are 50 or 60 people getting killed every single day in Iraq, some of them Americans. Fortunately the number of Americans has gone down. But the number of troops there has not gone down. The problem is not communications. There's no sign that any of this is getting any better. And the speeches don't change the substance of the problem.

DOBBS: From the right, John Fund, your thoughts about the president, the conduct? Is it a policy problem? Or are they policy problems? JOHN FUND, COLUMNIST, WALL STREET JOURNAL: Well, more policy more than anything else and that is Iraq. That is certainly leaning to a lot of insecurity and anxiety among Americans.

Fred Barnes, who is one the most pro-Bush journalists I know of, was on the pages of our newspaper today, the "Wall Street Journal," calling for a third term for the president, meaning he has to clean out the current White House staff, start anew, a whole new deck of cards. That's not the only thing he has to do, but frankly this president is caught in this perception problem that he doesn't have a grasp on the problems. He frankly needs a new team and some new thinking.

TOOBIN: Who cares what his team is. I mean, I don't care what...

FUND: ... It helped Ronald Reagan in 1986, because when he replaced his...

TOOBIN: ... Because he changed the policy.

FUND: Excuse me, Howard Baker didn't change the policy. Howard Baker simply gave a new start for Don Regan and obviously failed.

SHEINKOPF: These are process arguments about something that is emotional. If you weren't worried about the polling numbers, if you weren't worried about having the lowest polling numbers in recollection for an incumbent president, he would not be on the road in the heartland.

That is the problem. And you can see in his rhetoric that he is setting up to blame the media for reportage. Cheney was very clear about this. He says, "Look, what we're doing is not as sexy or is not as visual as seeing people killed in Iraq," when in fact there are people being killed in Iraq. Civilians and the war is out of control. That's the basic problem.

TOOBIN: When he was at 80 percent in the popularity in the polls, it seemed like he had no complaints about the media. I don't think the media has changed.

FUND: The war is in bad shape, but it's not in as bad shape as it is being portrayed. I refer to David Ignatius's column in "The Washington Post," clearly because reporters can't travel in Iraq, there are some things they can't cover.

SHEINKOPF: Well, there's no question. To say less would be unfair. But frankly, the appearance is still, both in the economy and in the war, that things are not in control. That is a danger for any president under any circumstances.

DOBBS: Yes, and I think we need to put that in some context, too, and I hope you would agree with this, John. We're watching Donald Rumsfeld, secretary of defense, sending his message out through the Pentagon briefing, almost every day, about 1:30, 2:00 in the afternoon. The White House briefing, almost every day. We have the Republican leadership on both houses sending the message out.

It becomes difficult for me to feel sorry for their -- feel sorry for them for an inability to get a message out.

FUND: They have a lot of problems, but there's one message they probably wish they could get out that they can't because knock on wood, one of the president's messages is, we are fighting the war in Iraq in order to help protect the homeland.

It's been five years since there's been an attack on the homeland. Obviously you can't say there won't be one tomorrow, but the fact that this administration has kept us safer five years, has to be factored into the balance as well.

DOBBS: We'll be right back in just one moment. We're going to continue with our panel, and please vote in our poll tonight. The question, do you believe the low approval ratings of both the president and this Congress are a result of poor communication or poor policies, as Jeffrey Toobin might suggest? Cast your vote at loudobbs.com. We'll have the results shortly and we'll share some more of your thoughts and e-mails as we continue here. Please stay with us.

(COMMERCIAL BREAK)

DOBBS: Joining me now, "Wall Street Journal" columnist John Fund, senor CNN legal analyst Jeffrey Toobin, Democratic strategist Hank Sheinkopf.

Jeffrey, let's go to the issue of this presidency, its ability. You say it's a matter of substance, not style, policies not just politics. Is there any likelihood, in your judgment, that we'll see a significant change?

TOOBIN: I think the best thing that could happen to this administration at this point is to get another Supreme Court vacancy, which is something they have no control over, because that's an issue they can rally their base.

DOBBS: Did you hear all that moaning out there and those cheers from the other side? I mean that's just what we want is another...

TOOBIN: ... Well, those of us in the legal business always are looking for that. But I think that's the best news the president has had in his entire second term, which is the Roberts and Alito nominations. Other than that, he has had no opportunity to get his side together.

DOBBS: Hank, as a Democratic strategist, Howard Dean seems to have dropped off the radar here. We're not hearing, quite the vociferousness from the Democratic leadership on Capitol Hill. Purposeful or coincidental?

SHEINKOPF: Purposeful, not coincidental. Look, when the other side's in trouble, you let them continue to be in trouble. Newt Gingrich and the Republicans, until they had a plan, did it to the Republicans when the Democrats were in charge. Excuse me, the Republicans waited until the Democrats had problems in '94, and did that. This is typical political maneuvering and frankly the Democrats are waiting for the Republicans to finish screwing up.

DOBBS: Well, Joe Biden calling for the resignation of Secretary of Defense Rumsfeld, joining other voices as well. What's your...

FUND: ... People have been calling for their resignations for awhile. I think your previous guest did identify one of the schisms. When a party is in trouble, you get the wings of the party fighting with each other.

DOBBS: For those who did not...

FUND: Kevin Phillips.

DOBBS: ... have the opportunity to be with us, Kevin Phillips, the author of "American Theocracy."

FUND: The tension between the social concert and the economic concert of winning the Republican Party. When a party is in trouble, they tend to fight.

But the Democrats also have a problem. They lost votes in 2004 when Howard Dean and other Democrats were viewed as being hostile to people of faith. That's one of the reasons why they're not taking the angle Kevin Phillips took in talking about an American theocracy, which I think is ridiculous. Theocracy is not something...

DOBBS: ... You think the premise is?

FUND: The word theocracy is a highly loaded term. Look it up in the dictionary, and I think it does not describe the general amicability that people have across religious faiths in this country.

The Democrats have to worry about not going too far in that direction, because that really did cost the votes in 2004. Both parties have to avoid the extreme. Both parties are in complete discredit with most of the American people.

DOBBS: Both parties are in complete discredit, and the idea of a theocracy, whether one -- however one looks at it, there's no question that religion is powerful in its influence in our court system, in our Congress, and in this White House.

TOOBIN: Just ask Harriet Miers. Harriet Miers' nomination was defeated not by Democrats, but by social, largely religious conservatives, who are so powerful in the White House right now, they got one -- the president's own Supreme Court nomination...

FUND: But her biggest backers were Dobson and Richard Land of the Southern Baptist Conference. It was the economic conservatives, including "The Wall Street Journal," that were skeptical. She had a lot of social conservative backers. So that doesn't wash.

(CROSSTALK) SHEINKOPF: ... religion is secondary, and the problem is that there is a tremendous fear among swing voters, so defined by the four states in which presidential elections are won and lost, their livelihoods are on the line. The oil industry...

TOOBIN: And that's something I don't really understand. Why are so people so worried about the economy when the economy isn't by traditional standards measures so badly?

DOBBS: I can tell you why they're worried about the economy. Over the course over the past 18 month, we've seen real wages decline in this country. We're watching outsourcing of hundreds of thousands of jobs. The offshoring of production that has typically been the purview of the American middle-class worker.

Americans aren't stupid. They're watching what's happening. Even though we've got a 4.8 unemployment rate in this country, there's no one feeling particularly sanguine about the prospects for themselves or their children right now.

TOOBIN: Apparently not, given -- but the traditional measure had been unemployment and inflation, and if they're both low, that's good. But I guess that's changing.

DOBBS: The so-called misery index is -- came up under the Carter administration...

FUND: Insecurity can't be measured. Ninety-three percent of the months since Ronald Reagan took office a quarter-century ago, have had -- showed economic growth. People are used to general prosperity. Individual security, which is, is my job safe, are my kids going to get to the right school, that is on the increase.

SHEINKOPF: Every time there is a mention of General Motors or Ford or a major auto maker going out of business, this country shakes. And the people that shake are those who are the -- those who vote Republican or Democrat...

(CROSSTALK)

FUND: ... good news, like all the jobs that are created -- because we have created millions in the last few years -- those don't make headlines.

TOOBIN: Maybe true.

DOBBS: Well, what does make headlines is Dell is going to create tens -- 10,000 jobs in India over the next three years.

FUND: How many jobs did they create in the West last year?

DOBBS: Was I interrupting you or were you interrupting me?

FUND: Sorry.

DOBBS: And 150,000 jobs are projected for Wal-Mart in China. I would just love to see -- and there's nothing wrong with that. I'm not suggesting that as a pejorative, so long as those are jobs that are not being pulled out of the United States and they are there to service those markets. But I would sure love to see that kind of robust growth from corporate America when they talk about middle-class American jobs.

And the fact is, they're not. And the president and this Congress are going to have to deal with that come November, and with a host of other issues which we thank you for enlightening us about.

FUND: Thank you.

DOBBS: Or as Kevin Phillips puts it in his book, in this era of disenlightenment. Jeffrey Toobin, John Fund, Hank Sheinkopf, thank you, gentlemen.

Coming up here, none other than Wolf Blitzer with "THE SITUATION ROOM." Wolf, tell us all about it.

WOLF BLITZER, HOST, "THE SITUATION ROOM": Thanks very much, Lou.

Three years after the U.S. invasion of Iraq, President Bush vows not to withdraw before an American victory. We'll get a no-holds- barred assessment on the situation of the ground from the "Time" magazine bureau chief on the ground, Michael Ware.

With President Bush's political standing growing shakier, there is some surprising talk about impeachment. I will ask the Republican Party Chairman Ken Mehlman about that.

Plus, squeezing a whole year's worth of work into just 97 days. The House of Representatives wants to do that. Could you get your job done that way? Those stories, Lou, lots more, coming up right at the top of the hour.

DOBBS: Ninety-seven days. Sounds like a do-nothing Congress. Could it be, Wolf?

BLITZER: Ninety-seven days. If they work really hard, maybe they could do something.

DOBBS: You got it.

Wolf, look forward to it. Thank you.

Still ahead here, we'll have the results of our poll and more of your thoughts. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Now the results of our poll. Ninety-seven percent of you say the low approval ratings for both the president and Congress are the result of poor policies. There is a shocker for just about everybody in Washington, D.C.

Well, now turning to some of your thoughts. Randall in South Carolina saying -- "Lou, I am one of your recent converts who used to think you were sitting on the extreme right side of the American fence. Now I've come to understand you're on top of the fence, trying to keep American jobs in and the illegal aliens out."

Well, Randall, this is the first time I have ever been accused of sitting on the fence, but I take your point.

Richard in California -- "Lou, why are we hoping for new legislation to protect us from illegals? They didn't enforce any of the existing laws. Why would we believe they will enforce any new laws?"

Again, I take your point.

Brian in Arkansas saying -- "Lou, if you didn't report that Congress was going on vacation, how would we know?"

And Doug in Tennessee -- "Bush wants to give control of our ports and airlines to foreign investors. Is the U.S. military next?"

And Fred in Georgia -- "Lou, I am outraged that the president would even consider turning the operation of U.S. airlines over to a foreign government. I suspect he will next consider turning the White House over to someone else. I pray that it will be a Democrat."

And Larry in Ohio -- "Lou, what's the big deal about Dubai controlling our ports? Mexico is already controlling our southern border and our immigration policy."

And Charles in California -- "Lou, every time Bush tries to do something good for the country, I wonder which country."

Daniel in Texas -- "Lou, it's funny. Bush says we should stay the course. The captain of the Titanic said the same thing."

We love hearing from you, always. Please send us your e-mails, your thoughts at loudobbs.com. Each of you whose e-mail is read here on this broadcast receives a copy of my book, "Exporting America."

Also, if you'd like to receive our email newsletter, please sign up at our Web site, loudobbs.com.

We thank you for being with us tonight. We hope you'll join us here tomorrow, when three of the country's best known radio hosts will be here to talk about what they're hearing from their listeners -- our weekly radio roundtable.

And also, Sonia Nazario, the author of the book, "Enrique's Journey," on immigration, illegal immigration and how to fix it.

For all of us here, thanks fro watching. Good night from New York. "THE SITUATION ROOM" starts right now with Wolf Blitzer -- 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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