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AMERICAN MORNING

Bush Says All Options on Table with Iran; Obama Bad for Business Says John McCain; Where Do Obama and McCain Stand on Taxes?; Arab World Reaction on U.S. Presidential Race

Aired June 11, 2008 - 06:00   ET

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


JOHN ROBERTS, CNN ANCHOR: We begin this morning with news just in from overseas. President Bush saying all options are on the table when it comes to dealing with Iran and its refusal to end its nuclear program.
The president spoke out just minutes ago from Germany where he's meeting with Chancellor Angela Merkel. Here's some of what he told reporters at a joint news conference that ended just moments ago.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I told you that all options are on the table, and my first choice is to solve this diplomatically. And the best way to solve it diplomatically is to work with our partners. And that's exactly what we're doing.

And the message to the Iranian government is very clear that there's a better way forward than isolation. And that is for you to verify, at least suspend your enrichment program. And the choice is theirs to make.

(END VIDEO CLIP)

ROBERTS: The president is stressing tougher sanctions on Tehran if it refuses to give up its uranium enrichment program. He also says the U.S. is not seeking permanent bases in neighboring Iraq. The president flies to Rome after today's meeting.

And President Bush talking candidly about his legacy. He told a British newspaper he regrets the language he used in the lead-up to the Iraq war, saying, "I think that in retrospect I could have used a different tone, a different rhetoric," admitting that some of his so- called cowboy talk may have affected the way people perceive him. Adding, "Bring them on, dead or alive indicated to people that I was, you know, not a man of peace."

KYRA PHILLIPS, CNN ANCHOR: Turning now to the "Most Politics in the Morning."

Still, John McCain says his economic plan is better for your bottom line. McCain telling small business owners that he's the one to get the economy back up to full steam, painting Obama as a tax and spend Democrat who is bad for business. Here's CNN's Dana Bash.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: John and Kyra, John McCain has been waiting for months to go head to head with the Democratic opponent. And it's probably not a surprise at the first issue he chose to draw a sharp contrast with Barack Obama on is the issue voters care most about, the economy.

(BEGIN VIDEOTAPE)

BASH (voice-over): A new twist on a time-tested Republican attack line. John McCain declared Barack Obama's economic policy's change that voters can't afford.

SEN. JOHN MCCAIN (R), PRESUMPTIVE PRESIDENTIAL NOMINEE: Under Senator Obama's tax plan, Americans of every background would see their taxes rise.

BASH: A day after suggesting Obama's presidency would be like Jimmy Carter's, McCain conjured up memories of that era's economic anxiety.

MCCAIN: Will we go back to the policies of the '60s and '70s that failed, or will we go forward?

BASH: And slammed Obama for wanting to repeal tax cuts for upper income Americans, tax cuts McCain initially opposed.

MCCAIN: Will we enact the largest single tax increase since the Second World War as my opponent proposes, or will we keep taxes low? Low for families and employers?

BASH: McCain may be selling himself as a different kind of Republican but not on the economy. Advisers want him to stick to what they insist is winning conservative credo, free trade, low regulation and low taxes.

In fact, McCain in the past has sparred with fellow Republicans over repealing the estate tax. Now, he is hitting Obama for wanting to raise it.

MCCAIN: The estate tax is one of the most unfair tax laws on the books.

BASH: From Obama, rapid response, calling McCain misleading.

SEN. BARACK OBAMA (D), PRESUMPTIVE PRESIDENTIAL NOMINEE: Let me be clear. My tax reform plan would cut taxes for 95 percent of workers.

BASH: McCain's speech to small business owners was interrupted three times by anti-war protesters.

You know, one of the --

BASH: He wove the heckles into his pitch for joint town hall meetings with Obama.

MCCAIN: So we need the town hall meeting. You just saw the example. Let's stop yelling at each other. Let's stop having sound bites and process questions and those things.

(END VIDEOTAPE)

BASH: McCain suggested he and Obama should travel to these town hall meetings together in the same plane and promised that he wouldn't fly it. It was a self-deprecating joke referring to the fact that while flying in Vietnam he got shot down. But in all seriousness, McCain advisers say they haven't heard much from the Obama camp on this joint town hall idea since it was proposed last week -- John And Kyra.

PHILLIPS: All right. Dana Bash, thanks so much.

And what does McCain's plan mean for your money? We're going to ask former Massachusetts governor and McCain supporter, Mitt Romney, coming up in our next hour.

ROBERTS: The Obama campaign is firing back. Communications Director Robert Gibbs telling CNN that the McCain plan favors giant corporations at the expense of the middle class.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, OBAMA COMMUNICATIONS DIRECTOR: What John McCain wants to do is take George Bush's economic plan and put it on steroids. He wants a $300 billion tax break for corporations and hasn't told us how he's going to pay for it. I don't know anybody in this country who believes that a tax break for corporations and wealthy CEOs is the way to get middle America back on track. It's just not going to work.

(END VIDEO CLIP)

ROBERTS: Gibbs also accusing the "straight talk express" of not being straight with voters. So where do Barack Obama and John McCain stand on taxes? It's your "AM Extra" here this morning.

Obama was against extending the 2003 Bush tax cuts. He supports eliminating the marriage penalty and extending child tax credits. He also supports scaling back capital gains and dividends tax cuts, and he wants to reexamine taxes for the top one percent of income earners.

McCain voted against the Bush tax cuts initially, but later voted to extend them through the year 2010. He says that he supports what's often called a fair tax which would replace income taxes and the IRS with a national sales tax.

And Barack Obama is considering former top military leaders among the candidates to be his running mate. His vice presidential search team meeting again with senators and congressional leaders on Capitol Hill. Twenty people are said to be on Obama's short list. One lawmaker says possible nominees have been debated in the media, but others are "outside the box" -- Kyra.

PHILLIPS: Following extreme weather across the country this morning, a major dam collapsed nearly emptying Lake Delton in Wisconsin. Hey, how are you doing?

Flood waters washing away homes in a stretch of highway not rain (ph). Not more of the rain actually is in the forecast.

Now, wildfires are burning in northern California. Also, firefighters say that strong winds are fueling those fires. Dozens of homes and several towns near Sacramento have actually been destroyed.

And some pretty amazing pictures from New York last night actually. Just check out this lightning right here. Forecasters say that the storm should cool things off.

And we apologize. We're having issues with our video and our pictures right now. We'll work on that and tell you about these couple of days of record temperatures that are coming up -- John.

ROBERTS: All right. New this morning, Kyra.

Investigators trying to figure out what caused the deadly plane crash in Sudan. The plane landed during a thunderstorm yesterday when it veered off of the runway and burst into flames. Police say more than half of the 214 people on board escaped, but dozens of others were killed.

Just about an hour and a half from now, the space shuttle Discovery will undock from the International Space Station. During the nine-day mission, the crew installed a Japanese made orbital research lab and brought a pump to fix the space station's only toilet. Discovery is scheduled to land Saturday at the Kennedy Space Center in Florida.

PHILLIPS: Well, we uncovered a lot of dirty details about President Clinton and Monica Lewinsky. And now, Ken Starr is in the privacy business. How he's taking on the paparazzi. This should be interesting.

ROBERTS: Coming up on the "Most News in the Morning" --

Squeezed (ph).

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I've already paid out $9,500 more, and that's only in the first three months.

(END VIDEO CLIP)

ROBERTS: From diesel fuel to feed, costs are up but the price is locked in.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: You can't pass that on.

(END VIDEO CLIP)

ROBERTS: Why all that money you're spending on milk isn't making it to the farmers. Ahead on the "Most News in the Morning."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JON STEWART, HOST, "THE DAILY SHOW": As you ponder these difficult times of the energy crisis, you might recall this exchange from a scant three months ago.

UNIDENTIFIED MALE: What's your advice to the average American who is hurting now, facing the prospect of $4 a gallon gasoline, a lot of people facing --

UNIDENTIFIED MALE: What do you say? You're predicting $4?

UNIDENTIFIED MALE: A number of analysts are predicting $4 a gallon gasoline this spring when they reformulate.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: That's interesting. I hadn't heard that.

(END VIDEO CLIP)

ROBERTS: Welcome back to the "Most News in the Morning." That was Jon Stewart poking fun at the president. As we've been telling you, the national average for gas above that $4 a gallon mark.

And now, the cost of a gallon of milk is soaring. And the little guy is getting squeezed.

Kathleen Koch joins us now with that story.

KATHLEEN KOCH, CNN CORRESPONDENT: John, Kyra, with the cost of a gallon of milk rivaling the cost of a gallon of gas in some cities, you might think dairy farming is a lucrative business. Well, in reality, many small family dairy farms are barely making ends meet.

(BEGIN VIDEOTAPE)

KOCH (voice-over): Ty Long has been working his family's 170- acre Pennsylvania dairy farm since he was a boy. He runs it now and says everything this year is costing a lot more, like diesel fuel and animal feed.

UNIDENTIFIED MALE: I've already paid out $9,500 more, and that's only in the first three months.

KOCH: And he can't up his price. Since the depression, the wholesale price of milk has been regulated by the federal government. The idea was to keep the price of such a vital commodity affordable for consumers.

And you can't just charge more for the milk?

UNIDENTIFIED FEMALE: No.

KOCH: You just can't recoup it.

UNIDENTIFIED FEMALE: You can't pass it on.

KOCH: Farmers say that's partly why the number of dairy farms nationwide has dropped from more than 131,000 in 1992, to just over 59,000 today.

SEN. BOB CASEY (D), PENNSYLVANIA: In Pennsylvania, we have at least 250, and by some estimates, as much as 350 dairy farms going out of existence every year.

KOCH: Senator Casey pushed for a subsidy in the farm bill to help dairy farmers cover the higher cost of feed. A group that lobbies for dairy farmers says processors, those buying milk at wholesale, are reaping most of the profits and should pay farmers more.

UNIDENTIFIED FEMALE: So the processors themselves, the purchasers of milk in this case should be paying a fair price that reflects a farmer's cost of production.

KOCH: Wholesale milk, farmers argue, they don't set the price paid to farmers.

UNIDENTIFIED FEMALE: It's not a perfect system. Everybody's got these higher costs. Our plans are all squeezed on their costs this year just as the farmers are.

KOCH: And consumers are ultimately being squeezed at the store. The average price of milk has gone from $3.07 from January of last year to $3.80 today. That's over 20 percent or 73 cents more per gallon. And very little of that money is winding up in the pockets of farmers like Ty Long (ph). Long hopes he'll be able to stay in business.

UNIDENTIFIED MALE: I like being out. I like the animals but, you know, the struggles that come along sometimes, you know it makes you think.

(END VIDEOTAPE)

KOCH: Congress has authorized a commission to find a fairer way to price milk. But it's unclear who that will end up benefiting, the farmer, processor, or the consumer --- John, Kyra.

ROBERTS: Kathleen Koch for us in Washington this morning.

PHILLIPS: Coming up on the "Most News in the Morning," our Mamie McIntyre got an exclusive interview with Defense Secretary Robert Gates about the long-term strategies for U.S. military bases in Iraq.

And there are more that could go. That's the warning as authorities watch 1,000 dams and the waters rise in Wisconsin. Rob Marciano tracking all the extreme weather for us. Hey, Rob.

ROB MARCIANO, AMS METEOROLOGIST: Yes, hey, Kyra. The rivers continue to rise and there is more rain on the way across parts of the flooded Midwest. We'll talk about that plus snow out west. An interesting water spout in Florida.

Complete weather coming up when AMERICAN MORNING comes right back.

(COMMERCIAL BREAK)

MARCIANO: Welcome back to the "Most News in the Morning." Rising rivers wiping up bridges and dams, and more may go today across the Midwest. Residents along the Mississippi River are preparing for what could be the worst flooding in 15 years. And more people in Iowa are preparing to get out after overflowing rivers washed away several mobile homes. Authorities in Wisconsin say 1,000 dams may be in danger in the next couple of weeks.

Welcome back. Here we go. More in the way of flood warnings that are posted across the counties and states in the Midwest, and this is not going to go away anytime soon. First of all because of the drainage system that may take some time to get this water downstream into the Mississippi then eventually out in the Gulf of Mexico. That's going to take a couple of weeks.

And then on top of that, this is the forecast model for the next two days; 48-hour precipitation totals indicate that, well, Des Moines, west and southwest, towards Omaha, we get a little bit of a bullseye there that could have several inches of rainfall. And then up in through parts of Wisconsin and Minnesota, also a couple of inches of rainfall. Already saturated ground so you know the routine there.

Indiana also is going to see some of that action too. And they are struggling with rivers that continue to be over flood stage. So these aerial pictures just showing the dramatic increase of water in the levees and river systems that just can't handle it.

Even with the sun shining yesterday, these pictures from where it's showing that the water just trying to get out of Johnson County and flow downhill. And unfortunately, that is producing some miserable conditions for those folks.

All right. Kansas City up towards Omaha, this is the first pulse of moisture in that precipitation forecast that shows that bullseye. That is sliding eastward quickly. And this is where we could see some severe weather. A moderate risk of seeing severe weather across parts of the upper Midwest today.

Cooling down a little bit across the northeast but still warm. Temperatures in the upper 80s. You had your rough weather yesterday from New York City Central Park to upstate. It will be a little bit more tranquil today. John and Kyra, back up to you.

ROBERTS: Rob, thanks very much.

The U.S. presidential campaign, all the buzz in the Arab world. Find out who is the most popular candidate there, and if there is any hope that the next commander in chief can make a breakthrough in the peace process.

PHILLIPS: Coming up -- feeding frenzy. Hollywood moves to crack down on the swarming paparazzi.

(BEGIN VIDEO CLIP)

DENNIS ZINE, LOS ANGELES CITY COUNCIL: Imagine, you're a motorist driving down the street and Britney Spears parks next to you.

(END VIDEO CLIP)

PHILLIPS: Meet the unlikely sheriff brought in to run him out of town. Ahead on the "Most News in the Morning."

(COMMERCIAL BREAK)

PHILLIPS: So you remember Ken Starr, the special counsel who introduced America to an intern named Monica Lewinsky? Well, he's back and in a very unlikely place. Hollywood. His mission -- kick the paparazzi to the curb.

CNN's Carol Costello has the story.

(BEGIN VIDEOTAPE)

CAROL COSTELLO, CNN CORRESPONDENT (voice-over): The paparazzi have gone wild in Los Angeles.

UNIDENTIFIED FEMALE: Hey!

COSTELLO: Hollywood TV captured this feeding frenzy when fashion model Kate Moss and her small daughter arrived at LAX. It's the kind of scene that California lawmakers say must stop.

DENNIS ZINE, LOS ANGELES CITY COUNCIL: You just imagine you're a motorist driving down the street and Britney Spears parks next to you. All of a sudden, your swarmed by these people. They've got cameras, they're jumping on the hood of my car, what are they doing?

You do not know. You don't know if you're getting carjacked. You don't know what's happening.

COSTELLO: But how do you stop a photographer hot for tabloid dollars from taking pictures of Britney Spears, whose every move, every recorded bout with mental illness, shot not on her property, but on a public street, which is perfectly legal? Hmmm, if anyone can find a solution -- it would be Ken Starr.

Yes. That Ken Starr. A man who once bitterly complained about the press himself. The independent counsel who brought us Monica Lewinsky in the stained blue dress. He's dean at the law school at Pepperdine now and the city of Malibu along with L.A. and West Hollywood have asked him to craft legislation to restrict these pap packs (ph).

DAVID MARK, POLITICO: The irony is that he was so criticized, even vilified by Hollywood liberals, Democrats 10 years ago during the Monica Lewinsky impeachment saga. Now, he's kind of aligned themselves with a lot of Malibu residents who probably disagree with him politically.

COSTELLO: But Starr has already contacted Malibu's mayor, although he's not ready to publicly comment on whether they have a plan. L.A. Councilman Zine welcomes Starr's help.

ZINE: I have a lot of respect for Ken Starr. We don't want to violate any rules. We don't want to violate the constitution. We believe that the constitution needs to be upheld. At the same time, we need to protect our celebrities.

(END VIDEOTAPE)

COSTELLO: One idea -- create a buffer zone around celebrities. The problem with that is, how do you define who a celebrity is and who is not? It's a tough problem to solve, but lawmakers are willing to try -- John, Kyra.

PHILLIPS: All right. Carol Costello for us.

ROBERTS: It is your money, and how will the presidential candidates spend it? We're looking at the economic policies of Barack Obama and John McCain. That's ahead.

And our Jamie McIntyre got an exclusive interview with Defense Secretary Robert Gates about the long-term strategy for U.S. military bases in Iraq.

You're watching the most "Most News in the Morning."

(COMMERCIAL BREAK)

ROBERTS: It's coming up on 25 minutes after the hour.

Polls suggests a general election campaign between John McCain and Barack Obama will be close. But it appears that one candidate may be a clear favorite in the Arab world.

Joining us now to talk about that and other Mideast issues is former Jordanian Foreign Minister Marwan Muashar. His new book is titled "The Arab Center: The Promise of Moderation." He joins us now from Washington.

Marwan, thanks very much for being with us. Good to see you again.

MARWAN MUASHAR, SR. V.P. WORLD BANK: Good to see you. Thanks, John.

ROBERTS: I want to ask how the presidential candidates are playing in the Arab world. But let me preface it by quoting from an op-ed that Tom Friedman has in today's "New York Times" in which he says, "This column will probably get Barack Obama in trouble, but that's not my problem. I cannot tell a lie. Many Egyptians and other Arab Muslims really like him and hope he wins the presidency."

Is that what you're hearing on the Arab street?

MUASHAR: I think the president who will end up being popular in the Arab world is someone that will take on the Arab-Israeli conflict in his first term and try to end it. There is no question that the image of America has suffered a great deal in the last eight years. And whether it is McCain or Obama, I think, as I said, the verdict is still out there until they take on the Arab-Israeli conflict.

ROBERTS: I see. You seem to be playing the diplomat here. I'm wondering, do you have a particular preference?

MUASHAR: I really don't. I mean, this is not up to me. This is domestic internal American politics. What I do have the preference for is a president, who as I said, will not wait until the end of his second term before he takes on the Arab-Israeli conflict.

ROBERTS: Right.

MUASHAR: The radicalization in the region is growing at a very alarming rate, and we really need to end this conflict and end it soon.

ROBERTS: You talk about the clash between the forces of moderation and the forces of radical Islam. In your book, you also speak to this idea of the Israeli Palestinian issue. It's widely cited as centerpiece in many of the problems throughout the Arab world in particular, as you said, relations between the Arab world and the United States.

But you also suggest in your book that it's a two-way street here. Here's what you say. You say, "Arab governments cannot demand that Arabs accept relations with Israel, an enemy state for decades, while refusing to accept opposition parties in their own countries and still be seen as credible by their public."

Do they need to come to the table of reform as well at the same time that the United States, as you said, needs to make a push just to finally solve this Arab-Israeli conflict?

MUASHAR: Absolutely. This is the center theme of the book. In fact, what I'm saying is that Arab moderation, particularly, on behalf on Arab governments has been a one-dimensional moderation. It has been moderation when applied to the peace process, but it has not been moderation when addressing other issues of concern to Arab cities and such as reform and good governance.

And my point is that unless Arab moderation becomes multidimensional, focused on all issues of concern to Arab cities and particularly reform and cultural diversity, that moderation will not be credible.

ROBERTS: Why is it so difficult, Marwan, to achieve Democratic reform in this area of the world, whether -- there are some other areas of the world that have lived under repression for decades and they seem to be doing quite well?

MUASHAR: Certainly, the Arab-Israeli conflict has contributed to that, and to the frustration of people. I think oil has been another, probably, issue that has sort of slowed down reform. Whatever the case, we are entering a phase where people are faced or faced with only two choices now and a ruling elite which is not checked by any system of checks and balances, and radical religious ideology that is also threatening the political and cultural diversity. And these are two uncomfortable options. And Arab society, Arab governments must open up the system, even if gradually, so that Arabs have third and fourth choices.

ROBERTS: You know, we could talk about the pursuit of democracy in the Arab world all day. But I also wanted to ask you about another very important issue in the region, that of Iran. And more tough -- tough talk yesterday from President Bush at the U.S. EU Summit in Slovenia. Let's listen quickly to what he had to say.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: If we end up with a nuclear weapon, the free world is going to say why didn't we do something about it at the time before they developed it?

They continue to isolate their people. They can continue to deny the people of Iran a bright future, by basically saying we don't care what the world says.

(END VIDEO CLIP)

ROBERTS: There is a belief in some circles, Marwan, that the U.S. is inexorably headed toward conflict with Iran. What do you believe is the best way to solve this crisis?

MUASHAR: Well, Iranian nuclear power is certainly going to pose a problem in the region as it will also accelerate nuclear rates (ph). We've always wanted a nuclear-free region to do that, it seems to me, and if you don't want a military option, which in my opinion is also a catastrophe for the region, then you need dialogue. And if you want to solve the problem diplomatically, I would suggest that the way to do that is through dialogue.

ROBERTS: The new book is called "The Arab Center: The Promise of Moderation." Marwan Muashar, good to see you again. Thanks for coming in this morning.

MUASHAR: Thank you.

PHILLIPS: And just about to cross the half-hour now, some of the top stories we're following. Gas prices hitting a new record this morning. According to AAA, the national average about $4.05 a gallon. 25 states are now paying more than 4 bucks a gallon.

And flooding threatening dams across the Midwest today. Several homes and a chunk of highway washed away in Wisconsin. Rivers in Indiana surging toward record levels now. Towns up and down the Mississippi River could see the worst flooding in 15 years.

Health care, a top priority in the general election. But both presidential candidates offering radically different approaches. Barack Obama wants to guarantee every American has access at low cost. But John McCain says that kind of plan is just more big government.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESUMPTIVE PRESIDENTIAL NOMINEE: Senator McCain says he supports choice. But when your employer lapsed your coverage because they're no longer getting a tax deduction and no one else will sell you insurance because the tax break that he's offering doesn't even cover half of the cost of health care for the average family. You will not have a choice.

My health care plan isn't about taking away your coverage. It's about giving people more options and, thus, a real choice.

SEN. JOHN MCCAIN (R), PRESUMPTIVE PRESIDENTIAL NOMINEE: We're going to offer every individual and family in America a large tax credit, refundable tax credit to buy their health care so that their health insurance is theirs to keep, even when they move or change jobs. My plan would allow those who want to stick with employer- provided health insurance to do so.

(END VIDEO CLIP)

PHILLIPS: And here's a closer look at where Obama and McCain stand on health care in our "AM Extra." Obama supports a national plan. He wouldn't mandate coverage for every American but would cover all children. Employers who don't provide insurance would be forced to contribute to the new plan. Estimates put that price tag at $50 to $65 billion.

McCain opposes mandated universal coverage. Instead he says he would provide tax credits for people buying their own insurance, as well as expanding community health centers, health savings accounts and encourage small businesses to work together to get lower insurance rates.

And we're going to talk to McCain supporter and former Republican presidential candidate Mitt Romney, that's coming up in our next hour.

ROBERTS: Defense Secretary Robert Gates is continuing his tour of Air Force bases. And CNN has the only television correspondent traveling with him. Our Jamie McIntyre caught up with Gates for this exclusive interview about the war in Iraq.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Secretary Gates was on his way to give another pep talk to airmen about nuclear weapons security and the failure of Air Force leadership when he agreed to take a few questions from CNN on another hot button issue -- America's long-term intentions in Iraq and what the new president will face. (on camera): What do you think is going to happen in Iraq?

ROBERT GATES, SECRETARY OF DEFENSE: I think either person who is elected president is going to come in and take a close look at it. I've said repeatedly we can't get the end game wrong.

MCINTYRE: Are you ever going to be answer this question about permanent bases?

GATES: We have no desire for permanent bases in Iraq.

MCINTYRE (voice-over): Gates' standard answer isn't satisfying to many on Capitol Hill, where there is bipartisan concern the new U.S.-Iraq Security Accord may go well beyond the boilerplate Status of Forces Agreement the U.S. has with more than 80 other countries.

(on camera): I guess the question becomes, what's a permanent base?

GATES: This is a permanent base.

MCINTYRE: This is permanent.

Are the bases we have in Korea or Germany, are those permanent bases or are they just bases that have been there forever?

GATES: I think you would have to look at them as permanent bases. They've been there for 50 years. They are U.S. facilities in the sense that they are U.S. only, in many instances.

MCINTYRE: And that's not what's going to happen --

GATES: It's not what we have in mind.

MCCAIN (voice-over): The negotiations by some accounts are dragging and may not be complete by the end of the Bush administration. Some Iraqi leaders complain the U.S. wants too many bases, too much control of the airspace and too much immunity from Iraqi law.

(on camera): Any chance you'd consider serving in another administration, either Democratic or Republican?

GATES: All right, look, I learned a long time ago never to say never. So my answer is the circumstances under which I would do that are inconceivable to me.

MCINTYRE: Gates believes whoever is elected the next president is going to want to get the end game right in Iraq. So whether it's Obama or McCain, he believes they're likely to chart a more moderate course than their campaign rhetoric might indicate. James McIntyre, CNN, Peterson Air Force Base, Colorado.

(END VIDEOTAPE)

ROBERTS: 34 minutes after the hour. This just in to CNN. No confirmation of anything from the U.S. Military. The charges flying from the Pakistani military today that a U.S. air strike along the Afghan-Pakistani border in the Mulfman (ph) region, where there is a lot of insurgent militant activity, killed 11 Pakistani soldiers.

Pakistanis are saying that this was a, quote, "Cowardly act that had hit at the very bases of cooperation between the two countries in the war on terror. Again, the U.S. Military not saying anything about this yet. We don't know how this incident unfolded, what happened, but the Pakistani military squarely putting blame on the U.S. saying that an air strike killed 11 of their soldiers.

We'll keep following the story for you this morning. We'll bring you the very latest on it just as soon as we get it. We got our folks at the Pentagon looking into this as we speak.

Kyra?

PHILLIPS: Alina Cho with stories making news this morning.

Good morning.

ALINA CHO, CNN CORRESPONDENT: Hey, there, guys. Good morning to you. Good morning, everybody.

New this morning -- President Bush taking a tough line against Iran. Just a short time ago in Germany, the president said, quote, "All options are on the table when it comes to stopping what the U.S. and other nations believe is a nuclear weapons program."

And while overseas, the president told the British newspaper he regrets some of the language he used in the run up to the war in Iraq like, quote, "Bring them on," and "Dead or alive," saying it may have affected the way people perceived him.

In Congress, Republicans in the Senate have defeated a bill that would have levied big taxes on big oil, the very same companies that profit from high gas prices. Democrat had proposed a 25 percent tax on what they called unreasonable profits raked in by the five biggest U.S. oil companies. But Democrats failed to get the 60 votes needed for passage. Senator Sam Brownback of Kansas is part of the GOP oppositions. We'll be talking to him in our next hour.

The FAA is under big pressure to do something about sleepy pilots. The new calls come after the National Transportation Safety Board, the NTSB, found pilot fatigue led to a runway accident in Michigan last year. Right now, pilots can work 14-hour days with eight hours of flight time. But with flight delays, they often work much longer. The FAA is planning a three-day symposium on fatigue next week to try to come up with solutions.

And a man in Kansas makes the ultimate mistake and survives. Listen to this, guys. He accidentally fired a 2 1/2-inch nail to the top of his head. We have the x-ray there. It was taken just after George Chandler was taken to the hospital. Take a look at that. You can just see it so clearly. He says, he and a friend were working in his backyard when a nail gun accidentally went off. This is the incredible part. Chandler says he felt a sting but he and his friend didn't think twice about it, until they went to the doctor.

Doctors found it in Chandler's head and they safely removed it using what else, a common claw hammer. Forget surgery. He is extremely lucky as we all know by now. The nail barely missed several important blood vessels. And there he is walking around again.

(CROSSTALK)

CHO: Look at that. It's incredible.

PHILLIPS: He can give it to his grandkids for show and tell at school.

CHO: That's right. It's a nice memento.

(CROSSTALK)

CHO: Can you imagine, a little something sting. Turns out it's a 2 1/2-inch nail.

PHILLIPS: Well, gas prices above $4 a gallon now. Barack Obama and John McCain say they have ideas to help Americans. We're going to tell you what their plans are.

ROBERTS: And with those out of control gas prices, some people are taking unique steps to get gasoline for free.

PHILLIPS: And desperately trying to hold back the water. The situation getting worse right now across the Midwest with more dams and danger giving way. You're watching the "Most News in the Morning."

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ROBERTS: 20 minutes to the top of the hour. You're watching the "Most News in the Morning." The economy is issue no. 1 at CNN and for many voters in November. Joe Johns explains where the two candidates stand on the economy. He's here now.

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CORRESPONDENT (on camera): John and Kyra, the differences between these guys are enormous. What they think the government should do with your money. Here's how Obama tries to paint McCain.

SEN. BARACK OBAMA (D), PRESUMPTIVE PRESIDENTIAL NOMINEE: A full--throated endorsement of George Bush's policies.

JOHNS: And here's how McCain tries to paint Obama.

SEN. JOHN MCCAIN (R), PRESUMPTIVE PRESIDENTIAL NOMINEE: It seems to me he's running for Jimmy Carter second.

JOHNS (voice-over): So, what's the truth of it? Keeping them honest, we asked a couple of guys who tracked this policy stuff from the different sides of the political spectrum and they agreed on a couple of things. Both Obama and McCain have some pretty bad ideas when it comes to doing something about the price of gasoline.

Bad idea number one --

OBAMA: I'll make oil companies like Exxon pay a tax on their windfall profits.

JOHNS: It sounds like a way to punish the oil companies for record profits, right? But our experts say the cost of that windfall profits tax would probably just get pass on to the consumer.

HENRY AARON, BROOKINGS INSTITUTION: I believe that the administrative difficulties associated with implementing such a tax, the peculiar and side-effects that it produces on businesses are not beneficial to the economy.

JOHNS: Bad idea number two --

McCain: All I wanted to do was give working Americans a little relief.

JOHNS: McCain proposed suspending the federal gas tax. Both experts say that idea is downright silly because the oil companies are under no obligation to pass the savings on to the customer.

DAVID KREUTZER, HERITAGE FOUNDATION: It sells to the public because they think it's going to lower their price. They're not going to be too happy when they find out that it won't lower their price and they'll be even more upset if they find out it's going to the oil companies.

JOHNS: Obama opposes suspending the federal gas tax. So, maybe it wasn't a coincidence that McCain gave a big economic speech today and didn't even mention this idea.

JEANNE CUMMINGS, POLITICO: It really surprised me. I wonder if it's signaled that he may be indeed stepping away from it.

JOHNS (on camera): No words from the campaign on that one. But wait a minute, this is not all about gas prices, these candidates are worlds apart on all kinds of economic issues.

On trade policy, Obama wants to revisit NAFTA, the North American Free Trade Agreement that gets blamed, sometimes falsely, for American job loss. McCain says no way.

On income taxes, McCain wants to extend the George Bush tax cuts. Obama wants to mostly let them run out, effectively raising taxes on top-wage earners.

On and on it goes. A high-stakes debate over your money with your vote in the balance.

John and Kyra?

(END VIDEOTAPE)

ROBERTS: It'll be a huge issue as get into November. "ISSUE #1" here at CNN. We'll continue to follow it for you in-depth all week long.

PHILLIPS: Also ahead, the Hogan family drama. The Hulk breaks his silence about the tragic event that landed his teenaged son behind bars.

And those deadly floods. They're devastating the Midwest. The threat could last for weeks. Rob Marciano tracking the extreme weather, straight ahead on the "Most News in the Morning."

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(WEATHER REPORT)

ROBERTS: That sounds like it's going to be a huge problem this summer. And the crop yield as well is going to be down this year.

Rob, thanks for watching that for us this morning.

Legendary wrestler Hulk Hogan fighting to clear his name. He spoke with CNN's Larry King about the beating that his family is taking over his son's stay in prison.

PHILLIPS: And Cindy McCain always standing by her man. But does the wife of the presumptive GOP nominee want a job in a McCain administration? You're watching the "Most News in the Morning."

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PHILLIPS: Welcome back to the "Most News in the Morning." He became a star in the fantasy world of pro-wrestling. But this morning, Hulk Hogan is in a real world fight to clear his name after a devastating car crash involving his son.

ROBERTS: That crash happened nearly a year ago, but it's back in the spotlight. Larry King took a look at the Hogan Family's new storm of negative publicity last night. And he's got that for us now.

(BEGIN VIDEOTAPE)

LARRY KING, HOST, LARRY KING LIVE: John and Kyra, Hulk Hogan was our guest last night, talking about something that's a tragedy for everybody involved.

His 17-year-old son is in jail for a car crash that left a friend permanently brain damaged. Some conversations between father and son were recorded and released, revealing what appeared to be pretty callous statements. HULK HOGAN, WRESTLER: Well, I don't know what type of person John was or what he did to get himself in this situation. I know he was pretty aggressive and used to yell at people and used to do stuff and -- but for some reason, man, God laid some heavy (BLEEP) on that kid, man. I don't know what he was into.

NICK: John was a negative person.

HULK: He was what?

NICK: He was a negative person.

(END VIDEO CLIP)

KING: Here's some of how Hogan responded.

HOGAN: We love John and in no way would we ever want to hurt John or the Graziano Family. That's why I'm so upset that, you know, irresponsible media sources have taken these tapes that were given out for whatever reason -- the legal Department of (INAUDIBLE) County Sheriff's Department decided to release these tapes and tale a short snippets of a conversation.

And so many irresponsible media sources say they've heard conversations with me and my son, and my wife and my son. They haven't heard a hello. They haven't heard a goodbye. They haven't heard an, I love you or how are you doing.

They haven't heard of the 27 hours. 90 percent of that is me reading my son from positive re-enforcement books from Michael Beckwith or James Ray or talking about the bible and explaining my son about forgiveness, for they know not what they do, forgive everyone. Because, you know, they don't understand what this is all about, that we have to stop the tragedy now.

KING: It was quite an hour. So many lives changed in an instant. And because Nick looks older, I think many people forget he is just 17. A tragedy all around.

John and Kyra, back to you.

(END VIDEOTAPE)

ROBERTS: Larry King this morning. And a reminder that you can see Larry every weeknight 9:00 p.m. Eastern, right here on CNN.

Coming up on AMERICAN MORNING -- disappearing milk money.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We can't just charge more for the milk? You just can't recoup it.

UNIDENTIFIED FEMALE: No. You can't pass it on.

(END VIDEO CLIP) ROBERTS: Small farms feel the pinch, just like you.

Plus, policing the paparazzi. Hollywood hires a star, a Bill and Monica fame, to protect celebrity's privacy, ahead on AMERICAN MORNING.

(COMMERCIAL BREAK)

PHILLIPS: Coming up -- feeding frenzy.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Hey! Wait!

(END VIDEO CLIP)

PHILLIPS: Hollywood moves to crack down on the swarming paparazzi.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Imagine you're a motorist driving down street. And Britney Spears parks next to you.

(END VIDEO CLIP)

PHILLIPS: Meet the unluckily sheriff brought in to run them out of town. Ahead on the "Most News in the Morning."

ROBERTS: And at 55 minutes after the hour, we're checking your political ticker this Wednesday morning. A rally across the river during the Republican National Convention.

Ron Paul plans to hold his own rally. He has scheduled an event at the University of Minnesota in Minneapolis during the GOP convention in St. Paul. His spokesman said it will be a celebration of Republican values.

Representative Dennis Kucinich is a little bit suspicious after his Web site crashed. The crash happened just after he posted newly introduced articles of impeachment against President Bush. The site got more than 100,000 hits an hour so it's not clear if the site was hacked or it was the heavy traffic to blame. Stay tuned. We hope to find out more about this, coming up.

Cindy McCain says that she'll be perfectly happy being first lady and nothing more. She ruled out taking an official position in a McCain administration. But if her husband is elected, she says that she wants to be active on education and other issues.

And Barack Obama flip-flops on his pick to win the NBA finals. Before the series started, the noted basketball fan picked the L.A. Lakers. But after the Celtics won the first two games, Obama said -- well, he might just have to revise his prediction, but he may have spoken too soon. The Lakers won last night's game. Game four is tomorrow. And for more up to the minute political news, just head to cnn.com/ticker. That raises a question, Kyra, is it ethical to flip your picks in the NBA finals?

PHILLIPS: Well, it depends. See how much money is at stake. Let's talk about that.

All right. We're five months away from the November elections and candidates are sharpening their attacks. Take a listen.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama seems to want to go back to the failed policies of the '60s and '70s.

OBAMA: The centerpiece of John McCain's economic plan amounts to a full-throated endorsement of George Bush's policies.

(END VIDEO CLIP)

PHILLIPS: Oh yes, we can expect the digs to increase as the campaigns heat up this summer. So we've decided to bring back Bruce Weinstein, the ethics guy, from businessweek.com with some tips on how these candidates can keep it civil, keep it ethical, while still getting their points across.

OK, Bruce, come on, these are politicians.

BRUCE WEINSTEIN, ETHICS COLUMNIST, BUSINESSWEEK.COM: Well, I know.

PHILLIPS: This is a pipe dream to think that they can be ethical and --

WEINSTEIN: Why should it be a pipe dream? You know, I wrote this article on code of ethics for politics and it's on the A360 blog. And people are saying -- oh, this is an oxymoron. Call it ethics for politicians. But why should it be an oxymoron. Why shouldn't we expect the best from our candidates? And why is it that so much of the campaign focuses on what the candidate needs to do to win instead of how to win.

PHILLIPS: But it's always been this way. It's always been if you go back decades, they were playing tricks on each other.

WEINSTEIN: But it's not too late to change. Well, I mean, this should be the moment where you say, you know what, enough is enough. Let's reach for the best within us, rather than the worst.

PHILLIPS: Well, it sounds wonderful.

WEINSTEIN: Well, I mean, we have to start somewhere so let's start with some basic rules of ethics.

PHILLIPS: All right. What's your code of ethics? WEINSTEIN: Tell the truth, imagine that. I mean, you now, you may recall -- 10 years ago, Warren Beatty made a film called "Bullworth." It was based on the idea that a politician would tell the truth. And it was a comedy. It was a satire. Why should this be the stuff of fiction? Why should we not expect politicians to tell us the truth when we have a right to know the truth.

PHILLIPS: Have you ever known a politician to come out on the campaign trail and say -- I'm going to do this, this, this, this and this, trust me. And then, they win and everything comes true?

WEINSTEIN: Well, you know what, today is the day to change all of that. And it seems to me that if politicians act ethically, the one who acts ethically, may in fact get the White House.