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Fed Slashes Interest Rates

Aired January 22, 2008 - 19:00   ET


LOU DOBBS, CNN ANCHOR: Thank you, Wolf.
Tonight the Federal Reserve taking drastic action to avoid a possible recession and market crash. The Fed slashing interest rates by three quarters of a point, but is it too late to save middle class working Americans from the devastating impact of an economic slowdown. We'll have complete coverage, all the day's news and much more straight ahead here tonight.

ANNOUNCER: This is a special edition of LOU DOBBS TONIGHT: news, debate, and opinion for Tuesday, January 22. Live from New York, Lou Dobbs.

DOBBS: Good evening, everybody. The Federal Reserve today announced the biggest rate cut and interest rates in this country in nearly a quarter century. The Federal Reserve cut interest rates amid rising concern about our weakening economy, the risk of recession and turmoil in our market. President Bush today declared he's optimistic that his administration and Congress can agree to a stimulus package that will revive our economy. President Bush discussed the proposal for $145 billion of tax relief with congressional leaders at the White House today. Ed Henry has our report from the White House. Ed?

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Lou, after that meeting here, Democrats and Republicans pledged quick action on the stimulus plan, but the question is, whether it will have real impact or just be a drop in the bucket.


HENRY (voice-over): Markets plunging, consumers hurting.

UNIDENTIFIED FEMALE: I'm definitely concerned because I know my retirement fund is completely deteriorating.

HENRY: Washington scrambling.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I believe we can find common ground to get something done that's big enough and effective enough.

HENRY: While President Bush works with congressional leaders on an economic stimulus plan that may take months to actually reach consumers, the Federal Reserve hit the panic button slashing a key interest rate by three-quarters of a point, the biggest cut in 24 years, to deal with an economic shock that's becoming a defining issue in the 2008 campaign and could overshadow the president's final year in office.

ANNE MATHIAS, STANFORD GROUP: If we go into recession, even if we have this economic stimulus package, we're not going to be out of the recession. It's not going to be smooth sailing by September and October in the waning days of the presidential campaign and this could not be worse news for the Republican.

HENRY: A long list of economic headaches for the president. From the sub prime mortgage crisis to rising prices for gas and food stoking concerns about inflation. Amid Wall Street's wild ride Tuesday, Mr. Bush huddled privately at the White House with his economic team and then dispatched Treasury Secretary Henry Paulson to Capitol Hill. His stimulus plan of nearly $150 billion in tax cuts and government spending.

HENRY PAULSON, TREASURY SECRETARY: Time is of the essence and the president stands ready to work on a bipartisan basis to enact economic growth legislation as soon as possible.

HENRY: There's also political risk for Democrats if they appear to be dawdling which is why they're also sounding a rare note of bipartisanship.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: We think that message that is sent to the American people about bipartisanship at a time when they're feeling the financial pain will instill confidence in the consumer and hopefully in the markets as well.

HENRY: But some economists believe any relief may be too little too late.

UNIDENTIFIED FEMALE: Well it's sort of a Band-Aid.


HENRY: Now congressional leaders believe they can get this stimulus package to the president's desk by mid February. But economics note that the actual tax rebate checks might not get to consumers until late spring or early summer. So any effort to get short-term relief is very, very unlikely, Lou.

DOBBS: Well, unlikely or not it's absolutely required. And if this government led by this president and those Democratic leaders in Congress and both the House and Senate, I would say that the Democratic Party and the Republican Party both have very serious problems facing them going into November.

HENRY: Absolutely, and that's why you see the pressure on both sides. They certainly heard an earful, lawmakers on the Hill back when they were home for the holidays at town hall meetings from people saying you did a lot of fighting last year, the president did a lot of vetoing of legislation, it's time to come together, at least on this issue of the economy, Lou.

DOBBS: One would think -- one would certainly hope. Ed Henry, thank you very much reporting from the White House. On the campaign trail Democratic presidential candidates today competing to present their own plans to tackle our economic crisis. But none of the presidential candidates talked about the fundamental weaknesses of our economy, our skyrocketing trade deficit, our soaring national debt and the failure of our federal government to regulate financial institutions and markets. Suzanne Malveaux reports now from Myrtle Beach, South Carolina where the economy, a top issue in last night's Democratic presidential debate.




H. CLINTON: Well, I'm here, he's not.

OBAMA: OK, well I can't tell who I'm running against sometimes...

H. CLINTON: Well...

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT (voice-over): Following a series of bitter personal exchanges in Monday night's debate.


MALVEAUX: Today, the leading Democratic candidates tried to appear focused on what's important.

OBAMA: We woke up this morning to bad news from Wall Street.

MALVEAUX: Addressing the one issue voters are consumed with, the tanking economy.

H. CLINTON: This is a global economic crisis.

MALVEAUX: Senator Hillary Clinton, like John Edwards and Barack Obama called for serious and swift action by the president.

H. CLINTON: It's imperative that the president and his economic team instill confidence in the competence of our government.

MALVEAUX: Each laid out what they would do as commander in chief to fix the economy.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: We've got to get the economy stimulated again.

MALVEAUX: But wait a minute -- remember this guy? He's still of the president for another year. And while he may be perceived as a lame duck, President Bush is the only one who's got the power to try to do the kinds of things the candidates are talking about. BUSH: I believe we can find common ground and get something done.

MALVEAUX: So in the meantime, the candidates are left with trying to outdoor each other, and appearing presidential and making sure the media stays focused on them.


MALVEAUX: And, Lou, there were several campaigns who held these conference calls with reporters to try again, once again, to lay out economic plans, but really to try to garner the spotlight on them. Lou?

DOBBS: And that's a wonderful point. Exactly on point, Suzanne. The idea that these candidates, frankly, are no different than the leadership of the Democratic-led Congress and the Republican White House. They're talking, but they have done very little to bring stability to the markets or direction to this economy with platitudes and blather over the course of this campaign. And my gosh, I mean, the idea that they want to be president but aren't looking to the underlying issues I don't think is going to persuade many voters.

MALVEAUX: One of the things I think voters are looking for, Lou, as well as more specifics, we keep hearing that they really want these candidates to lay out not just ideas but specific plans, what would they do as president. But once again, that's a push that's coming from voters.

DOBBS: All right, Suzanne, thank you very much. Suzanne Malveaux.

Republican presidential candidates today trying to convince their voters they have the best policies to manage a beleaguered economy, Republicans all placing a heavy emphasis on tax cuts as they campaigned in Florida. But like the Democratic presidential candidates, the Republicans didn't discuss the deep structural flaws in our economy and the failures of government policy. Mary Snow has our report from palm beach Gardens, Florida.


MARY SNOW, CNN CORRESPONDENT (voice-over): For Rudy Giuliani, some of his answers for the economy were pulled out of his pocket, literally. Yes, he has a tax cut plan, but he's also telling a single forum to simplify how you file taxes.

RUDY GIULIANI (R), PRESIDENTIAL CANDIDATE: It's a tax reform and a tax reduction. And it will simplify the economy in that it will be a lot less expensive, a lot easier to file your taxes. I think you'll see a lot more compliant.

SNOW: And Giuliani figures that will mean more money in the economy, more money, says Senator John McCain could come through cutting government spending. He advocates tax cuts on individuals and corporations and says a recession isn't inevitable. SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I still believe our fundamental underpinnings of our economy are strong but it's obvious that we are facing challenges which will require action such as the Federal Reserve took today.

SNOW: Mitt Romney has added economic turnaround to his message. He's calling for tax cuts and mortgage help.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: What you're seeing with the stock market reaction here and around the world is a recognition of these long-term features and underscoring the need to take a different direction in the economy.

SNOW: Mike Huckabee says that change needs to come by wiping out income taxes altogether, and replacing them with a national sales tax.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: If we could free people up to go out and earn, get their whole paychecks, it could make a truly huge difference in securing jobs and making the economy work.

SNOW: But any of these plans are at least a year away and economists say right now, time is of the essence.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: It is how quickly are -- are these fiscal stimulus initiatives in act? That's the real issue, it's more about when and not what.


SNOW: Now, all the Republican candidates here are calling on Washington for quick action on an economic stimulus package. But it's becoming clear, that as the economy is catapulted to the top issue, the candidates are really rushing to get out the details of their plans on how to fix it, Lou.

DOBBS: And for the rest of us to try to figure out if those details in those plans warrant much examination. So far, the answer would seem to me to be not much. Thank you very much, Mary Snow, with the Republican presidential candidates.

Time now for our poll. Which of the following candidates do you believe has the economic knowledge and leadership to guide the United States through the next four years? Rudy Giuliani, Mike Huckabee, John McCain, Mitt Romney, Hillary Clinton, John Edwards or Barack Obama? Cast your vote at We'll have the results for you here later. You may notice that Fred Thompson isn't on that list, that's because today he dropped out of the Republican race for the presidential nomination.

Coming up at 8:00 p.m. Eastern here, our special edition of LOU DOBBS TONIGHT continues. "Independents Day: Awakening the American Spirit", tonight, we'll have much more on this economic crisis devastating our middle class, the response of the White House, the Democratically-led Congress, Democratic and Republican presidential candidates. We'll see what got us here and what could get us out of this mess. Up next here, our economy may be already in recession, but President Bush, he's optimistic. What in the world is going on here? Kitty Pilgrim has our report. Kitty?

KITTY PILGRIM, CNN CORRESPONDENT: Lou, the Bush administration keeps insisting that everything is fine. But a growing number of people on Wall Street and Washington say there are long-term structural problems in the U.S. economy -- Lou.

DOBBS: Thank you very much, Kitty. Looking forward to the report.

Also, Senator Obama, Senator Clinton, they seem incapable of, well, calling and sustaining a truce. We'll have the latest on their increasingly nasty campaign fights.

And the federal government facing powerful opposition to its plans for a fence along our southeastern border with Mexico. The opposition from an unlikely quarter. We'll have that special report and a great deal more straight ahead. We're coming right back.


DOBBS: The rivalry between Senator Clinton and Senator Obama is getting nastier, and both candidates on the attack again today, just hours after their pointed debate on CNN last night. As Jessica Yellin reports now from Greenwood, South Carolina, don't expect another so- called truce from these two, with just four days before Saturday's Democratic presidential primary in South Carolina.


JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT (voice-over): It would seem the love fest is over.


YELLIN: At the center of this drama, Bill Clinton.

H. CLINTON: You talked about Ronald Reagan being a transformative political leader. I did not mention his name.

OBAMA: Your husband did.

H. CLINTON: You -- well I'm here. He's not.

OBAMA: OK, well I can't tell who I'm running against.

H. CLINTON: Well...

YELLIN: That wasn't enough to knock out the former president who was throwing punches again today.

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I thought he was running against me in Nevada for awhile.

YELLIN: And Senator Hillary Clinton isn't backing down either. She chastised Obama for his attacks on her husband and her campaign.

H. CLINTON: Senator Obama is very frustrated. He clearly came last night looking for a fight.

YELLIN: Today, Obama's campaign raised the stakes. His supporter, former Senate Majority Leader Tom Daschle, told reporters he thinks this kind of backbiting destroys the party. Meantime, Obama insists he's taking the high road.

OBAMA: This is exactly the kind of politics we cannot afford right now. Not when the stakes are this high.

YELLIN: But it seems he's not opposed to attacks when he's the one making them.

OBAMA: Being ready on day one means getting it right from day one. She changed her plan to look like mine. Only in Washington could Senator Clinton say that NAFTA led to economic improvements up until she started running for president.

YELLIN (on camera): Lou, the latest development comes from the Obama campaign. They say they're forming a truce squad of supports who will speak out anytime they say their candidate's record has been distorted. But Lou the truth is all the candidates have had informal truce squads for months. And they're made up of supporters who will make their candidate's case, but also say things the candidate doesn't want to be caught saying in public -- Lou.


DOBBS: Jessica, thank you. Jessica Yellin reporting there.

We've got our own truce squads here that we're going to keep well employed. Former President Bill Clinton is cutting politically sensitive ties with Dubai. That according to a "Wall Street Journal" report today. President Clinton and supermarket billionaire and his friend Ron Burkle, along with the ruler of Dubai and part of a global investment fund, Senator Hillary Clinton has criticized sovereign wealth funds such as that. President Bill Clinton will reportedly walk away with some $20 million when he breaks his ties with both Burkle and Dubai.

Coming up next here we'll have a lot more from the campaign trail tonight. I'll be joined by three of the country's top radio talk show hosts. And our economy it's, well we're going deeper in debt while politicians and elected officials just keep talking. And our middle class caught in a trap. We'll have a special report.

And fighting fences on this side of the border. The battle -- this one's going all the way to Washington. We'll have an in-depth report for you. All of that, much more straight ahead. We're coming right back. Stay with us.


DOBBS: Private land owners tonight are standing in the way in the federal government's planned fence construction along our border with Mexico. The Department of Homeland Security is now trying to cut a deal with landowners in Arizona, Texas and California to build parts of that fence. But not all of the landowners want that fence on their property, so the federal government, they're being forced to go to court. Jeanne Meserve has our special report from the Texas side of the border.



JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT (voice-over): Eloisa Tamez's family was given this land in 1767 before the United States of America even existed.

ELOISA TAMEZ, LANDOWNER: This is my history. This is my heritage.

MESERVE: But now the U.S. government is threatening to build a border fence right through the three acres she has left.

TAMEZ: I will not allow them to come and survey my land. I have an American given right to protect my property.

MESERVE: But the U.S. government last week started suing landowners like Tamez who are refusing to cooperate with surveying for the fence.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: If the public were to recognize that as long as we give fair compensation, it's part of their civic responsibility to accept a certain amount of sacrifice.

MESERVE (on camera): The Rio Grande forms a natural barrier, but it isn't very wide. People swim across, so many that they have formed this trail, they have come up, discard their wet underwear, change into dry clothes and vanish into the U.S. It is why so many people feel there should be a fence.

(voice-over): We came upon one man who swam across, we apparently frightened him.


MESERVE: We later saw him swim back across on the Mexican side. Some say a fence won't stop people like this, only slow them down. The mayor of the border town of McAllen calls it a multibillion dollar speed bump and is considering testing the border fence law in court.

MAYOR RICHARD CORTEZ, MCALLEN, TEXAS: It's a false sense of security. America will not be safe. America will continue to waste resources on something that's not going to work.

MESERVE: He would like to see the Rio Grande made deeper, the shore cleared and more border patrol, but before the government sees him in court it's going to have to deal with Eloisa Tamez and others like her. (on camera): And you'll fight them how long?

TAMEZ: Oh, as long as I have to. As long as I have to, I'm not backing down.

CHERTOFF: But can we simply abandon the enterprise because it's a problem for a particular individual, and thereby creating an engraved invitation for drug dealers to move across or for people to shoot at our border patrol agents? I don't think I can accept that.

MESERVE (voice-over): So Homeland Security is plowing ahead with the fence, no matter how fiercely some oppose it.

Jeanne Meserve, CNN, El Calabozo (ph), Texas.


DOBBS: And the Department of Homeland Security has a long way to go to secure that 2,000-mile long border with Mexico. About 150 miles of fencing built last year. There are plans to build another 370 miles of fencing this year.

Time now for some of your thoughts. Savvas in Michigan wrote in about the president's comments that the country will be just fine if Congress passes his stimulus package. He said, "No, the economy will not be just fine for the simple reason that having exported all these manufacturing jobs when people spend the stimulus money we will be stimulating other country's economies."

And Bob in Florida, "Lou, how can a $800 check from Bush help the economy if everything we buy is made in China? How does this jump start our economy?" Well that unfortunately is a very good question.

And Fred in Illinois, "Lou, just where just where is President Bush going to get the $145 billion? China?" Well in part you're right. Part of that money will definitely be coming from China.

We'll have more of your thoughts here later in the broadcast. Each of you whose e-mail is read here receives a copy of my new book "Independents Day: Awakening the American Spirit".

And now coming up next, Senator Obama, Senator Clinton, they aren't chilling it, as one of their colleagues and Congress suggested they do. Three top radio talk show hosts will join us to give us their perspective on what is becoming an increasingly ugly inter-party fight.

Also a revolt by states against Real I.D., a new driver's license to protect this country from terrorism. The governor of Montana, well he doesn't think much of that. He'll be joining us here, Governor Brian Schweitzer.

And the Bush White House offering short term fixes to our economy, ignoring deep structural and long-term problems behind this crisis. I'll be talking with two of the world's leading authorities on this economy, Professor Jeremy Siegel and Robert Kuttner next. Stay with us. We'll be right back.


DOBBS: President Bush today said he's optimistic that the Congress and he will agree on a stimulus package quickly and move the economy to health. There are, however, fundamental structure problems with this economy that the federal government has been unable or unwilling to acknowledge and certainly to fix. The structural problems that will continue to erode the foundations of our middle class are severe and long-term. Kitty Pilgrim has our report.


PILGRIM (voice-over): The Bush administration today denied there are long-term problems in the economy.

EDWARD LAZEAR, CHMN., COUN. OF ECONOMIC ADVISERS: The structure of the American economy is sound.

PILGRIM: But Moody's, the financial credit rating agency recently warned the country's triple-A credit rating could be at risk long term because of high government debt, soaring health care costs, and Social Security spending. U.S. Comptroller General David Walker has been saying that for months calling the situation analogous to the fall of Rome.

DAVID WALKER, U.S. COMPTROLLER GENERAL: Well our country has four deficits, a budget deficit, a balance of payments deficit, of which the trade deficit is a subset, a savings deficit and a leadership deficit. And we need to address all four. The type of disruptions that we're seeing today are nothing like what we will see in the future if we don't get serious soon.

PILGRIM: The United States has been hemorrhaging millions of manufacturing jobs now done in factories in places like China, for sweatshop wages. And President Bush is pushing for the approval of even more free trade agreements with Peru, Colombia and South Korea.

ALAN TONELSON, U.S. BUSINESS & INDUSTRY COUNCIL: Our main problem is that we don't produce nearly as much as we consume. And therefore, to maintain our consumption, which means maintaining our living standards, we have to borrow from the rest of the world.

PILGRIM: The U.S. Business and Industry Council found imports are displacing significant amounts of domestically produced goods. In crown jewel industries, including semiconductors, aircraft manufacturing, telecommunications, medical equipment and pharmaceuticals.

PETER MORICI, ECONOMIST, UNIV. OF MARYLAND: The trade deficit is running about $750 billion a year. It's 5.5 percent the GDP and it's an enormous tax on growth.


PILGRIM: Critics of President Bush's economic stimulus package says it may not boost the economy. After their rebates consumers will likely continue to spend on cheap imports. And many U.S. manufacturers will not feel the effects of an increase in demand -- Lou.

DOBBS: In other words, the stimulus package that Ben Bernanke, the Fed chairman said we should be buying those domestically produced products, we're in a world of hurt even in that area.

PILGRIM: It certainly is true. There's really no guarantee how this will play out on the consumer side.

DOBBS: I think that's well put, Kitty. Thank you very much, Kitty Pilgrim.

Joining us from Philadelphia, Professor Jeremy Siegel. He's the professor of finance at the Wharton School at the University of Pennsylvania, one of the world's leading authorities on financial markets. Professor, good to see you again. Robert Kuttner, co-editor and the author of the important book "The Squandering of America." Good to have you with us.


DOBBS: Let me start with you, Professor Siegel, .75% cut by the fed. A surprise cut. Although there are a number of wags who said they were too late with this move. I think it's probably the first thing, in my opinion, at that fed has done right for some time. What's your thought?

PROF. JEREMY SIEGEL, UNIVERSITY OF PENNSYLVANIA: This was a very good thing. It surprised me. I was rooting for .75% point in the regular meeting next week. It came early. It is a good move for the economy, absolutely.

DOBBS: And Robert Kuttner, your thoughts?

KUTTNER: The problem is, it won't fix what's broken. You've got all of these structural problems with bank balance sheets because the bank sponsored this orgy of speculative spending. And they've lost tens of billions of dollars. You know a balance sheet is a balance sheet. The idea that Citigroup can have something that's off balance sheet. If you and I apply for a loan and we say to the creditor, well, some of my stuff is off balance sheets, I didn't tell you that, we'd go to hail. This smack of Enron and the damage of all this stuff is going to cascade on the rest of the economy.

DOBBS: Robert Kuttner is referring to the collateralized debt obligations, more securitized debt, the misapplication of which Professor Siegel we have seen the ramifications for just about 30 years in this country. Why in the world aren't the regulators in this marketplace, why aren't they regulating these institutions? And why in the world is this government, in both political parties, permitting this kind of unadulterated, unfettered capitalism to rape this country? SPIEGEL: Well, certainly we had too much lending, mostly against housing. And a case can be made, that Greenspan sat back without saying anything, saying, oh, the markets will take care of it. The world markets will take care of it and ignoring it. And there can be a case made on that.

DOBBS: Where are the free marketeers now? Where are those faith-based economists who said let Mr. Market smile and everything will be fine?

KUTTNER: Well, they look like damn fools, as they ought to. And we've some had foxes in chicken coops for third years often under republicans and sometimes democrats. We've had regulators who didn't believe in protecting the consumer.

DOBBS: We talked about the structural issues here. Lord knows we need the stimulative package because we have people in this country hurting. And to the degree that this president and this democratic leadership and congress moved money in direct form -- and I frankly don't care what form it takes so long it gets to the families and the men and women who need this money to stimulate the economy -- that's all well and good. But what are we going to do about the failure to regulate? What are we going to do about the massive debt that has been run up here? And when are we going to see these presidential candidates, Professor Siegel, if I may start with you, when are we going to see them start addressing the real issues? A debtor nation in perpetuity, is that what we're going to be?

SPIEGEL: Lou, I think we also have to keep some perspective. No one ever said that fed or the regulators can prevent the business cycle, you know, that we conquered it. If you look at the last 15 or 20 years, we had a mild recession after 9/11. We're still not in a recession yet. We may or may not go. The previous one was ten years before that. What I'm saying is, if we live in a capitalist society, we have to accept some fluctuations. Yes, there will be excesses. But the alternative of government control squelches entrepreneurship and originality. You have a balance there and you can't just say no capitalism on fed is the worst thing for our society.

KUTTNER: This is not about the business cycle. This is about the regulator throwing away the rule book and virtually inviting sub- prime lenders to make 100% loans to people with bad credit histories. Congress passed a law in 1994, the home equity protection act, prohibiting this and Greenspan refused to do this. He was an enabler of this.

DOBBS: An absolute enabler and Professor Siegel, let's come back and we're going to talk about these so-called free markets and the role in country's history and how far we've gotten from both our history and our national values. Professor Siegel and Robert Kuttner will be joining us in the next hour as well. Gentlemen, thank you very much.

Turning now to that special edition of LOU DOBBS TONIGHT, at 8:00 p.m. eastern here, we'll be coming back with more "INDEPENDENTS DAY: AWAKENING THE AMERICAN SPIRIT," examining the governmental response to the economic crisis, the role of the white house, congress, democratic and republican presidential candidate, their offered proffered solutions. All of that and more at the top of the hour.

A reminder now to vote in our poll, which of the following candidates do you believe has the economic knowledge and the leadership to guide this country for the next four years? Rudy Giuliani, Mike Huckabee, John McCain, Mitt Romney, Hillary Clinton, John Edwards, Barack Obama? Cast your vote at We'll have the results in a few moments. I'll be talking with Professor Siegel and Robert Kuttner about who in that list inspires their enthusiasm.

Coming up next, the heated rhetoric from the democratic debate last night carries over to the campaign trail. People aren't playing nice. Three of the nation's leading talk show hosts joining me to assess that. I'll be joined as well by the esteemed governor from the state of Montana. He's fighting against the state's plan to secure driver's licenses. We'll be finding out why and what we should be doing about that.

Stay with us. We're coming right back.


DOBBS: Governor Brian Schweitzer of Montana is leading a revolt against the federal government's Real I.D. plan to sustain national standards to secure driver's licenses. The state of Montana has already opted out of that plan. Governor Schweitzer is also sending letters to governors of 17 other states to resist what he called Department of Homeland Security coercion. Governor Brian Schweitzer joins us tonight.

Good to talk with you, Governor. Thanks for being with us.

GOV. BRIAN SCHWEITZER (D), MONTANA: I'm the lone ranger out here. That's not exactly true there, Lou. There's 17 states that agree with us in Montana that's there's overreaching from the federal government. And this is not partisan. About half of those states have democrats as governors, about half of them republicans. The Montana legislature, before they acted, they considered all of these things and that Montana legislature is about half republicans, half democrats.

DOBBS: I'm sorry. What are you arguing with me about, Governor? You came out of the box there kind of early. I'm not sure what we're arguing about.

SCHWEITZER: Oh, we're talking about the Real I.D.

DOBBS: Yeah, I understand that. But I thought you said I didn't quite have it right. I was trying to figure out what we didn't have right.

SCHWEITZER: Well, there's people all over this country that think it's the federal government that ought to be telling the states how to regulate, educate, medicate, incarcerate, to tell us how fast we can drive our cars. They tell us how to regulate our clean air, our clean water. They tell us how we ought to test our kids. And this is a particular case where it's not just Montana.

Where you didn't have it right is you were suggesting that Montana was leading a revolt and I was. No, there's 17 states that have problems right now with this Real I.D.

DOBBS: Actually, most have opted out of it, not 17. There's six. The reality is, and whatever we're fighting about here, I'll just accede to you. I don't know what we're arguing about.

What I do want to talk to you about is the role of the federal government securing our borders and protecting this nation against terrorism. How in the world can the state of Montana, by the way, I'm partial to the state of Montana, how it can cock its hat and say just go to hell, folks, because we're going to do what we want to do.

SCHWEITZER: We're not actually the ones who are saying go to hell. What we have is the federal government saying if we don't comply to their one size fits all by May 12th, they're going to pat all the citizens down before they walk into a federal courthouse and they're going to pat us down before we get on an airplane. Now, they haven't proposed that the rest of the country is going to have Real I.D. by then. In fact, Lou, they're not even proposing if you're 50 years old or if you'll be 50 years old by about 2012, you'll ever have this kind of a document.

DOBBS: By then, I will be and I'll be awfully upset about it.

The reality is, Governor, as you well know, this country's got to do something about identifying, setting up some standards in identifying folks crossing our borders and entering our ports. And if your objection is on the basis of cost, it seems to me that should be worked out with DHS and they should bear a sizable portion of the cost. But I gathered that you don't want any kind of Real I.D. program or national identification that would work for border security and port security.

SCHWEITZER: Well, I guess the federal government is telling us right now, if you really want to be free, we have to give up some of your freedoms now. We have to have every state have some kind of a driver's license that conforms to the ideas of Washington, D.C. They're telling us that we have to, in the states, we'll have to maintain these confidential records and share them with other states until the end of time.

I've got to tell you, we've seen how the federal government and even some states have handled secure documents. And if you put all of this information in such a single place and expect governments to keep them secure, you're going to be disappointed. We've been disappointed in the past. And we think we'll be disappointed in the future.

DOBBS: You know, I don't think I can argue with you much about the competency of the federal government and the experience we've had with it. But I do know this that the issue of competence should be resolved by making the government competent. The issue of leadership should be resolved by bringing in real leadership in government. I would love to hear your solutions. We're on a war on terror whether you like it. We've got a border to secure. We've got ports to secure. We've got to have identification documents that's reliable, at least to me, governor, that are reliable. And state driver's licenses are a joke right now.

SCHWEITZER: Well, I guess what you're proposing or what the federal government is proposing is that somehow if you walk in eye were a birth certificate to any one of our states that that's going to make the whole system secure. I don't care what you do with the system after. If you start with just one piece of paper and it was a fraud to begin with, the whole thing is going to be a fraud. You're not going to be more secure with this system. They're going to spend billions of dollars. They're going to force states to do things that we didn't want to do in the first place and you're still not going to have a better outcome.

DOBBS: Governor, we'll continue follow it. We'll talk more about it. I'm really looking less to propose something and understand what you're proposing. We'll get to that on the next round, how about that?

SCHWEITZER: All right. Enjoy yourself.

DOBBS: Thank you. You, too, Governor. Governor Schweitzer, thank you.

Up next, Fred Thompson dropping out of race for president, his party's presidential nomination; we'll examine which republicans benefit, if at all.

And no relief in sight for our middle class; three of the top radio talk show hosts join me here to tell us what their listeners are saying about all of these developments, debates and the worsening economic crisis.

We're coming right back.


DOBBS: Joining me now, three of the best radio talk show hosts in the country. In Washington, D.C., Joe Madison, WOLR, XM Radio, great to see you, Joe. And Los Angeles, Doug McIntyre, KABC Radio; Doug, thank you for being with us. Here in New York studios, Laura Flanders, Air America. Laura, thank you for being here.

Hillary Clinton says senator Obama was looking for a fight last night. How dare he?

LAURA FLANDERS, AIR AMERICA: You're looking for a fight, Lou. I mean I thought it was great what Stephanie Tubbs Jones said yesterday to Tucker Carlson. She said Tucker get a life. I feel like saying to the media, get a life. There may have been some bickering last night on the democratic debate but the real news was big stuff that economic justice is on the table. These are the key issues pushed by Edwards and others. The myth of the Reagan years and sense that you can give all power and influence to the rich and not have the bottom of society drop out, that was the substance of last night. Much as the media would like to make it about personality, this and that. It's not what the American people want to hear. I think there was some news last night. I really do.

DOBBS: I do, too. Doug McIntyre, do you agree with Laura?

DOUG MCINTYRE, KABC RADIO: To an extent. The substance was the economic legacy of the Reagan administration but I think most people vote personality. It's a sad reality, but that's what we do. I thought Barack Obama was able and skillful in getting into what was the mosh pit of American presidential politics. And that's what you have to do to win and he's capable of doing it.

DOBBS: Joe Madison?

JOE MADISON, WOL RADIO: I don't like prize fighting, never really did. And that first round, they just wasted quite honestly time. I agree with Laura. The second half of the debate was the most substantive. The first half was a waste of time, I think outside of the beltway, that's how most people felt. I also felt that on Martin Luther King's birthday, they missed a golden opportunity to invoke one of the things that is draining this economy and that is, the $500,000 a minute that we're spending on the war in Iraq. War is an enemy of the poor people. I get back to Washington today, and the richest county in Maryland will now have to start cutting services because of the sub-prime situation. And I will close by saying, people better look at their 401k statements and their IRA statements very carefully. There's going to be a shock wave after today.

FLANDERS: But I do think that John Edwards did raise those issues and the others too. And I think what's shocking is to watch you know you said it was one of the best moves that the fed has made. Maybe it's just because it's a move at last but the idea coming from Bernanke that we can beg people into borrowing us out of this mess is just a joke and I thought that Edwards was very strong last night when he said we have to hear poor people in America who tell us they have no financial resources to fall back on and when it comes to their credit cards, they are maxed out. That was a powerful part of the debate. If we had focused on that rather than what role does Bill Clinton play in this, I think we'd be in a better state today to respond to this pathetic strategy on the side of the fed.

MADISON: Well, Bill Clinton is the one that better start thinking about that. I mean you know this guy, Eugene Robinson, had a very interesting piece in "The Washington Post" today. I mean this is not a man who is acting like a statesman, a former president. I mean, he is -- you know what he reminds me of, I just thought, he's like Don King, man. He reminds me of Don King. The only thing different is his hair.

FLANDERS: Don't go there. Don't go there.

MCINTYRE: That's what reminds me of Bill Clinton, he's doing to the democrats what they did to the republicans for 15 years, except now they're doing it to their own team, and people are shocked to find out at that Clintons play hard-ball politics.

MADISON: I'm not shocked. I said that yesterday.

DOBBS: I've got to ask this please. I'd love to hear, tell me because I'm sort of having trouble here. Are we suggesting here that people didn't know that poor people and working men and women in this country and their families were struggling? Are we sitting here talking about we didn't know the Clintons played hard ball? Are we sitting here saying that precious Barack Obama is a street fighter suddenly? He looked to me like a man out of his element. This is a guy who hasn't been messed with. And I don't think he likes being messed with. And Senator Clinton is being kicked in the butt for going after it. I think she's being aggressive. I thought she did well. I think Senator Edwards was the only one who preserved his dignity and was civil throughout and I think he's going to get great points.

MADISON: He's the one who scored yesterday.

FLANDERS: It's not that we in America don't know the reality. It's that we have been sold a type of debate in this country that has ranged from give a lot to the rich, to just give most stuff to the rich. What happened last night was an attempt, I think, to at least say this conversation needs to shift. We need to get back to addressing what has happened at the bottom of this economy, which I know you talk about, Lou. But we've got to have government talk about this. It's not unrelated to the crisis that we're facing. We've got -- the cupboard is bare when it comes to borrowing our way out.

DOBBS: Are you scared yet, Doug McIntyre?

MCINTYRE: I think that we've been sold a style of debate that's not about substance. It's about the tabloid kind of gotcha kind of zingers one-liners and that's unfortunate. And in terms of the economy, I don't know what to say about the economy, Lou. First of all, I'm not good at it, that's why I get up at 3:00 in the morning to go to work and I work in radio but to me, while we're investigating baseball players for steroids, I think we've got a steroid economy. That's what I think we're doing. We're just throwing cheap credit at it and hoping to push this consumer spending past the election, and then eventually, interest rates have to go up so that the dollar doesn't plunge. I just think this is a whole rigged economy.

DOBBS: I love it when McIntyre pleads modestly his ignorance on something and in my humble judgment nails it. Joe Madison, I know you want to say something. We're going to be right back and you and Laura and Doug will have plenty of opportunity to more to say more. We'll be right back.

And at the top of the hour, we'll have our special edition of LOU DOBBS TONIGHT, INDEPENDENTS DAY: AWAKENING THE AMERICAN SPIRIT, the spirit alive and well here tonight.

We'll be right back. Stay with us.

(COMMERCIAL BREAK) DOBBS: Joining me now, three of the best radio talk show hosts in the country; in Washington, Joe Madison, WROL, XM Radio; in Los Angeles, Doug McIntyre, KABC Radio; Laura Flanders with me here in New York, Air America.

Let me start, Joe, with the idea, they're putting out these polls about America being ready for a woman president, being ready for a black president. And guess what the polls show. America's ready. Any surprise there?

MADISON: Yeah. I mean, in my opinion, I think that there's surprise. I think people answer these polls because their conscience tells them, yeah, I'm ready. I'm ready. I'll tell you, I'm thinking ahead to Labor Day. And I'm thinking about the map that's going to be on CNN, the red versus the blue, and I'm wondering how women, black candidates are going to play in those red states. I'm just wondering. I don't know if America will be ready when the real poll counts.

And, Lou, the only thing I was going to say before the break was, your poll question today of the candidates, my answer would be none of the above. This is where independents need to step up who do not have a vested interest in the Democratic Party or the Republican Party and need to put forth real economic solutions. This is now the time for independents.

FLANDERS: Oh, Joe is just saying that to suck up to you, Lou.

DOBBS: You don't know Joe very well then.

MADISON: Whoa, whoa -- excuse me, young lady, I don't suck to nobody! No. Don't go there with me. I'm not sucking up. And, hey, don't play Hillary with me. I'm not Obama.

FLANDERS: It seems to me a week ago, we said we wouldn't believe these polls again, right? We said a week ago, we were not going to believe these polls again. I would agree with Joe. We don't know what anybody does in the privacy of that polling booth assuming they go have the privacy and the polls have never been shown right, particularly when it comes to race and gender.

Finally, the only interesting thing about that poll is that with blacks and whites, abortion is dead last or maybe third from the last for whites. Meanwhile today on the anniversary of Roe Versus Wade, you had the GOP grandstanding on that issue again. They are a party in search of a platform, and they are in trouble.

DOBBS: But, you know what? They're not involved in a bunch of race-based politics like the democrats.

MADISON: And the democrats are --


MADISON: Okay, the democrats are ready to blow a golden opportunity.

DOBBS: I couldn't agree with you.

Doug McIntyre, you're going to get the last word. I've never seen you be so reticent here, Doug?

MCINTYRE: Well you know, the thing is all American politics is coalition politics and the real risk that the democrats run right now is driving a wedge between the African-American vote and the party and alienating a voting block that could stay home just the way the evangelicals if they don't like who the republicans put up can stay home on Election Day and I still think both parties are very vulnerable a third party challenge on the left and right, and I think that can be determined in this election.

DOBBS: I think everybody is watching why they are vulnerable because they're playing group and identity politics here. And whether we like it or not, that's a reflection of reality.

FLANDERS: And the media?

DOBBS: Sure, the media's just as bad. But the issue is that we're actually seeing, and I think particularly in these two parties and this goes to what Doug McIntyre was saying, what Joe was saying, we're actually seeing parties put forward candidates who are not nearly as good as the people they profess to want to lead and that to me is the greatest concern of all. Joe Madison.

MADISON: Thank you.

DOBBS: Good to have you with us, partner. Doug McIntyre, thank you for being here. Laura Flanders, as always, thank you very much for coming out of your shell here tonight.

The results of our poll, 28 percent of you said Mitt Romney has the economic knowledge and leadership to guide the United States for the next four years, 26 percent said John Edwards; 23 percent said Hillary Clinton, 11 percent Barack Obama, the rest of the republicans didn't do so hot.

We thank you for being with us tonight. Stay with us for our next hour, our live special edition of LOU DOBBS TONIGHT, INDEPENDENTS DAY: AWAKENING THE AMERICAN SPIRIT," begins right now.