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Treason Indictment; Presidential Q&A; Survey: Nearly 655,000 Iraqis Have Died Since War Began

Aired October 11, 2006 - 14:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: Well, his family calls him Adam. Others call him "Azzam the American". Soon we can call him indicted.
It's a developing story that we're following from the NEWSROOM. CNN has learned indictments are coming against Adam Gadahn, a California native who's now in league in al Qaeda.

Let's get the latest from our justice correspondent, Kelli Arena.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Adam Gadahn, a U.S. citizen and self-proclaimed al Qaeda member, will be charged with treason, as you said. This is the first time in more than 50 years that a U.S. citizen will face a treason charge.

Gadahn was first put on the FBI's alert list in 2004, saying that he was sought in connection with possible terror threats against the United States. He is described by the FBI director as an al Qaeda spokesman. In fact, he's appeared in five al Qaeda messages.

In one he called for the world to convert to Islam. He's praised the September 11th hijackers.

Gadahn is from California. He's 28 years old. Officials believe that he is living in Pakistan.

Now, CNN tried to get comment from his family on the charges, but they refused. And federal sources have told us that Gadahn has already been charged in a sealed indictment with material support of terrorism.

Now, this new charge of treason will come as part of a superceding indictment. We're expecting that sometime this afternoon -- Kyra.

PHILLIPS: Kelli, do we know anything more about how he got connected to al Qaeda, his background, why he decided to do this?

ARENA: Well, we know that he was -- he converted in the mid- '90s, in 1995. He hooked up with a man who sort of perverted those views for him, and he became more and more extreme. He left the United States.

Exactly how he ended up in the position that he's in now, you know, not very clear, but he -- he's been very, very public here. He's been a concern for a long time. He's out there speaking in English on those tapes. And so, you know, whether or not he'd be involved with any, you know, terror threat coming to the U.S. because he's so publicly known has sort of been discounted by U.S. officials. But he is right -- he is in there. You saw him with Ayman al-Zawahiri, the second in command of al Qaeda, on one tape. So he's right where they are.

DON LEMON, CNN ANCHOR: All right. Kelli Arena.

North Korea, Mark Foley and a staggering new estimate of Iraqi war dead all were the subjects of harsh words today from President Bush in a news conference you may have seen live right here on CNN.

Here are the highlights.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I've spoken with other world leaders, including Japan, China, South Korea and Russia. We all agree that there must be a strong Security Council resolution that will require North Korea to abide by its international commitments to dismantle its nuclear programs. This resolution should also specify a series of measures to prevent North Korea from exporting nuclear or missile technologies and prevent financial transactions or asset transfers that would help North Korea develop its nuclear missile capabilities.

I'm pleased that the nations in the region are making clear to North Korea what is at stake.

I thank China, South Korea, Japan and Russia for their strong statements of condemnation of North Korea's actions.

Peace on the Korean Peninsula requires that these nations send a clear message to Pyongyang that its actions will not be tolerated. And I appreciate their leadership.

The United States remains committed to diplomacy. The United States also reserves all options to defend our friends and our interests in the region against the threats from North Korea.

These are tough times in Iraq. The enemy's doing everything within its power to destroy the government and to drive us out of the Middle East, starting with driving us out of Iraq before the mission is done.

The stakes are high. As a matter of fact, they couldn't be higher.

If we were to abandon that country before the Iraqis can defend their young democracy, the terrorists would take control of Iraq and establish a new safe haven from which to launch new attacks on America.

How do I know that would happen? Because that's what the enemy has told us would happen. That's what they have said. And as commander in chief of the United States military, and as a person working to secure this country, I take the words of the enemy very seriously, and so should -- so should the American people.

No question it's violent. But this report is one -- they put it out before. It was pretty well -- the methodology is pretty well discredited.

But I -- you know, I talk to people like General Casey. And, of course, the Iraqi government put out a statement talking about the report.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: So the figure's 30,000, Mr. President? Do you stand by your figure, 30,000?

BUSH: I -- you know, I stand by the figure a lot of innocent people have lost their life. Six hundred thousand, or whatever they guessed at is just, it's not credible.

I still stand by my prediction. We'll have a Republican speaker and a Republican leader of the Senate.

Thank you.

Well, they may not use, "Cut and run," but they say, "Date certain," as to when to get out before the job is done; that is cut and run. You know, nobody's accused me of having a real sophisticated vocabulary; I understand that.

And maybe their -- their words are more sophisticated than mine. But when you pull out before the job is done, that's cut and run, as far as I'm concerned. And that's cut and run as far as most Americans are concerned.

And so, yes, I'm going to continue reminding them of their words and their votes.

(END VIDEO CLIP)

LEMON: And Mr. Bush repeated the Iraq war is "tough on the American psyche," and he acknowledged it's having a political impact.

PHILLIPS: President Bush said it's discredited, the Iraqi government says it's exaggerated, but researchers say it's legit. As we mentioned, a new survey finds the Iraq war has taken a far greater toll than any of us knew.

Pentagon Correspondent Barbara Starr has all the details.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT: The survey done by a team of American and Iraqi public health researchers estimates that some 600,000 Iraqis have been killed in the violence since the war began. This study was done based on a random survey of some 1,8000 households in Iraq. Experts say in a war zone such a survey is very difficult to conduct. And, of course, the results cannot be confirmed. But a number of experts that CNN spoke to who looked at the survey said it appeared to them that the methodology was, indeed, sound.

Now, the survey found that the number of deaths attributable to coalition forces has actually declined over time in Iraq. But the sectarian violence still causing a great deal of tragedy. Gunfire remains the most common cause of death according to the survey, and deaths also from car bombings are now on the rise since last year.

The statistics are difficult to confirm, but there's an awful lot of information out there from Iraqi government officials about what they believe is going on in their country. According to the Iraqi Health Ministry, still, for the last many, many weeks, about 1,000 bodies of dead Iraqis delivered to the central morgue in Baghdad almost every month. And the Iraqi Migration Ministry estimates that some 300,000 Iraqis have been displaced since the war began.

All of this a glimpse into the tragedies and difficulties of that war-torn country.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

PHILLIPS: And today at 3:00 p.m. Eastern, two of the leading men in the Iraq war, Defense Secretary Donald Rumsfeld and multinational force commander George Casey at the Pentagon. We're going to bring you their briefing live.

LEMON: Japan puts its foot down. No North Korean ships, no North Korean imports, no North Korean visitors. It's a total ban on all things Pyongyang by a country that considers itself in gravest danger.

CNN's Aneesh Raman is in Tokyo.

(BEGIN VIDEOTAPE)

ANEESH RAMAN, CNN CORRESPONDENT: Not waiting for the U.N. to decide what sanctions it will impose on North Korea, Japan is taking measures of its own. After a late cabinet meeting on Wednesday, the government has reportedly decided to impose fresh new bilateral sanctions banning all ships from going between North Korea and Japan, banning as well all imports and exports between the two countries.

Trade between Japan and North Korea, by the way, was about $180 million in 2005.

Meantime, a sign of the new normal here. The new jittery atmosphere that has taken hold came this morning when Japanese media reported that an earthquake had been caused by a second nuclear test in North Korea.

South Korean news agencies almost immediately contradicted that, saying South Korea saw no seismic activity in the North. It turns out they were right, that this was not a manmade earthquake, a natural one that occurred not in North Korea, but instead off the eastern coast of Japan. But the threat of a second test remains.

Japan's foreign minimum strer speaking to the parliament today said that he had unconfirmed information that North Korea was planning a second nuclear test, an imminent one that could come as early as today.

Meantime, in an interview with the Japanese news media in Pyongyang, North Korea's number two said that a second nuclear test would be decided by the United States and what kind of pressure it now mounts on the regime in Pyongyang.

Aneesh Raman, CNN, Tokyo.

(END VIDEOTAPE)

PHILLIPS: And another take on the Foley scandal. We've just learned that Republican congressman Rodney Alexander of Louisiana will testify before the House Ethics Committee next week.

Joining us from the Hill with all the details, CNN's Andrea Koppel.

What do we know, Andrea?

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: Well, Kyra, as our viewers may or may not remember, Congressman Alexander's office was the office that was contacted last fall by that 16-year-old former page who said that he had received what were described as over friendly e-mails from Mark Foley. It was then Congressman Alexander's chief of staff who called over to Dennis Hastert's office.

Now, Congressman Alexander is going to be testifying, CNN has learned, before the House Ethics Committee, next Wednesday, as his chief of staff will also be testifying at the beginning of the week.

This is just one development today. The House Ethics Committee has been busy. We know that what we believe to be among the first key witnesses to come before the Ethics Committee today.

Among them, Peggy Sampson (ph), who is the head of the Republican pages. She was in there this morning. She's the one who is responsible for their day-to-day activities. She's the one who has close contact with the Republican pages and would know what they're doing pretty much all hours of the day. Presumably, she could also be aware of concerns about Mark Foley's interactions with some of these pages.

Now, Kyra, we also know that the woman who's the head of the Democratic pages has just gone into the room as well -- Kyra.

PHILLIPS: All right. Well, now another key player in this scandal testifies tomorrow, right? Kirk Fordham, we're talking a lot about him. KOPPEL: We have. Kirk Fordham is Foley's former chief of staff, and he is the one who has said that he told a top aide to Dennis Hastert -- to House Speaker Dennis Hastert about this several years ago. This contradicts what Hastert's office has said, Kyra. They've maintained that the first they heard about these both over friendly e- mails, let alone those sexually explicit instant messages, was a year ago last fall -- Kyra.

PHILLIPS: Well, it's interesting, Andrea, don't you think? The more that we talk about this, little by little, there are other people coming out and talking about this, saying that they might have a connection, they might know of somebody.

Are you getting a sense through your sources there up on the Hill we may hear of some other people coming forward, possibly some big names having to testify? Or do you think this might be close to the end of the road?

KOPPEL: Probably not. I mean, we know that the House Ethics Committee last week had approved four dozen subpoenas. Now, not everyone is going to be subpoenaed. Many of these people, as Congressman Alexander will, his chief of staff, are going on their own free will.

But we do know that this hotline that started -- got up and running, this toll-free number that family members, friends, current and former pages can call in to confidentially report what they think was inappropriate behavior either with Congressman Foley or other members of Congress and their staff, they have gotten just in the last four or five days, Kyra, over 400 phone calls that are being transcribed right now. So I think that there is a lot of concern and awareness here on the Hill that there are going to be a number of other names that we're going to hear about before this investigation is completed.

PHILLIPS: Andrea Koppel, thanks.

Well, make sure that you get your daily dose of political news from CNN's new political ticker. Just go to CNN.com/ticker.

LEMON: And it certainly is a very busy day at the White House. We carried the press conference live of the president earlier talking about a number of things. And you're looking at that live, the president again speaking, talking about the economy. He is touting what he calls a dramatic reduction in the federal budget deficit this year, at about $247 billion.

It's 22 percent lower than last year. And the lowest since 2002. The president talking again at the White House.

PHILLIPS: Straight ahead from the NEWSROOM, a serial rapist on an Indian reservation. He catches his victims off guard by pretending to be a cop. We're going to talk with one of those searching for the reservation rapist.

LEMON: Plus, a protest reminiscent of the 1960s. College students shut down the nation's premier school for the deaf. What's their beef?

The story ahead in the CNN NEWSROOM.

(COMMERCIAL BREAK)

LEMON: It is the fourth day of no classes at Gallaudet University. Students are occupying buildings and blocking gates at the nation's premier school of the deaf and hard of hearing in Washington. They're protesting the process of choosing a new school president.

Reporter Phyllis Armstrong of CNN affiliate WUSA has the latest.

(BEGIN VIDEOTAPE)

PHYLLIS ARMSTRONG, REPORTER, WUSA (voice over): Student protesters raise the stakes, mobilizing to shut down Gallaudet before sunup.

UNIDENTIFIED MALE (through translator): The students decided that the negotiation process has not worked at all. We have tried over and over again to negotiate with them, to try to compromise, and so we've decided that we need to just go the next step.

ARMSTRONG: University president I. King Jordan's efforts to reopen the gates are rejected, leaving one concerned parent worried about what is next.

UNIDENTIFIED MALE: We are afraid for the safety of our children. The campus security has already assaulted my daughter, Tara (ph).

ARMSTRONG: The administration has continued to back incoming president Jane Fernandes.

JANE FERNANDES, INCOMING PRESIDENT: I will not step down.

ARMSTRONG: She refuses to comply with the students' demand that she step aside, but so far the university has decided not to try to force the students to back down.

FERNANDES: I don't know if we'll have to do that. I certainly hope not. We'll do everything possible to negotiate with the students to bring this to a peaceful resolution.

(END VIDEOTAPE)

LEMON: And that report from Phyllis Armstrong of CNN affiliate WUSA.

PHILLIPS: Well, here's a story that may keep you up at night, especially if you're staying at a hotel. A woman and her two sons are suing Marriott, saying they were chewed by bed bugs at a Marriott hotel near Disneyland in southern California.

They say that they suffered more than 1,200 bites among them. Marriott doesn't dispute the bug bites but says it has "a ream of questions about where those critters came from."

LEMON: A picturesque community, a horrible, horrible crime.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Such a beautiful place that you don't think that these things will be happening.

(END VIDEO CLIP)

PHILLIPS: A serial rapist on the loose on an Indian reservation, and there are unique obstacles to catching him.

We'll have that story in the CNN NEWSROOM.

(COMMERCIAL BREAK)

PHILLIPS: Thirteen rapes since March, and those are just the ones investigators know about. The victims, girls and young women on Arizona's Fort Apache Indian reservation. The suspect, a Native- American posing as a police officer.

The Bureau of Indian Affairs is leading that manhunt. Its deputy director, Chris Chaney, joins us now from Washington.

Chris, what's making this so difficult? Is it -- is it the time? The place? Is it the fact that he's posing as a police officer?

CHRISTOPHER CHANEY, DEP. DIRECTOR, BUREAU OF INDIAN AFFAIRS: Kyra, one of the problems in this case is the fact that the suspect is apparently posing as a police officer. It has aroused fear within the community and made victims reluctant to come forward with information.

PHILLIPS: So you have a lot of forces out there knocking on doors, trying to interview people, but they don't even want to open their doors because they don't know if this person's real or fake.

CHANEY: Well, I think that the public is now opening their doors to law enforcement. Originally, there was fear about the suspect, and -- but what we have done is we have brought in Federal Bureau of Indiana affairs, law enforcement officers from across the United States to help out with the investigative effort.

The message is getting out that Bureau of Indiana Affairs Law Enforcement is there to help, and people are starting to come forward with information.

PHILLIPS: Now, you believe the suspect is American-Indian. Do you think that he lives on this reservation, that he's somebody that's been a part of this community on a regular basis?

CHANEY: I'm not at liberty to discuss that at this point. It's a pending federal criminal investigation.

PHILLIPS: Well, if, indeed, that may be the case, do you think now, with all the forces that you have trying to find him, considering the size of the reservation and how many people we're talking about, that you may be able to close in on him quicker?

CHANEY: We hope so. We have brought in seven of our top criminal investigators from across the United States. We've brought in 11 federal police officers to assist.

We've so far had over 350 calls into a tip line. And like I said earlier, people are coming forward. We're getting leads. We hope to be able to close in on the suspect and get an indictment soon, if possible.

PHILLIPS: We actually have a picture of the police hat that he has been wearing. Can you describe -- what have victims told you about what he says, how he approaches the women, what else he's wearing? Is he talking on a radio? Can you give me specifics?

CHANEY: What we know is that there's a trail between two housing projects in Whiteriver, Arizona, which is on the White Mountain Apache reservation. On that trail, young teenage girls have been approached by a man believed to be Native-American, 20 to 40 years old, medium height, medium build, typically wearing a dark shirt with the word "Police" on it and a dark baseball hat that says "Police" on it. He will approach the victims, tell them that they are under arrest, and then he will handcuff them, take them to a secluded area and rape them.

PHILLIPS: Are you getting the word out -- well, let me ask you this. What he's wearing, is that -- does that look exactly like the other officers within the Apache police? Is that their standard uniform?

CHANEY: It's similar enough that some people might be fooled, but it is actually different. The White Mountain Apache tribal police officers wear a black shirt. They have a badge above the left chest. And they have a U.S. flag on their uniforms above the right chest, which would be different than what the suspect in this case has been wearing.

PHILLIPS: Now, he hasn't attacked in a month, is that right? The last attack was at the beginning of September?

CHANEY: As far as we are aware, the last attack happened on September 6th.

PHILLIPS: So is that a good sign? A bad sign? Do you think he might have fled the reservation?

CHANEY: At this point we don't know. I'm hoping that that's a good sign and that means that he is either cautious and will not attack any other women. That's what we're hoping. But we're still working the case to make sure that we can find the suspect and get him off the reservation, if possible.

PHILLIPS: Well, obviously we wanted to bring attention to this story because we want to see you capture this man as well. But in addition, what are you doing, and how are you using your resources just to educate the families, educate the young girls? Are you going into the schools? What are you doing particularly on the reservation?

CHANEY: That's a good question. In addition to bringing on the seven criminal investigators and 11 police officers, we now have one federal police officer who patrols the trail at night, all-terrain vehicle.

We have put notices out to the public to make them aware of the danger and what to avoid. And we have also established a reward and are encouraging people to call in if they have information about this case.

PHILLIPS: A $10,000 reward, correct?

CHANEY: That is correct.

PHILLIPS: Where's that money coming from?

CHANEY: That money is coming from the Bureau of Indiana Affairs.

PHILLIPS: OK. And just anything else that we can say or do to help in your efforts to find this man?

CHANEY: Well, if you could encourage your viewers to -- that if they have any information, to call 1-480-WITNESS. That's 1-480- WITNESS. There are operators on standby who are ready to receive information that can be relayed to law enforcement officials.

Or if they are local, they can also contact the Bureau of Indian Affairs Office of Justice Services office in Whiteriver, Arizona, and provide them with information direct.

PHILLIPS: Chris Chaney, deputy director of the U.S. Bureau of Indian Affairs -- 1-480-WITNESS is the hotline number. We'll stay on top of this story as well.

Appreciate your time, Chris.

CHANEY: Thank you, Kyra.

LEMON: North Korea, if it did set off a bomb, it probably didn't do it on its own. Ahead in the NEWSROOM, who helped Pyongyang and why?

(COMMERCIAL BREAK)

LEMON: In any scandal, Washington wants to know who knew what and when. In a crisis, it's who messed up? And thus big guns from both parties, big guns with big ambitions, are pointing at each other over North Korean nukes. Here's CNN's Brian Todd.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT (voice over): The political infighting in the U.S. over who lost North Korea has gone nuclear.

SEN. HILLARY CLINTON, (D) NEW YORK: Some of the reason we are facing this danger is because of the failed policies of the Bush administration. And I regret deeply their failure to deal with the threat posed by North Korea.

TODD: Specifically, Senator Clinton's aides tell CNN, she believes the Bush administration should have done more than rely on six-nation talks that have so far failed to get Kim Jong-il to give up his nuclear ambitions. The man who may run for president against her in two years has this to say.

SEN. JOHN MCCAIN, (R) ARIZONA: I would remind Senator Clinton and other Democrats critical of the Bush administration policies, that the framework agreement her husband's administration negotiated was a failure. We had a carrots and no sticks policy that only encouraged bad behavior. When one carrot didn't work, we offered another. Now we are facing the consequences.

TODD: Contacted by CNN, a spokesman for President Clinton said North Korea conducted no nuclear weapons development during the eight years of that administration. And on McCain, "it is unfortunate that anyone would attempt to rewrite history to score political points at a time when we need to address this serious threat." But security experts say North Korea likely would have pursued this program regardless of the approach.

MICHAEL GREEN, CENTER FOR STRATEGIC & INTERNATIONAL STUDIES: Kim Il-sung, the great leader of the father of Kim Jong-il, the current leader, saw what nuclear weapons did for Mao Tse-tung in China four decades ago.

TODD: And Chris Hill, the current U.S. negotiator for North Korea, points out that the north built what he calls its first ramshackle nuclear reactor back in the 1970s.

(on camera): One expert points out this current debate could even be harmful to U.S. national security. The North Koreans, he says, are watching this, looking for seams inside America's political system to see how much maneuvering room they can get.

Brian Todd, CNN, Washington.

(END VIDEOTAPE)

PHILLIPS: Well, it's the second layer of the North Korea nuke threat. If Pyongyang is now nuclear capable, somebody had to help. Any guesses who? Pakistan says, not us, but history suggests otherwise.

CNN senior international correspondent Nic Robertson reports.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN CORRESPONDENT (voice-over): When Pakistan tested its first nuclear device in 1998, it invited the North Koreans to watch. Both countries already had a close relationship. Pakistan had been buying missiles from North Korea, building its military arsenal in case of war with neighboring India. By the mid-1990s, though, Pakistan's cache reserves were running low. It sent AQ Khan, soon to become known the father of Pakistan's nuclear bomb, to North Korea. That was before General Musharraf came to power in Pakistan.

In his autobiography, he says AQ Khan sold North Korea almost two dozen centrifuges to make highly-enriched uranium, the type of fissile or potentially explosive material needed in some nuclear bombs. Around the same time, AQ Khan was selling something perhaps far more dangerous to the Libyans: nuclear missile designs. The suspicion is he may also have sold those designs to North Korea.

DAVID ALBRIGHT, NUCLEAR EXPERT: So in terms of the link with Pakistan and this current test is really over whether North Korea got a nuclear weapons design from Pakistan and whether that nuclear weapons design would have helped North Korea design a better weapon.

ROBERTSON: For experts like Albright, such missile warhead designs were exactly what the North Koreans would have been looking for, knowing they lacked warplanes capable of dropping a nuclear bomb.

ALBRIGHT: If you're in North Korea's shoes, a miniaturized nuclear warhead is your goal.

ROBERTSON: Most analysts are now concluding North Korea tested a plutonium, not a highly enriched uranium, one. It's not clear why it chose that route, but Pakistan says it's proof they had no involvement.

TASNIM ASLAM, PAKISTANI FOREIGN MINISTRY: There's absolutely no link between the nuclear test conducted by North Korea or what might have gone on between Dr. AQ Khan and the North Korean government. North Korea's program is plutonium-based, and Pakistan's is mainly uranium-based.

ROBERTSON: But AQ Khan is under house arrest. Only Pakistani officials can talk to him. Public debate on the nuclear issue is almost forbidden.

HASSAN ABBAS, HARVARD UNIVERSITY: Nothing about nuclear issue can come out, because this is considered as a very sacred issue.

ROBERTSON (on camera): Among international experts, there is real concern that even President Musharraf may not know exactly what AQ Khan sold. And they say as long as the physicist is under house arrest, there is no incentive for him to pass along the vital details that might give the valuable clues as to exactly how advanced North Korea's nuclear program actually is.

Nic Robertson, CNN, London.

(END VIDEOTAPE)

PHILLIPS: And we expect to hear more on North Korea today, 3:00 p.m. Eastern. Defense Secretary Donald Rumsfeld and multinational force commander George Casey will brief at the Pentagon. We'll bring that to you live.

And a gritty look at war through the eyes of the soldiers fighting it.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I think what people will find out through this movie that soldiers are not all monolithic. We're not all cut from the same political branch.

(END VIDEO CLIP)

LEMON: This is not just a story about boots on the ground. It's the hearts and minds of the men and women in uniform. That's ahead in the NEWSROOM.

(COMMERCIAL BREAK)

LEMON: If it weren't for war, scandal and a nuclear threat, the economy would probably be a bigger factor in next month's elections. It still matters, of course, and that's why President Bush is talking it up at the White House today. In particular, a smaller federal deficit -- new figures show that at about $247 billion, it's 22 percent lower than last year, and that's the lowest since 2002.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: These budget numbers are proof that pro-growth economic policies work. By restraining spending in Washington and allowing Americans to keep more of what they earn, we're creating jobs, reducing the deficit, and making this nation prosperous for all our citizens.

(END VIDEO CLIP)

LEMON: Well, Democrats called the improvement a temporary blip. They say the deficit will rise unless policies are changed.

Why don't we bring in Susan Lisovicz? She's live at the New York Stock Exchange. Susan, a question for you. Is the economy really as strong as the president claims it to be?

SUSAN LISOVICZ, CNN ANCHOR: Don, I think that the president does have some bragging rights here when you put some of the fundamentals on the table. I mean, for instance, the U.S. unemployment rate is 4.6 percent, which is lower than the U.K.'s, France's, Germany, India, China, Russia, so that's a good thing.

The inflation rate has improved considerably as well. It's 2.4 percent, which is much better than last year, although it's still outside the comfort zone of the Federal Reserve, which is why we watch the Fed so carefully.

What's of interest here is that the GDP at 2.6 percent is half of what it was in the first quarter, the most recent read. Now, the economy is slowing down. That is a good thing as long as we don't go into a recession.

But the president, of course, is talking an awful lot about cutting the federal deficit to $248 billion. That's a whole lot of money, but it is three years ahead of schedule from the projected '09 deficit. You have to remember that when the president took office, we were running a $128 billion surplus.

The Bush administration's policy of tax cuts and increased defense spending is what gave us a deficit, but the economy is slowing. And it's economics 101, Don, that if the economy is slowing, that there's just going to be lower tax receipts. There's going to be less revenue for the government.

Meanwhile, our spending continues. Our commitments to Iraq and Afghanistan are long term, so some economists that I talked to today said that this may be as good as it gets going forward.

LEMON: Yes, smaller federal deficit but, nonetheless, it's still there. Is this really an issue? Will people vote on the deficit?

LISOVICZ: Well, you know, over the past six years, Don, a lot of voters have expressed their concerns about increased spending. And they have certainly brought that to the White House, and the president is addressing that. He's addressing that today, and there is improvement there, and he deserves credit for it.

But I think when you're talking about elections, it's something that we've seen in a lot of elections, and that is are you better off now than you were four years ago? Eight years ago? Ten years ago? And there's been an awful lot of talk about how people are struggling. The middle class is struggling to keep up with healthcare payments, to heat their homes, to pay for their kids' education.

The federal minimum wage is at $5.15 an hour, hasn't changed since 1997. The inflation rate, in the meantime, has increased 26 percent. You and I know that, you know, a gallon of gas has doubled in that time, that healthcare costs have gone up by more than 40 percent. So those are the kind of things that voters tend to concentrate on. That is quality of life.

LEMON: Yes, everyone likes to take credit, too, for when the economy is good. And you always hear, are you better off than you were four years ago? But everyone wants to take credit. You know, the person before says, oh, well, he -- you know, this president was successful because of what the other person left behind, right? So can the president really take credit this time for revving up the economy?

LISOVICZ: Well, you know, a lot of the economists who I've spoken to not only today, but just over the past six years, say that the president does deserve some credit for getting the economy back on course.

For instance -- and first of all, he inherited a very different economy than when President Clinton left office. We had 9/11. We have a war. We had a recession, a bear market, so it's a very different landscape. And he did cut taxes, and that did stimulate growth.

But we also had the Federal Reserve cutting income -- the interest rate to historic lows. We had corporate America really ramping up productivity, which is why we saw -- you know, we've seen several years of double-digit growth in corporate America. So I think the bottom line is, the president doesn't deserve all the blame. He doesn't deserve all of the credit either.

LEMON: But nonetheless, things are -- appear to be looking up. Thank you, Susan Lisovicz.

LISOVICZ: You're welcome, Don.

PHILLIPS: Straight ahead from the NEWSROOM, swearing by Streisand. The diva conservatives love to hate lets loose on stage. Jeanne Moos on Bab's f-bomb.

LEMON: My oh my. Plus, A.J. Hammer, "SHOWBIZ TONIGHT."

Hey, A.J., what's on tap?

A.J. HAMMER, "SHOWBIZ TONIGHT": Hey, Don, Kyra, a question that's been bouncing around for about a week now, will Madonna come home from Africa with a new son? We'll have more news on the singer's alleged adoption.

Plus, there's a new movie that puts you right on the frontlines of the war in Iraq. I'll have all of that when CNN NEWSROOM continues.

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LEMON: Madonna and child, adoption rumors born of a pop diva's visit to Africa. Details of that and the day's other entertainment news from "SHOWBIZ TONIGHT's" A.J. Hammer in New York.

How you doing?

HAMMER: Good, Don. I hate to say it, but those details still a bit sketchy. We're not exactly sure if the immediate family of Madonna has expanded to a fifth member this week.

Now, according to the Associated Press, a guy named Yohame Banda, who's the father of a 1-year-old Malawian boy, is claiming that the singer has, in fact, adopted his son, David. In fact, Banda tells the A.P., quote, "I am very, very happy because, as you can see, there is poverty in this village, and I know he will be looked after very well in America."

However, "SHOWBIZ TONIGHT" reached out to Madonna's publicist, Liz Rosenberg, last week. She denied reports, she's denying the reports again this week, not able to confirm the story.

The 48-year-old entertainer has been in the African nation now since October 4th. She's visiting her Raising Malawi project, and they're setting up an orphan care center for 4,000 children. Doing a lot of good, and spending a lot of money doing that.

She and her husband, Guy Ritchie, already have two children, of course, 9-year-old Lourdes, and 5-year-old Rocco, so we'll wait and see who actually gets on the plane when they decide to come back home.

Moving onto some movie news now, there's a new documentary film about the war in Iraq, and it literally gives you a first-hand view of the war, and that's because it was shot by soldiers who were right there on the front lines. Here's a look at "The War Tapes."

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UNIDENTIFIED MALE: Sergeant Smith's down!

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