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LOU DOBBS TONIGHT

Al-Maliki: Friend or Foe?; President Bush Meets With Nancy Pelosi, Other Lawmakers After Their Trip to Iraq; GOP Backlash; Iran's Meddling

Aired January 31, 2007 - 18:00   ET

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


LOU DOBBS, HOST: Tonight, the Iraqi prime minister blasting American efforts to stop Iran's rising threat to our troops in Iraq. Is the Iraqi prime minister an ally of the United States or an ally of Iran?
We will have an exclusive interview and report from Baghdad.

And the Bush administration refusing to take action to end three decades of trade deficits that have costs Americans millions of jobs and trillions of dollars in debt.

We'll have that report.

And one of the Senate's most powerful Democrats, Senator Chuck Schumer, is among our guests tonight. We'll be talking about his party's strategy to end the war on the middle class.

All of that and much more, straight ahead here tonight.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion for Wednesday, January 31st.

Live in New York, Lou Dobbs.

DOBBS: Good evening, everybody.

New questions tonight about why the United States is supporting Iraqi prime minister Nuri al-Maliki and his government. The central question is whether al-Maliki is loyal to the United States or loyal to both Iran and Muqtada al-Sadr and the Shia over any concept of the Iraqi nation. In an exclusive interview with CNN, the Iraqi prime minister today told the United States to end its proxy war against Iran.

Meanwhile, President Bush is making an urgent new attempt to stop the widening rebellion within his own party over the conduct of this war. Leading Republicans are worried the Senate could pass resolutions that oppose the president's policies in Iraq.

Michael Ware tonight reports from Baghdad on the problems the new U.S. strategy in Iraq faces because of the Iraqi prime minister.

Jamie McIntyre, tonight he reports from the Pentagon on the latest evidence of Iran's support for the radical Islamist insurgency and direct attacks on our troops. And Dana Bash tonight reporting from Capitol Hill on the Republican backlash against the president's conduct of this war.

First, Michael Ware from Baghdad.

(BEGIN VIDEOTAPE)

MICHAEL WARE, CNN CORRESPONDENT: Iraqi Prime Minister Nuri al- Maliki left the door open today in an interview for the possibility of an escalation and an increase in American troops. While the prime minister believes the new strategy now under way will work, he was critical of past American mistakes that he says have prolonged and deepened this conflict.

He also said that with more support, his forces could take over within three to six months. Nonetheless, if things do not improve, he said, then there may be a need to bring in more American forces

NURI AL-MALIKI, IRAQI PRIME MINISTER (through translator): One of the major issues for President Bush's plan, which we consider support to our Baghdad security plan, is the extent to which there is a need for additional troops, American and multinational, to support the operations. And we agree, this will be assessed by those in the field, the military commanders. And if their assessment is for more, we will ask for these troops.

WARE: One the key challenges for those troops will be attacking Iraq's militias which have a stranglehold on this government. Foremost among the militias is the Mehdi military of the anti-American cleric Muqtada al-Sadr.

U.S. military intelligence says Muqtada has American blood on his hands. Indeed, there is an outstanding arrest warrant for the cleric. Nonetheless, he is a political ally of the prime minister.

The prime minister contributed to the furor over Iranian activity here in Iraq. He said that he could not contradict U.S. military intelligence that Iranians are killing American soldiers. Indeed, he said that this seemed to be happening. He said Iranians are targeting Americans and Americans are targeting Iranians in his country, and he wants it to stop.

Michael Ware, CNN, Baghdad.

(END VIDEOTAPE)

DOBBS: President Bush today focused on dealing with domestic critics of his conduct of this war. President Bush met with House Speaker Nancy Pelosi at the White House today. Congresswoman Pelosi has just returned to Washington after trips to Iraq and Afghanistan.

Ed Henry now reports from the White House -- Ed.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Lou, that's right, the president earlier today was in New York trying to talk up the economy, got a positive reception on the floor of the New York Stock Exchange. But as you noted, came back here to Washington. A much different scene here.

Obviously, under heavy pressure from both Democrats and Republicans to change course in Iraq. The president, as you noted, had a long meeting that just broke up a short time ago with Speaker Nancy Pelosi, as well as the fierce Bush critic, Democrat John Murtha, along with another group of lawmakers.

They just came back from Iraq and Afghanistan, a fact-finding mission. Nancy Pelosi came back from that trip calling the situation "catastrophic" on the ground.

Before the meeting, a senior Democratic aide told CNN that Pelosi was planning to be "blunt but polite" to the president. And sure enough, when she came out, she had a lot of platitudes about -- about common ground and whatnot, but really did not offer very many specifics about what was discussed during this meeting.

She said the president listened for a long time from all the lawmakers about their reports, about what they saw in Iraq and Afghanistan. But we've previously heard from Democrats complaints that they wish the president had been listening sooner.

They feel that he pushed ahead with sending more troops to Iraq despite their objections. But now they're saying they believe the president is listening, but obviously the troops are already on their way to Iraq -- Lou.

DOBBS: Already. And the speaker saying "catastrophic," Ed. How did that language strike the White House and the staff there?

HENRY: Certainly not pleased by that. They've been going back and forth with the speaker in recent weeks about various comments she's been making.

That's obviously to be expected at this point. There's a lot of partisanship flying around. Democrats taking over, and there's a new political dynamic for both sides, clearly. But she tried to come out here and talk up a little bit more bipartisanship, and I think that's because she is also trying a political balancing act herself -- Lou.

DOBBS: Ed, thank you very much.

Ed Henry from the White House.

The president's closest allies on Capitol Hill tonight are making a new effort trying to stop a Republican revolt over the president's Iraq war policy. Bush loyalists are trying to quell the rebellion before a critical Senate debate on the president's conduct of the war.

Dana Bash has a report from Capitol Hill.

(BEGIN VIDEO TAPE)

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT (voice-over): President Bush's allies are so worried that resolutions opposing his Iraq plan could pass, they are not waiting for next week's formal debate to start slamming them.

SEN. DAVID VITTER (R), LOUISIANA: Do you not throw mere words out that have no concrete effect except undermining our troops and emboldening the enemy?

SEN. JIM DEMINT (R), SOUTH CAROLINA: Our responsibility is to sell it to the American people, not just to criticize, not to come up with resolutions that don't mean anything, intended to embarrass the president.

BASH: Preemptive strikes not just aimed at Democrats, but at fellow Republicans, meant to pressure GOP senators not to vote against the president.

SEN. SUSAN COLLINS (R ), MAINE: Comments like that are really inappropriate.

BASH: Instead, it is intensifying the deepening discord within the Republican Party.

Susan Collins is one of four GOP senators co-sponsoring a resolution that opposes sending more troops to Iraq.

COLLINS: The vast majority of those of us serving and in leadership roles on this debate feel very strongly, are not motivated by political purposes.

BASH: But when GOP Senator Jim Demint was asked if he thinks fellow Republicans, including former Armed Services Chairman John Warner, are really trying to embarrass the president, he said: "It's clearly not an act of leadership."

Bush allies admit there is less pressure on GOP lawmakers to stand with the president.

SEN. JOHN CORNYN (R), TEXAS: The president has the bully pulpit of the office of president of the United States. But I think in many ways, the American people have sort of chosen up sides on this issue and are not listening.

(END VIDEO TAPE)

BASH: The one person Republicans think still does have clout on this issue is General David Petraeus, the man the Senate just approved and confirmed to be the commander of U.S. forces in Iraq. CNN is told that he has actually been meeting here on the Hill this week with lawmakers, trying to make the case that he needs additional U.S. troops in Iraq in order for his mission to succeed -- Lou.

DOBBS: And still, the polemics, the partisan polemics, are not focusing on policy choices and consequences, and we are now at midweek. Any likelihood that'll occur soon?

BASH: You know, we're likely to hear a lot -- a lot of that when this really gets under way. And that's not until next Monday now, Lou. The formal debate will start next Monday. And if you listen and believe what senators on both side of the aisle are saying, they promise that they're going to talk about the substance and the consequences of what could or could not happen in Iraq, in addition to the partisanship that we've heard.

DOBBS: There is -- I would think that partisans on both sides would find it somewhat embarrassing to this government that a four- star general now in command of our troops in Iraq would have to be put into the position of seeking additional troops, hat in hand, if you will, after a policy decision is taken. It's a very complex and difficult moment.

BASH: It is. And that's precisely the argument that you hear from the White House and its allies here.

What you hear them saying is, you know, you've confirmed this man by a unanimous vote, 81-0, and he's going to Iraq. He has said in a confirmation hearing that he needs these troops, so don't undermine him. That's what you hear from the White House and it's allies.

And the other side, you hear senators saying, look, we have a role here. We disagree no matter what he says. Other generals disagree, that's why we're going to have this debate.

DOBBS: Dana, thank you very much.

Dana Bash, live from Capitol Hill.

Insurgents in Iraq have killed four more of our troops. One soldier killed today. Two soldiers and a Marine killed yesterday.

Eighty-five of our troops have been killed this month in Iraq. 3,085 of our troops since the beginning of this war have been killed. 23,279 of our troops wounded, 10,342 of them so seriously they couldn't return to duty within three days.

A top U.S. general today said the military has proof that Iranian weapons are now killing and wounding our troops in Iraq. General Raymond Odierno told "USA Today" that the United States has serial numbers that prove Iran has supplied weapons to the insurgents. U.S. officials say the United States could soon make a formal public presentation of the evidence that would link Iran to the insurgency.

Jamie McIntyre reports from the Pentagon.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT (voice over): A brazen attack on this Iraqi government center in Karbala almost two weeks ago is the latest incident in which anonymous U.S. officials are pointing an accusing finger at Iran. But Pentagon officials say it's only a suspicion based on the sophistication of the attack and concede there's no direct evidence to corroborate Iranian involvement, even as other U.S. officials claim a mountain of proof to support the more sweeping charge, that Iran is backing several militia groups in Iraq with money, weapons and expertise. The evidence is said to include computer files seized durng a raid in northern Iraq last month in which five Iranians were detained. The State Department promises, once declassified, the evidence will be of smoking gun quality.

SEAN MCCORMACK, STATE DEPT. SPOKESMAN: We're going to do it in such a way that it is -- that it is properly presented, it is clear.

MCINTYRE: The U.S. also wants to avoid an embarrassing repeat of Colin Powell's convincing, but ultimately inaccurate, WMD presentation to the U.N. back in 2003.

TRITA PARSI, NATIONAL IRANIAN-AMERICAN COUNCIL: I think the president is going to have a very, very tough case to make because of the past failures of his administration to present credible and correct evidence for the accusations that he has made.

MCINTYRE: Trita Parsi is president of the Iranian-American Council. He doesn't defend Iran, but says it is mostly supplying Shia groups, while Syria and Jordan appear to be helping the Sunni insurgents.

PARSI: I don't have any doubt in my mind that the Iranians are involved in Iraq. Everyone knows that. The question is, are the Iranians the ones that are supporting the groups that are killing Americans?

MCINTYRE: Most of the evidence cited so far by the U.S. military consists of weapons found in Iraq but made in Iran. The list includes shaped charges used to make armor-piercing IEDs, detonation wire, rocket-propelled grenades, .82 millimeter mortars, and Katushya rockets.

(END VIDEOTAPE)

MCINTYRE: So far, the evidence the U.S. has made public, while incriminating, is circumstantial. But the U.S. says it has the proof and will produce it if Iran doesn't back off -- Lou.

DOBBS: Jamie, to what end -- this is, after all, a war. If the United States government is confident of its intelligence, has that evidence, why in the world would not the general staff order a response and take action? Why should there be this appearance of a trial?

And you did bring back the specter of former Secretary of State Colin Powell in February of 2003 appearing at United Nations with what turned out to be compelling evidence, but absolutely incorrect evidence.

MCINTYRE: Well, there's a couple of things going on here.

One is, obviously they want to make sure that any evidence they produce is bulletproof. Two, they also want to be sure that while they're confronting Iran they don't provoke a response that's irrational. And they are trying right now to pursue diplomatic means to put pressure on Iran. They want to see how that works before they pull out the rest of their hold cards. And, of course, they are responding militarily against Iran on the ground in Iraq.

DOBBS: Responding militarily, if indeed the intelligence is correct. And we have had reports of this intelligence now for the better part of a year.

Why in the world has there not been a response? Because our troops are at risk. American lives are at risk, as are Iraqis. It seems to be a peculiar posturing end approach.

MCINTYRE: Well, you know, the U.S. is -- has stepped up its target of Iranian operatives in Iraq. They've put together a special task force that's doing that. They've laid down the guantlet. The U.S. government has laid down the gauntlet to Iran.

They are taking other moves such as moving aircraft carriers into the region and increasing air assets. So they're moving on a number of fronts. I'm not sure what else I can say.

DOBBS: Jamie McIntyre, we thank you very much for that from the Pentagon.

Jamie McIntyre reporting.

Still ahead, new evidence of massive fraud, waste and corruption in U.S. efforts to rebuild Iraq. We'll have that report for you.

And rising pressure tonight to free two Border Patrol agents sent to prison for doing their jobs trying to protect this country from illegal Mexican drug smugglers.

We'll have that story.

And the war on the middle class escalating. One of the Senate's most powerful Democrats, Senator Chuck Schumer, joins us here. He has a plan to help working men and women. He's among our guests.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Pressure tonight on the White House to pardon former Border Patrol agents Ignacio Ramos and Jose Compean. And that pressure is rising.

So far, President Bush has only promised to look into the case. The agents are beginning their lengthy prison terms while the wounded illegal alien, Mexican drug smuggler given immunity by the Justice Department to testify against those agents remains free. And he's filed a $5 million lawsuit against the U.S. government.

Casey Wian reports.

(BEGIN VIDEOTAPE) CASEY WIAN, CNN CORRESPONDENT (voice over): Former Border Patrol agents Ignacio Ramos and Jose Compean were transferred this week to their new homes for the next 11 and 12 years -- federal prisons, each more than a thousand miles from their families in El Paso. At the same time, efforts to release the men convicted of shooting and wounding a Mexican drug smuggler near the Texas border two years ago are intensifying.

DAN PATRICK (R), TEXAS STATE SENATE: This is outrageous. I mean, these two men put their lives on the line to protect our country. And I've read the case. I've gone through all the facts. Maybe they made mistakes, maybe they didn't make mistakes.

Look, I don't trust a drug dealer, number one.

WIAN: Federal lawmaker are demanding the Justice Department release documents relating to the decision to prosecute the agents and grant immunity to an admitted illegal alien Mexican drug smuggler.

REP. TED POE (R), TEXAS: And the question is, why the is the government stonewalling the truth? Why don't they just come and level with us and let us know what was behind all of this prosecution?

WIAN: One of the documents from the Homeland Security Department's Office of Inspector General we first disclosed five months ago. It shows smuggler Oscar Aldrete-Davila admitted to a Border Patrol agent he was transporting a drug load the day he was shot. That admission took place five days before prosecutors granted him immunity, contradicting statements by U.S. Attorney Johnny Sutton that he couldn't prosecute the smuggler because of a lack of evidence.

Meanwhile, Sutton has launched a public relation's offensive. While declining our interview request, Sutton has made other media appearances defending his prosecution.

REP. DANA ROHRABACHER (R), CALIFORNIA: He has targeted the men who were defending us. He's tried to demonize them. He's called them corrupt. They've never had any charges of corruption.

He said that they had a bad record. They've never had any disciplinarian actions against them all.

WIAN: A bill sponsored by Californian Republican congressman Duncan Hunter to pardon the agents now has 77 co-sponsors.

(END VIDEOTAPE)

WIAN: Congressional sources say the White House has promised to review the case once the official trial transcripts are released, which could happen within the next several weeks -- Lou.

DOBBS: Casey, as you continue reporting on this, as we continue to focus on this case, the idea that this -- the Department of Homeland Security has still not responded to Congressman Michael McCall who, when he chaired the Homeland Security Committee, requested the report, the IG report on this case, this is -- and every congressman I've talked with about this is absolutely furious about it.

WIAN: It raises huge questions, Lou. We of course spoke with Congressman Ted Poe of Texas today, and one of the things he said -- he's a former judge.

DOBBS: Right.

WIAN: And in his experience, it was always the prosecutors that wanted to get all the evidence and the information out in criminal cases. This time it's the prosecutors, he says, who wants to hide the evidence -- Lou.

DOBBS: Yes, and it's really interesting the fact that U.S. attorney Johnny Sutton, who we -- who I had an off-the-record discussion with months ago, who said he could not talk on the air at that time because of the proceedings, said he would come on here and talk. We've continued to put an invitation out there. He is apparently comfortable talking with other news outlets perhaps not as well informed about the case as I think this broadcast, certainly you, Casey Wian, are.

He seems to be resistant to going before our audience and addressing the truth of the matter.

WIAN: He has stated publicly that he's anxious to talk once the trial transcripts are out. When that happens, maybe he'll talk to us -- Lou.

DOBBS: Well, we can hope. And we can hope that agents Ramos and Compean, that somebody in that White House finally gets up the spine to take a look at these facts and do the right thing.

In my opinion, this is a travesty of justice and it is -- and thank goodness for Congressman Rohrabacher, Congressman Poe. These men in Congress, Republicans all, by the way -- and it's startling that there's not a single Democrat lined up in behalf of these agents.

And we need to understand what that is all about. We need to understand, too, why LULAC, La Raza, all of these ethnocentric organizations -- these men, after all, are by ethnicity Hispanic. Why in the world haven't they looked into this issue?

Why in the world -- where is the ACLU? Because these men certainly have a right to their concern -- Casey.

WIAN: Well, Lou, we have contacted in the past some of those Latino rights organizations, and none of them took the opportunity to weigh in on the case. As for the ACLU, not sure what their stance is on this case. We'll have to check that out for you.

DOBBS: All right. Thank you very much, Casey Wian.

WIAN: OK.

DOBBS: Excellent job of reporting, as always.

Casey Wian from Los Angeles.

Coming up here next, the Treasury secretary questioned by the Senate about our record trade deficit with communist China. And 30 consecutive years of trade deficits.

We'll have a report on what this administration is thinking about.

Venezuela's socialist anti-American president, Hugo Chavez, he now has the power to rule by decree for the next 18 months -- a year- and-a-half dictatorship.

We'll have that report.

"Waste, fraud and abuse." A new report on the reconstruction effort in Iraq using those words to describe the conduct of U.S. contractors.

We'll have that story, a great deal more, straight ahead.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Treasury Secretary Henry Paulson today said he believes that having a "dialogue" with China is the best way to cut our soaring record trade deficit with the communist country. Lawmakers on Capitol Hill, however, not entirely in agreement, pointing to the millions of jobs that have been exported to cheap overseas labor markets as proof that more drastic measures must be taken and soon.

Lisa Sylvester reports from Washington.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Good morning. The committee will come to order.

LISA SYLVESTER, CNN CORRESPONDENT (voice over): Senate Democrats took turns drilling Treasury Secretary Henry Paulson for failing to level the trade playing field with China.

SEN. JIM BUNNING (R), KENTUCKY: All the jaw-boning and talking that you are doing with the Chinese is not going to affect one iota that steel worker in Bessemer, Alabama.

SEN. RICHARD SHELBY (R), ALABAMA: If the roof is leaking, we better fix it. I think the roof is leaking as far as the imbalance of trade.

SYLVESTER: For years, China has manipulated its currency to make its goods cheap and American products more expensive. The result? A U.S. $230 billion trade deficit with China. That's rippled across the U.S. economy. U.S. factories shut down as companies moved overseas.

BILL HAWKINS, U.S. BUSINESS & INDUSTRY COUNCIL: Companies who have relocated to China, American companies who have moved to China, benefit from China's policies. And they have a lot of clout with this administration.

SYLVESTER: The Bush administration has been reluctant to issue ultimatums and instead has formed a strategic economic dialogue group of U.S. cabinet officials to engage the Chinese.

HENRY PAULSON, SECRETARY OF TREASURY: We're coordinating what we're doing economically and we're speaking with one voice. And I think that gives us great leverage.

SYLVESTER: The new chair of the Senate Banking Committee says the American people want more than dialogue and chitchat as they lose their jobs.

SEN. CHRIS DODD (D), CONNECTICUT: They are livid. They are livid, Mr. Secretary. And the Congress isn't going to wait necessarily for us to get some sort of vague definition of how this is kind of progressing when they watch three million manufacturing jobs leave this country.

SYLVESTER: Patience is running out. Senators Chuck Schumer and Lindsey Graham are leading the call to slap a tariff of 27.5 percent on all Chinese imports into the United States unless China corrects its currency imbalances.

(END VIDEOTAPE)

SYLVESTER: Congressional lawmakers say they are tired of hearing the same thing. One witness said it feels a lot like the movie "Groundhog Day." China manipulates its currency, the U.S. government does nothing about it, workers lose their jobs, that's been going on for years as the Treasury Department continues to talk with the Chinese -- Lou.

DOBBS: In point of fact, it may be becoming clearer to all of us that it will be easier to -- for Americans to influence the policy of the Chinese government than to influence the policy of this administration and this Congress.

Lisa, thank you very much.

Lisa Sylvester.

Time now for our poll. The question tonight -- let's follow up with the Treasury Secretary.

Are you encouraged that Treasury Secretary Paulson is "actively pressing the Chinese to introduce greater currency flexibility and undertake wider market reforms" or do you believe the Treasury secretary and the administration should be focusing on U.S. policies and strategies to alleviate our record trade deficit?

Please cast your vote at LouDobbs.com. We'll have the results here later. Time now for some of your thoughts. Robin in California: "We need fair trade, not free trade. This president hasn't done much of anything else right. Why should we trust him with fast track authority in trade? Congress needs to take back its power, and the people need to ride herd on Congress."

Monica in California: "When are our elected officials going to start putting the good of our country before their political careers? What's it going to take for our representatives to wake up and save this wonderful country of ours?"

Gene in Georgia said, "Lou, the damn war in Iraq is causing all the distraction and inability of our government to function rationally. The 111 amendments to the Minimum Wage Bill is the perfect example of obstruction, just like the Free Trade Bill."

Send us your thoughts at LouDobbs.com. More of your thoughts upcoming here. And each of you whose e-mail is read here receives a copy of my book, "War on the Middle Class".

Up next, a self-proclaimed enemy of America, Venezuela's Hugo Chavez, has just won the power to do real damage. We'll have that special report.

And shocking new evidence of how your tax dollars are being squandered in the effort to rebuild Iraq.

And a terrorist scare in Boston as officials discover a series of suspicious packages. You will not believe what those packages turned out to be. And you won't believe the explanation.

Stay with us.

(COMMERCIAL BREAK)

DOBBS: Venezuela's Hugo Chavez, given to fiery anti-American rhetoric, now has the power of a dictator, given to him in a ceremony in parliament. The Venezuelan dictator's growing appetite for absolute power raising some modest concern at our State Department.

Kitty Pilgrim has the report.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Maximum revolution is his slogan. The so-called mother log is Chavez' dictatorial power over every aspect of the country.

Chavez seeks out enemies of the United States for alliances and has embraced rogue regimes from Iran to North Korea to Syria.

Chavez' power comes from oil wealth. Venezuela has the largest oil reserves outside of the Middle East. Since Chavez first took office in 1999, oil prices have soared from $15 a barrel to $60 a barrel last year. PAMELA FALK, CITY UNIVERSITY OF NEW YORK: Hugo Chavez in many ways is Fidel Castro, but with petro dollars. Chavez has also threatened to divert a lot of his oil sales to other countries, including China. He's threatened to take out much of the Citgo, Venezuelan owned oil distributing network in the United States, as well.

And so he could have a very serious impact on the U.S. economy.

PILGRIM: With today's new powers, Chavez controls Venezuela's largest telecommunications company, the electricity sector, most industry, including the oil and gas industries. All done with a wink and a nod to democracy, voted in by a rubber stamp parliament.

On Monday, Chavez, meeting with Cuba's ailing Fidel Castro, was clearly posing as the ideological successor to the revolutionary icon in the region.

JOHN NEGROPONTE, DEPUTY SECRETARY OF STATE NOMINEE: Mr. Chavez who has been trying to export his kind of radical populism and I think his behavior is threatening to democracies in the region.

PILGRIM: Venezuela is the fourth largest oil supplier for the United States and accounts for some 15 percent of U.S. imports.

(END VIDEOTAPE)

PILGRIM: Now this next six-year term for Chavez will give him more power than any other individual in Venezuela in the last 50 years. Power that he has pledged to use in exporting his revolution and challenging the influence of the United States in the region -- Lou.

DOBBS: And I love Negroponte's response. He calls it radical populism. He's a dictator, for crying out loud.

PILGRIM: Yes.

DOBBS: And this guy's going to be No. 2 in the State Department.

PILGRIM: Populism is a euphemism for what's going on in Venezuela, I have to say.

DOBBS: I think these boys need to learn how to talk straight and perhaps a little more accurately. Otherwise, Hugo Chavez is going to have a lot of fun with these rather timid personalities. I won't go into their I.Q.'s.

All right, Kitty, thanks a lot. Kitty Pilgrim.

A series of bomb scares caused considerable chaos in Boston today. At least nine suspicious devices were discovered all around the city. And those suspicious devices forced the shut-down of roads, bridges, a stretch of the Charles River.

Hundreds of local police, bomb squads and homeland security swept in and around and over all of this. The alert was even monitored by the U.S. Northern Command in Colorado Springs, Colorado.

But guess what? It turned out all of these devices, some of which were actually blown up, weren't actually bombs. They were part of an outdoor marketing campaign for a late-night show on the Cartoon Network.

That marketing company tonight refuses to comment to us. But CNN's parent company, also the parent company of the Cartoon Network, Turner Broadcasting, says those electronic light boards -- there it is, flashing with its very clear message -- they say those boards are harmless. The light boards were designed to promote the show "Aqua Teen Hunger Force".

But local and state officials are not in any way mollified. In fact, they are furious. Governor Deval Patrick said it is a hoax and it is not funny. No word at this hour on what in the world that campaign was supposed to accomplish. We'll keep you posted.

Up next, we'll hear from our distinguished panel. A political analyst on the president's policies at Iraq, at home and the Democratic position. And the senior Senator from New York, Senator Chuck Schumer, joins me here later. We'll be talking about America's war on the middle class and his new book.

And Senator Joe Biden announced he's running for president, promptly -- well, goes after a few of his potential rivals, and certainly Senator Barack Obama. We'll have that and a great deal more. Stay with us.

(COMMERCIAL BREAK)

DOBBS: New evidence tonight of the huge scale of corruption and mismanagement in American efforts to rebuild Iraq. A government auditor today said simply the United States is still wasting tens of millions of taxpayer dollars in Iraq nearly four years after the war began.

In one case, the State Department paid nearly $45 million for a police training camp that remained empty for months. The price tag of waste is reaching billions of dollars.

An architect of the Democratic victory in the midterm elections is Senator Chuck Schumer. He's become one the most powerful members in the Senate, and the senior senator from New York has a brand-new book out whose theme and title leave us on this broadcast absolutely warm with appreciation: "Positively American: Winning Back the Middle Class Majority One Family at a Time".

Senator Schumer, congratulations on the new book, an important book. And we're glad to you have here.

SEN. CHUCK SCHUMER (D), NEW YORK: Hey, Lou, great to be on with you.

DOBBS: And it is great to hear somebody talking about the middle class, the problems that are faced by the middle class, and actually coming up with a solution. And the middle class is nothing new in your concerns.

SCHUMER: No, well, you know, Lou, I wrote this book because I feel that the 2008 election will be pivotal. The middle class is up for grabs. They had originally bought into the Reagan philosophy in 1980 but the world has changed so. Technology is created, terrorism is created, one global market, where jobs go overseas. We live longer. That changes when we get married, when and if we have kids and lots of leisure time.

So the middle class is not feeling terrible, but they're not feeling great. And they're looking for government to help them out a little bit.

And I've written a book based on the experiences of Joe and Eileen Bailey.

DOBBS: Right.

SCHUMER: They're a middle class couple in Massapequa, which is a suburb on Rhode Island. He's an insurance adjuster, makes around $40,000, $50,000 a year. She works in a medical office, makes $15 to $20. And they need some help from government.

And what I've proposed is 11 goals that my party, the Democrats, should promise the Baileys will achieve within 10 years. Each one is a concrete goal. It's called the 50 Percent solution, because it's a number. Raising reading and math scores by 50 percent. Reducing property tax by 50 percent.

We'll win the Baileys over for a generation. And the middle class will feel once again, which they don't feel now, government's on their side.

DOBBS: Well, government, as you and I both know, sure the heck isn't on the side of the middle class.

SCHUMER: Not right now they're not.

DOBBS: Two hundred and fifty million. It's the policies, free trade policies pursued by both the Democratic Party, the Republican Party. This administration is staring at 30 consecutive years of trade deficits. We have a record trade deficit each and every year over the past decade just about.

And the idea that Senator Max Baucus of your party comes out and starts talking about fast track authority for this administration, which has told middle class America to go to hell time and time again. What in the world is that?

SCHUMER: Well, we talk about what we can do here to help the middle class. And we talk about the things that bother most. Jobs, as you talk about. Paying for the tuition, paying for the medical care. Making sure the jobs stay here.

So for instance, on an issue near and dear to your heart, we propose reducing illegal immigration by more than 50 percent. And we can do it if we do the plan in our book. And then raising legal immigration but in a rational way, filling jobs that we need and not having all the immigrants, having diversity in immigration. Let there be economic diversity and geographic diversity of our immigrants.

DOBBS: Senator Schumer, the one thing I've got to say is this is the most rationally, ethnically, socially, religiously diverse society on the face of the earth. Why in the world is the Democratic Party, particularly in the Senate, talk about quote/unquote "comprehensive immigration reform," the effect of which is to turn over immigration policy to the government of Mexico rather than make a public policy choice, is the responsibility of this government.

SCHUMER: Yes, I'm not sure the Democrats are quite doing that. But let me tell you my plan, which I hope both parties will adapt, OK? And here's what I believe.

The Baileys, Joe and Eileen Bailey, middle class folks, they are not anti-immigrant. Neither are you. They're anti-illegal immigration.

Why do illegal immigrants come into this country? One reason only, jobs. If you make a $1 a day in Oaxaca province and you can make $3 an hour here in the U.S., you're going to get here.

So if we stop the jobs, the immigrants, the illegal immigrants won't come. But when employers are asked for identification, they're showing a driver's license, a Social Security card.

DOBBS: Fraudulent documents.

SCHUMER: Forged for 40 bucks.

DOBBS: Right.

SCHUMER: We propose every American, citizen, legal immigrant gets a non-forgeable employment card, a national employment card. It has a little chit in there that you can't forge that matches the retina of your eye.

Every employer -- every employer would have to swipe the card through a little machine like a credit card machine, when someone applied for a job who would have their picture on it, of course.

DOBBS: Right.

SCHUMER: And if the computer said they're a citizen...

DOBBS: I got it. I got it, Senator. I got it. I think I got it.

SCHUMER: Wait, but here's the other part. If the employer doesn't swipe the card or hires them anyway, the first time, a $50,000 fine. Second time, jail. It will cut illegal immigrants, and then the Baileys will be willing to accept lots of legal immigrants who we need in this country. DOBBS: Well, I don't think there's much problem with Americans accepting legal immigrants of any origin or of any number, so long as it's a choice of their government, their representatives, and they're expressing the will of America, which is exactly the opposite of what's happening right now, as you know, Senator.

It is great to you have here. We wish you all of the success in the world with your book.

SCHUMER: I'm going to hold up the book. I can't see if you are, Lou. So I will. Please, take a look. It has a lot of interesting ideas.

DOBBS: The book is -- the book is actually full screen, Senator.

SCHUMER: Good.

DOBBS: You didn't trust us.

SCHUMER: I couldn't see you, Lou. I'm looking at the camera.

DOBBS: Senator, you've got to go with us on this. I mean, you've got to understand if it says middle class and it's in the interest of the middle class in this country, it's going to get full screen treatment every time.

SCHUMER: Thank you, Lou.

DOBBS: Senator, good to have you with us.

SCHUMER: Great. Nice to talk to you. Glad you're feeling better. Hope we can talk more about it at another point.

DOBBS: You got it.

SCHUMER: Thank you, buddy.

DOBBS: Thank you.

Just ahead, three of the country's sharpest political minds join me to discuss the president's conduct of the war in Iraq, the growing revolt within his own party, and just how great this economy really is.

And Senator Joe Biden joins a growing list of presidential contenders. He doesn't like a lot of Democrats.

We -- we'll also have some comments about Senator Barack Obama that are just a little off. We'll have that story and a great deal more. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Up at the top of the hour "THE SITUATION" with Wolf Blitzer -- Wolf. WOLF BLITZER, CNN ANCHOR: Madeleine Albright, the former secretary of state, says she is worried the U.S. could face a war with Iran. She explains why here in "THE SITUATION ROOM".

And fraud and abuse are destroying U.S. efforts to rebuild Iraq. We're going to bring you the stunning details of a new government audit.

Senator Biden's underdog race for the White House stumbles out of the gate. Is the chairman of the foreign relations committee suffering from what his critics say is foot-and-mouth disease?

Rescue dogs dying. Why their owners now blaming 9/11.

All that, Lou, coming up right here in "THE SITUATION ROOM".

DOBBS: Wolf -- Wolf, thank you very much.

Joining me now with more on the growing list of presidential contenders and the growing list of issues confronting this country, Ed Rollins, Republican strategist; former White House political director, Georgette Mosbacher, Republican strategist, former Republican National Committeewoman; Robert Zimmerman, Democratic strategist, Democratic national committeemen.

Good to you have you all here. What in the world was Joe Biden thinking about today? He went after Hillary. He went after -- I mean, Barack Obama.

ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: Message discipline is highly overrated.

DOBBS: Apparently to Joe Biden.

ZIMMERMAN: You know, obviously he's going to have to explain those comments and put his campaign back on track if he can.

DOBBS: Which hasn't really begun.

ZIMMERMAN: But the more important point is -- it hasn't begun yet. But the more important point is on issues of substance. He has been putting out ideas regarding how to address Iraq effectively. He's a respected voice and an effective chairman of foreign relations.

DOBBS: And what about Senator Clinton? Her talk about those evil bad men?

GEORGETTE MOSBACHER, REPUBLICAN STRATEGIST: That was unbelievable. I have to admit. I mean...

DOBBS: You mean unbelievably good wit, or an unbelievable gaffe? Or...

MOSBACHER: A gaffe. Gaffe. I mean, I don't think you should say those kinds of things about your husband, even if you believe them. Even if they're true, you know, you're supposed to fake it. ZIMMERMAN: She wasn't talking about her husband.

MOSBACHER: Really? Sorry, well, then I missed it all.

ZIMMERMAN: She was talking about Osama bin Laden. She was talking about all of those individuals the Bush White House refuses to go after.

MOSBACHER: I see. The bottom line is...

ED ROLLINS, REPUBLICAN STRATEGIST: Here's the bottom line. Joe Biden is going to be diminished very quickly in this presidential race. He can't -- he can't get in this race. He tried it before. He's a very substantive man. He and Dodd, who's also a substantive man, will find very quickly they can't raise the money. They don't have the -- they don't have the identity among the party activists that Hillary has. And for them getting in is going to be a fool's mission.

And worse than that, it's going to create chaos in the Senate. You're going to have two major chairmen out there, basically fighting with two significant senators who aren't major chairmen, throughout this. And I think that poor old Harry Reid is going to have to struggle to hold his majority together on a daily basis.

DOBBS: I think -- the reason I brought up both of those is that, you know, there's -- Senator Biden made an unfortunate comment. Particularly, it seems concerning Senator Obama. However you want to take it, Senator Clinton having a little fun. Suddenly she is on the -- on the national media's couch, being psychoanalyzed by journalists, which is pretty dangerous stuff to begin with.

I mean, is there going to be any maturity at all in this -- in the coverage of this campaign? Or is it going to be more of the same?

ROLLINS: Well, the point, it's way too soon to start a race. And the reality is, you're going to -- everybody's going to get worn down. All they should be doing this year is being quiet, doing their job as senators, and raising money, but they're not, because the media basically wants to cover a presidential race.

DOBBS: Wait a minute. We'll take responsibility for a lot of things, Ed. But I don't think we're the guys with the starter gun.

ROLLINS: Well, the starter gun is the money. But the reality is this is like a full-scale race in which polls are being run in media outlets on a daily basis. Who's ahead, who's this, who's that? It's a considered process.

MOSBACHER: And they're all out there fighting for the same dollar, and we're talking about big money here.

ZIMMERMAN: But there's much more at stake here. You know, in the same way the Internet was so defining of the 2004 presidential election. YouTube and some of our video cameras are going to define this presidential election and turn it into a side show. What really concerns me are there are powerfully important issue, substantive issues that have got to be addressed. And the media, I think, has a responsibility to focus on that with the candidates.

DOBBS: We do our very best on this broadcast, as you know, to do just that.

ZIMMERMAN: Absolutely.

DOBBS: But then we are confronted right now with a Democratic leadership in the Senate that has 111 amendments to the minimum wage legislation. Give me a break. Let's get it done. Move on. You guys are supposed to be taking on...

ZIMMERMAN: And all 51 Democratic senators agree with you. But you need 60 votes to move it forward.

DOBBS: Then let's -- you know, let's root it out. Put it out there.

ROLLINS: The good news is this is Senate bill No. 2. So everything that didn't get passed in the last dozen years is being stashed into this bill. It's a long, hard process. And I think to a certain extent the hundred-hour drill that the speaker attempted to do, it's a long hard two-year session, and they ought to basically get some strategic thinking.

DOBBS: White House facing a revolt within the president's party. Facing adamant opposition by the Democrats on the issue of Iraq. What's going to happen here, Georgette?

MOSBACHER: Well, he is the commander in chief. I mean at the end of the day, he's going to...

DOBBS: He's also the decider and decision-maker.

MOSBACHER: I'll tell you, for the Democrats to be criticizing the president and this new initiative, and yet they confirmed General Petraeus unanimously. I mean, this is the man that's going to carry out this thing.

I don't understand it. This is where they should have taken their stand, and they didn't.

ZIMMERMAN: Quite contrary, the Democrats, the senators did exactly what they're supposed to do as senators. They do not interrupt the military chain of command, and they support the right of the president to choose his secretary of defense and choose his generals.

The chain of command, according to our Constitution, is the Senate to the president. And so the fact that we have resolutions now from Republicans and Democrats that are going to confront President Bush on the war escalation is the important first step.

MOSBACHER: No, they missed the important first step. ROLLINS: Well, one important thing to notice. There are two senators who didn't vote today for the general. One is Senator McCain, who basically is advocating the president's position. And the other is Senator Kerry, who basically is off in Davos, saying we're a nation of pariahs.

And I think the reality is they should have been there. They should have voted for this man or not voted for this man. The bottom line is that we've got about six months to fix this problem, and I think that everybody's pretty much in unanimous opinion of that.

DOBBS: We thank you very much. And -- and the fact is, Robert Zimmerman, you need much more time to defend your party.

ZIMMERMAN: I'm sorry.

DOBBS: Georgette.

ZIMMERMAN: Took up all of the time.

DOBBS: And so we're going to give you that opportunity, say, Friday. Would that work for you?

ZIMMERMAN: Look forward to it.

DOBBS: You got it. Look forward to seeing you guys. Thanks very much, Georgette Mosbacher, Robert and Ed Rollins.

We'll be right back here in just one moment.

(COMMERCIAL BREAK)

DOBBS: Now the results of our poll tonight. Ninety percent of you say the treasury secretary and the Bush administration should be focusing on U.S. policies and strategies to alleviate our record trade deficit, rather than Chinese policies.

And time now for a few of your thoughts.

John in Massachusetts said, "Lou, let me get this straight. Two Border Patrol agents are in prison for stopping an illegal immigrant drug smuggler at the border, and the National Guard, who backed away from armed persons who approached them at the border, got modals for backing away. Sure looks to me like Mexico controls our border."

And Fred in New Jersey: "Why don't we take all these tunnels between Mexico and the United States that have been discovered but not yet filled in and make a subway system to further ease and expedite illegal entry into our country? While we're at it, why not make it a high speed rail system?"

We love hearing from you. Send us your thoughts on LouDobbs.com, and we thank you for being with us tonight.

Please join us here tomorrow, when among my guests will be Terry McAuliffe, the head of the Hillary Clinton presidential campaign, author of a new book on the Democratic Party.

And for all of us here, we thank you for watching tonight. Good night from New York. "THE SITUATION ROOM" begins right now with Wolf Blitzer -- Wolf.

BLITZER: Thanks very much, Lou.

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