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THE SITUATION ROOM

Missile Launched by North Korea; Discovery Launch Successful; President Bush Visits Fort Bragg, North Carolina; New Jersey Casinos May Shut Down

Aired July 4, 2006 - 16:00   ET

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


JOHN KING, CNN ANCHOR: Thank you both and to our viewers, you are in THE SITUATION ROOM, where new pictures and information are arriving all the time. Standing by, CNN reporters across the United States and around the world to bring you today's top stories.
Happening now, breaking news -- word of a missile launch by North Korea. Is it the provocative move that U.S. officials have feared?

Discovery on a Fourth of July flight. It's 4:00 p.m. at the Kennedy Space Center, where the shuttle launched less than two hours ago. We are tracking the mission and the last minute problem that had some NASA officials worried. We are expecting a briefing this hour and we, of course, will carry it live.

Also this hour, an Independence Day declaration. It's 4:00 p.m. at Fort Bragg, North Carolina where President Bush spent the holiday with the troops and he vowed once again to stay the course in Iraq despite the election year political fireworks.

And the New Jersey governor's big gamble. It's 4:00 p.m. in Trenton where state lawmakers are holed up right now trying to resolve a budget crisis, will they succeed or will the government shutdown close casino doors. Wolf Blitzer is off today. I'm John King. You are in THE SITUATION ROOM.

Breaking news this hour, word just in to CNN of a missile launch by North Korea. U.S. officials, of course, for several weeks have said North Korea was preparing to test a long-range missile but is this the missile that has been launched? Our national security correspondent David Ensor tracking this for us and has the latest -- David.

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: John we are hearing that a missile has been launched by North Korea but it is not the big one, the one capable of reaching across the Pacific Ocean that U.S. has been watching for so closely.

First word came to CNN about 20 minutes ago, to CNN's Justine Redmond from State Department officials, we now have two additional sources including an intelligence official who say that North Korea launched a missile, a smaller missile, they believe, than a Taepodong- 2, it was not launched from the same launch pad that that missile that has been watched so closely in the last weeks or so.

It's not clear where the missile was headed, whether it had a target or whether it was simply a test or even perhaps if it was designed to launch something into space but certainly it's a missile that's getting a lot of attention this afternoon -- John.

KING: And David, obviously we are trying to get more information from our sources and it's very difficult in a situation like this, especially given that we are dealing with the North Korean government. But let's walk through sort of the history, if you will, of the rhetoric and provocation from the government in North Korea.

Everyone has been expecting, as you said, this long-range missile to be tested, perhaps to launch a satellite into space, perhaps a test of its capabilities, any information at all, has anyone speculated that North Korea might try something else essentially to throw a curveball at the United States and others?

ENSOR: Well, there had been word over the last day or so, John, that from people in Asia, who were hearing that North Korea intended to do something perhaps today.

But the assumption was that they were going to be launching the Taepodong-2 that's been sitting on that launch pad for weeks now with fuel trucks around it. Now earlier today, some fuel trucks around that missile were removed. Not clear whether the missile is fully fueled or not. But attention was obviously focused that launch pad. So this is now a surprise that apparently a smaller and different missile has been launched, we believe from a different part of North Korea.

KING: And David, from what we do know about North Korea's missile capabilities, as you know the expectation was they would test this Taepodong-2, which we believe to be a three stage longer range missile, you say this is a smaller missile, any information, is this capable of putting a satellite into space or do we know anything about range of what we are told by our sources has been launched?

ENSOR: We don't know anything, John, I'm afraid, I just have to be honest with you.

It could be something as small as a ground to surface missile designed to take a plane out of the air or it could be something larger. The Taepodong-2 on the launch pad is believed to be a two stage, not a three stage. But people aren't really sure about that, either. This is such a secretive place, North Korea. They make no announcements of what they intend to launch.

And that, of course, is what has so concerned the Bush administration. The president saying several times that this is a regime that doesn't even tell its neighbors when it's going to launch a missile which is standard operating procedure when doing weapons tests.

KING: David Ensor for us. Word of this missile test launch of some sort by North Korea. David we will let you go to continue your reporting. Other CNN resources, of course, around the world tracking this story. We will bring you more information as we get it. Again, breaking news into CNN this hour, some form of a missile launch by North Korea. We have confirmed that, details still sketchy. We will continue to pursue more information and bring it to you as soon as we get it.

Now, moving on. For the first time in a year the space shuttle is in orbit. Discovery launched a short while ago, defying the weather and an 11th hour crack in fuel tank foam and worries that have dogged NASA since the Columbia disaster in 2003.

Let's check in now with CNN's John Zarrella at the Kennedy Space Center for the latest.

Hello, John.

JOHN ZARRELLA, CNN CORRESPONDENT: Hi, John, that's exactly right. This is only the second launch of a space shuttle from the Kennedy Space Center in some three and a half years, Columbia three and a half years ago, and Discovery a year ago.

Of course, foam insulation, the big bugaboo, they worked through that yesterday, decided to go ahead with the launch but it was spectacular here today, a little weather issue that NASA had to deal with, cross winds that could have affected things over at the emergency landing site should they have had to come back here to the Kennedy Space Center.

That was ruled a go late in the countdown. So they took off from the Kennedy Space Center right on time. No issues with the vehicle on the ascent. Picture-perfect day, clear blue skies, you could certainly hear the shock wave rumbling across here from pad 39-B up here to the press mound.

Now, since the launch we have had an opportunity to take a closer look at some of those isolation cameras on the external tank, you know, foam being the big issue. The foam that fell off the external tank during Columbia and again in the Discovery mission a year ago. Very difficult to see, but along the bottom side of that image, along that pipeline on the left-hand side of the external tank, it appears there are tiny pieces of some sort of material that are falling away, breaking away from the external tank in those isolation shots.

Now, we are awaiting a news conference here at the Kennedy Space Center and we may be able to get to that and take a look, get a little bit more clarification from those folks as to what exactly happened.

KING: John, I am going to jump in there, that briefing has begun, we are going to leave John Zarrella for now and go straight to that briefing from NASA, the questions about the safety concerns.

WAYNE HALE, SPACE SHUTTLE PROGRAM MANAGER: ... very raw preliminary data. As I said I want to come back in a couple of hours with a little bit more information for you. The imagery team was hard at work when we left them reviewing not only the E.T. camera footage that you all saw but also all the high definition TV cameras, from the ground cameras all around the center. Hopefully, we will get the E.T. umbilical well (ph) camera pictures which the crew took and which were taken automatically down before I come back here in a couple, three hours.

UNIDENTIFIED MALE: Next question, we'll stay along the wall. We'll go to Tracy Watson (ph).

QUESTION: Tracy Watson, "USA Today," I guess again for Mr. Hale.

Did you see anything when you first looked, did you see anything hit the orbiter, and did you lose any more foam off that little side on the lockfine (ph) strut.

HALE: I think I told you about all we know right now. And the report I asked, first of all was did we see anything in first stage, early on when we were worried about the aerodynamic transport and the very early word was no. But I have got to caution you, again the folks will take time to look through all the data and it will be a while before we get a complete picture of what happened during the incident and we are looking for these very small events that were going on.

UNIDENTIFIED MALE: All right. Stay along the wall and we will go with Todd.

QUESTION: Todd Halbertam (ph) of "Florida Today". I guess for Wayne, we were looking frame by frame at the video, and it appeared as if some of that foam down near the ice frost ramps was actually flapping in the wind on the way uphill. And I'm wondering if, A, that would raise concern for the potential for foam coming off at a more critical time during flight, and B, whether that foam looked to be the size that might damage the heat shield?

HALE: Well, you know, OK, I will put it very simply for you. We are beginning the analysis. We are going to do a thorough engineering analysis. I don't have anything more for you right now. Sorry. And we will do our usual thorough job and it will take a little while. But there is not a great deal of pressure. I am sorry these guys have a lot of film to review and it will probably take a couple, three days before we get the whole story together.

WILLIAM GERSTENMAIER, ASSOCIATE ADMINISTRATOR: And again, I think I would add that that isn't too far off normal from what I have been trying to describe to you in press conferences before. We fully expected to lose some foam along the ice frost ramp areas and if you can remember back what I told you before, I thought it would be interesting if we knew when that foam came off, because that could pin point us back to the failure mechanism underlying the foam loss which will help us make a better design.

So I think we have got two awesome pieces of data here that from an engineering standpoint is going to help us take the information we've got and put it back in our theories and really learn what's going on with foam.

So there's two ways of looking at this. And I think it's two early for all of us to start jumping in and speculating. Let's let the good folks take a look at the video, let them look at the images and get some of the E.T. stuff back when Wayne can describe a lot of that to you in the future. But I would not discount this as off- nominal, this is kind of what we expected. And, in fact, it's good that we captured this in the video just like we expected so we can, again, use it for benefit and engineering analysis.

HALE: Just one more. And we won't take me more debris questions, but I will add one more thing. It happened after -- what we saw happened after the time that we are concerned before the debris coming off. And that is really good news.

Because that says that a lot of the things we could only see at the end of it and at the time we separated the tank, we didn't know when it occurred, and we always thought that if you lose little pieces on of foam late, that would be probably the best news that we could get out of this flight.

So what we have seen is very encouraging, but we are way too early and like I said, no more debris questions. We'll come back to you and talk to you a little bit.

MICHAEL GRIFFIN, NASA ADMINISTRATOR: I want to add a comment, what you are seeing and what you are having a nearly unique opportunity to see is engineers at work solving a problem in the midst of the problem and having an opportunity to watch how it is that we work and what we do and how we go about solving our problems in the face of unknown unknowns. And how we go about gathering data and how we go about reducing those unknown unknowns into things we can handle.

We are as impatient to get the data as you are to see it, and when we have it, we will share it with you as we've promised many times, but this is what it looks like with when we are trying to solve a problem that, at some point, we didn't even know we had.

KING: The NASA administrator, Michael Griffin speaking there, the first live briefing since the launch of Discovery a short time ago. Our John Zarrella, of course, standing by and listening to all this. The officials, saying it will be sometime until they have a good sense of whether any debris broke off on launch. Whether that debris was big enough or hit in a spot that could have caused any damage.

So we have a wait a while. John, just wondering, given your experience, I wonder if you heard anything there in those first few minutes of the briefing that perked your interests?

ZARRELLA: Well, it sounded positive. Certainly that's the spin they're putting on it now, that the debris came off during the ascent phase, that was actually good for them, after the solid rocket boosters had come off of the vehicle, so it sounds as if the particles that came off at least at first blush, John, were not a problem, but a couple hours from now we are going to get a good look at the isolation cameras that they talked about there.

The cameras taken by the astronauts who actually looked out the window as the external tank is falling away and they get pictures of the external tank and some of the remote cameras that they had, those pictures coming down in the next couple of hours, giving everybody, including the NASA engineers, a much better view of what happened.

But at first blush, it looks like the debris was small enough it did not cause any problems. It happened late enough during the ascent that it did not cause any problems -- John.

KING: John Zarrella, tracking this for us at the Kennedy Space Center in Florida where Discovery not too long ago took off. Discovery now in orbit. We will continue to monitor this briefing and any other developments, John, we will see you a bit later. Thank you very much.

Now to the situation in Iraq. Iraqi TV is reporting a local official has been freed unharmed after being abducted by insurgents today. Emergency police say the deputy electricity minister and 19 bodyguards were ambushed in eastern Baghdad by gunmen wearing uniforms. Seven of the bodyguards reportedly were released.

And three Iraqi police officers were killed by a roadside bomb that targeted their patrol in Baghdad. Two other officers were wounded.

Also today two women in the Iraqi parliament are demanding severe punishment for those accused of killing four members of an Iraqi family and they are urging an independent investigation. Former army Private Steven Green is charged in the killings and with raping one of the victims before shooting her.

In the meantime, British Prime Minister Tony Blair said today there could be opportunities over the next year and a half to withdraw a substantial number of British troops from Iraq. Prime Minister Blair pegged that troop reduction to the buildup of Iraqi forces. Britain now has about 7,200 troops in Iraq, that's down from 46,000 during the height of the war back in 2003.

Back here in the United States, President Bush rallied the troops on this Fourth of July and he promised U.S. forces would prevail in what he called their fight to give Iraqis their shot at democracy and freedom. Mr. Bush is back at the White House this hour after visiting Fort Bragg, North Carolina. Let's turn now for the latest to our White House correspondent Ed Henry -- Ed.

ED HENRY, CNN CORRESPONDENT: Good afternoon, John. That's right. The president was at Fort Bragg. The army base that's home to the paratroopers and the special operations forces. Perhaps the highlight of the president's trip came when he actually met the special ops pilot who was the person who flew Saddam Hussein to the Baghdad airfield after he was pulled out of that spider hole dramatically a couple of years back.

The president seemed to be surprised to be meeting, in fact, this pilot and at some point the president said that -- did you really do that? That was a good job. It was not a surprise when the president actually spoke. In his remarks he spoke a lot about patriotic themes, he talked about the sacrifice in Iraq, saying that the sacrifice of military officials brings Independence Day to Americans every day of the year.

What was a surprise that the president mentioned the number of war dead. That's something he rarely does when he spoke about what's at stake in Iraq.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Our troops will help the Iraqi people succeed because it's in our national interests, a free Iraq in the heart of the Middle East will make America and the world more secure.

I'm going to make you this promise. I'm not going to allow the sacrifice of 2,527 troops who have died in Iraq to be in vain by pulling out before the job is done.

(END VIDEO CLIP)

HENRY: Now, after the speech, the president had lunch with the troops and they surprised the commander in chief with a birthday cake two days early. As you know, the president, on Thursday the president hits the big 6-0.

He is now back at the White House and he will have a front row seat, of course, for the fireworks on the National Mall and we're told that a lot of family and friends in town, there's also expected to be a small birthday bash for the president, so he will be getting that two days early, obviously a lot of tweaking of the president from some of his friends about the fact that a lot of people now saying that 60 is the new 40 -- John.

KING: Maybe I will say that when I'm 60. And I want to leave the president to his birthday party but let's focus on the trip to Fort Bragg. This is four months to the Tuesday, if you will, four months to Election Day, the midterm elections. The president knowing perhaps on a holiday he has the stage to himself. So it's a pep rally for the troops but it's also a very political message for the president, is it not?

HENRY: Absolutely. And the president noted that it was special operations forces that actually brought al Zarqawi to justice, what the White House is portraying as a real turning point in this war and the president used that to say that he now believes we are on offense in Iraq and I think the same could possibly be said about the White House itself in is terms of strategy.

One of the things that really frustrated the president's supporters in recent months was they really thought the White House was on the defensive when it came to pushing back against Democrats. Ever since Josh Bolten has come in as chief of staff, also with Karl Rove, shifting responsibilities a bit.

They have now said they really want to get back on offense and Iraq and they realize that that's going to be the central issue in the midterm elections and they feel that while, obviously, the mission has not gone perfectly, they are confident that voters in the end will be more confident with Republicans on the issue of national security just as they were in 2002, 2004. Time will tell if that come true, John.

KING: Both celebrating and practicing democracy on the Fourth of July. Ed Henry at the White House. Ed thank you very much.

And stay with CNN for an exclusive interview with the President Bush and First Lady Laura Bush at Thursday at 9:00 p.m. Eastern, 6:00 p.m. Pacific. That interview on CNN's LARRY KING LIVE.

And time now for "The Cafferty File". Jack joins us from New York. Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: How you doing, John.

America celebrating its 230th birthday today, a very different country from the one formed when our founding fathers signed the Declaration of Independence. How well of our values stood the test of time.

A new "USA Today"/Gallup poll shows more than 70 percent of us still respect freedom of speech and religion, but when asked to compare today's values with those of just five years ago, some startling trends appear. Check this out.

Sixty-eight percent of Americans are more materialistic now, 56 percent say we are less supportive of government decisions, 48 percent say we are less tolerant of other points of view and 46 percent say we show less personal responsibility, 36 percent say we have stronger religious beliefs.

So here's the question -- what does it mean to you to be an American in 2006, e-mail your thoughts to the CaffertyFile@CNN.com or go to CNN.com/CaffertyFile. Fairly dramatic changes in some of those numbers just in five years time, John.

KING: And we will see what the email brings, Jack, thank you very much.

And coming up we are following, of course, the breaking news this hour of a missile launch by North Korea. We'll bring you new developments and reaction as we get it.

Plus the casinos closed will all bets be off for lawmakers in New Jersey. We'll have a live report on the budget crisis that has shut down the state government and now is threatening Atlantic City.

And today is the day for fireworks but we may see political fireworks over immigration tomorrow. Our Bill Schneider will be right here in THE SITUATION ROOM to explain.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

KING: A major breaking development this afternoon, word of a North Korean missile launch, U.S. officials have been anticipating a test for sometimes, but sources telling our national security correspondent David Ensor it is not the triple stage Taepodong-2 missile that U.S. officials had feared.

We are joined now on the telephone by Joe Cirincione, he is vice president of the National Security Center for American Progress and an expert on North Korea. Joe, trying to get your sense of what to make of this provocative test by North Korea even though we still have scant details?

JOE CIRINCIONE, NATIONAL SECURITY CENTER FOR AMERICAN PROGRESS (on phone): Well, I think the North Koreans are yanking our chain a little bit, they know it's Fourth of July here, that we're closely watching their test site. They didn't want to launch the full-up Taepodong, so they shot off a little firecracker just to keep us on edge, just to let us know that they are still there and to keep our attention going.

KING: Well, it is an unpredictable regime and you may say that they are trying to get our attention, yank our chain, to use your words, but what would the goals be of doing Pyongyang in doing that right now.

CIRINCIONE: Well, it's pretty clear they want to use this missile test, either the actual test or threat of the test to increase their negotiating leverage, we know that because even as we are observing their activity at this launch facility the North Koreans have told us they want to negotiate the entire missile program and the nuclear program and they want direct talks with the United States. Our administration has correctly refused that offer but invited the North Koreans to come back to the six-party talks which is the proper forum for discussion of these programs.

KING: But the administration has said it hasn't ruled out talks once you get back to the table. If North Korea were to get back to the table, if North Korea would foreswear a nuclear weapons program, the United States says at that point it's willing to offer incentives, it's willing to enter into discussions with North Korea.

One of the hang-ups has been getting the Chinese to put more pressure on North Korea to come back to the table with the open mind. Is something like this, Joe, something provocative like this likely to increase pressure on the Chinese in the international community to perhaps nudge Pyongyang along.

CIRINCIONE: It's possible this test is also aimed at Chine and here's the difficulty on the U.S. side. Our administration has been ambivalent about whether to actually conclude a deal, or whether to squeeze North Korea into submission. And in the last few months, we have tried to tighten up bank credits to North Korea, for example, which have hurt North Korea and have caused them to react by staging this missile stunt.

The missiles themselves, it's not clear how much of a threat they are. They have three basic kinds of missiles, a SCUD missile which can go 300 to 600 kilometers, a Nodong, which can hit Japan, can go about 1,000 kilometers, and then these Taepodongs. Which are basically a SCUD put on top of a Nodong missile. They launched one eight years ago. It went about 1,500 kilometers. We're not sure if the one they have got on the launch pad can go any farther, but they are exploiting this for all its potential both to sort of, I think, to threaten us into improving our negotiating offer with them and also possibly for internal reasons, Kim Jong-il wants to make sure that he retains the support of his military and he wants to maintain sort of a tough posture vis-a-vis the Americans.

KING: You've laid out the calculations as you see them, then what is the next step? How should the Bush administration in your view respond to what you call a stunt?

CIRINCIONE: I think it's very clear that, one, this is not a particularly serious threat. It's just a test for us. But two, we should use this to invite the North Koreans back to the negotiating table but make clear that if they come this time, that we're prepared to cut a deal, that we're prepared to negotiate a final end to their nuclear and missile programs in exchange for economic incentives which the Japanese and Koreans would largely bear and security assurances, a pledge from us that we would not attack North Korea and that in fact conclude a peace agreement finally ending the Korean War.

If they knew that that deal was possible, and the Chinese were to believe we were sincere in our negotiations, I really think we could wrap up negotiations with the North Koreans by the end of this year.

KING: Joe Cirincione, I don't know if you can stand by, but if you can, please do. I want to bring our national security correspondent David Ensor back to the conversation, David, I understand you have new information.

ENSOR: Yes, John, we can confirm from two different State Department sources that an additional missile has been fired by North Korea. There are now that we are aware of two missile launches. The last one we are told was about an hour ago, again, this was believed to be a smaller missile. Not an intercontinental but clearly the North Koreans are busy.

KING: And David, two missile launches within an hour or so of each other, not a military threat from anything we know based on the information we have now, you have been listening to the conversation with Joe Cirincione, I think he calls this more of a stunt, in his view, a political calculation. Consistent what your sources have been telling you and have speculated about the regime over time?

ENSOR: We are getting the sense that U.S. officials are not overly concerned about this, they are watching it closely, clearly. America's eyes and ears in space and at air and at sea and the area around North Korea are very much trained on that country, so anything that goes up in the air is being noticed, including these fairly small missiles.

But no, I don't get the sense there's deep concern about this. They will be irritated. That's for sure. As far as Reuters reporting that the first missile landed in the Sea of Japan, 600 miles from Japan, I gather that was quoting NHK, the Japanese network. We are not able to confirm that at this time. But we're working on it. KING: And you raised an interesting point, David, and I hope I'm not putting you on the spot but in anticipation of the test of the larger missile, the United States had moved some extra military assets into the region, I believe more for a monitoring standpoint than any sort of military posturing. What do we know about that?

ENSOR: Well, that's right. There are a couple of ships in the area that are designed for monitoring this sort of thing, you can assume that there's other assets there, too, obviously spy satellites come into play in this sort of event.

And of course, U.S. officials have warned the North Koreans that this would be unwise, that this would be provocative, that there would be a reaction. The Japanese government has been quite strong, much stronger than usual on the same point and there have been some discussion in Washington as to whether the missile defense shield that the United States has, very, very limited in capacity, might be used. That seems to be pretty unlikely, John, but still people are dusting it off and talking about it.

KING: Our national security correspondent David Ensor, the best in the business, David, we will free you to do more reporting.

And Joe if you are still with us on the phone, I would like to ask you a question about that, you are talking about this as a stunt, now that David has confirmed there are two missile launches, I want you to update any assessment you might have.

If you will, we are talking about reaction in the United States but David just talked about the tougher posture of late from Japan. I am interested as well in how you think this will impact South Korea which has had some tensions with the Bush administration over the negotiating strategy in those so-called six-party talks.

CIRINCIONE: Yes. The interesting thing here is both of these missiles are short-range missiles, that is, they are one of hundreds of missiles that North Koreas can have that can impact South Korea but can't even threaten Japan, so the actual launches aren't much of a threat, don't represent any new capability, but they are certainly to irritate Japan, as David just said. They are going to irritate the United States.

What can we do about it? Not much. Do we have anti-missile systems? Yes we do, both Patriot systems which are in Japan, plus the long-range systems that -- it's in Alaska. But neither one of these are very capable. There's really no chance whatsoever that these systems have any capability against the South -- the North Korean missiles.

What's it going to do for South Korea? It -- South Koreans go back and forth on this. Basically, at this point, their policy is oriented towards trying to change the South -- the North Korean government from within, to encourage trade and negotiations with the North Koreans.

They have been distancing themselves from the United States steadily over the last year. It's hard to say right now which way this will break. But, probably, the South Koreans will be irritated as well at the North Koreans.

Total -- bottom line about this, it's going to irritate everybody in the region, from the Russians, through the Chinese, the Japanese, and the South Koreans, doesn't represent much of a threat. Don't think it is going to change the diplomatic dynamic very much at this point.

KING: And, Joe, let me ask you, in closing -- and this may be an unfair question, because we are dealing with perhaps the most unpredictable regime on Earth.

But they have tested two smaller missiles, according to our David Ensor. But, of course, the speculation was that they were about to test a larger missile with a longer range. It is still sitting on the launchpad -- sources telling our correspondents and producers that the fuel trucks moved away from that earlier today. So, presumably, it would be ready to launch.

Does North Korea go ahead with this test, or do you think it's staging a smaller stunt, again, to use your words, on purpose?

CIRINCIONE: It -- it is possible what the North Koreans want is to raise the price for their not testing. They want either the Chinese or the Japanese or the United States to come to them and say: Look, seriously, don't test. We promise you we will give you X, a little more than what we promised you last time.

If they don't get that, I am worried that the North Koreans will go ahead with this test. That might not be so bad. There's a lot of us out in the expert community who want to see what they got. This test, while -- while annoying and irritating, should be able to settle, once and for all, how much of a capability the North Koreans have. I am betting it's not much.

KING: Joe Cirincione, we thank you for your insights today, as we track this breaking news story -- again, sources telling CNN, North Korea has tested -- fired, anyway -- we don't know exactly its goals just yet -- but North Korea has fired not one, but two missiles over the past hour or so -- our correspondents checking to try to get more information. We, of course, will bring it to you as we get it, following this breaking news story.

But for now, though, our Zain Verjee joins us with a closer look at other stories making news.

Hi, Zain.

ZAIN VERJEE, CNN ANCHOR: Hi, John.

Police say a bomb planted in a handcart behind a car was the source of an explosion today in downtown Kabul. The blast wounded at least 10 people. Earlier, another explosion rocked the Eastern part of the Afghan capital, injuring one person. Bombings are relatively unusual in Kabul. The attacks come amid surging violence by Taliban- led rebels, mostly in southern and eastern Afghanistan.

A Spanish official says the subway train that derailed on Monday in Valencia, killing 41 people, was going twice the speed limit. He says the train's black box data recorder confirmed that -- the train's speed at the time of the crash. People in Valencia, Madrid, and other Spanish cities stopped for five minutes of silence today to honor the victims. Valencia's government has called for three days of mourning.

It could be weeks or even months before a victor is declared in Mexico's presidential election. Leftist candidate Andres Manuel Lopez Obrador has demanded a full recount. He says that there were irregularities in the balloting, which could account for millions of missing votes. Election officials say a preliminary count gives ruling party candidate Felipe Calderon a 400,000-vote advantage. They plan to begin an official count tomorrow. The weeklong process could become protracted, though, by a lot of court challenges -- John.

KING: No hanging chads (ph), I hope.

Zain Verjee...

VERJEE: No.

(LAUGHTER)

KING: ... thank you very much.

Up next, of course, we will continue to follow this breaking news story, North Korea firing not one, but two missiles over the past hour or so -- our correspondents checking their sources, trying to get more information on this developing story. We will bring it to you right here in THE SITUATION ROOM.

Also: Atlantic City on edge -- casinos and beaches could close tomorrow. We will have a live report on the government crisis behind it all.

And new developments in the immigration wars -- we will tell you about a road show version of a battle on Capitol Hill.

Stay right here. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

KING: Welcome back to THE SITUATION ROOM. I'm John King in Washington, following a breaking story this afternoon -- word from our sources that North Korea has fired at least two missiles, this provocation at a time the United States had been expecting one test of a long-range North Korean missile.

Want the latest now from our national security correspondent, David Ensor -- David.

ENSOR: John, as you say, just in the last hour or so, North Korea has fired at least two small-range missiles. It's not the large, at least as far as we know, so far, not the large long-range missile, although that needs to be watched closely.

But, so far, we can report that two missiles, shorter-range missiles, have been fired by North Korea -- not clear what the targets were, what the intentions were. There is a Reuters report, an NHK television report from Japan as well, saying that the -- well, the first missile landed in the Sea of Japan, 600 miles from the coast. But that, we have not yet been able to confirm.

So, all eyes and certainly spy satellites are on North Korea at this time, as U.S. officials here in Washington and elsewhere try to get a fix on exactly what is North Korea up to. There is some concern there could be further developments -- John.

KING: And, David, let's go through the geopolitics of this just a little: Kim Jong-il, the leader of North Korea, the most secretive regime perhaps on the face of the Earth.

Much of the speculation is that there would be a test of that longer-range missile as part of a political confrontation, if you will, with the United States and its other partners in the so-called six-party talks -- the goal of those talks, to get North Korea to set aside its nuclear program. But are your sources speculating at all about what they think Kim Jong-il is up to here, trying to get attention, trying to divide the parties to the six-party talks?

ENSOR: Clearly trying to get attention.

And we had heard from American officials that they had reason to believe there would be a missile test today. They thought it would be the larger missile. And it may yet be. But, so far, what we can confirm, what we have multiple sources on, is these two lesser launches.

KING: And no indications yet -- and I know it's a very difficult environment in which to report -- but no indications yet of any military consequences? These appear to be test-launches, not a military objective?

ENSOR: That's how it looks at the moment, John. But this is a -- this is a breaking story. This is a moving target, as they say.

KING: And very difficult reporting, David. We thank you that you're on it.

And we will check back in with you as developments warrant -- our David Ensor following this breaking news story, missile test launch by North Korea.

Moving on, though, in New Jersey, many people are enjoying the holiday on the Atlantic City Boardwalk, knowing the casinos and beaches there could close tomorrow. But state lawmakers are behind closed doors right now, trying to prevent that. They are under orders from Governor Jon Corzine to resolve a budget crisis that has shut down state government. Our Mary Snow is tracking it all for us from Atlantic City -- hello, Mary.

MARY SNOW, CNN CORRESPONDENT: Hi there, John.

And is a political showdown with high stakes. We are at one of a dozen casinos here in Atlantic City, waiting on word from the state capitol here in New Jersey, waiting for lawmakers to give them orders on whether or not they are going to have to shut down tomorrow morning.

(BEGIN VIDEOTAPE)

(APPLAUSE)

SNOW (voice-over): In a rare July Fourth special session, New Jersey Governor Jon Corzine told lawmakers to act on what he called an immediate constitutional crisis, a crisis that could play out on New Jersey's poker tables Wednesday morning. Atlantic City's 12 casinos could be forced to shut for the first time, if a state budget agreement isn't reached. Gamblers say they feel like bargaining chips.

UNIDENTIFIED MALE: Put all these people out of work. And the income that the state derives from the casino, it's asinine to shut these casinos down.

SNOW: Casinos would be affected, because they can only operate with state monitors. Those monitors are part of the next phase of a government shutdown that began Saturday. Union leaders say it would affect far more than state employees.

BOB MCDEVITT, UNION LEADER: Right now, there's 60,000 workers in the Atlantic City industry that are holding their breath for tomorrow morning at 8:00 a.m. And it's just not fair.

SNOW: The showdown reaches everything from state offices to racetracks. Even the state beaches could be forced to close down. It centers around a 1 percent sales tax increase the state's Democratic governor says is needed to overcome a $4.5 billion deficit.

GOV. JON CORZINE (D), NEW JERSEY: Any spending cut, any tax increase is politically risky and difficult. But I also understand that taking a problem head on is better than hiding from it, even when it hurts.

SNOW: Corzine is facing resistance from fellow Democrats, mostly the New Jersey state assembly speaker, who says Corzine's plan is not the only remedy.

JOSEPH ROBERTS JR. (D), NEW JERSEY STATE ASSEMBLY SPEAKER: It's almost as if his position is, if there's no sales tax, there is no state of New Jersey.

SNOW: Corzine says his plan would cost an average family $260 a year. State officials say, if casinos are closed, $1.2 million would be lost per day in tax revenue. The political cost is still being tallied.

(END VIDEOTAPE)

SNOW: Now, here in Atlantic City, hotels would still remain open and city beaches would as well. However, the big question is, will this really affect business? Some say they already have, because the uncertainty is driving people to -- away or just keeping them at home -- John.

KING: Mary Snow for us in Atlantic City tracking this state budget crisis -- Mary, thank you very much.

ANNOUNCER: This is CNN breaking news.

KING: More developments now on a breaking story this hour that raises major national security questions for the Bush administration and for governments across Asia, first, one, then two, now word of three missiles launched by the government of North Korea.

For the latest now, we turn to our national security correspondent, David Ensor -- David.

ENSOR: John, this is becoming serious.

North Korea, we now have from two State Department sources, launched that Taepodong-2, that long-range missile that the United States has been worried about, just a short time ago. We understand from sources that there may have been a problem, that the missile may have broken up in midair or there may have been some problem with the launch.

We are not clear on exactly what the problem was. However, this decision by North Korea to launch a missile that, at least technologically, is believed to be capable of reaching U.S. soil is obviously going to have major repercussions. There will be reaction from this country.

For the moment, CNN's State Department Elise Labott is hearing from State Department officials that they expect Japan will have some things to say very shortly. There is some discussion of the possibility of a U.N. Security Council meeting tonight -- John.

KING: And, David, I should add, as we continue a little question-and-answer here, I just checked in with a White House official, who said she is trying to get additional information, but has none at this moment -- obviously, this a developing situation.

But let's walk through the differences. As we talked earlier, as this story was first breaking, it was one, then two firings of what are believed to be shorter-range missiles; correct?

ENSOR: That's right.

KING: And...

ENSOR: And one of them is believed to have fallen in the Sea of Japan, short of Japan by 600 miles, so not a very long-range missile.

KING: But this larger missile you're talking about now in the third firing is the one everyone has been waiting for, for a period of about two weeks now, as my best guesstimate.

What is the significance, if indeed North Korea has fired that missile?

ENSOR: Well, if what we have so far is correct, if, A, it has launched it, and, B, there has been a mechanical problem of some sort, and the missile has fallen out of the air or broken up, on the one hand, you have a North Korean regime defying the world, basically, and certainly defying the United States by launching a missile capable of reaching across the Pacific Ocean and hitting Alaska, and even the West Coast, not that they necessarily were trying to do that.

But, still, it's a provocative act to fire such a missile without any kind of warning or announcement to anybody. And, secondly, you apparently have a failure, which, in a way, sends another message, a message that North Korea is, shall we say, not as technologically advanced as it would like to be -- John.

KING: "Fairly rudimentary" was the term Vice President Cheney used in an interview I had with him a little more than a week ago when he was discussing this technology.

But he also said there were some, say, in the United States who try to knock this missile off the platform. And the vice president thought unwise, because, as he put it, if you fire one missile, you better be prepared to fire more.

Unlikely the people of North Korea, if this missile was a failure, if the test of failure, unlikely the people of North Korea will hear that from their very secretive government, though, right?

ENSOR: I think that's safe to assume. This is not a government that tells the truth to its people frequently at all.

But the word is going to get out, even to them, I would assume, rather quickly. This is going to be everywhere. This is a development that's going to have repercussions throughout diplomacy and throughout the world.

Certainly, China, which has been, in a sense, a friend of North Korea's, a state that at least has supplied food, and has been accommodating to North Korea in various ways, and has been trying to get China to rejoin the six-party talks, China will be embarrassed by this missile launch.

Japan will be angered by this missile launch, which, presumably, was fired in their direction. You will recall that, in the late '90s -- I believe it was '98 or '99 -- North Korea launched a Taepodong-1 missile and fired it right over the top of Japan, without warning the Japanese.

Japan has made clear that another such missile test without warning would be considered a provocative act by Japan, and they would take measures against North Korea. They do have some options, in terms of sanctions they could impose. The U.S. has pretty much imposed everything that can be thought of already.

KING: Japan a great source of food, in fact, for the North Korean government.

David, I want to ask this question, and then I will let you get back to the reporting for now.

But, obviously, there's been, as everyone has been waiting to see whether this missile would be tested, the longer-range missile -- and early indications are, this test may, in fact, have resulted in a failure -- but walk through the debate in the intelligence community about the potential range of this missile. Some say it could reach here, the coastal United States. But that's not a certainty by any means, right?

ENSOR: No, it's not.

I mean, for one thing, people are not entirely sure whether this is the three set -- the missile that has three parts to it, three parts that will take it further, or the two-stage rocket. There's disagreement about that.

And it's just not clear to the analysts how capable North Korea is now with these missiles. The Taepodong-1 they fired in the late '90s, well, it was -- it went pretty far. It wasn't, as far as anyone could tell, particularly accurate. Hard to tell, though. It just landed in the middle of the Pacific Ocean.

An awful lot of what you need to be able to be able to make a missile effective is decent guidance systems. And there's no indications the North Koreans have got a handle on that, nor have they gotten a handle on making a nuclear weapon small enough and rugged enough to survive launch on a missile. So, U.S. intelligence officials are quite confident that North Korea cannot send a nuclear missile, for example, here.

That said, every single step along the way, as they improve their missile technology and test it, is of enormous concern here in Washington...

KING: And, David...

ENSOR: ... clearly.

KING: ... I promised to let you get back to your reporting, but our international viewers have joined us as well.

So, if I could ask you to first quickly summarize what we do know about these three missile firings by North Korea today.

ENSOR: The word came in -- it's now just over an hour ago, John -- to CNN that a first missile had been fired by North Korea. Word was that it was not the big missile sitting at the launch site that everyone has been watching, the Taepodong-2, but some smaller missile. Then came word from NHK television in Japan that that missile had landed in the Sea of Japan, 600 miles from the coast.

Then we got word that a second short-range missile had been fired by North Korea, probably about 15 minutes after the first. And now we have word -- and all -- in each case, we have got at least two, and in some cases three, sources on these -- we have word now that that Taepodong-2 missile was indeed fired a short time ago by North Korea.

But there are indications -- and, again, we haven't got the clarity on this that we would like to have, and we will be working on it -- indications that that large Taepodong missile has somehow failed, that there has been some kind of mechanical error or that it has fallen out of the sky -- not exactly clear. But something has gone wrong with that large missile -- John.

KING: David, we want to let you get back to your reporting for now. We will check back in with you as soon as we can.

And we thank David Ensor, Elise Labott at the State Department, our producer Justine Redman as well, for their fine reporting, as this breaking news story unfold.

And what does this all mean?

We are joined now on the telephone by Wendy Sherman. She was a top State Department official in the Clinton administration and is a veteran of negotiating with Kim Jong-il's regime in North Korea.

Wendy Sherman, you have been listening to David Ensor. Not one, not two, but three missile firings by the regime in Pyongyang today, what do you make of that?

WENDY SHERMAN, FORMER STATE DEPARTMENT ADVISER: Well, I make of it that they are trying to send quite a signal, not only to the United States, but the rest of the world, that they should be taken seriously.

I think that I am not surprised, as I don't think many people would be surprised, that the test of the longest-range missile may have failed. North Korea's point here is to say they have capabilities, growing capabilities, and that people ought to deal with them in a very serious way.

KING: Well, define a very serious way from your perspective. I know you have disagreed from time to time with the posture of the Bush administration in the six-party talks -- the goal of those talks to get North Korea to end, permanently and verifiably, President Bush would say, its nuclear weapons program.

What would your advice be to the United States? How do you react to something you have to take as a provocation?

SHERMAN: Well, it's certainly a provocation. There will be, I'm sure, some sanctions put on by countries unilaterally, like Japan, and perhaps an effort to go to the U.N. Security Council. But, on the other hand, people may look at these test-firings and see them as a failure and decide not to respond as strongly, but rather to urge North Korea back to the negotiating table.

North Korea will think they are coming back with a stronger hand. The international community may be somewhat frustrated with North Korea, including China and Russia, who aren't always on the same page with Japan and the United States, which are the toughest in this crowd.

South Korea will not want to provoke North Korea to take further action, because South Korea is really the greatest at risk, from a military perspective. I think it's not surprising that Kim Jong-il chose the United States' Fourth of July and the day that the United States launched a satellite in space. And they may be -- they may claim that they are just trying to do the same thing.

KING: Well, this is a very secretive regime. It is unknown to many people, not only here in the United States, but around the world.

You, perhaps, have more insight in this -- into this leader than most would, given your experience in the Clinton days, when there actually were direct negotiations with Kim Jong-il's regime. Tell us a little bit about this man. And you mentioned he's timing this for the Fourth of July celebrations here on Independence Day in the United States. What's his ultimate calculation?

SHERMAN: Well, I think his ultimate calculation is to set sort of people off, as we all have to understand, Kim Jong-il really doesn't have anything else to do, except to negotiate with his missiles and his nuclear capabilities.

The country is an economic failure. They don't have much going for them. This is the only leverage he has. At the end of the Clinton administration, Secretary Albright and I made a trip to Pyongyang and spent 12 hours with Kim Jong-il. He is a smart man. He really sees him as a grand director on the world stage, trying to get people's attention and make sure his regime is secure.

He's not crazy in the normal sense that we think of that, though he obviously is isolated from the rest of the world, and has a very peculiar prism on the world. He, I think, really does want to negotiate. Whether in fact he would give up his nuclear weapons at this point, I don't think we know.

During the Bush administration, we have gone from have -- them having enough plutonium for maybe one or two nuclear weapons to probably enough plutonium for six, eight, 10 nuclear weapons. So, in that regard, the policy by the Bush administration to date has been a failure.

One more thing, John -- in 1998, when North Korea launched a missile over the Sea of Japan and surprised analysts with its capability, it meant that the Bush -- the Clinton administration took a strong, tough look at its policy, with former Secretary of Defense Bill Perry leading the effort and my working with him.

And I would urge the Bush administration to take this as a sign that their policy has not been working. They might want to name a senior coordinator, which they have been reluctant to do. And, most importantly, all of the administration gets -- needs to get on one page, so that we can be tough negotiators and make sure that we have peace and security on the Korean Peninsula.

KING: Well, we are discussing the impact of the potential policy debate here in the United States. Help us understand, what happens in South Korea today?

SHERMAN: Well, South Korea is really on a path of engagement with the North.

They have a lot of economic activity that goes on between the two countries. The trade has increased significantly. South Korea will probably take a tough line about the firing of these missiles, because it does threaten South Korea. But they have a million-man army poised on their border all of the time from the North.

They literally do not think, at the end of the day, that North Korea is a threat to them militarily, that the Korean people are all one people. And although they may take a tougher public stance after these rocket firings, at the end of the day, they do not want this regime to implode, because they think that would be catastrophically, either militarily or economically, for South Korea.

KING: And David Ensor was just talking that Japan has been more muscular, if you will, in its rhetoric, it posture, in this confrontation in recent weeks and months.

Prime Minister Koizumi was just here, has a close friendship with President Bush. Is that friendship likely to have any impact on what happens next from the Japanese standpoint?

SHERMAN: Well, I think the Japanese will be very tough in their response, because these, it appears, from the news reports, fell into the Sea of Japan.

Japan is at great risk by North Korea's Nodong missiles, even without a ballistic -- an intercontinental ballistic missile that's capable. So, in 1998, when this happened, Japan was very angry, took tough action. And I suspect that they will again.

The only caveat to all of this is if people decide not to play too much into the hands of North Korea, but point out that these missile tests have failed. I am sure the intelligence community will try to collect whatever data it can about the trajectory and the capability. So, I think we have some more to play out here. And we don't have all the news reports in to tell us exactly what has happened here.

KING: Wendy Sherman, we thank you for your insights -- Wendy Sherman, a former top State Department official in the Clinton administration who has negotiated directly with Kim Jong-il.

Wendy Sherman, I would like to ask you to stand by.

Recapping, quickly, our breaking news this hour, North Korea has tested not one, not two, but fired three missiles this afternoon, including, according to CNN sources, its long-range missile that had been sitting on a platform for some time, provoking warnings from the United States and others that it should not be tested.

We are trying to get more information on this story. We ask our viewers here in the United States and around the world to stay with us.

We are going to a quick break. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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