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LOU DOBBS TONIGHT

Violence in Iraq; Hurricane Katrina was Turning Point for Bush; Probe Into Comair Plane Crash; Racism in School Buses?

Aired August 28, 2006 - 18:00   ET

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


KITTY PILGRIM, CNN ANCHOR: Tonight, insurgents kill eight of our troops in Iraq. More than 20 Iraqi troops are killed in a battle with Shiite gunmen.
We'll have a special report on that.

And Florida braces for the arrival of one of the biggest storms of the hurricane season. People in Florida line up for gas and emergency supplies.

We'll have a live report.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion for Monday, August 28th.

Sitting in for Lou Dobbs, who is on vacation, Kitty Pilgrim.

PILGRIM: Good evening, everybody.

Tonight, a wave of deadly attacks against our troops in Iraq. Eight of our troops have been killed in the past three days.

At the same time, more than 60 Iraqis have been killed in fighting between Iraqi troops and Shiite gunmen in a town south of Baghdad.

Jamie McIntyre reports from the Pentagon -- Jamie.

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT: Well, Kitty, it's a tough sell making the case that things are improving in Iraq when the death toll for U.S. and Iraqi forces and civilians continues to climb. But U.S. military commanders are trying to make that case anyway.

It's been a particularly deadly couple of days in Iraq, what with a suicide attack against a police checkpoint, with members of the Iraqi army and police in fierce gun battles with members of the Mehdi Army, the militia backed by Shiite cleric Muqtada al-Sadr. And also, with eight U.S. troops dying over the course of the last couple of days.

That brings, by the way, to 2,629, the number of American troops killed in the Iraq war. Also, 19,609 wounded. Almost half of that number, 8,922, were very serious wounds.

Still, the U.S. insists that the violence is lessening in Baghdad when you compare August to July. They claim that the number of attacks are down to about 23 a day. That's a reduction. They say the murder rate in Baghdad has been cut in half, as well as the number of car bomb attacks down by 50 percent.

But Kitty, there was also a troubling admission today from one of the generals briefing reporters from Iraq who said that about -- a group of about 100 Iraqi soldiers refused orders to go to Baghdad to help contain the violence there. The Iraqi army is supposed to be a national army that reports with loyalty to a central government, but these troops apparently came from one area and wanted to stay in that area.

The matter is under investigation, but it is not the first time something like this has happened, where Iraqi troops have refused to go where they had been ordered to go by the government -- Kitty.

PILGRIM: Jamie, I was about to ask you, there was an earlier incident earlier this summer, correct?

MCINTYRE: That's right. There was -- there was another incident where troops from the north were ordered to deploy, and they didn't deploy either. And again, it undercuts what the U.S. is trying to do in helping the Iraqis build an army that can respond to threats around the country if they don't want to leave their hometown.

PILGRIM: Thanks very much.

Jamie McIntyre.

Well, let's take a look at Tropical Storm Ernesto. It's now barreling toward southern Florida. Now, this storm could slam into the coast as early as tomorrow.

Governor Jeb Bush has declared a state of emergency in the entire state. Drivers have been lining up at gas stations to fill their vehicles with gasoline before Ernesto makes landfall. Residents have been going to hardware stores to stock up on supplies to help them ride the storm out.

Ernesto is expected to make landfall as a strong tropical storm. That's about 24 hours from now. And afterwards, Ernesto is likely to move north, across Florida, before heading to the Carolinas.

So stay tuned to complete -- for complete coverage of Ernesto as it heads towards Florida. We'll have the very latest from our hurricane headquarters here on CNN.

Well, as Ernesto threatens Florida, President Bush began a two- day trip to the Gulf Coast to mark the first anniversary of Hurricane Katrina. The president's first stop was the Mississippi Gulf Coast, where he toured neighborhoods hit hard by the hurricane, and the president said promises he made to the people of the Gulf Coast are being met.

(BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I said, "We have a duty to help the local people recover and rebuild." And I meant what I said. Working with Thad and Trent Lott and other members of the United States Congress, we have appropriated $110 billion to help rebuild this area. It is a strong federal commitment that we will keep.

(END VIDEO CLIP)

PILGRIM: But tonight tens of thousands of families displaced by Katrina still live in trailers and mobile homes, $3.5 billion has been spent on cleanup efforts, and still the cleanup is not complete. Needy homeowners are still waiting for the disbursal of billions in reconstruction aid.

Now, the White House still has not committed itself to a costly flood protection plan that would help New Orleans withstand a Category 5 hurricane. It's estimated that 16 percent of FEMA payments that should have gone to Katrina victims were handed out to fraudulent recipients instead. As much as $1 billion may have been wasted.

Hurricane Katrina was a turning point for the image of President Bush. Voters believe President Bush and the federal government failed the people of Louisiana and Mississippi.

Bill Schneider reports.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Hurricane Katrina was a deep shock to the American public.

BUSH: The federal, state and local governments were unprepared to respond to such an extraordinary disaster.

SCHNEIDER: Sure, there's lots of blame to be shared, but that doesn't get President Bush off the hook. Shortly after the hurricane, only 40 percent of Americans approved of the way President Bush handled the government's response. A year later, only 34 percent approve.

President Bush took two hits from Hurricane Katrina. One was to his image of strength and competence.

SEN. MARY LAUNDRIES (D), LOUISIANA: It's past time that we hold government officials accountable, not just for their policies, but for their follow through and their competence.

SCHNEIDER: Just after 9/11, three-quarters of Americans called President Bush strong and decisive. In July 2005, 62 percent still felt that way. Just after Katrina, a bare majority, 52 percent, called Mr. Bush strong and decisive. And a year later, no improvement.

President Bush's self-declared image as a compassionate conservative also took a hit. The public saw a remote, even clueless president after Katrina struck.

BUSH: Brownie, you're doing a heck of a job.

UNIDENTIFIED MALE: We misled the public about how bad things were there, which is the typical Washington way of doing things.

BUSH: Particularly when TV viewers could see for themselves how bad things were. Before Katrina, most Americans saw President Bush as someone who cares about people. After Katrina, that number fell to 42 percent. And now, worse.

During the year before Hurricane Katrina, President Bush's job approval averaged 49 percent. During the year after Katrina, his polls have averaged points lower.

(END VIDEOTAPE)

SCHNEIDER: A year later, New Orleans has not fully recovered. And neither has President Bush -- Kitty.

PILGRIM: Bill, has the president turned around in the polls at all?

SCHNEIDER: There has been some slight improvement in a couple of the polls. Our own poll shows the president's rating at 42 percent, and so does the "USA-Today"-Gallup poll. Other polls show no real change.

But if there's any improvement, it's been really because of focus on the terrorism issue, particularly since the arrests in London earlier this month.

PILGRIM: It will be a big issue going forward. Thanks very much.

Bill Schneider.

Well, in southern California tonight, fierce wildfires are raging out of control in the town of Santa Clara. That's in northern Los Angeles County.

Hundreds of firefighters are battling these fires tonight. They've engulfed some 100 acres. Some people have been evacuated from their homes. Forecasters say hot, dry conditions are expected to persist through tomorrow in the area, and that raises the possibility that these wildfires could spread.

Well, there are new questions tonight about what happened to a commuter jet that crashed in Lexington, Kentucky. Forty-nine people were killed. Investigators are trying to establish why the pilot tried to take off from the wrong runway.

David Mattingly reports from Lexington -- David.

DAVID MATTINGLY, CNN CORRESPONDENT: Kitty, the NTSB, the National Transportation Safety Board, is looking at everything about this airport, about this aircraft and about this crew. So far, they've been able to tell us that the cockpit voice recorder which was recovered here yesterday has provided them with some valuable information.

They were able to determine that the pilot and the air traffic controller in the tower at the time yesterday morning were able to verbally confirm -- and they have evidence of this -- verbally confirm that the flight was supposed to take off on the long runway, runway 22. That runway is 7,000 feet long, it was long enough for this fully-loaded Comair commuter jet to take off safely.

Instead, still, for some unknown reason the pilot took a left turn on to runway 26. That runway is much too short. The aircraft was not able to gain altitude, and it crashed, killing 49 people of the 50 who were on board.

Now, at this hour, they are also looking into the issue of lights. It turns out, we're told, that this were no lights on that short runway. So it appears that the pilot was not only turning on to the runway, but it was dark there on that runway before dawn.

While this is going on, there's also confirmation going on of the identities of the bodies. A lot of work is going on with that. A very sensitive time for everybody involved.

The NTSB will also be looking at this wreckage to see if there are any design problems or any other factors that might have contributed to so many people dying here, to see if there is any way that anybody else might have been able to get out alive -- Kitty.

PILGRIM: Thanks, David.

David Mattingly, in Lexington, Kentucky.

Well, this deadly crash is not the only threat to Comair's future. The airline has been operating under bankruptcy protection for nearly a year, and it's been fighting its flight attendants over pay cuts. At the same time, Comair's parent company, Delta Airlines, says it may outsource some of Comair's routes to other airlines.

Well, in Indiana today, a small plane crashed into a pond in Indianapolis. A bystander jumped into the pond and rescued the pilot and three passengers. It is not clear what caused the crash.

Also today, a U.S. Airways pilot made an emergency landing near Bristol, Tennessee, after a threatening note was found on board. The aircraft was flying from Philadelphia to Houston, with 52 passengers. Police did not find a bomb on that aircraft.

Still to come, stunning developments in the case against John Mark Karr, the prime suspect in the JonBenet Ramsey murder investigation.

Also, the latest on the charges of racism that have rocked a school district in Louisiana.

Plus, new clashes between supporters of illegal aliens and the advocates of border security.

And the war on the middle class, how rising interest rates are costing many working families their homes.

(COMMERCIAL BREAK)

PILGRIM: Tonight, a white school bus driver in rural Louisiana remains accused of forcing black students to sit at the back of the bus. Now, her case is bringing back painful memories of this country's segregationist past.

Bill Tucker reports from Shreveport, Louisiana.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice over): Coushatta, Louisiana, is a small town, the sort of small rural town where everyone knows everybody, and a town which finds itself uncomfortably in the national spotlight, at the center of a civil rights controversy nearly 50 years old. Current town officials have dodged answering questions about the incident two weeks ago, where black children were allegedly sent to the back of the school bus.

The current mayor goes as far as to leave town. But Coushatta's former mayor is not so shy and is disturbed that such an incident would happen in 2006.

ARCHIE WORSHAM, FMR. COUSHATTA MAYOR: I think it's out of character because we haven't had, you know, any problems, too many problems in our school system and in our town.

TUCKER: Patricia Sessoms grew up in Coushatta. The former mayor, her high school principal. She recently moved back to town after serving 20 years in the Air Force. She rembers when she left the community it was racially divided.

PATRICIA SESSOMS, COUSHATTA RESIDENT: When I graduated high school we were still -- it was 1985. We still had a black prom queen, a white prom queen. We still had a black homecoming court and a white homecoming court. And that was 1985. But when this happened, it just brought back so many memories of things that had happened in the past.

TUCKER: She had hoped this history had been put to rest. For her and others in the community, under the outrage and the shock there is hurt.

JASON EBEY, FMR. PRES. COUSHATTA CHAMBER OF COMMERCE: I think a lot of the feelings in this community is more of the hurt rather than the anger that something like this would happen. We're -- we're a small parish. We've got 9,622 people.

We all know each other. We go to the post office together. We go to the grocery stores together. We're so involved together, we see each other almost on a daily basis.

(END VIDEOTAPE) TUCKER: Now, the bus driver involved in the racial incident, Kitty, is now saying that the seating was not racially motivated. There's a lot of confusion in this town, but there is one thing for certain, there are a lot of questions being addressed to the Red Parish School Board, and there are no answers forthcoming -- Kitty.

PILGRIM: Bill, what are town officials doing about this?

TUCKER: Town officials are running as fast as they can to avoid answering any questions. Literally today, Kitty, we called the mayor's office. We were told he just came into the office, put us on hold, and they came back to tell us he just left town.

So I don't think there's anybody in this little small town that wants to deal with the issue that they've now got laid at their front steps.

PILGRIM: Thanks very much for bringing it to us.

Bill Tucker.

Well, that brings us to our poll tonight. Are you surprised to hear that in 2006, black students are being asked to sit in the back of the bus? Yes or no?

Cast your vote at loudobbs.com. We'll bring you the results later in the broadcast.

Tonight, the war on the middle class hits home. As interest rates rise, families across the country are finding it increasingly difficult to keep up with the monthly mortgage payments. Now, the result is a staggering rise in the number of foreclosures.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Any other bids?

LISA SYLVESTER, CNN CORRESPONDENT (voice over): Investors crowd into an office in downtown Chicago...

UNIDENTIFIED MALE: $195,000 once, $195,000 twice.

SYLVESTER: ... bidding on foreclosed properties. This are many to choose from. Housing foreclosures in the Chicago area are up 60 percent, according to analysis by the firm foreclosures.com.

ALEXIS MCGHEE, FORECLOSURES.COM: A 60 percent increase first quarter after second quarter is a very big number. I think we're on an uptick. I think we're starting to see an increase in numbers and we're going to continue to see this increase.

SYLVESTER: During the housing boom, many middle class families financed their homes with adjustable rate mortgages. When interest rates began climbing, they suddenly found themselves unable to afford the higher monthly mortgage payments.

BRUCE GOTTSCHALL, NEIGHBORHOOD HOUSING SERVICES, CHICAGO: We anticipate there's going to be more and more people. The adjust adjusting ARMs are getting greater and greater. We've heard that over the next 18 months or so, up to a trillion dollars of, you know, ARMs will be resetting, interest rates are going up.

SYLVESTER: It's not just in Illinois. Foreclosure activity in Michigan is up 42 percent in the last year. California, up more than 41 percent, and Colorado 36 percent.

Neighborhood housing services of Chicago helped Catherine Powell keep her home. After a divorce, she was $20,000 behind in her payments, and her lender was on the verge of foreclosing.

CATHERINE POWELL, HOMEOWNER: Whenever you have a situation that can set you back a month or two, it can be really hard to get caught up when you've had two incomes versus one.

SYLVESTER: She was fortunate that she had enough equity in her home to refinance, but others are not and are learning a hard lesson. An ARM can quickly turn into a fist when interest rates are on the way up.

(on camera): Consumer groups say people at risk of foreclosure need to stay on top of it, talk to their lender, find a credit or housing counselor to work on the problem. There are options, including refinancing, but it's important to get help and to get it early.

Lisa Sylvester, CNN, Washington.

(END VIDEOTAPE)

PILGRIM: Still ahead, a stunning new twist in the case of John Mark Karr, the suspect in the JonBenet Ramsey case.

We'll have a live report.

Plus, Congress is all but refusing to assist middle class workers in desperate need of help.

We'll talk to the head of the National Republican Congressional Committee, Congressman Tom Reynolds.

And an inside look at the making of the new documentary "Border War." Now, this movie is giving Americans a shocking realistic look at what illegal immigration is doing to this country.

(COMMERCIAL BREAK)

PILGRIM: This just in. Former president Gerald Ford was discharged from Minnesota's Mayo Clinic today after undergoing heart surgery there last week. Now, Ford is 93 years old. He underwent heart angioplasty surgery at the Mayo Clinic. He has returned to his home in California. Now, Ford has a history of health problems in recent years. He recently had a heart pacemaker implanted. He's been hospitalized four times since December.

The battle over illegal immigration and border security is intensifying tonight. Supporters of expanded rights for illegal aliens clashed with border security advocates in two U.S. cities over the weekend. And more unrest is expected.

Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice over): About half of Maywood, California's 45,000 residents are illegal aliens. Maywood leaders declare their city a sanctuary city where local police ignore immigration racial laws. Border security activists gathered in Maywood Saturday to say they've had enough.

DON SILVA, DAVE OUR STATE: Our focus is on taking it to the streets, because obviously our elected officials, including the City Council of Maywood, have completely forsaken their oaths of office and are now on a wholesale tirade to just go against the American people no matter how many of us seem to be on the other side of the issue.

WIAN: Police barricaded streets to separate border security activists from hostile counter-protesters, including those who say anyone of European descent is an illegal alien.

UNIDENTIFIED MALE: The white racists need to go back to Europe. They'll be a lot more comfortable there. They'll be a lot more happy.

WIAN: But the only expressions of racism were from illegal alien supporters, who surrounded this elderly man and shouted, "Huero!" a Spanish insult meaning white boy while police escorted him away.

What angered border security activists most was this: counterprotesters raised a Mexican flag over the Maywood post office. It appeared on Web sites from both sides of the illegal immigration debate.

Fourteen hundred miles away, in Farmers Branch, Texas, population 28,000, several hundred protesters also clashed over several proposals to crack down on illegal immigrants.

UNIDENTIFIED FEMALE: I'm here to support our Hispanic culture and our Hispanic heritage.

WIAN: They marched against a city councilman's push to fine businesses that hire illegal aliens, fine landlords who rent property to them, and make English the city's official language.

This man says he attended the rally por Los Mexicanos, for the Mexicans. Others, however, were careful to express their loyalty to the United States.

UNIDENTIFIED MALE: I pledge allegiance to the flag of the United States of America.

UNIDENTIFIED GROUP: ... to the flag of the United States of America.

WIAN: Along with their support for illegal alien rights.

Border security activist were outnumbered but refused to back down.

UNIDENTIFIED MALE: Stop crying racism and come over here legally.

UNIDENTIFIED FEMALE: We are legal!

WIAN: It's clear the battle for border security has spread to even the smallest U.S. cities.

(END VIDEOTAPE)

WIAN: And more protests are planned in the weeks ahead. Cities from coast to coast are continuing to struggle with the federal government's failure to control illegal immigration -- Kitty.

PILGRIM: Thanks very much, Casey.

Casey Wian.

Well, now it's time for some of your thoughts.

Charlie in North Carolina writes, "The war on the middle class, well, now there's one Bush is winning."

And Michael in Tennessee writes, "If the Republican Party keeps control of Congress this year, it will prove that Bush is the Teflon president."

Gerald in Nevada, "We have one major problem with intelligence, there is not enough of it in Washington, D.C."

And Dick in California writes, "The cost of comprehensive immigration reform should be deducted from the salaries of these senators and lawmakers."

J.D. Lewis in Illinois, "If only hard-working people are coming across the border illegally, why does the Border Patrol have to protect the National Guard along the border?"

E-mail us, loudobbs@cnn.com. And we'll have more of your thoughts a little bit later in broadcast.

Still ahead, Colorado prosecutors have dropped their murder case against John Mark Karr in the JonBenet Ramsey investigation. But Karr will not be released just yet.

We'll be live in Boulder with the stunning developments.

Plus, U.N. Secretary-General Kofi Annan travels to Lebanon. He says Israel and Hezbollah are breaking key promises.

And Americans' opinion of Congress is plunging less than three months before Election Day. I'll talk to the congressman who's supposed to make sure that Republicans hold on to the House.

All that coming up.

(COMMERCIAL BREAK)

PILGRIM: In Lebanon, U.N. Secretary-General Kofi Annan today criticized Israel and Hezbollah for failing to implement key parts of the U.N. cease-fire agreement. Annan said Israel must lift its air and sea blockade of Lebanon, and Annan called on Hezbollah to release two captured Israeli soldiers.

Jim Clancy reports from Beirut on Annan's visit.

Aneesh Raman reports from Tehran on Iran's latest nuclear defiance.

And Jamie McIntyre reports from the Pentagon on new doubts about the effectiveness of our nation's missile defenses.

Jim Clancy reports.

(BEGIN VIDEOTAPE)

JIM CLANCY, CN CORRESPONDENT (voice-over): The U.N. secretary- general was booed by supporters of Hezbollah and pressed on all sides by heavy security as he walked in the rubble strewn streets of the southern suburbs.

Chanting their support for their leader, the crowd held up posters of Hezbollah chief Hassan Nasrallah and shouted death to Israel, death to the United States. Walking alongside Lebanese prime minister Fouad Siniora, Kofi Annan had come to see with his own eyes the destruction caused by the month-long war with Israel.

Earlier, the U.N. secretary-general met with Siniora and others to convey a message that now was the time for Lebanon to secure its sovereignty, its security and peace. He said he was calling on Israel to release prisoners it is holding and had a similar message for Hezbollah.

KOFI ANNAN, U.N. SECRETARY-GENERAL: I also renew my call for the abducted soldiers to be freed, and that's the first step to be transferred under the auspices of ICRC, either to the government of Lebanon or to a third party.

CLANCY: Annan pledged to support Beirut's government in its call for Israel to end the air and sea blockade that is hobbling the economy. Israel is demanding Lebanon halt any flow of arms across its borders from Syria to Hezbollah. Annan said strong borders would help assert Lebanon's sovereignty.

ANNAN: Lebanon has seen too much conflict, there are too many arms in the country already. You don't need anymore. And we all -- not only does Lebanon has to protect its borders, but all nations have to respect the Security Council resolution that has imposed embargo on arms shipments into Lebanon.

CLANCY: Hezbollah leader Hassan Nasrallah says U.N. peacekeepers will be welcome so long as they do not attempt to forcibly disarm his militia. As Kofi Annan saw for himself in Beirut's southern suburbs, disarming Hezbollah and putting authority back in the hands of elected officials will not be easy.

(on camera): What the secretary-general did not see during some of those tense moments on the streets is that many Lebanese agree with him. They view the consequences of this conflict as a warning: unless Hezbollah disarms, unless Israel is forced to respect this country's borders, their nation will be used as a regional battlefield into the future.

Jim Clancy, CNN, Beirut.

(END VIDEOTAPE)

PILGRIM: Israeli prime minister Ehud Olmert today ordered a government appointed committee to investigate the conduct of the war with Hezbollah. Olmert rejected calls for an independent commission of inquiry. And the prime minister said an independent investigation would turn the Israeli army into what he called a whipping boy.

Iran today said it is not worried about the threat of United Nations sanctions. The United Nations said Iran must agree to stop enriching nuclear fuel by Thursday. The United States wants the U.N. to impose sanctions if Iran does not comply.

Aneesh Raman reports from Tehran.

(BEGIN VIDEOTAPE)

ANEESH RAMAN, CNN CORRESPONDENT (voice-over): Iran's president is saying it as often and as clearly as he can these days -- the west should stop waiting.

"You should know," he says, "that no power can stop our nation from making progress. Based on this, our nation's decision in its way of scientific and technological development is a strong one."

The latest remarks came as Ahmadinejad applauded Iran's nuclear scientists for their work and came a day after the president, ahead of a U.N. deadline to stop Iran's nuclear program, announced the opposite, that he was expanding it, unveiling a new heavy water production plant at the Iraq nuclear facility.

Then there are the country's ongoing war games. On Sunday, state-run TV showcased a submarine fired missile. Overall, the message is a defiant one, but the rhetoric is not always consistent.

In fact, President Ahmadinejad sometimes offers more conciliatory words, repeatedly these days saying Iran is no threat to the world, nor even to the country he wants wiped off the map.

"We are no threat, he said on Saturday, "to the Zionist regime, which is a definite enemy to the people of the region. The solution is election to solve the problem of Israel. We have said that a free election attended by all Palestinians must be held."

Iran knows its nuclear defiance could bring about U.N. sanctions, but officials here hope its calls for dialogue will keep the U.N. divided over what to do next.

And as for reports, the United States may embark on unilateral sanctions, that would come as little surprise. Recently, the country's head nuclear negotiator told CNN this entire nuclear dispute is fueled by the Bush administration's desire for regime change. It's a sentiment likely to resurface Tuesday when Iran's president gives only his third news conference since taking office.

(END VIDEOTAPE)

RAMAN: And so if question tonight is whether the diplomatic showdown we expect next week will be between Iran and the United Nations or more directly between the U.S. and Iran -- Kitty.

PILGRIM: Aneesh, being based in Tehran you have the opportunity to move around and talk to people. Do the people support this harsh stance that Iran is taking right now?

RAMAN: They support the fact that Iran should have the right to a peaceful civilian nuclear program, for two reasons. One, they say other countries have that right and that Iran is being unfairly judged because it's suspicion of a weapons program that hasn't been proven.

The other reason is there is fierce nationalist pride in the fact that Iran earlier this year was able to enrich uranium on its own. Before that it was going to be dependent on the Russians in order to have any civilian nuclear program.

The fact that they did that gave Iranians a sense of pride they hadn't had in some time. And many people are clinging to that as a reason they should pursue this to the end, Kitty.

PILGRIM: What are you saying about using this nuclear program for peaceful purposes? After all, it's somewhat fiction in the west that this is a peaceful program. Most of the world believes it's a weapons program. Do people on the street even acknowledge that?

RAMAN: Yes, it's interesting. The first thing is there's an undeniable disconnect between the people and the government. There is very little, if anything, their voice can do to affect the course of action being taken by their leader. So when you talk to them, there's a sense of resignation among the people. They talk to you almost as observers in their own country rather than citizens.

On camera, everyone denies that there's any weapons program. They firmly believe the government's claim that this is a peaceful civilian nuclear program. When you ask why does Iran need one when it sits on one of the largest oil reserves? They say it is about gas, that and Iran has to import a lot of its gas, its refineries aren't up to date.

But quietly, off camera, people will tell you the most extreme sort of voice is we don't know exactly what the government's intentions are, but for the moment it hasn't veered off and if it has, there is nothing we can do. But we believe in a peaceful civilian nuclear program. And that's what we're being told we're pursuing, Kitty.

PILGRAM: That is very fascinating. Thanks very much. Aneesh Raman in Tehran.

Well, Iran is matching its tough language with a new show of force. The Iranian Navy has fired what it says is a new type of missile from a submarine. This test was designed to show that Iran has a new weapon to sink oil tankers and other ships in the Gulf.

Defense Secretary Donald Rumsfeld is expressing caution about the effectiveness of this country's missile defenses. Now Rumsfeld says a multibillion dollar system needs more realistic testing. The system is designed to destroy missiles from rogue states such as Iran and North Korea. Jamie McIntyre reports from the Pentagon.

(BEGIN VIDEOTAPE)

MCINTYRE (voice-over): A year and a half ago when this target missile was launched from Kodiak Island, Alaska, the interceptor missile that was supposed to shoot it down failed to launch. It was the second flop in a row for U.S. missile defense tests.

So Sunday, as Defense Secretary Donald Rumsfeld toured the U.S. missile base at Ft. Greely, Alaska, where another test is being readied, he in effect pronounced the system a work in progress.

North Korea raised the stakes earlier this summer with its test of a newer version of this long range Taepodong II missile. Even though it failed within seconds of liftoff, it could in theory someday threaten the U.S.

But Rumsfeld was issuing no pronouncements about the ability of the fledgling system to shoot down an incoming missile, saying he would first need to sew a full end-to-end demonstration where we actually put all the pieces together.

That's not what's happening Thursday. The Missile Defense Agency says the first scheduled launch of an interceptor from Vandenberg, California, is designed to get data on new radars and guidance systems, not to knock the dummy warhead out of the sky, although that could happen, too.

STEPHEN YOUNG, UNION OF CONCERNED SCIENTISTS: Well, basically they're trying to lower expectations. They've had a series of failures in a row. And they're trying to build up slowly from the start, basically going back to ground zero and starting again. MCINTYRE: A full scale intercept test is set for the end of the year, which the Pentagon says had give the best indication yet of the system's viability.

(END VIDEOTAPE)

MCINTYRE: Secretary Rumsfeld says these days North Korea is more of a threat to export missile technology to potential U.S. adversaries than to mount an invasion of the south. It's true the north still has a million man army, but Rumsfeld says it is beset by critical shortages and a lack of training. It is one reason the U.S. wants to reduce its forces in South Korea by roughly 12,000 troops, Kitty.

PILGRIM: Thanks Jamie, Jamie McIntyre. Well let's bring you up to speed on the very latest on the JonBenet Ramsey case. Tonight, Colorado prosecutors have dropped their case against John Mark Karr, who was the man who was the prime suspect in the JonBenet Ramsey murder case. Karr is still in custody tonight on separate charges. Susan Candiotti is live in Boulder, Colorado tonight with the very latest on that, Susan.

SUSAN CANDIOTTI, CNN CORRESPONDENT: Hello, Kitty. What a turn of events for Boulder police, for the district attorney and for all of the families directly involved in this investigation. As you indicated, the case against John Mark Karr has now been dropped despite his own words that he raped and kidnapped and murdered JonBenet Ramsey. But police all along have always needed more than his words. They needed evidence. And there was no DNA match between Karr and JonBenet Ramsey. Yet, tonight he is not a free man.

(BEGIN VIDEO CLIP)

SHERIFF JOE PELLE, BOULDER COUNTY, COLORADO: This has all occurred to us in the last couple of hours, the changes, but we have received a teletype from California confirming that they are willing to extradite him on the charges they have there. And so he will be returned to the jail. He'll be held in our custody until California can make arrangements for the extradition.

(END VIDEO CLIP)

CANDIOTTI: Now you will recall the case against Karr in California is this, he was jailed on misdemeanor child pornography charges back in 2001. He was freed from jail for a time, but didn't make a court appearance and so he skipped out on bond. Therefore, he was a wanted man. They brought him here to Colorado, putting those California charges aside. But now, as you've just heard, they are picking up those charges again and there will be an extradition hearing to bring him back to California. So in the end, there is no case against him. The case dropped against him in connection with JonBenet Ramsey. However, the case is still open about who killed her. We still don't have an answer to that. Kitty?

PILGRIM: Thanks very much Susan Candiotti.

Still ahead, the other war that may decide the election in 2006. It is the war on the middle class. We'll have a special report on the issues that matter most to American voters.

And also ahead, Congressman Tom Reynolds, chairman of the National Republican Congressional Committee joins me. He'll explain why he says that Democrats have been reckless and irresponsible.

And a new documentary on the escalating illegal alien crisis in this country. I'll talk with the producer of "Border War" coming up.

(COMMERCIAL BREAK)

PILGRIM: Americans are not happy with Congress and how it has handled health care, energy crisis and the economy, among other things. According to recent polls less than one-third of Americans approve of the job Congress is doing. As a result, incumbents may have a difficult time convincing voters they deserve another term in office. Christine Romans reports.

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): You can't blame the American voter for feeling under siege. Gas prices have doubled over the past four years, from $1.42 then to $2.87 today. College tuition is rising more than double the rate of inflation. Last year, up almost 7.5 percent. Mortgage payments for millions of Americans headed higher. Half a trillion dollars in adjustable mortgages reset this year to higher interest rates. And real wages are falling, even as the overall economy comes along. Harry Holzer was chief economist in Bill Clinton's Labor Department.

HARRY HOLZER, GEORGETOWN UNIVERSITY: Real wages, which are wages adjusting for inflation, have not been rising over the last few years, really over the last five to six years, while productivity has been booming.

ROMANS: That productivity boom helping corporate profitability, he says, not workers. Meanwhile, it's harder to file for bankruptcy, but the credit card offers keep coming. On these pocketbook issues, conservative scholar Norm Ornstein says incumbents are hard pressed to prove their constituents are better off today than when they took office.

NORMAN ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: There's one word to describe voters' moods right now and that's sour. People are unhappy about the state of the economy. They're uneasy about what might happen to their pension and health benefits. They don't like the price of gasoline. They're not real happy about Iraq or the state of the world.

ROMANS: Ornstein says that's bad news for incumbents in both parties.

(END VIDEOTAPE)

ROMANS: But most troubling for the party in control, whether that's Republicans in Congress or Democrats at the statehouse or in the governor's mansion, Kitty.

PILGRIM: It's going to be a tough election year. Thanks very much. Christine Romans.

Well Republicans and Democrats in Congress both claim to be committed to helping middle class workers. Congressman Rahm Emanuel, the chairman of the Democratic Congressional Campaign Committee gave us his ideas for improving the plight of the middle class on this broadcast last week. His Republican counterpart joins me tonight. Congressman Tom Reynolds is the chairman of the National Republican Congressional Committee. And he joins me from buffalo, New York. Thanks for being with us, sir.

REP. TOM REYNOLDS (R), NEW YORK: Kitty, great to be on.

PILGRIM: You know this program has very much documented the squeeze on the middle class. What do you think that your party can do about it that hasn't been tried?

REYNOLDS: Well, first of all, I believe cutting taxes has helped us have about 18 or 19 quarters of positive growth. Second, since 2003, August of 2003, we've seen 5.5 million new jobs created. And we have also seen unemployment --

PILGRIM: But, sir, we've heard this --

REYNOLDS: At about 4.8 percent. So, first of all, I would like to see a permanent tax cut for middle America. My colleague Rahm Emanuel talked about the fact of the middle class. If we don't extend this tax cut and make it permanent, we would find a wage earner of a household of $50,000, four people, two children, their taxes would go up $2,100 if we don't extend the Bush tax cuts that were created in 2003. I think that's dealing with middle class where more of that money is back in hardworking Americans' pockets.

PILGRIM: We've heard some of these statistic before and the squeeze continues. We've well documented on this broadcast. As a strategy, you've encouraged some of your colleagues to talk about local issues as opposed to the Democrats, who are talking about things on a national scale. Do you think that that will help your party?

REYNOLDS: Well all politics is local. In Buffalo, New York, it's about jobs and taxes. That's the issues in western New York. When you look at other parts of the country, it could be job, it could be taxes. As a matter of fact, last week in a Pew poll, it actually said that most Americans would want the address of Congress to be on pocketbook issues versus on the war or other issues. I believe that the House, and particularly the Republicans in Congress, are best to articulate the issues that matter most in their districts, whether it's jobs or taxes or immigration and border security. And that's what Republicans are doing, is talking about those pocketbook issues back home.

PILGRIM: Now, sir, certainly the war is a major factor. And we've seen it already come into play in some political races.

REYNOLDS: There's only one race I'm aware of in the House, and I think that's Congressman Shays who has made that a central issue in this campaign. The rest of the issues I see around the country, and I'm watching it pretty close, are pocketbook issues which the voters relate to their members of Congress in the House much more on pocketbook issues as I said about the Pew poll and others that we're certainly seeing that are public polling.

PILGRIM: All right, let me just quote for a second. Responding to the global war on terror, you recently said, national Democrats are stone cold guilty of engaging in a reckless and irresponsible pattern of neglect for the security of our citizens. Is this just another blow to the battle of who will protect Americans better? It seems like a fairly moot point. Everyone's interested in safety, isn't it?

REYNOLDS: Well, again, I have to go back to the Pew poll and it outlined last that about 42 percent, 43 percent of Americans believe Republicans do a better job, about 31 percent Democrats. It seems that we do have kind of a key issue on national security that Republicans have more voter confidence. But what I'm more concerned about is the fact that Democrats politicize retirement security. They politicize Katrina. They're now politicizing the war on terror and they're politicizing national security.

The American public doesn't want a party of slash and burn and no. They do want some of the issues and ideas advanced. And I look forward to that debate on any issues that are out there. I just happen to believe that, as we look at control of the Congress, Congress will be controlled by a choice between two voters. And I think if Republicans articulate those issues and choice on pocketbook issues that are all politics is local back home, they're going to do just fine.

PILGRIM: Well we look forward to that debate over pocketbook issues. And thanks very much for being on the show...

REYNOLDS: Thank you.

PILGRIM: ... Representative Tom Reynolds. And next, border wars, the battle over illegal immigration. A new documentary reveals the devastating impact of illegal immigration on this country. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: This nation's worsening illegal alien crisis is the subject of an important new documentary opening in theaters this week. The documentary is called "Border War", the Battle over Illegal Immigration. and it tells the story of five people whose lives have been changed by this crisis. David Bossie is the producer of the film and the president of the group Citizens United and he joins me. Thanks for being with us.

DAVID BOSSIE, PRODUCER: Thanks for having me.

PILGRIM: Why did you take on this topic?

BOSSIE: About a year ago we were looking forward to some of the important political issues that would be playing across America come election year. And, of course, we had no idea that it would be this big, but we decided to take it on.

PILGRIM: You did a rebuttal film to Michael Moore's "Fahrenheit 911." You have been very -- you've been wading into political turf for a very long time. This is a political film, although it handles social issues. Let's take a look at a clip from the movie. Enrique Marones is a very interesting, influential character in the film and he's a dual citizen, Mexican and American and he is an open borders advocate. So let's listen to that.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We started doing this and the organization began to grow, we're all volunteers, of course, then I hear about this wall that the U.S. government wants to put up, which is called Operation Gatekeeper. So many of us went and started protesting and saying, don't put up that wall. This is going to cause a tremendous amount of death and tragedy and misery and the U.S. government says no, it will stop the people from coming in. And we said we, that are involved in human rights, why would it stop people from coming when they've been coming for hundreds of years and we never really crossed the border, the border crossed us.

(END VIDEO CLIP)

PILGRIM: now, he's an open borders advocate. Is he a threat to the security of the country do you see?

BOSSIE: Well I think he's an interesting character. I don't -- I think a threat is one way to describe him. He is somebody who believes that Arizona and New Mexico, southern California, parts of Texas actually aren't necessarily part of the United States of America. So and he says it in the film that we didn't cross the border, the border crossed us. And I think that's a very important thing for the American people to hear from Mexican citizens, that they don't believe that there's a border there, that they can actually legally come in.

PILGRIM: Amazing. One of the most interesting things -- we're almost out of time. But one of the most interesting thing in the movie is these coyotes who actually smuggle people across the border. And you bring out the whole exploitation of the people who are in their grasp while they're trying to get across. That this is not as clearly cut as people might suspect.

BOSSIE: It's not. And the border patrol agents do a great job in trying to educate the Mexican citizens they pick up and are returning back to Mexico to tell them the danger they are in. This movie, I think, it will do great justice to the border patrol agents. I think the American people will really see what a tough job they have.

PILGRIM: That angle of Mexicans exploiting other Mexicans is an angle that's not necessarily discussed in most debates. I wish we had more time. Great movie, thanks very much David Bossie.

BOSSIE: Thank you. PILGRIM: Still ahead more of your thoughts on the controversial new season of "Survivor" and the racial segregation that's planned. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Before we bring you the results of tonight's poll, we promised you the results of Friday's poll after we had a technical problem. So we asked do you believe it's appropriate to segregate teams by race on a nationally televised reality show as CBS's "Survivor" plans to do in its upcoming season. Seventy percent of you said no, it is not appropriate.

So here are the results of tonight's poll, 64 percent of you are surprised to hear that in 2006, black students are being asked to sit in the back of the bus and 36 percent of you are not.

Let's take a look at some more of your thoughts. And many of you wrote in about our report on the new season of "Survivor," which will divide the teams based on race.

Diane in Texas writes: "For CBS to air this 'Survivor' show that divides group by race shows lack of sensitivity on the part of management. I can't believe CBS would see racial division as a game."

And Delise in Oklahoma writes: "Today in 2006, I feel it is OK to have games segregated by race. Why not? It is what it is, a game."

Randy in Florida writes: "I think it's a good idea to have the races ethnically represented in teams. It will hopefully show that diversity is positive."

And Tyler in Arkansas writes: "Bravo, 'Survivor.' Your idea is perfectly ethical. Would we object to male versus female? No."

And James in Washington: "What is next? Jewish, Muslim, Christian and Hindu 'Survivor'?

Send us your thoughts, it's always interesting, LouDobbs.com. Each of you whose e-mail is read here will receive a copy of the "Financial Report of the United States" with a foreword by Congressman Jim Cooper of Tennessee. And a copy of Senator Byron Dorgan's important book, "Take this Job and Ship It."

Thanks for being with us tonight. For all of us here, good night from New York. "THE SITUATION ROOM" starts right now with John King in for Wolf -- John?

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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