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LOU DOBBS TONIGHT

FBI Raid on Congressman's Office Was Legal, Judge Rules; Action Delayed on North Korea; Bush Doctrine Dead?

Aired July 10, 2006 - 18:00   ET

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


LOU DOBBS, CNN ANCHOR: Tonight, a federal judge has delivered a long-awaited ruling in the constitutional and legal battle over the first-ever FBI raid on Capitol Hill. The judge has dismissed top lawmakers' assertions that the raid on the offices of Congressman William Jefferson were unconstitutional.
We'll have a special report.

And the United States is allowing communist China to lead international efforts to convince North Korea to stop its missile test and end its nuclear weapons program. The United Nations has delayed a vote on a resolution criticizing North Korea.

We'll have complete coverage here tonight.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion for Monday, July 10th.

Live in New York, Lou Dobbs.

DOBBS: Good evening, everybody.

New developments tonight in the legal battle over the FBI's raid on Congressman William Jefferson's Capitol Hill offices in a bribery investigation. A federal judge today ruled members of Congress are not above the law. Top Republicans and Democrats had insisted the FBI raid was unconstitutional.

John Roberts reports from Washington -- John.

JOHN ROBERTS, CNN SR. NATIONAL CORRESPONDENT: Good evening to you, Lou.

It is a very significant ruling. Federal agents had never before raided a congressional office. And now Judge Thomas Hogan has ruled that they were fully within the bounds of the Constitution to do it.

Jefferson had argued that the search of his congressional offices in the Capitol building on May 20th and 21st violated the speech or debate clause of the Constitution which prohibits the executive branch from intimidating members of Congress. Hogan's ruling echoed his thoughts in a hearing a few weeks back when he said, "The speech or debate clause is not a hide and conceal clause."

In addition to declaring the search constitutional, Hogan also ordered that the materials seized in that search, documents, computer hard drives, and whatnot, which had been placed under seal after President Bush ordered a 45-day cooling off period, would be turned over to the Department of Justice.

Jefferson is under investigation on suspicion of taking bribes. The FBI claims that they have videotape of him taking $100,000 from a government informant. The FBI later found $90,000 in a freezer in Jefferson's Washington home.

It's a big victory for the Justice Department, though not wanting to crow. The response was fairly muted. "We are pleased with this decision which allows us to move forward in this investigation using the documents that the court has concluded were lawfully obtained," said spokesman Brian Roehrkasse. "At the same time, we will also continue our discussions with Congress about harmonizing policies and procedures for possible future searches."

The response from Jefferson's attorney, Robert Trout, wasn't surprising. In a statement, he said, "The raid on Congressman's Jefferson's office was unprecedented, unnecessary and unconstitutional. We appreciate the consideration the judge accorded our motion for the return of the seized property, but we respectfully disagree with his conclusion and we intend to appeal the ruling."

Jefferson's attorneys also plan to ask Judge Hogan to stay the release of the seized materials to the Justice Department until after that appeal is heard. The Justice Department says it will not try to access the documents until after the motion for the stay is heard and resolved -- Lou.

DOBBS: John, thank you.

John Roberts from Washington.

Turning now to the international confrontation with North Korea, the United Nations Security Council today agreed to delay a vote on a resolution that would punish North Korea for firing seven ballistic missiles. Security Council members are now giving communist China an opportunity to convince North Korea to resume negotiations on its nuclear and missile programs.

China is North Korea's closest ally. Beijing has sent a delegation to Pyongyang.

Richard Roth reports from the United Nations on the setback for U.S. and Japanese efforts to quickly pass a U.N. resolution against North Korea.

Ed Henry reports from the White House tonight on reaction to charges that the Bush administration has changed its policy toward North Korea.

We begin with Richard Roth at the United Nations -- Richard.

RICHARD ROTH, CNN SR. U.N. CORRESPONDENT: Lou, you might say the United States is outsourcing direct talks to -- with North Korea through Beijing. Those negotiations may be taking place in the next few days while the U.S. promises tougher action here, if necessary, at the Security Council.

(BEGIN VIDEOTAPE)

ROTH (voice over): China's vice premier and his delegation are carrying more than gifts on their visit to North Korea, scheduled to celebrate 45 years of a friendship treaty. They're now carrying the expectations of the 15 member nations that are watching and waiting on the United Nations Security Council.

CONDOLEEZZA RICE, SECRETARY OF STATE: We do think that the Chinese mission to North Korea has some promise, and we would like to let that play out.

ROTH: That meant Japan, the main proponent of a sanctions resolution against North Korea, delayed a potential vote by a divided Security Council.

KENZO OSHIMA, JAPANESE AMBASSADOR TO U.N.: We have a resolution which is tabled, ready to be voted upon, and it's only a matter of timing.

ROTH: The vote would have been interesting since another round at talks at the U.N. failed to break the deadlock over sanctions among Asian powers. But China hinted it may be ready to accept some form of resolution.

WANG GUANGYA, CHINESE AMBASSADOR TO U.N.: We asked them to modify their position. If they wish to have a resolution, they should have a modified one, not this one.

ROTH: Japan upped the stakes by raising the possibility of a preemptory strike against North Korean missile sites. Some at the Security Council don't want to wait forever for China to come through.

JOHN BOLTON, U.S. AMBASSADOR TO U.N.: I'm a patient person, but delay won't be infinite. We're going to look at it on a day-to-day basis and go from there.

(END VIDEOTAPE)

ROTH: Two updates tonight, Lou. China introducing a tougher statement, but not legally binding as a resolution would be. And a North Korean representative told us the U.S. is at fault for bringing it to the Security Council, and, "We didn't do anything wrong" -- Lou.

DOBBS: Richard, thank you.

Richard Roth from the United Nations.

As Richard just reported, Japan is considering the possibility of taking military action to stop the launch of North Korean missiles. Japanese officials are discussing whether a preemptive strike against North Korea would violate Japan's constitution. Their constitution prohibits Japan from waging war.

Japan has only limited military capability. It has no long-range strike aircraft nor ballistic and cruise missiles. However, Japan has a small number of fighter aircraft based on the American F-16 that could strike North Korean missile bases.

In this country, there has been no public discussion by Bush administration officials about the possibility of a preemptive military strike against North Korea. President Bush is emphasizing he wants to stop North Korea's missile and nuclear programs by diplomacy. The White House today said this does not mean the Bush doctrine on tackling rogue states is dead.

Ed Henry reports from the White House.

(BEGIN VIDEOTAPE)

TONY SNOW, WHITE HOUSE PRESS SECRETARY: There is no change. The idea that the president -- was the president a cowboy when he put together the six-party talks? Was he a cowboy when he helped -- when he was supporting quietly the efforts of the EU-3? The answer is that this is a president who has always seen diplomacy as the first and most important step to take in trying to prevent people from behaving badly.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT (voice over): But there's no denying the president is displaying a new more cautious tone towards Pyongyang.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The problem with diplomacy, it takes a while to get something done. If you're acting alone, you can move quickly. When you're rallying world opinion and trying to, you know, come up with the right language at the United Nations to send a clear signal, it takes a while.

HENRY: A far cry from January 2002, when the president declared North Korea, Iraq and Iran were part of an "axis of evil" and patience was the last thing on his mind.

BUSH: We'll be deliberate. Yet, time is not on our side. I will not wait on events while dangers gather. I will not stand by as peril draws closer and closer.

HENRY: Tony Snow insisted there's a misperception among the president's critics.

SNOW: Preemption is not merely a military doctrine, it's also a diplomatic doctrine. And in this case we are engaging in preemption at the diplomatic level.

HENRY: Democrats beg to differ, saying the president has no choice but to trim his sails because his credibility has been shot by the war in Iraq.

HOWARD DEAN, DEMOCRATIC NATIONAL COMMITTEE CHAIRMAN: Where was the president five or six years ago when North Korea was violating their obligations? He was divided because he wouldn't listen to the people who understood what was going on like Colin Powell. He was in the grip of these neoconservatives who had this bizarre world view of how things are going to work out.

(END VIDEOTAPE)

HENRY: Now the president is also taking flak from some conservatives. Bill Kristol charging in the "Weekly Standard" magazine that the president's approach to North Korean is now Clintonian. Fighting words from a conservative magazine. All of this complicating the president's trip later this week to Germany and then Russia for the G8 summit, where North Korea will be at the top of the agenda -- Lou.

DOBBS: Ed, thank you.

Ed Henry from the White House.

A new wave of sectarian violence in Iraq today, one day after terrorists killed at least 40 unarmed Iraqis in western Baghdad. At least five people today were killed in a car bomb attack in eastern Baghdad. Nearly 50 others injured.

The killings come despite increased security measures in the Iraqi capital. There are rising concerns that a full-scale civil war could break out between Shia and Sunnis in Iraq.

The Israeli prime minister, Ehud Olmert, today said the Israeli military campaign in Gaza could go on indefinitely. The prime minister said the operations would continue until Palestinians release a captured Israeli soldier and Palestinians stop firing rockets into Israel.

At least seven Palestinians were killed in today's fighting. Nearly 60 Palestinians and one Israeli have been killed over the past two weeks. Israel said it carried a series of airstrikes today aimed at Palestinians preparing to fire rockets into Israel.

Still ahead here, you won't believe how many of this country's most influential political and business figures, including a former president, are supporting an organization that supports amnesty for illegal aliens.

We'll have a special report.

And a leading congressman says he has a plan to break the political deadlock over our illegal immigration and border security crises. The author of the compromise, Congressman Mike Pence, joins me here tonight.

And our public school system is failing our students and our nation. High school dropout rates are soaring. Three of the country's leading authorities on public education join me to discuss solutions.

Stay with us.

(COMMERCIAL BREAK) DOBBS: Minutemen border security advocates hope to stage a peaceful march in Hollywood this weekend against illegal immigration and in support of border security. But illegal aliens and their supporters clashed violently with Los Angeles police after they were told they had no permit to stage a counter-protest against the minutemen. The minutemen had a permit to march.

Many of the protesters wore bandanas over their faces, trying to hide their identities. Six illegal alien supporters were arrested for fighting with the L.A. police officers. One police officer was injured.

Minutemen opponents say they had every right to disrupt the minutemen's lawful march.

(BEGIN VIDEO CLIP)

CARLOS ALVAREZ, ANTI-MINUTEMAN PROTESTER: Minutemen have targeted Latino neighborhoods. And that's why we're responding, because it's a very obvious racist attack.

JIM GILCHRIST, MINUTEMAN PROJECT FOUNDER: The Minuteman Project is a multiethnic immigration law enforcement group.

UNIDENTIFIED MALE: Are the minutemen racists?

GILCHRIST: No.

(END VIDEO CLIP)

DOBBS: The minutemen say they are increasingly being targeted for violence by illegal aliens and their supporters in this country both on the border and at the lawful minuteman rallies being held around the country.

Hazleton, Pennsylvania, and Avon Park, Florida, are set to vote on important ordinances intended to fight the problems created by illegal immigration in their communities. The Hazleton, Pennsylvania, city council takes a final vote later this week on its illegal immigration relief act. The act would fine landlords $1,000 for renting to illegal aliens.

Hazleton's ordinance would revoke the business permits of employers found guilty of hiring illegal aliens. And it would make English the city's official language. The city council of Hazleton has already given its tentative approval to the ordinance by a vote of 4-1.

The city council of Avon Park, Florida, votes later this month on its own ordinance against illegal immigration. The ordinance would fine landlords and employers who hire or rent to illegal aliens. The ordinance would also make English Avon Park's official language.

Illegal alien rights advocates say these ordinances violate the U.S. Fair Housing Act and the Civil Rights Act. The mayor of Avon Park, Tom Mackline, will be our guest tomorrow. Lou Barletta, the mayor of Hazleton, Pennsylvania, also will be our guest this coming Friday.

And a Senate hearing in Miami today on its so-called comprehensive illegal immigration reform legislation focused on the military. Joint Chiefs of Staff chairman senator -- General, rather, General Peter Pace, testified about serving in Vietnam with soldiers who were immigrants.

Senator Edward Kennedy cited statistic on non-citizens serving on active duty in the military. He said it would be an insult to make their relatives felons. Senator Kennedy and none of the participants in the hearing distinguished between lawful immigrants and illegal aliens, if you can believe it.

Many of the country's most powerful political figures are gathered tonight in Los Angeles. Many of them there to pander to illegal alien amnesty sponsors and advocates of the National Council of La Raza.

Casey Wian, in Los Angeles, where the National Council of La Raza, one of the leading groups fighting for illegal alien rights is holding its annual conference. And he has the report -- Casey.

CASEY WIAN, CNN CORRESPONDENT: Lou, political leaders from both parties and top executives from industries as diverse as banking and entertainment are paying their respects to La Raza.

(BEGIN VIDEOTAPE)

WIAN (voice over): The four-day conference began Saturday with an event billed as Cafe con Clinton, with the former president telling the National Council of La Raza exactly what they wanted to hear, he supports amnesty for illegal aliens.

WILLIAM JEFFERSON CLINTON, FMR. PRESIDENT OF THE UNITED STATES: And I think that we have to keep giving other people the opportunity to come here to make this a great country by living their own dreams.

WIAN: Clinton was full of praise for his wife's efforts to raise the minimum wage, for the two Latino immigrant women he said cut his hair, and for his hosts. The National Council of La Raza not only advocates amnesty, it helps illegal aliens avoid apprehension by immigration authorities.

Its Web site promotes a link to a three-page National Immigration Law Center paper entitled "Immigration Enforcement: Know Your Rights at Home and at Work." It instructs illegal aliens to not allow immigration agents into their home without a warrant. If there is a warrant, it suggests talking to officers outside, to protect other illegal aliens in the house. And it advises them to go into hiding if they hear immigration is asking questions about them.

Still, Republican California Governor Arnold Schwarzenegger addressed the conference. So did Republican U.S. Senator Sam Brownback.

SEN. SAM BROWNBACK (R), KANSAS: Hola, y buenos dias. Yo soy Sam Brownback, el senador de Kansas. Gracias por invitarme.

WIAN: Bank of America sponsored the conference. It was the first to offer free remittance service to Mexico and claims a 70 percent share of the Hispanic market.

LYNN PIKE, PRESIDENT, BANK OF AMERICA CALIFORNIA: As many as half of the Hispanic households in the United States are currently on bank. That fact alone would give us huge growth potential.

WIAN: Though the La Raza conference addressed other issues, including health care and jobs, immigration was clearly center stage.

(on camera): And it will continue to be. Tuesday's speakers include White House adviser Karl Rove, New Mexico Governor Bill Richardson, and civil rights activist Jesse Jackson.

Casey Wian, CNN Los Angeles.

(END VIDEOTAPE)

DOBBS: Coming up here next, communist China targets American industries for destruction. Washington does absolutely nothing. Now lawmakers and businesses, some of them, at least, have had enough. Our special report on the battle to save American jobs.

And most Americans cast ballots on electronic voting machines. Is our federal government doing enough to regulate electronic voting? Is it doing anything? The answers are coming up next.

And Congressman Mike Pence says his illegal immigration legislation would satisfy both the House and the Senate. Critics, however, say it's just another form of amnesty. Congressman Pence joins me.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: The Treasury Department has failed to defend U.S. industries against the predatory trade practices of communist China. Now some American manufacturers have decided to join with a group of lawmakers to override a Bush administration that simply and consistently refuses to enforce U.S. law.

Bill Tucker reports.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice over): The outcry from America's steel mills, tool and die shops and factory floors is finally being heard in Washington. In the House, bipartisan legislation has been crafted to allow America's domestic manufacturers to haul China into court to recoup the costs of unfair trade practices.

The legislation sponsored by Republican Duncan Hunter of California and Democrat Tim Ryan of Ohio.

JONATHAN KALKWARF, METALS SERVICE CENTER INST. What the Hunter- Ryan bill would do is define currency manipulation as an export subsidy. Expert subsidies under the WTO are illegal. So that is the legal right created through the WTO and U.S. law that would allow U.S. companies to bring suit.

TUCKER: The bill has 169 co-sponsors. And there's talk of introducing a companion bill in the Senate.

The growing feeling is that the administration is all talk about China's undervalued currency while significant action is what is needed.

SKIP HARTQUIST, CHINA CURRENCY COALITION: Well, it's really time to fish or cut bait. And it may be that the congressional route is the only route. The Ryan-Hunter bill would allow industries in United States that are being harmed by the manipulation of the currency to take action.

TUCKER: The bill has won the surprising endorsement of the National Association of Manufacturers International Economic Policy Committee. It won in a vote that was largely drawn along the lines of domestic manufacturers in multinational corporations.

FRANK VARGO, NATIONAL ASSOCIATION OF MANUFACTURERS: You are seeing a strong sense of frustration because we all wanted to see the U.S. government have obtained some agreement with the Chinese to move the currency up by now.

TUCKER: The endorsement is not the official stance of the full NAM yet. That decision will be up to the executive committee which meets in September.

(END VIDEOTAPE)

TUCKER: The Hunter-Ryan bill is currently in both the House Armed Services Committee and the House Ways and Means Committee. Because it is a trade bill, Lou, it must clear the House Ways and Means Committee first before it can go to the full floor for a vote.

DOBBS: And you wonder, while this is an important piece of legislation, you wonder why someone in Congress hasn't made it possible to sue, say, the Bush administration or Congress for permitting these idiotic trade policies that have cost 3.5 million manufactures jobs and three million outsource jobs over the course of the last five years. As predatory as the practices of China are, the policies of the United States are simply moronic and self-destructive.

Bill Tucker, thank you.

Communist China's unfair trade practices and persistent trade policies and deficits are the problems confronting the new Treasury secretary, at least some of them. Former Goldman Sachs chairman Henry Paulson was sworn in as Treasury secretary today. Paulson has close ties with China's communist leaders. He formed a partnership with a former communist Chinese military official just so Goldman Sachs could do business in China.

Under Paulson's leadership, Goldman Sachs purchased more than a billion dollars in band loans from communist China's very bad state- owned bank. China's trade surplus widened to a record, by the way, $14.5 billion last month.

Taking a look now at some of your thoughts.

Larry in Idaho, "Lou, we may be the world's only remaining superpower, but look who is loaning us the money to make payroll: China."

And Lazaar in Idaho, "Lou, it's easy to see why corporate America loves free trade agreements. They're free to outsource American jobs, free to pay low wages overseas, free to import those same goods back to lower-waged Americans."

Marilyn in Illinois said, "Because of the great loss of world approval of the current policies of our government we should change the words of our song 'God Bless America' to 'God Help America.'"

Margaret in Missouri, "Lou, I do not think illegals want American citizenship. As citizens they would be subject to our laws."

Michael in New York, "Lou, I really like you, I really do. But the problem with our borders is that Americans are hiring illegal aliens to work in the United States."

And we reported that part of the story as well, but the problems go well beyond that, to the point of insecure borders, among other things.

Send us your thoughts at loudobbs.com. We'll have more of your thoughts coming up here later.

And in tonight's poll, please tell us, what is the greatest challenge to your family, good paying work, cost of health care, cost of education, cost of groceries and utilities, or the cost of housing?

Please cast your vote at loudobbs.com. The results are coming up later in the broadcast.

Next, more than half of all Americans will cast their ballots this year on electronic voting machines. Critics say the United States hasn't even begun to ensure that these votes will be fairly counted in our upcoming midterm elections.

A special report ahead on our democracy at risk.

Congress is once again failing to resolve its intensifying border showdown. Congressman Mike Pence has a plan, he says, to end the deadlock. Is it a good idea? We'll find out when I talk with him here next.

And three of the country's most distinguished experts on education join me to discuss the nation's rising educational crisis and what can be done to fix our schools.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Republican Congressman Mike Pence says he has a plan to break the congressional stalemate on comprehensive immigration reform, as it's come be called. Congressman Pence will join me here in just a moment.

But first, Massachusetts' highest court today ruled that its landmark decision allowing gay marriage can be put to the state's voters, but only if the state legislature first gives its approval. But the court says if voters overturn the gay marriage law, the court can still rule in favor of gay marriage once again. The ruling comes after two major court decisions against gay marriage in New York and Georgia last week.

A gas explosion is the most likely cause of today's building collapse in the Upper East Side in Manhattan. At least 15 people were injured when an explosion demolished a townhouse. The doctor who lived and practiced in the building is in critical condition tonight.

Space shuttle Discovery astronauts spent seven hours today floating 220 miles above the earth on an important repair mission. During this space walk, astronauts made repairs to the International Space Station, the second of three planned space walks during the 13- day mission.

And as NASA celebrates a successful space walk, India's space program suffered a major setback today. A rocket carrying a satellite blew up shortly after liftoff.

Tonight, the federal government is failing to protect our democracy from an imminent threat. Electronic voting machines are open to fraud and can be compromised by hackers. But the federal government cannot enforce security standards for electronic voting machines. It hasn't set specific standards yet. Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): More than half of all American voters will vote on electronic voting machines in upcoming elections. And watchdog groups want the federal government to be more aggressive to prevent fraud.

MICHAEL WALDMAN, BRENNAN CENTER FOR JUSTICE: The federal government, through the election assistance commission, should be training local officials in how to do the right kind of audits of these voting systems. That can happen right away. That doesn't need new legislation. It should be the job of the federal government to do the kind of threat analysis that private groups and computer scientists have done.

PILGRIM: Federal guidelines for designing and testing electronic voting machines were drafted by a federal advisory board in 2005. But those standards are voluntary and won't be officially into effect until December 2007.

DeForest Soaries was the first chair of the Federal Election Assistance Commission set up after the hanging chad controversy of 2000 to oversee election reform. Soaries resigned April of last year.

DEFOREST SOARIES, FORMER CHMN, ELECTION ASSISTANCE COMM.: Well what's wrong with the standards is they are not standards, they are recommendations at best. I'm worried about electronic voting because we've done such inadequate research that we don't know what we don't know.

PILGRIM: Computer engineers say the guidelines are not enough to actually check the machine that is in place at the polling station.

JOSH WASHBURN, VOTETRUSTUSA: We don't know enough about the system in front of you to know if it is or is not the same as the one that was tested. So any statement about the tested system may or may not apply to your system.

PILGRIM: Also watchdog groups say guidelines allow for an acceptable failure rate for electronic voting machines that is too high.

(END VIDEOTAPE)

PILGRIM: The Federal Election Assistance Commission says voting guidelines have always been voluntary and left up to the states. Now the Help America Vote Act sets minimum guidelines, but doesn't say what kind of technology should be used or require how it should be verified. That decision, Lou, is local.

DOBBS: It may be local, but this is a national issue for certain. The idea that we can be a matter of months away from the upcoming midterm elections and not have any assurance whatsoever that these machines work, can't be tampered with or that fraud will occur is just mind boggling.

PILGRIM: No, the people that we talk to who watch this are absolutely in shock over this. And they're very upset that local officials aren't taking the energy to check and connect with people.

DOBBS: Well what in the world is the federal government doing?

PILGRIM: The federal government has basically dropped the ball on this, Lou.

DOBBS: Dropped the ball. Minor thing with our Democratic republic at stake. Not that we don't have enough issues to deal with, the fact that we can't even rely upon a vote. We'll continue with your excellent reporting on this issue, very important issue. Thank you, Kitty Pilgrim.

In Mexico tonight, the leftist presidential candidate is stepping up his challenge to election results that show him losing to Felipe Calderon by a slim, slim margin. Supporter of populist candidate Andres Manuel Lopez Obrador packed Mexico's Central Square this weekend. Obrador filed a formal challenge to the election results after addressing this crowd.

Today Obrador showed reporters videotapes of what he calls irrefutable evidence of voting fraud. Obrador is calling for a series of nationwide protests. Those protests, Obrador wants to begin by Wednesday.

State legislators are not waiting for the federal government to take action on the illegal immigration crisis. In fact, they're increasingly acting on their own. This year, more than 500 pieces of legislation against illegal immigration have been introduced in state legislatures all across the country.

Fifty-seven laws against illegal immigration have been enacted, far more than last year. Employment laws topping the list, 13 laws prohibiting the hire of illegal aliens and insisting on penalties against businesses that hire illegal aliens. Altogether, 27 states have now enacted legislation against illegal immigration.

President Bush's plan to deploy National Guard troops on our border with Mexico has simply stalled. Fewer than 900 troops have actually been sent to the border; 900 troops supporting border patrol agents are on the border tonight.

That's far fewer, of course, than the 6,000 troops that President Bush had promised. The border patrol says the deployments have had, quote, "no impact at all," end quote on arrests or security. Meanwhile, 100 members of the Arkansas National Guard are on their way to New Mexico. The White House says more than 2,500 National Guard troops have been deployed to the border states. It doesn't say how troops are actually on the border with Mexico. Note to White House: the number is 900.

Congress tonight remains deadlocked on how to solve this nation's worsening illegal immigration crisis. Congressman Mike Pence, the chairman of the House Republican Study Committee is the author of a new immigration proposal. And he says his compromise could break the deadlock between the Senate and the House. It's a four-point plan that calls for securing our borders first. It calls for a crackdown on employers that hire illegal aliens.

Congressman Pence says his plan would deny amnesty for illegal aliens, but like the immigration -- the comprehensive immigration reform bill passed in the Senate, the Pence plan calls for the creation of a guest worker program that critics say is nothing more or less than illegal alien amnesty. Congressman Pence joins us tonight from Capitol Hill. Congressman, good to have you here.

REP. MIKE PENCE (R), INDIANA: Thanks, Lou, thanks for having me back.

DOBBS: I just listened earlier this afternoon to Senator Warner and I listened to parts of the hearing that the Senate held in its hearings on immigration reform down in Miami. They didn't make a single distinction between a legal immigrant and an illegal immigrant.

Why should anybody think anyone pushing the president's, quote unquote, comprehensive immigration bill is in any way sincere about this problem when they won't even make the distinction between an immigrant and an illegal alien?

PENCE: Well, it's a source of frustration for me. I'm the grandson of a legal immigrant who came ashore on Ellis Island in April of 1923 and I think we have to be very candid with the American people that we're dealing with a problem of illegal immigration that begins with securing our border.

And as I told the president about two weeks ago in the Oval Office, Lou, before we do anything else, we have to dedicate our resources to securing our nation's border and that we cannot be begin any -- even a no- amnesty guest worker program until the border security measures are substantially completed.

DOBBS: Congressman, your plan calls for increased security. The Senate and the House, the legislature, the president has passed legislation. Talking with Governor Bill Richardson just recently, he still hasn't received even the 265 border patrol agents he was supposed to receive.

Senator Bill Frist looked straight into the camera and said that border security first. What is going on in that town that you all want to combine immigration reform with border security? Why when you're looking, as we just reported, nearly 30 states are passing laws, municipalities, cities, towns across the country are passing laws to halt the impact of illegal immigration and the United States Congress can't seem to understand that people want border security. They want to control their ports, they want to control that border and we keep hearing all this Washington talk instead of action?

PENCE: Well, it's a great source of frustration to me and to many conservatives in Congress who saw the Senate amnesty bill really, Lou, for what it is. It's one of the reasons we're having hearings all over the country starting last week to try and expose the so- called comprehensive bill in the Senate, which would begin a guest worker program at the same time as doing border security.

My proposal, actually, which seems to be gaining some transaction among many of my colleagues in the House is that you would exclusively do border security for two years. Now, during that period of time, you could be setting up these private sector Ellis Island centers outside the United States that could be ready to go as soon as homeland security certifies that the border is closed, but not before.

DOBBS: All right congressman, I know you've got the best of intentions.

PENCE: Thank you.

DOBBS: The president has sort of embraced your plan. But I've got a couple problems. One is that corporate America's supporting illegal immigration and they're getting a free pass here. They've been breaking U.S. law, our immigration laws, our border laws with impunity and without punishment. And I know we've got a little, minor enforcement action it seems to be a P.R. effort.

But the idea that you turn these Ellis Island centers or Ellis centers over to private sector. Isn't that basically just handing corporate America what it wants, privatizing our immigration laws? I mean that just, it gets rid of the middleman. And the middleman in this case is the government.

PENCE: Well, if I was proposing getting rid of the government's role in this, I think you might have somewhat of an argument. What we're contemplating is that homeland security would oversee all of these Ellis Island Centers. The Justice Department would do all of the background checks that would be done on every applicant. State department would issue the visa. What we're talking about is going to the American companies, Lou, that do private placement, that put Americans into jobs every day of the week, every year by the millions and saying help us sort through the enormous paperwork of dealing with 12 million people.

DOBBS: Congressman I know you're a conservative. I know that you got the best interests at heart but it seems to me like you've run straight into a great conflict for a conservative, ideologically. You have a government that isn't even working. You're going to turn over to the Department of Homeland Security, which is a monumental sham, I mean it hasn't been able to secure our borders. It can't secure our ports. It doesn't even seem to have the energy or the leadership or the national interest at heart to do so. And you would have them certify, I think the expression is in your language, operational security at our borders? Why should any American take any kind of faith, place any kind of faith in that?

PENCE: Well, I understand the frustration there, Lou. But look, even if we did a border security only bill, it would still be the government doing the border security. Lou, ultimately we have to put first things first, we have to get control of the border. We have to build in a triggering mechanism that no additional guest worker visas will be issue issued until we have control of the border and congressional oversight will be key.

DOBBS: We just heard the president say sending 6,000 national guardsmen down to the border. Turns out that was not really to the border. It is right behind the border to support the border patrol.

PENCE: Right.

DOBBS: We haven't even got 1,000 of them there yet. We're approaching mid-July. When is the president and this Congress going to take seriously and straightforwardly its responsibilities to enforce our borders, to enforce our immigration laws and to make the American people secure instead of running PR stunts?

PENCE: Well, I hope it's soon. And I hope, irrespective of this Fall's elections, that members of both parties of Congress will recognize and the White House will continue to recognize that this issue, like millions of people watching this program right now, Lou, has captured the anxiety and the imagination of the American people like no other. And I think the American people want us to secure the border, but they also want us to deal with 12 million illegal immigrants without amnesty. That's why my idea of using the private sector to ask people to leave the country and apply at these new Ellis Island centers is getting a little bit of attention. It is a way of solving the problem without amnesty and putting border security first.

DOBBS: How about just doing border security. Instead of putting it on faith and letting us rely on a federal government that has failed us just horribly, in terms of discharging its responsibility, how about just secure the borders, take control of our immigration laws that exist, secure our ports? How about that, then we can discuss those other issues down the line?

PENCE: I trust that we're in the process of doing some of that. We're in the midst of the appropriations season. The recent supplemental bill included billions for border security.

DOBBS: One point nine billion.

PENCE: We need legislation to change the law to rededicate ourselves to securing our borders. But I really do believe a new system that allows illegal immigrants to leave the country and apply for the legal right to be here is an idea whose time has come.

DOBBS: Congressman Mike Pence, we thank you for being here.

PENCE: Appreciate it.

DOBBS: Up next our public school system. It's failing a generation of our children. Three of the country's leading authorities on public education join me next with solutions. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Our public schools in this country are in crisis. Not many people want to talk about it that straightforwardly. But let's talk straight here tonight. Just about a third of all high school students in this country drop out. And many of them in the freshman year. And the dropout rate among black and Hispanic students in this country is just about 50 percent.

Joining me tonight are three people who know a lot about education, its problems and something about the solutions. Christopher Swanson is the director of Editorial Projects at the Education Research Center and supervisor of a study on nationwide dropout rates. Pedro Noguera, an urban sociologist with New York University, co-editor of the book "Unfinished Business, Closing the Racial Achievement Gap in our Schools." And Truett Abbott, he's the principal of the Warren County Middle School in rural Georgia. His school has made amazing progress, improving student test scores in both writing and mathematics. Joining us tonight from Atlanta.

Good to have you all here. Let's start out with Chris Swanson. If we can put this up, national graduation rates. We've got this, I believe, as a full screen graphic showing the graduation rates for Asians, whites, Latinos, Native Americans, African-Americans. As you look at those numbers, that's just, if people aren't scared to death that this country is supporting an education system that is the great equalizer in this society and we're tolerating that? What kind of society are we?

CHRIS SWANSON, EDUCATION RESEARCH CENTER: We've got a serious problem here. What we find in our research and this is very consistent with a lot of the independent research of the past couple of years, national graduation rate of about 70 percent, which is a problem. But once we get underneath that 70 percent number, that's where we see the real tragedies. We have a 25 percentage point gaps between African-American, Latinos and whites and Asians.

So we've got huge racial disparities. We've got gender gaps of 8 percent, on average. And the thing that we're doing in this study that's really never been done before in quite the same way, we're starting to look within the states to an extent that really researchers haven't done. That's when you see some of the really shocking differences, when you look at very low performing large urban or small rural districts, compared to affluent suburban districts. It's just worlds apart.

DOBBS: If we all agree, if you disagree with me, please say so, but I've always believed that the public education system in this country is what makes this country based on equality. We can send a kid from any where, any quarter, any circumstance and they have a shot at improving themselves, economic and educational opportunity the result. If we do this to kids, Pedro, what is the future of this country?

PEDRO NOGUERA, AUTHOR, "UNFINISHED BUSINESS": Well, I think it has frightening implications for our future because the connection between education attainment and long-term income is very strong. Students who do not graduate from school are going to be relegated to the worst jobs and low incomes for their life. But what's important to keep in mind here is that kids are not consciously saying I want to relegated to a low income job for the rest of my life. They are at a very young age either being pushed out because the schools really don't know how to serve them or opting to work because they are supporting their families very early.

DOBBS: Truett Abbott, Principal Abbott, you have taken a school with more than 90 percent minority population and turned it around, and you've done so in relatively quick order. What has been the key to success for your young people?

TRUETT ABBOTT, PRINCIPAL, WARREN COUNTY, GA: Well, the primary key to success is having everybody in the building believe that the students can achieve and will achieve if we find the methods to make them do that. And we've put everything into that, and we work on it every day.

DOBBS: Put that straightforwardly. When you say everybody in the building believes the students can achieve. Why in the world couldn't they achieve at some level, but certainly standard levels nationwide?

ABBOTT: Well, we believe they can achieve to the level of standards for the test if we provide the means for them to do so, and we aggressively pursue different kinds of projects, programs and strategies that will get them to be what we want them to be.

DOBBS: And I know, Truett, that you have focused -- you and your folks -- have focused mightily on reading. And how critical is that to the success that your students are enjoying?

ABBOTT: Well, when we first started out in this school in 2001, the students were about three years below in reading. And now they're going to the high school almost up to grade level on reading.

And I would like to say, on the high school part of it, we had a 75 percent graduation rate in our high school this year, and in our ninth grade -- we talk about ninth grade problems -- we had only 4 out of 82 students in the ninth grade who failed, and they'll probably pass by the end of summer school.

DOBBS: You know, that gets to a point, Pedro, because he's talking obviously -- talking about some smaller numbers. And you're dealing with in Los Angeles, Chicago, New York, Detroit. How important is it for schools -- irrespective of what the NEA is saying, No Child Left Behind, everything else, how important it is that classroom size and the ability of teachers to deal with those students?

NOGUERA: It's very important. Because when have you class size as you have in some of our large cities of 35, close to 40 students, it is impossible for the teacher to know those students, it is impossible for them to even grade all the work, because they're simply overwhelmed by the papers.

So class size is an important part of this. The size of the schools themselves is another important part. But the students need to be known, and they need to have adults who are putting the -- giving them the encouragement to succeed.

DOBBS: I love the way you said that, students need to be known. And so many people are forgetting that. Because each one of those kids is so important.

What do you think the odds are that we can break through all the educational bureaucracy, the nonsense, and start getting things done in this country?

SWANSON: Well, I think it is not a matter of odds. It is something we have to do, whether it is something that takes a year or it takes 10 years. I think a couple of these issues we've heard...

DOBBS: That's what I argue. I can't think of anything worse than giving away that many lives over the next decade. Can you?

SWANSON: We can't wait to deal with this issue. It's a very serious problem that's been around for a long time. We can't fix it overnight, but we have to do something serious and we have to do it now. And I think there's a lot of activity now. You know, we heard from our colleague in Georgia there. Getting started early in middle school. That's a really key issue. We found that ninth grade is a really important source of student loss. If we can get the students prepared coming into the high school, that's a big step to finding the solution.

DOBBS: Let's go for a year.

SWANSON: We'll do what we can.

DOBBS: Truett, thank you very much. Pedro, thank you very much. Thank you.

And we're going to be back with these gentlemen, if they will concur, over the next -- every couple of weeks or so. We're going to get to these solutions and try to bear down a little bit on it, maybe it will be helpful dialogue. Thank you all.

We'll be right back. The results of our poll coming up next, and a lot more. Stay with us.

(COMMERCIAL BREAK)

DOBBS: THE SITUATION ROOM with Wolf Blitzer coming right up at the top of the hour. Wolf, tell us about it.

WOLF BLITZER, HOST, "THE SITUATION ROOM": Thanks, Lou. A first strike against North Korea by Japan? Does that country have the capability and the will to take on a North Korean missile? We'll go live to Tokyo.

Plus, some say she may be the next Margaret Thatcher. I'll speak one-on-one with tough-talking British Foreign Secretary Margaret Beckett about some of the biggest world hot spot of the day -- Iraq, Iran, North Korea.

And there's a race now under way within the Democratic Party to not be like Hillary Clinton. Who will stand out from the crowd in '08? All that, Lou, coming up right here in THE SITUATION ROOM.

DOBBS: Thank you, Wolf.

And next here, the results of our poll. Stay with us.

(COMMERCIAL BREAK)

DOBBS: The results of our poll tonight: 33 percent of you said your greatest challenge to your family is good-paying work; 38 percent responded the cost of health care; 2 percent said the cost of education; 18 percent said groceries, utilities; 9 percent, the host of housing.

That's the broadcast. Thanks for being with us. Please join us here tomorrow. Among our guests, Mayor Tom Mackline of Avon Park, Florida, dealing with immigration -- illegal immigration at the local level.

For all of us here, good night from New York. "THE SITUATION ROOM" begins right now with Wolf Blitzer.

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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