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Lou Dobbs Tonight

U.S. Soldier Receives Maximum Sentence; Bloodbath in Gaza

Aired May 19, 2004 - 18:00   ET

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

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


(BEGIN VIDEOTAPE)
LOU DOBBS, CNN ANCHOR (voice-over): Tonight, the first court case in the Iraqi prisoner abuse scandal and a maximum jail sentence for the accused American soldier. We'll have reports from Baghdad and Capitol Hill.

GEN. JOHN ABIZAID, CMDR., U.S. CENTRAL COMMAND: Every officer is responsible for what his or her unit does or fails to do.

DOBBS: A bloodbath in Gaza, almost 20 Palestinians killed during an anti-Israeli protest. We'll have a report from Gaza and I'll talk with Diana Buttu, legal adviser to the PLO.

Record gasoline prices and rising political rhetoric. President Bush says he will not release oil from this country's emergency reserves.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will not play politics with the Strategic Petroleum Reserve.

DOBBS: Arizona's governor, Janet Napolitano, wants the president to investigate the skyrocketing price of gasoline. She's our guest tonight.

And in "Face-Off," is free trade really good for America? Congressman Jim DeMint says free trade creates jobs. Congresswoman Marcy Kaptur says free trade has destroyed millions of American jobs.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Wednesday, May 19. Here now for an hour of news, debate and opinion is Lou Dobbs.

DOBBS: Good evening.

There was death and chaos in Gaza today when a Palestinian protest against Israel's new offensive in Rafah ended in massive bloodshed. An explosion in the middle of the demonstration killed at least 18 people. More than 50 others were wounded. The Palestinians accuse the Israelis of massacring civilians. The Israelis said Palestinian gunmen were hidden in the crowd.

Matthew Chance reports from Gaza.

(BEGIN VIDEOTAPE) MATTHEW CHANCE, CNN CORRESPONDENT (voice-over): On the march to Rafah, thousands of Palestinians walking into tragedy. It was a peaceful, if angry demonstration against Israel's military. Then came the response.

In the skies above, a single Israeli gunship launches flares at first to protect itself, then a rocket. Israeli officials confirm tanks also opened fire near the crowd. From the chaos, the dead and injured are carried off to hospitals already inundated in recent days. Among the casualties are unarmed civilians and a number of children, only the latest carnage, say Palestinian officials, that Israel's army has inflicted upon the people here.

GHASSAN KHATIB, PALESTINIAN LABOR MINISTER: But this most recent and most vicious Israeli crime of shelling by missiles a peaceful demonstration is an indicator to the real intentions of the Israeli army, which is simply trying to effect the maximum casualties of the Palestinian people, regardless whether they are civilians or otherwise.

CHANCE: From the Israeli government, an expression of deep sorrow for the loss of innocent life. But officials are insisting the rocket was aimed at open ground. It was meant to disburse the crowd, not kill them.

RA'ANAN GISSIN, SENIOR ADVISER TO ARIEL SHARON: This is a war zone. It's been a war zone for 3 1/2 years. And we have to conduct these operations with all the care that we take. Sometimes, the loss of life is unavoidable here. And sometimes they are staged. We know very well that the area where the incident occurred today was saturated with explosive charges, like in Jenin, placed before the crowd.

So we're investigating that possibility as well. Before you jump to a conclusion about a massacre or anything, allow us to exhaust the investigation. You can rest assured that all the information will be presented.

CHANCE: But there's been a mounting chorus of criticism of Israel and its tough military action in Rafah to destroy what it calls the terrorist infrastructure there. There are renewed calls, too, for international protection of Palestinians civilians here. The latest killings, say some, underline the pressing need for that.

(END VIDEOTAPE)

CHANCE: Well, Israel says it has launched a full investigation into what exactly happened here today. They're saying that the casualties could have been caused by a tank firing into what they believed was an abandoned building in an attempt to disburse the crowd, but that's not going to convince the very many Palestinians who believe that at least here in Gaza that Israel has abandoned all military restraint -- Lou.

DOBBS: Thank you very much. There was no condemnation of that violence from President Bush today when he talked publicly about the Israeli offensive. For the first time, President Bush simply called on Israel and the Palestinians to exercise restraint.

Elaine Quijano reports from the White House.

(BEGIN VIDEOTAPE)

ELAINE QUIJANO, CNN CORRESPONDENT (voice-over): As he's done before, President Bush repeated a call to both sides in the Israeli/Palestinian conflict to stop the violence.

BUSH: I continue to urge restraint. It is essential that people respect innocent life in order for us to achieve peace.

QUIJANO: What the president did not do was directly condemn Israel in the latest incident, an explosion on a road where hundreds of Palestinians were marching to protest Israel's crackdown in southern Gaza.

Palestinian officials say dozens of people, including children, were killed or wounded and they blamed Israel. But a top adviser to I'll Prime Minister Ariel Sharon said under its rules of engagement the Israeli military is not allowed to fire into a crowd. President Bush, speaking to reporters at a Cabinet meeting, said he needed clarification from the Israeli government and had not had a chance to be briefed.

BUSH: I will continue to speak out about the need for all parties to respect innocent life in the Middle East.

QUIJANO: Later, White House spokesman Scott McClellan said it wasn't clear how the deaths occurred, but that Israel expressed regret and was investigating.

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: We want to know how this happened. It is a tragic event. And we are deeply concerned about it.

QUIJANO: European leaders went further, making clear their disapproval. In a written statement, the president of the European Council called Israel's action completely disproportionate to any threat faced by the Israeli military, adding that Israeli forces showed a reckless disregard for human life.

And at the United Nations, Secretary-General Kofi Annan called for Israel to immediately halt military operations in southern Gaza and strongly condemned the deaths of Palestinian protesters.

(on camera): The violence comes at a sensitive time for the White House as officials try to build support among Arab allies for the Iraq mission. At the same time, the president remains focused on trying to achieve his two-state solution to the Israeli/Palestinian conflict, an effort clearly undermined by this latest violence.

Elaine Quijano, CNN, the White House.

(END VIDEOTAPE)

DOBBS: And a short time ago, the United Nations Security Council passed a resolution condemning the killing of Palestinian civilians. The United States, usually a supporter of Israel at the United Nations, did not veto tonight's resolution. The Security Council passed the resolution by a vote of 14-0. The resolution also called on Israel to stop the demolition of Palestinian homes.

Later, I'll be talking with a legal adviser to the Palestine liberation organization. Diana Buttu will join us from Ramallah in the West Bank.

Tonight, there are conflicting reports about a U.S. air attack on an Iraqi village in which as many as 40 people were killed. The Pentagon said an airstrike destroyed a safe house for foreign fighters near the border with Syria after American troops came under fire. But a police chief in Iraqi town of Ramadi said the American aircraft fired on a wedding party. The police chief said between 42 and 45 people were killed in the attack. Local Iraqis said revelers fired weapons into the air in a traditional wedding celebration shortly before the airstrike.

In Baghdad today, the first court-martial in the Iraqi prisoner abuse scandal and the first sentence. A military court sentenced Specialist Jeremy Sivits to one year in jail. That's the maximum possible. Sivits apologized for taking pictures of Iraqi prisoners being humiliated by their guards.

Harris Whitbeck reports from Baghdad.

(BEGIN VIDEOTAPE)

HARRIS WHITBECK, CNN CORRESPONDENT (voice-over): Armored helicopters buzzed overhead. U.S. Army troops continuously marched by. This was the Baghdad setting for court-martial of Army Specialist Jeremy Sivits and the arraignment of three more soldiers, all accused of abusing and humiliating Iraqi detainees at Abu Ghraib prison.

In his court-martial, Sivits broke down twice as he pled guilty, describing the brutal beating some of the prisoners received and the acts of sexual humiliation the soldiers photographed. "It was wrong," he said. "It shouldn't have happened. I apologize to the Iraqi people and to the detainees. I apologize to the court, the Army, to my unit and to my family."

But contrition wasn't enough. Military prosecutors said: "These acts are horrendous, appalling and simply wrong. They took advantage of others who were vulnerable." The judge agreed. Sivits was sentenced to a year in prison, a reduction in rank and a bad conduct discharge. Three other soldiers were arraigned on similar charges of abuse. A date was set for a new pretrial hearing.

(on camera): While this trial has resulted in jail time for one soldier, it has not put the matter of prison abuse to rest. More courts-martial will be scheduled and it is expected more information will emerge on how far up the chain of command responsibility for the prison abuse lies.

Harris Whitbeck, CNN, Baghdad.

(END VIDEOTAPE)

DOBBS: An indication of that today. As the military court decided the fate of Specialist Sivits, the top general in Iraq today declared the prisoner abuse scandal will indeed be investigated all the way up the chain of command. General Ricardo Sanchez told a Senate committee his own conduct would be part of that investigation.

Pentagon correspondent Barbara Starr reports.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): Lieutenant General Ricardo Sanchez, commander of U.S. forces in Iraq, said he, too holds himself accountable for the abuse of Iraqi prisoners.

LT. GEN. RICARDO SANCHEZ, U.S. COMMANDER IN IRAQ: I accept responsibility for what happened at Abu Ghraib. And I accept as a solemn obligation the responsibility to ensure that it does not happen again.

STARR: But questions for General John Abizaid, the senior commander.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: How did it happen so long and so deep and we not know?

GEN. JOHN ABIZAID, CMDR., U.S. CENTRAL COMMAND: Well, I think there are failures in people doing their duty. There are failures in systems. And we should have known and we should have uncovered it and taken action before it got to the point that it got to.

STARR: Sanchez insisted his order last year for military intelligence to take some responsibility for prison operations did not involve the Pentagon and was not an order to soften up the detainees for interrogation through violence and sexual humiliation.

Major General Geoffrey miller, the new head of detainee operations, denied his recommendations for using military police to set the conditions for interrogation encouraged coercion of detainees. A report last November from the International Committee of the Red Cross containing abuse allegations was never seen at the highest levels.

ABIZAID: We've got a problem there that's got to be fixed.

STARR (on camera): Abizaid warned, the violence in Iraq will grow. He said it is now vital to name new Iraqi leaders to take over after June 30 and that it might be April of next year before the Iraqis are ready to provide law and order. Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

DOBBS: Still ahead here, a day of violence in Gaza, as Israel continues its offensive. Diana Buttu, the PLO's legal adviser, will join us.

Gasoline prices skyrocketing, politicians demanding action from the federal government, among them, Arizona's governor, Janet Napolitano. She's our guest tonight.

And Democrats launch a campaign to stop Ralph Nader, the independent candidate Democrats fear could cost Senator Kerry the presidential election.

(COMMERCIAL BREAK)

DOBBS: As we reported, Israel said its deadly two-day offensive in Gaza will continue. At least 18 Palestinians today were killed, many of them teenagers. Israel says the attacks are targeting terrorists located in Rafah.

My guest tonight, legal adviser to the PLO Diana Buttu joins us tonight from Ramallah in the West Bank.

Good to have you with us.

Your reactions to the violence today, the Israelis saying that there were gunmen, Palestinian gunmen, in the crowd.

DIANA BUTTU, PLO LEGAL ADVISER: Well, there's absolutely no evidence whatsoever that there were gunmen in the crowd. And even if there were, what Israel is basically saying is that it's OK to use missiles and to use tanks to disburse a peaceful demonstration, a demonstration that was simply designed to demonstrate and protest against Israel's demolition of the homes of 17,000 Palestinians in the Rafah area.

There was absolutely no threat to Israel or to Israel's soldiers or to Israeli civilians. But what Israel is constantly doing is massacring Palestinians and continually just targeting Palestinian civilians. It is about time that the international community step up to the plate and start not only condemning these actions, but beginning to ensure that international law is actually respected.

DOBBS: The United Nations condemned the violence today and called, as is the case over the past half century, for a cessation of violence. Is there, in your judgment, anything in the United Nations' action that can be helpful here?

BUTTU: Well, I'm hoping that the United States does more than simply condemn, that it actually begins to do things to act. I would like to see Israel prosecuted for war crimes, because what they are doing right now in terms of destruction of Palestinian homes are, in fact, war crimes. The killing of Palestinian civilians are war crimes. So I would like to see more than simply condemnation.

And I'm hoping that the United States -- the United Nations will step forward and actually act, rather than simply condemn.

DOBBS: The Likud rejected Ariel Sharon's plan to withdraw from Gaza. The prime minister of Israel is now working to come up with a new initiative. Can you give him any guidance as to what would be effective?

BUTTU: Yes.

I would tell the prime minister to simply withdraw completely from the Gaza Strip and allow the Palestinians to finally live in the freedom that they deserve to live in. He doesn't need to maintain any settlements or the military installations, the airspace, water, the borders, everything that he wants to control. It's time for Israel to simply withdraw from the territories, the West Bank and the Gaza Strip, and allow the Palestinians to live in freedom.

And it is when the Palestinians live in freedom that we'll begin to see peace in this area. And then I won't have to hear at 1:00 in the morning that Israel is firing missiles into another refugee camp in the Gaza Strip.

DOBBS: Diana, let me ask you this. The last time you and I talked, just over a month ago, you had said you thought the situation would get worse. And I was asking you about terrorism and the cycle of terrorism. What is your sense now?

BUTTU: I think it actually will get even -- deteriorate even further, unfortunately, Lou, because right now the United States has given Israel the green light to pretty much do whatever it wants. The United States is the only country so far who hasn't condemned Israel's actions today. It didn't vote in favor of the resolution. In fact, it abstained.

And I think that until Israel is given the red light to actually stop, then, unfortunately, you're going to see a much bloodier Middle East than we've seen for a long time.

DOBBS: Diana Buttu from Ramallah, thank you.

The Justice Department today said an 11-year-old Oklahoma girl will be allowed to wear her Muslim head scarf to school. The government sued Nashala Hearn's school district on her behalf after the district suspended her twice for wearing the head scarf. The Muskogee Public School District does not allow students to wear hats or any head covering. The district agreed to settle the lawsuit and allow exceptions to its dress code for religious clothing.

Turning overseas, India, the world's largest democracy, has a new prime minister tonight. Manmohan Singh took office after Sonia Gandhi, the head of the Congress Party, stepped aside. Gandhi dropped out after Hindu nationalists increased their attacks on Gandhi for being born in Italy. The Congress Party won a general election last week. Still ahead here, the two men hoping to take the White House from the president hold a friendly meeting in Washington. But behind the scenes, a new effort under way to make the campaign a two-man race. We'll have the latest from Washington.

Also, gasoline prices not only at record highs. They have spiked more than 20 percent in the past two months in some places. Arizona is one of them. And Arizona's governor, Janet Napolitano, is demanding an investigation of possible price gouging. She's our guest next.

(COMMERCIAL BREAK)

DOBBS: Democratic presidential candidate Senator John Kerry meeting with the man who, as some polls suggest and some savants suggest, could cost him the election. Independent candidate Ralph Nader met with Senator Kerry in Washington. That meeting comes as many Democrats are starting a campaign to stop Nader.

Ed Henry has the story from Washington.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): The new group called the National Progress Fund is being formed amid serious Democratic concerns that Nader could pull enough support in key states to tip them to President Bush and cost Kerry the election.

Former Howard Dean spokeswoman Tricia Enright is the president of the group.

TRICIA ENRIGHT, NATIONAL PROGRESS FUND: This is an effort to give Karl Rove his real nightmare, because, right now, Karl Rove's dream is for the Democratic Party and progressives to be divided. And what we want to do is create a community, a real movement, of Democrats, progressive Democrats, Nader supporters who are uniting around one common goal.

HENRY: A senior Kerry aide told CNN that the campaign is aware of the organization and said Democrats should remember what happened in 2000, but the Kerry aide stressed that the group is -- quote -- "completely independent of the campaign."

The group has already cut ads that it intends to run in swing states which feature former Nader voters who now regret their decision.

(BEGIN VIDEO CLIP, AD)

UNIDENTIFIED MALE: I feel I made a mistake.

(END VIDEO CLIP)

HENRY: They're pledging to raise as much money as it takes to slow Nader's impact in Florida, New Hampshire, Iowa, Oregon, Wisconsin, and New Mexico, as well as other tight states, where Nader could make the difference.

Recent state polls show the potential impact of Nader's candidacy. In Oregon, Bush and Kerry were tied at 45 percent in a recent poll, with Nader drawing 5 percent. In Pennsylvania, Bush leads Kerry in one poll by six points, with Nader drawing 8 percent. In New Jersey, an April poll showed Bush topping Kerry by four points, with Nader getting 5 percent. The group is also trying to create an online community of progressives who like Nader, but intend to on vote for Kerry, the Web site, TheNaderFactor.com.

(END VIDEOTAPE)

HENRY: Lou, this independent group is now in discussions with the Association of Trial Lawyers of America about trying to get that association to pay for these television ads. As you know, the trial lawyer lobby is one of the most powerful lobbies in Washington. They pour millions of dollars into Democratic campaigns in every election cycle.

If they were to get the trial lawyers on board, that would juice up this anti-Nader campaign. Also interesting to note that Democrats are very quietly enlisting the support of other lawyers to try to knock Nader off the ballot in key battleground states, all this pretty ironic given the fact that the consumer advocate has always been one of the best friends of the trial lawyers. But the trial lawyers are now privately saying that Nader is somebody who could once again prevent a Democrat from taking back the White House -- Lou.

DOBBS: And could it also not be that this focus on Nader could be harmful to Senator Kerry's chances?

HENRY: Oh, absolutely.

There are some Democrats who are privately wondering whether, if there's too much focus on Nader and if it becomes kind of an anti- Nader, a negative tone, that could also turn off Democratic voters and maybe get some people to swing back over to President Bush. So it is, obviously, a very tricky situation. That's why Senator Kerry was very careful in this meeting not to address directly the issue of whether or not Nader should get out. At least that's what Kerry's campaign said after the meeting, that that issue never came up.

I think Senator Kerry is tiptoeing a little bit here because he wants to be very careful about not annoying Nader more. They need to make sure that Nader does become anymore angry than he already is -- Lou.

DOBBS: Ed Henry, thank you very much, reporting from Washington.

Senator Kerry, many other Democrats are demanding President Bush take action against record high gasoline prices. Today, President Bush rejected calls to transfer oil from the Strategic Petroleum Reserve to the open market.

(BEGIN VIDEO CLIP) BUSH: We will not play politics with the Strategic Petroleum Reserve. That petroleum reserve is in place in case of major disruptions of energy supplies to the United States. The idea of emptying the Strategic Petroleum Reserve would put America in a dangerous position in the war on terror.

(END VIDEO CLIP)

DOBBS: My guest tonight is one of the several governors who sent a letter to the president asking him to help ease record high gasoline prices. Arizona's governor, Janet Napolitano, and her constituents have seen one of the biggest spikes in gasoline prices in the country. The average price of a gallon of gas there has jumped 54 cents since March, $2.13 today. Governor Napolitano also wants the federal government to investigate whether price gouging is to blame.

She joins us tonight from Phoenix.

Governor, good to have you with us.

GOV. JANET NAPOLITANO (D), ARIZONA: Thank you.

DOBBS: What do you think will be revealed by an investigation into price gouging?

NAPOLITANO: Well, price gouging is a term of art.

What I have said is that there needs to be an investigation directed by the president to one of his executive agencies into the pricing of gasoline in this country and whether or not the market remains competitive. Now, we've seen a reduction in the number of refineries. We've seen a reduction in the number of independents, which can put competitive price pressure on.

We know that half the price of a gallon of gas is related to the OPEC price. Now, that's a foreign policy issue as much as anything. But the next big jump is at the refinery and distribution level. And no one can give you accurate data on that. No one has really investigated that in a way to say, look, do we still have a market that is working, that is price competitive, so that Arizona and American consumers are not paying unduly high prices for a gallon of gas?

DOBBS: Governor, as you know, President Bush today blamed Congress for not passing his energy legislation. Your reaction?

NAPOLITANO: Well, the last time I looked, both houses of the Congress were controlled by the president's party. So I don't know quite what he's complaining about.

But we have a short term and a long-term issue. The short-term issue is to investigate now why this spike, why this high, and why so long. And the second issue is a more long-term one. What can we do on the supply side to make this market more competitive? What can we do on the demand side to alleviate our overdependence on Mideast oil?

(CROSSTALK)

NAPOLITANO: And both of those things need to be directed at the national level.

DOBBS: Both parties, as you know, Governor, for the past 24 years have, in fact, done little to encourage serious conservation. Our dependence on foreign oil has risen under both parties, administrations of both parties. Why should we believe that one party or the other now is about to get serious?

NAPOLITANO: Well, in a way, it shouldn't be a partisan issue. They don't check your voter registration when you fill up your tank at the gas station. But I think what we have...

DOBBS: They'll sure check it in November, governor.

NAPOLITANO: Yes. I think what we're seeing, clearly illustrated here, though, is gasoline prices going up inexorably and very suddenly with really no warning, and no clear explanation given at any level as to why.

You get kind of pablum responses, well, we have the Mideast situation and Venezuela. And oh, there is a refinery down in California. There's always a refinery down in California. But what you don't have is an in-depth exploration of the competitiveness in the market combined with a long-term strategy. And we need one.

DOBBS: Governor, I want to address one thing, you are amongst the governors whose have had the courage to order that state contracts could not go to companies outsourcing work for residents in your state. The Chamber of Commerce has accused you of being anti- business. Your reaction?

NAPOLITANO: Well, I'm very pro-business. I have great support in the business community. But we had -- this is the kind of situation we're dealing with where a call center that employed 250 people in Chandler, Arizona, closed and if those people were calling our Department of Economics Security to find out about their unemployment benefits, that call was being routed to India. And that kind of thing paid for by state tax dollars is something we've put a stop to.

DOBBS: Govern Napolitano, thank you for being with us here tonight.

Tomorrow tonight, Republican Governor Bill Owens of Colorado joins us. We'll be talking about many of the same issues that we addressed with Governor Napolitano, a partisan issue, if you will. Governor Owens says the president is doing all he can to stop rising gasoline prices. Again, he joins us tomorrow night. We hope you will as well.

Taking a look at your thoughts on whether the Bush administration should open the strategic oil reserve. Dan Jenkins of Naples, Florida, "Lou, the strategic oil reserves are for a national emergency, high gas prices are not a national emergency. William in Rolla, Missouri, "Lou, opening the strategic oil reserve is really for emergencies, such as losing the supply from the middle east. It is not to lower prices to fill the over-sized gas guzzling SUV's."

Paul Chaffy in Saint Charles, Missouri, "Lou, according to your poll, most Americans think the government should open the strategic petroleum reserves without realizing a real emergency. The price of gasoline is around $5.00 in European nations. We shouldn't complain."

E-mail us at loudobbs@CNN.com. We'll have quite a few more of your thoughts later in the broadcast.

Still ahead tonight, NASA's calculations coming up short, financial calculations. Fuzzy math in the space agency's accounting department. Congress investigating a suspicious money trail from a Washington-based bank to foreign governments. We'll have that report.

And is free trade good for this country? Some people say free trade creates jobs in this country. Others say free trade has destroyed American jobs. We'll meet two of them, Congresswoman Marcy Kaptur, Congressman Jim DeMint face off tonight.

(COMMERCIAL BREAK)

DOBBS: In January, President Bush outlined an ambitious new vision for NASA, including a manned mission to Mars. But since then, NASA's finances have been called into question, putting the entire space program into jeopardy. Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): NASA may be able to accomplish great feats in outer space, but financially, it is out of orbit. Among the findings by independent audit firm Price Waterhouse Coopers, $565 billion in accounting errors that stem from NASA's conversion to a new financial system, $2 billion in unaccounted funds and an insufficient audit trail.

GREG KUTZ, GENERAL ACCOUNTING OFFICE: If you think about an individual reconciling their checkbook to the monthly bank statement, they basically were not doing it during the last fiscal year.

EDWARD HUDGINS, CATO INSTITUTE: If this happened in the private sector, heads would roll. The board of directors would have cleaned out management, the investors would have said, no way are we going to put our money into this kind of an operation.

SYVESTER: This is not the first time NASA's finances have been called into question. The International Space Station is five times overbudget. The X-33, which was to replace the shuttle, cost taxpayers nearly $1 billion before being shelved. In a hearing on Capitol Hill, NASA's chief financial officer defended the agency and promised to track the unaccounted money.

GWEN BROWN, NASA CHIEF FINANCIAL OFFICER: I'm reconciling my checkbook for the last 5 years. And I will continue that until I'm able to get to a point where I am comfortable in knowing where each and every dime went.

SYLVESTER: But critics say NASA's culture, which was in part to blame for the Columbia disaster, is hindering the agency. There are 10 separate NASA centers, each with its own separate accounting department with little oversight from headquarters. Robert Walker, a member of the Moon to the Mars Commission, believes NASA's latest mission could be in jeopardy.

ROBERT WALKER, PRESIDENTIAL COMMISSION ON SPACE EXPLORATION: In order for NASA to sustain that kind of mission, it has to be credible, and particularly, its finances have to be credible. And what we see and hear is at the present time that credibility is lacking.

(END VIDEOTAPE)

SYLVESTER: Lawmakers are criticizing NASA to buying a billion dollar financial system that still cannot produce basic financial statements for Congress that's required by law. And the software used by the new accounting system is almost obsolete. It is no longer sold by the manufacturer, and tech support will not be available after 2012 -- Lou.

DOBBS: Lisa, it's too bad management in accounting departments don't have some rocket scientists. Thanks very much, Lisa Sylvester reporting from Washington.

Also on Capitol Hill today, the Senate Finance Committee took on the case of Riggs National Bank. The government has fined the bank billions of dollars for not reporting suspicious activity, including money laundering. Federal investigators are now insisting on further review of what they say may be a terrorist money trail. Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): What went wrong with Riggs? The Treasury Department hit the bank with a $25 million fine for not reporting suspicious transactions by foreign governments, including Saudi Arabia.

SEN. CHARLES GRASSLEY, (R) CHMN. FINANCE COMMITTEE: I think Riggs deserved every penny of the fine that they got. Basically, what they've been doing over a long period of time was not complying with the Bank Secrecy Act. And the Bank Secrecy Act is the act that is to protect us from the underworld and, in this particular case, now it's being applied to terrorism.

PILGRIM: Riggs a Washington-based bank with many embassies as clients. Federal regulators say it violated laws in a quote, "willful and systemic way." Riggs didn't report suspicious activity for years. What is particularly disturbing is Riggs didn't report hundreds of millions of dollars in suspicious financial transactions by Saudi Arabian clients. An outrage, especially after September 11. JONATHAN LEVIN, INVESTIGATIVE PROJECT: On September 11 the financial community has been much more aware, which in some sense, makes this very issue even more kind of disturbing that Riggs knows there is an issue, knows that there's been thoughts and discussion about Saudi connections to terrorism and nontheless is not filing its required reports.

PILGRIM: Riggs did not admit or deny guilt. But, they say, they are getting rid of many of their embassy clients because they are too risky.

WILLIAM FOX, U.S. TREASURY DEPT.: We're going to continue to watch Riggs. I think that's appropriate. I know the officer of the comptroller of currency is going to do that as well. We want to make sure that the systems they are putting in place are adequate to address the risks associated with their business as it is today.

PILGRIM: Riggs says going forward, it will limit exposure to countries with high levels of graft, or suspicion of money laundering.

(END VIDEOTAPE)

PILGRIM: Now, that's not good enough for either Congress or federal regulators. The Senate held hearings today on the issue. And FinCEN which is the law enforcement department of the Treasury will still aggressively monitor the Riggs accounts -- Lou.

DOBBS: The bank's chairman has resigned. The Treasury Department says that they have completely mishandled this, resisted, in fact, regulations. Why in the world is anyone in Congress, the Treasury, in any regulatory agency tolerating this nonsense?

PILGRIM: This is not going to go away. There are Senate investigations. The Federal Reserve is insisting on an independent auditor.

DOBBS: But Why aren't the regulators shutting and down and taking these people to task rigorously?

Are there political connections, here?

PILGRIM: There are some political connections, which the Saudi's are involved. There is a full investigation going on into the accounts. And there...

DOBBS: I'm talking about in terms of Democrats or Republicans?

PILGRIM: that's yet to be proven.

DOBBS: OK, Kitty Pilgrim, thank you very much. We'll follow this closely.

PILGRIM: I think everyone will.

DOBBS: I know you will. Thanks, Kitty. Still ahead, the debate over whether free trade creates jobs or kills jobs. Two members of Congress, distinctly opposing views face off next.

Also, our special report, "Made in America." Some of the finest shoes worn around the world are -- I hope my daughters are listening -- made right here in the U.S. of A.

(COMMERCIAL BREAK)

DOBBS: Now, "Made in America," our series of special reports recognizing companies that carry the made in the USA label. Tonight an American classic popular with discriminating businessmen worldwide. The Alden Shoe Company has been making shoes for more than a century. Every single pair made in New England.

Peter Viles reports from Middleborough, Massachusetts.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): If you ever want to go back in time, get a good map and find the Alden Shoe factory south of Boston where they make men's shoes as they did a century ago, by hand, one stitch at a time.

ART TARLOW, CEO, ALDEN SHOES: We're here to accomplish something, something that's a little bit special, and not common.

VILES: Nothing common about Alden Shoes. They're made with the finest leathers, including shelled cordova from Chicago, fashioned by a 100 craftsman, priced at $275 a pair and higher.

BRIAN COATS, FASHION EDITOR, GQ: They recognize what's important to their customer and, you know, to their customer, what's important is a classic, well-made shoe that's comfortable, and, you know, something that doesn't go out of style.

TARLOW: Hi, Walter, got some shoes to (UNINTELLIGIBLE)?

VILES: The CEO, Art Tarlow, is a throwback, a third generation shoe maker. His grandfather bought the company from Mr. Alden in '30s. His father invented the tassel loafer in the '50s. He says fine leather has character and shoes, if they're well made, they have personality and integrity. Could you outsource all of this? Of course, you could, as long as you don't care about the personality, character and the integrity.

TARLOW: We need to make this product where we can make it best. And we need to make it where we all are, and that means we're in New England.

VILES: Workers belong the Shoe Makers Union. Many have been here for decades.

SHIRLEY QUAGAN, ALDEN SHOE EMPLOYEE: I came here when I was 43, I'm 75 now. And I work eight hours a day. I started out cutting linings 14 years ago they decided I was boss material because I'm very well organized. I like it. They've been very, very good to me.

VILES (on camera): Shoe making has a rich history in New England. Alden believes it has a bright future. In fact, the company is a partner in a brand new shoe company up in Maine.

Peter Viles, CNN, Middleborough, Massachusetts.

(END VIDEOTAPE)

DOBBS: Where it's "Made in America."

That brings us to tonight's poll. The question tonight, do you believe free trade works for America? Yes or no. Cast your vote at cnn.com/lou. We'll have the results a little later in the broadcast.

Now, let's look at some of your thoughts on "Broken Borders."

Mike Mallory of Oregon says, "How Secure is the United States if people can cross the southern border in the amounts that they are doing? It's just a matter of time before terrorist start seeing how easy it is and exploiting it. Is that what it will take for us to enforce the laws of our land?

Oren Arends of New Lisbon, Wisconsin. Sorry about that pronunciation. "If we are to win the war in Iraq, we first need to close the borders.

William Latz in Austin, Texas, "I like many others am tired of hearing about what the next president is going to do about Iraq. I want to know what the next president is going to do about the United States of America."

Again, e-mail us at loudobb@cnn.com.

In tonight's "Face-off," two different views on the issue of free trade. The debate over free trade is intensifying as the United States is preparing to sign yet another agreement, this time with Central America.

Joining me now, Congressman Jim Demint, he's Republican from South Carolina who supports free trade and says the United States has actually, had a lack of trade agreements. He says more than 100,000 jobs have been created his states since NAFTA passed a decade ago.

And on the other side of the issue, Congresswoman Marcy Kaptur, Democrat of Ohio. She is against free trade saying it destroys American jobs, 3 million jobs over the past four years. They both join us from Washington, D.C. I know you both just finished a vote in the House. We thank you for rushing to get out here.

Let me start on the issue of the new CAFT agreement, the Central American Free Trade agreement.

Congressman Demint, why is this going to be any better -- more effective as a free trade agreement than, say, NAFTA? REP. JIM DEMINT (R), SOUTH CAROLINA: Lou, I'm surprised that the information is sometimes used on this show and with politicians. Our unemployment rate in this country is 1 percent lower than before NAFTA. And our manufacturing output has increased 40 percent. And we've got about 6.5 million jobs that are American job that is came from outsourcing of other countries. As you continue to talk about trade, let's just look at the facts. In South Carolina, we're expanding exports of 2.5 times the national average. And most of the jobs now in South Carolina and a quarter of the jobs in this country are dependent on exports. So I do believe that expanding our relationships in this hemisphere with the Central American countries will help us be competitive with the Asians, particularly in industries important to South Carolina like textiles.

DOBBS: Congresswoman Kaptur, your thoughts?

REP. MARCY KAPTUR (D), OHIO: My thoughts are from the statistics I've looked at, South Carolina has lost 250,000 jobs during the 1990s. And when you look at NAFTA as the template for the trade, we have gone into deeper deficit with Mexico and Canada since NAFTA signing. With all the jobs we've lost to Mexico and Canada, why would we want to expand it to CAFTA?

We ought to fix what's wrong with NAFTA and stop the hemorrhage of good jobs in this country. Over the last three years we've lost 3 million more jobs at an accelerating rate. Our standard of living is going down. People are losing their health insurance benefits. And even education is more unaffordable to our youth who want to go on to college. We have a huge trade deficit, which is actually a job deficit, and a huge growing budget deficit.

Our trade deficit with China, Mexico and Canada really has cost us millions and millions of jobs. We ought to have trade reciprocity, a balance, not these huge deficits.

DOBBS: Congressman.

DEMINT: Lou, I can assure you the sky not falling. There are more Americans working today than ever in our history. We are gaining more jobs from exporting. Certainly, jobs have always been changing. That's nothing new. We blamed it on the Japanese years ago and then Mexico. Mexico and Canada have become our second and third leading customer of South Carolina products. America has so much overcapacity if we don't sell to other nations, we're not going to be able to produce and have manufacturing in this country. I really think if you put the facts on the table, you will see that the only way to grow our economy in the future is to expand our exports. To do that, we have to become the best place in the world to do business. The problem is not trade. That's the opportunity. The problem is we make it too expensive to do business in this country through our tax code, our junk lawsuits, the cost of energy. You go down the list. It's 22 percent more expensive to do business in America. Not in China but our leading trading partners.

DOBBS: Congressman, I work hard to be neutral on these issues in our face-offs. I have to say this to you. We have not run a trade surplus in this country for 28 years.

DEMINT: I'm not saying we have a trade surplus.

DOBBS: I know you're not. I'm saying to you, we've had a massive trade deficit. What are we going to do about it?

DEMINT: South Carolina has a trade deficit with North Carolina and Georgia and New York.

DOBBS: Congressman, you're not going to compare a trade deficit among states of this nation to a trade deficit with, you just mentioned Mexico, with Canada, the European Union, China, Japan, a half a trillion dollars, Congressman.

DEMINT: We are the wealthiest country in the world and we buy more than these others.

REP. MARCY KAPTUR (D), OHIO: You know what's happening is we are exporting our jobs, not our products. The Congressman might have a few examples he can point to where they're exporting a little bit. The imports so dwarf the exports going out. If you look at the last month of job creation in this country, half of the 200,000 new jobs are temporary jobs with no benefits. They're part-time jobs with no benefits. They're service jobs, not jobs that produce real additional wealth for our country. So I think he's sort of not looking at the whole ledger. He's not looking at the imports, only at the exports of jobs, not products.

LEMINT: You are looking at the jobs lost, blaming it on trade. A lot of that is automation, lean manufacturing. Manufacturing output in this country has increased 40 percent...

KAPTUR: But that doesn't mean the jobs have increased. They're going elsewhere.

LEMINT: That's not a problem with trade. It is lean manufacturing, modernization. We're producing more with fewer people.

KAPTUR: Jim, what about when they move the jobs to Mexico, jobs from Ohio, jobs from South Carolina?

(CROSSTALK)

DOBBS: Congressman DeMint, Congresswoman Kaptur, we thank you very much for being here. We are absolutely out of time. We really do appreciate...

DEMINT: Let's come back and argue some more. The facts are on our side.

DOBBS: Come on back. There are plenty of facts to consider. Thank you both.

Tonight's thought is on America. "There is nothing wrong with America that faith, love of freedom, intelligence and energy of her citizens cannot cure." So said the 34th president of the United States, Dwight David Eisenhower.

Still ahead here. Workers of one company fighting back against the exporting of America.

(COMMERCIAL BREAK)

DOBBS: Stocks closed, little change on Wall Street today. The Dow down 30 points, the NASDAQ up a fraction. The S&P fell almost 3. Although the Dow had been up significantly as had the NASDAQ. Record- high gasoline prices as we reported showing no signs of falling. Christine Romans with that story -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Already record gasoline futures rose another 5 percent today. Supplies just not building fast enough to satisfy our demand for gasoline. That demand surged more than 4 percent in April but supply is 5 percent below the five-year average. Lou, trading data shows speculators have been heavy buyers in the futures markets. That makes this whole thing worse.

The government does expects $2.03 gasoline this summer. We're there. The summer driving season has yet to begin. As Americans are squeezed by the rise in gas prices, SBC workers are fighting against the exporting of America. 100,000 SBC workers are prepared to strike Friday for job security and benefits. The Communication Workers of America says 29,000 of its members have lost their jobs at SBC in the past three years, yet thousands of high tech SBC jobs have gone to India and The Philippines. Healthcare, pensions, wages also at issue. That strike scheduled to begin midnight on Friday. 13 states will be affected.

DOBBS: 13 states. Thank you very much, Christine.

Still ahead, the results of our poll. We continue in a moment.

(COMMERCIAL BREAK)

DOBBS: The results now of our poll. 15 percent of you say free trade works for America. 85 percent do not. That's our show for tonight. Thanks for being with us. Please join us tomorrow. Colorado governor Bill Owens will be here to tell us why he says tapping the Strategic Petroleum Reserve is not the answer to high gasoline prices.

Former deputy national security adviser James Steinberg says the United States should immediately set a date to pull out of Iraq. Please join us. For all us here, good night from New York. "Anderson Cooper 360" is next.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


Aired May 19, 2004 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
LOU DOBBS, CNN ANCHOR (voice-over): Tonight, the first court case in the Iraqi prisoner abuse scandal and a maximum jail sentence for the accused American soldier. We'll have reports from Baghdad and Capitol Hill.

GEN. JOHN ABIZAID, CMDR., U.S. CENTRAL COMMAND: Every officer is responsible for what his or her unit does or fails to do.

DOBBS: A bloodbath in Gaza, almost 20 Palestinians killed during an anti-Israeli protest. We'll have a report from Gaza and I'll talk with Diana Buttu, legal adviser to the PLO.

Record gasoline prices and rising political rhetoric. President Bush says he will not release oil from this country's emergency reserves.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We will not play politics with the Strategic Petroleum Reserve.

DOBBS: Arizona's governor, Janet Napolitano, wants the president to investigate the skyrocketing price of gasoline. She's our guest tonight.

And in "Face-Off," is free trade really good for America? Congressman Jim DeMint says free trade creates jobs. Congresswoman Marcy Kaptur says free trade has destroyed millions of American jobs.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Wednesday, May 19. Here now for an hour of news, debate and opinion is Lou Dobbs.

DOBBS: Good evening.

There was death and chaos in Gaza today when a Palestinian protest against Israel's new offensive in Rafah ended in massive bloodshed. An explosion in the middle of the demonstration killed at least 18 people. More than 50 others were wounded. The Palestinians accuse the Israelis of massacring civilians. The Israelis said Palestinian gunmen were hidden in the crowd.

Matthew Chance reports from Gaza.

(BEGIN VIDEOTAPE) MATTHEW CHANCE, CNN CORRESPONDENT (voice-over): On the march to Rafah, thousands of Palestinians walking into tragedy. It was a peaceful, if angry demonstration against Israel's military. Then came the response.

In the skies above, a single Israeli gunship launches flares at first to protect itself, then a rocket. Israeli officials confirm tanks also opened fire near the crowd. From the chaos, the dead and injured are carried off to hospitals already inundated in recent days. Among the casualties are unarmed civilians and a number of children, only the latest carnage, say Palestinian officials, that Israel's army has inflicted upon the people here.

GHASSAN KHATIB, PALESTINIAN LABOR MINISTER: But this most recent and most vicious Israeli crime of shelling by missiles a peaceful demonstration is an indicator to the real intentions of the Israeli army, which is simply trying to effect the maximum casualties of the Palestinian people, regardless whether they are civilians or otherwise.

CHANCE: From the Israeli government, an expression of deep sorrow for the loss of innocent life. But officials are insisting the rocket was aimed at open ground. It was meant to disburse the crowd, not kill them.

RA'ANAN GISSIN, SENIOR ADVISER TO ARIEL SHARON: This is a war zone. It's been a war zone for 3 1/2 years. And we have to conduct these operations with all the care that we take. Sometimes, the loss of life is unavoidable here. And sometimes they are staged. We know very well that the area where the incident occurred today was saturated with explosive charges, like in Jenin, placed before the crowd.

So we're investigating that possibility as well. Before you jump to a conclusion about a massacre or anything, allow us to exhaust the investigation. You can rest assured that all the information will be presented.

CHANCE: But there's been a mounting chorus of criticism of Israel and its tough military action in Rafah to destroy what it calls the terrorist infrastructure there. There are renewed calls, too, for international protection of Palestinians civilians here. The latest killings, say some, underline the pressing need for that.

(END VIDEOTAPE)

CHANCE: Well, Israel says it has launched a full investigation into what exactly happened here today. They're saying that the casualties could have been caused by a tank firing into what they believed was an abandoned building in an attempt to disburse the crowd, but that's not going to convince the very many Palestinians who believe that at least here in Gaza that Israel has abandoned all military restraint -- Lou.

DOBBS: Thank you very much. There was no condemnation of that violence from President Bush today when he talked publicly about the Israeli offensive. For the first time, President Bush simply called on Israel and the Palestinians to exercise restraint.

Elaine Quijano reports from the White House.

(BEGIN VIDEOTAPE)

ELAINE QUIJANO, CNN CORRESPONDENT (voice-over): As he's done before, President Bush repeated a call to both sides in the Israeli/Palestinian conflict to stop the violence.

BUSH: I continue to urge restraint. It is essential that people respect innocent life in order for us to achieve peace.

QUIJANO: What the president did not do was directly condemn Israel in the latest incident, an explosion on a road where hundreds of Palestinians were marching to protest Israel's crackdown in southern Gaza.

Palestinian officials say dozens of people, including children, were killed or wounded and they blamed Israel. But a top adviser to I'll Prime Minister Ariel Sharon said under its rules of engagement the Israeli military is not allowed to fire into a crowd. President Bush, speaking to reporters at a Cabinet meeting, said he needed clarification from the Israeli government and had not had a chance to be briefed.

BUSH: I will continue to speak out about the need for all parties to respect innocent life in the Middle East.

QUIJANO: Later, White House spokesman Scott McClellan said it wasn't clear how the deaths occurred, but that Israel expressed regret and was investigating.

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY: We want to know how this happened. It is a tragic event. And we are deeply concerned about it.

QUIJANO: European leaders went further, making clear their disapproval. In a written statement, the president of the European Council called Israel's action completely disproportionate to any threat faced by the Israeli military, adding that Israeli forces showed a reckless disregard for human life.

And at the United Nations, Secretary-General Kofi Annan called for Israel to immediately halt military operations in southern Gaza and strongly condemned the deaths of Palestinian protesters.

(on camera): The violence comes at a sensitive time for the White House as officials try to build support among Arab allies for the Iraq mission. At the same time, the president remains focused on trying to achieve his two-state solution to the Israeli/Palestinian conflict, an effort clearly undermined by this latest violence.

Elaine Quijano, CNN, the White House.

(END VIDEOTAPE)

DOBBS: And a short time ago, the United Nations Security Council passed a resolution condemning the killing of Palestinian civilians. The United States, usually a supporter of Israel at the United Nations, did not veto tonight's resolution. The Security Council passed the resolution by a vote of 14-0. The resolution also called on Israel to stop the demolition of Palestinian homes.

Later, I'll be talking with a legal adviser to the Palestine liberation organization. Diana Buttu will join us from Ramallah in the West Bank.

Tonight, there are conflicting reports about a U.S. air attack on an Iraqi village in which as many as 40 people were killed. The Pentagon said an airstrike destroyed a safe house for foreign fighters near the border with Syria after American troops came under fire. But a police chief in Iraqi town of Ramadi said the American aircraft fired on a wedding party. The police chief said between 42 and 45 people were killed in the attack. Local Iraqis said revelers fired weapons into the air in a traditional wedding celebration shortly before the airstrike.

In Baghdad today, the first court-martial in the Iraqi prisoner abuse scandal and the first sentence. A military court sentenced Specialist Jeremy Sivits to one year in jail. That's the maximum possible. Sivits apologized for taking pictures of Iraqi prisoners being humiliated by their guards.

Harris Whitbeck reports from Baghdad.

(BEGIN VIDEOTAPE)

HARRIS WHITBECK, CNN CORRESPONDENT (voice-over): Armored helicopters buzzed overhead. U.S. Army troops continuously marched by. This was the Baghdad setting for court-martial of Army Specialist Jeremy Sivits and the arraignment of three more soldiers, all accused of abusing and humiliating Iraqi detainees at Abu Ghraib prison.

In his court-martial, Sivits broke down twice as he pled guilty, describing the brutal beating some of the prisoners received and the acts of sexual humiliation the soldiers photographed. "It was wrong," he said. "It shouldn't have happened. I apologize to the Iraqi people and to the detainees. I apologize to the court, the Army, to my unit and to my family."

But contrition wasn't enough. Military prosecutors said: "These acts are horrendous, appalling and simply wrong. They took advantage of others who were vulnerable." The judge agreed. Sivits was sentenced to a year in prison, a reduction in rank and a bad conduct discharge. Three other soldiers were arraigned on similar charges of abuse. A date was set for a new pretrial hearing.

(on camera): While this trial has resulted in jail time for one soldier, it has not put the matter of prison abuse to rest. More courts-martial will be scheduled and it is expected more information will emerge on how far up the chain of command responsibility for the prison abuse lies.

Harris Whitbeck, CNN, Baghdad.

(END VIDEOTAPE)

DOBBS: An indication of that today. As the military court decided the fate of Specialist Sivits, the top general in Iraq today declared the prisoner abuse scandal will indeed be investigated all the way up the chain of command. General Ricardo Sanchez told a Senate committee his own conduct would be part of that investigation.

Pentagon correspondent Barbara Starr reports.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): Lieutenant General Ricardo Sanchez, commander of U.S. forces in Iraq, said he, too holds himself accountable for the abuse of Iraqi prisoners.

LT. GEN. RICARDO SANCHEZ, U.S. COMMANDER IN IRAQ: I accept responsibility for what happened at Abu Ghraib. And I accept as a solemn obligation the responsibility to ensure that it does not happen again.

STARR: But questions for General John Abizaid, the senior commander.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: How did it happen so long and so deep and we not know?

GEN. JOHN ABIZAID, CMDR., U.S. CENTRAL COMMAND: Well, I think there are failures in people doing their duty. There are failures in systems. And we should have known and we should have uncovered it and taken action before it got to the point that it got to.

STARR: Sanchez insisted his order last year for military intelligence to take some responsibility for prison operations did not involve the Pentagon and was not an order to soften up the detainees for interrogation through violence and sexual humiliation.

Major General Geoffrey miller, the new head of detainee operations, denied his recommendations for using military police to set the conditions for interrogation encouraged coercion of detainees. A report last November from the International Committee of the Red Cross containing abuse allegations was never seen at the highest levels.

ABIZAID: We've got a problem there that's got to be fixed.

STARR (on camera): Abizaid warned, the violence in Iraq will grow. He said it is now vital to name new Iraqi leaders to take over after June 30 and that it might be April of next year before the Iraqis are ready to provide law and order. Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

DOBBS: Still ahead here, a day of violence in Gaza, as Israel continues its offensive. Diana Buttu, the PLO's legal adviser, will join us.

Gasoline prices skyrocketing, politicians demanding action from the federal government, among them, Arizona's governor, Janet Napolitano. She's our guest tonight.

And Democrats launch a campaign to stop Ralph Nader, the independent candidate Democrats fear could cost Senator Kerry the presidential election.

(COMMERCIAL BREAK)

DOBBS: As we reported, Israel said its deadly two-day offensive in Gaza will continue. At least 18 Palestinians today were killed, many of them teenagers. Israel says the attacks are targeting terrorists located in Rafah.

My guest tonight, legal adviser to the PLO Diana Buttu joins us tonight from Ramallah in the West Bank.

Good to have you with us.

Your reactions to the violence today, the Israelis saying that there were gunmen, Palestinian gunmen, in the crowd.

DIANA BUTTU, PLO LEGAL ADVISER: Well, there's absolutely no evidence whatsoever that there were gunmen in the crowd. And even if there were, what Israel is basically saying is that it's OK to use missiles and to use tanks to disburse a peaceful demonstration, a demonstration that was simply designed to demonstrate and protest against Israel's demolition of the homes of 17,000 Palestinians in the Rafah area.

There was absolutely no threat to Israel or to Israel's soldiers or to Israeli civilians. But what Israel is constantly doing is massacring Palestinians and continually just targeting Palestinian civilians. It is about time that the international community step up to the plate and start not only condemning these actions, but beginning to ensure that international law is actually respected.

DOBBS: The United Nations condemned the violence today and called, as is the case over the past half century, for a cessation of violence. Is there, in your judgment, anything in the United Nations' action that can be helpful here?

BUTTU: Well, I'm hoping that the United States does more than simply condemn, that it actually begins to do things to act. I would like to see Israel prosecuted for war crimes, because what they are doing right now in terms of destruction of Palestinian homes are, in fact, war crimes. The killing of Palestinian civilians are war crimes. So I would like to see more than simply condemnation.

And I'm hoping that the United States -- the United Nations will step forward and actually act, rather than simply condemn.

DOBBS: The Likud rejected Ariel Sharon's plan to withdraw from Gaza. The prime minister of Israel is now working to come up with a new initiative. Can you give him any guidance as to what would be effective?

BUTTU: Yes.

I would tell the prime minister to simply withdraw completely from the Gaza Strip and allow the Palestinians to finally live in the freedom that they deserve to live in. He doesn't need to maintain any settlements or the military installations, the airspace, water, the borders, everything that he wants to control. It's time for Israel to simply withdraw from the territories, the West Bank and the Gaza Strip, and allow the Palestinians to live in freedom.

And it is when the Palestinians live in freedom that we'll begin to see peace in this area. And then I won't have to hear at 1:00 in the morning that Israel is firing missiles into another refugee camp in the Gaza Strip.

DOBBS: Diana, let me ask you this. The last time you and I talked, just over a month ago, you had said you thought the situation would get worse. And I was asking you about terrorism and the cycle of terrorism. What is your sense now?

BUTTU: I think it actually will get even -- deteriorate even further, unfortunately, Lou, because right now the United States has given Israel the green light to pretty much do whatever it wants. The United States is the only country so far who hasn't condemned Israel's actions today. It didn't vote in favor of the resolution. In fact, it abstained.

And I think that until Israel is given the red light to actually stop, then, unfortunately, you're going to see a much bloodier Middle East than we've seen for a long time.

DOBBS: Diana Buttu from Ramallah, thank you.

The Justice Department today said an 11-year-old Oklahoma girl will be allowed to wear her Muslim head scarf to school. The government sued Nashala Hearn's school district on her behalf after the district suspended her twice for wearing the head scarf. The Muskogee Public School District does not allow students to wear hats or any head covering. The district agreed to settle the lawsuit and allow exceptions to its dress code for religious clothing.

Turning overseas, India, the world's largest democracy, has a new prime minister tonight. Manmohan Singh took office after Sonia Gandhi, the head of the Congress Party, stepped aside. Gandhi dropped out after Hindu nationalists increased their attacks on Gandhi for being born in Italy. The Congress Party won a general election last week. Still ahead here, the two men hoping to take the White House from the president hold a friendly meeting in Washington. But behind the scenes, a new effort under way to make the campaign a two-man race. We'll have the latest from Washington.

Also, gasoline prices not only at record highs. They have spiked more than 20 percent in the past two months in some places. Arizona is one of them. And Arizona's governor, Janet Napolitano, is demanding an investigation of possible price gouging. She's our guest next.

(COMMERCIAL BREAK)

DOBBS: Democratic presidential candidate Senator John Kerry meeting with the man who, as some polls suggest and some savants suggest, could cost him the election. Independent candidate Ralph Nader met with Senator Kerry in Washington. That meeting comes as many Democrats are starting a campaign to stop Nader.

Ed Henry has the story from Washington.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): The new group called the National Progress Fund is being formed amid serious Democratic concerns that Nader could pull enough support in key states to tip them to President Bush and cost Kerry the election.

Former Howard Dean spokeswoman Tricia Enright is the president of the group.

TRICIA ENRIGHT, NATIONAL PROGRESS FUND: This is an effort to give Karl Rove his real nightmare, because, right now, Karl Rove's dream is for the Democratic Party and progressives to be divided. And what we want to do is create a community, a real movement, of Democrats, progressive Democrats, Nader supporters who are uniting around one common goal.

HENRY: A senior Kerry aide told CNN that the campaign is aware of the organization and said Democrats should remember what happened in 2000, but the Kerry aide stressed that the group is -- quote -- "completely independent of the campaign."

The group has already cut ads that it intends to run in swing states which feature former Nader voters who now regret their decision.

(BEGIN VIDEO CLIP, AD)

UNIDENTIFIED MALE: I feel I made a mistake.

(END VIDEO CLIP)

HENRY: They're pledging to raise as much money as it takes to slow Nader's impact in Florida, New Hampshire, Iowa, Oregon, Wisconsin, and New Mexico, as well as other tight states, where Nader could make the difference.

Recent state polls show the potential impact of Nader's candidacy. In Oregon, Bush and Kerry were tied at 45 percent in a recent poll, with Nader drawing 5 percent. In Pennsylvania, Bush leads Kerry in one poll by six points, with Nader drawing 8 percent. In New Jersey, an April poll showed Bush topping Kerry by four points, with Nader getting 5 percent. The group is also trying to create an online community of progressives who like Nader, but intend to on vote for Kerry, the Web site, TheNaderFactor.com.

(END VIDEOTAPE)

HENRY: Lou, this independent group is now in discussions with the Association of Trial Lawyers of America about trying to get that association to pay for these television ads. As you know, the trial lawyer lobby is one of the most powerful lobbies in Washington. They pour millions of dollars into Democratic campaigns in every election cycle.

If they were to get the trial lawyers on board, that would juice up this anti-Nader campaign. Also interesting to note that Democrats are very quietly enlisting the support of other lawyers to try to knock Nader off the ballot in key battleground states, all this pretty ironic given the fact that the consumer advocate has always been one of the best friends of the trial lawyers. But the trial lawyers are now privately saying that Nader is somebody who could once again prevent a Democrat from taking back the White House -- Lou.

DOBBS: And could it also not be that this focus on Nader could be harmful to Senator Kerry's chances?

HENRY: Oh, absolutely.

There are some Democrats who are privately wondering whether, if there's too much focus on Nader and if it becomes kind of an anti- Nader, a negative tone, that could also turn off Democratic voters and maybe get some people to swing back over to President Bush. So it is, obviously, a very tricky situation. That's why Senator Kerry was very careful in this meeting not to address directly the issue of whether or not Nader should get out. At least that's what Kerry's campaign said after the meeting, that that issue never came up.

I think Senator Kerry is tiptoeing a little bit here because he wants to be very careful about not annoying Nader more. They need to make sure that Nader does become anymore angry than he already is -- Lou.

DOBBS: Ed Henry, thank you very much, reporting from Washington.

Senator Kerry, many other Democrats are demanding President Bush take action against record high gasoline prices. Today, President Bush rejected calls to transfer oil from the Strategic Petroleum Reserve to the open market.

(BEGIN VIDEO CLIP) BUSH: We will not play politics with the Strategic Petroleum Reserve. That petroleum reserve is in place in case of major disruptions of energy supplies to the United States. The idea of emptying the Strategic Petroleum Reserve would put America in a dangerous position in the war on terror.

(END VIDEO CLIP)

DOBBS: My guest tonight is one of the several governors who sent a letter to the president asking him to help ease record high gasoline prices. Arizona's governor, Janet Napolitano, and her constituents have seen one of the biggest spikes in gasoline prices in the country. The average price of a gallon of gas there has jumped 54 cents since March, $2.13 today. Governor Napolitano also wants the federal government to investigate whether price gouging is to blame.

She joins us tonight from Phoenix.

Governor, good to have you with us.

GOV. JANET NAPOLITANO (D), ARIZONA: Thank you.

DOBBS: What do you think will be revealed by an investigation into price gouging?

NAPOLITANO: Well, price gouging is a term of art.

What I have said is that there needs to be an investigation directed by the president to one of his executive agencies into the pricing of gasoline in this country and whether or not the market remains competitive. Now, we've seen a reduction in the number of refineries. We've seen a reduction in the number of independents, which can put competitive price pressure on.

We know that half the price of a gallon of gas is related to the OPEC price. Now, that's a foreign policy issue as much as anything. But the next big jump is at the refinery and distribution level. And no one can give you accurate data on that. No one has really investigated that in a way to say, look, do we still have a market that is working, that is price competitive, so that Arizona and American consumers are not paying unduly high prices for a gallon of gas?

DOBBS: Governor, as you know, President Bush today blamed Congress for not passing his energy legislation. Your reaction?

NAPOLITANO: Well, the last time I looked, both houses of the Congress were controlled by the president's party. So I don't know quite what he's complaining about.

But we have a short term and a long-term issue. The short-term issue is to investigate now why this spike, why this high, and why so long. And the second issue is a more long-term one. What can we do on the supply side to make this market more competitive? What can we do on the demand side to alleviate our overdependence on Mideast oil?

(CROSSTALK)

NAPOLITANO: And both of those things need to be directed at the national level.

DOBBS: Both parties, as you know, Governor, for the past 24 years have, in fact, done little to encourage serious conservation. Our dependence on foreign oil has risen under both parties, administrations of both parties. Why should we believe that one party or the other now is about to get serious?

NAPOLITANO: Well, in a way, it shouldn't be a partisan issue. They don't check your voter registration when you fill up your tank at the gas station. But I think what we have...

DOBBS: They'll sure check it in November, governor.

NAPOLITANO: Yes. I think what we're seeing, clearly illustrated here, though, is gasoline prices going up inexorably and very suddenly with really no warning, and no clear explanation given at any level as to why.

You get kind of pablum responses, well, we have the Mideast situation and Venezuela. And oh, there is a refinery down in California. There's always a refinery down in California. But what you don't have is an in-depth exploration of the competitiveness in the market combined with a long-term strategy. And we need one.

DOBBS: Governor, I want to address one thing, you are amongst the governors whose have had the courage to order that state contracts could not go to companies outsourcing work for residents in your state. The Chamber of Commerce has accused you of being anti- business. Your reaction?

NAPOLITANO: Well, I'm very pro-business. I have great support in the business community. But we had -- this is the kind of situation we're dealing with where a call center that employed 250 people in Chandler, Arizona, closed and if those people were calling our Department of Economics Security to find out about their unemployment benefits, that call was being routed to India. And that kind of thing paid for by state tax dollars is something we've put a stop to.

DOBBS: Govern Napolitano, thank you for being with us here tonight.

Tomorrow tonight, Republican Governor Bill Owens of Colorado joins us. We'll be talking about many of the same issues that we addressed with Governor Napolitano, a partisan issue, if you will. Governor Owens says the president is doing all he can to stop rising gasoline prices. Again, he joins us tomorrow night. We hope you will as well.

Taking a look at your thoughts on whether the Bush administration should open the strategic oil reserve. Dan Jenkins of Naples, Florida, "Lou, the strategic oil reserves are for a national emergency, high gas prices are not a national emergency. William in Rolla, Missouri, "Lou, opening the strategic oil reserve is really for emergencies, such as losing the supply from the middle east. It is not to lower prices to fill the over-sized gas guzzling SUV's."

Paul Chaffy in Saint Charles, Missouri, "Lou, according to your poll, most Americans think the government should open the strategic petroleum reserves without realizing a real emergency. The price of gasoline is around $5.00 in European nations. We shouldn't complain."

E-mail us at loudobbs@CNN.com. We'll have quite a few more of your thoughts later in the broadcast.

Still ahead tonight, NASA's calculations coming up short, financial calculations. Fuzzy math in the space agency's accounting department. Congress investigating a suspicious money trail from a Washington-based bank to foreign governments. We'll have that report.

And is free trade good for this country? Some people say free trade creates jobs in this country. Others say free trade has destroyed American jobs. We'll meet two of them, Congresswoman Marcy Kaptur, Congressman Jim DeMint face off tonight.

(COMMERCIAL BREAK)

DOBBS: In January, President Bush outlined an ambitious new vision for NASA, including a manned mission to Mars. But since then, NASA's finances have been called into question, putting the entire space program into jeopardy. Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): NASA may be able to accomplish great feats in outer space, but financially, it is out of orbit. Among the findings by independent audit firm Price Waterhouse Coopers, $565 billion in accounting errors that stem from NASA's conversion to a new financial system, $2 billion in unaccounted funds and an insufficient audit trail.

GREG KUTZ, GENERAL ACCOUNTING OFFICE: If you think about an individual reconciling their checkbook to the monthly bank statement, they basically were not doing it during the last fiscal year.

EDWARD HUDGINS, CATO INSTITUTE: If this happened in the private sector, heads would roll. The board of directors would have cleaned out management, the investors would have said, no way are we going to put our money into this kind of an operation.

SYVESTER: This is not the first time NASA's finances have been called into question. The International Space Station is five times overbudget. The X-33, which was to replace the shuttle, cost taxpayers nearly $1 billion before being shelved. In a hearing on Capitol Hill, NASA's chief financial officer defended the agency and promised to track the unaccounted money.

GWEN BROWN, NASA CHIEF FINANCIAL OFFICER: I'm reconciling my checkbook for the last 5 years. And I will continue that until I'm able to get to a point where I am comfortable in knowing where each and every dime went.

SYLVESTER: But critics say NASA's culture, which was in part to blame for the Columbia disaster, is hindering the agency. There are 10 separate NASA centers, each with its own separate accounting department with little oversight from headquarters. Robert Walker, a member of the Moon to the Mars Commission, believes NASA's latest mission could be in jeopardy.

ROBERT WALKER, PRESIDENTIAL COMMISSION ON SPACE EXPLORATION: In order for NASA to sustain that kind of mission, it has to be credible, and particularly, its finances have to be credible. And what we see and hear is at the present time that credibility is lacking.

(END VIDEOTAPE)

SYLVESTER: Lawmakers are criticizing NASA to buying a billion dollar financial system that still cannot produce basic financial statements for Congress that's required by law. And the software used by the new accounting system is almost obsolete. It is no longer sold by the manufacturer, and tech support will not be available after 2012 -- Lou.

DOBBS: Lisa, it's too bad management in accounting departments don't have some rocket scientists. Thanks very much, Lisa Sylvester reporting from Washington.

Also on Capitol Hill today, the Senate Finance Committee took on the case of Riggs National Bank. The government has fined the bank billions of dollars for not reporting suspicious activity, including money laundering. Federal investigators are now insisting on further review of what they say may be a terrorist money trail. Kitty Pilgrim reports.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): What went wrong with Riggs? The Treasury Department hit the bank with a $25 million fine for not reporting suspicious transactions by foreign governments, including Saudi Arabia.

SEN. CHARLES GRASSLEY, (R) CHMN. FINANCE COMMITTEE: I think Riggs deserved every penny of the fine that they got. Basically, what they've been doing over a long period of time was not complying with the Bank Secrecy Act. And the Bank Secrecy Act is the act that is to protect us from the underworld and, in this particular case, now it's being applied to terrorism.

PILGRIM: Riggs a Washington-based bank with many embassies as clients. Federal regulators say it violated laws in a quote, "willful and systemic way." Riggs didn't report suspicious activity for years. What is particularly disturbing is Riggs didn't report hundreds of millions of dollars in suspicious financial transactions by Saudi Arabian clients. An outrage, especially after September 11. JONATHAN LEVIN, INVESTIGATIVE PROJECT: On September 11 the financial community has been much more aware, which in some sense, makes this very issue even more kind of disturbing that Riggs knows there is an issue, knows that there's been thoughts and discussion about Saudi connections to terrorism and nontheless is not filing its required reports.

PILGRIM: Riggs did not admit or deny guilt. But, they say, they are getting rid of many of their embassy clients because they are too risky.

WILLIAM FOX, U.S. TREASURY DEPT.: We're going to continue to watch Riggs. I think that's appropriate. I know the officer of the comptroller of currency is going to do that as well. We want to make sure that the systems they are putting in place are adequate to address the risks associated with their business as it is today.

PILGRIM: Riggs says going forward, it will limit exposure to countries with high levels of graft, or suspicion of money laundering.

(END VIDEOTAPE)

PILGRIM: Now, that's not good enough for either Congress or federal regulators. The Senate held hearings today on the issue. And FinCEN which is the law enforcement department of the Treasury will still aggressively monitor the Riggs accounts -- Lou.

DOBBS: The bank's chairman has resigned. The Treasury Department says that they have completely mishandled this, resisted, in fact, regulations. Why in the world is anyone in Congress, the Treasury, in any regulatory agency tolerating this nonsense?

PILGRIM: This is not going to go away. There are Senate investigations. The Federal Reserve is insisting on an independent auditor.

DOBBS: But Why aren't the regulators shutting and down and taking these people to task rigorously?

Are there political connections, here?

PILGRIM: There are some political connections, which the Saudi's are involved. There is a full investigation going on into the accounts. And there...

DOBBS: I'm talking about in terms of Democrats or Republicans?

PILGRIM: that's yet to be proven.

DOBBS: OK, Kitty Pilgrim, thank you very much. We'll follow this closely.

PILGRIM: I think everyone will.

DOBBS: I know you will. Thanks, Kitty. Still ahead, the debate over whether free trade creates jobs or kills jobs. Two members of Congress, distinctly opposing views face off next.

Also, our special report, "Made in America." Some of the finest shoes worn around the world are -- I hope my daughters are listening -- made right here in the U.S. of A.

(COMMERCIAL BREAK)

DOBBS: Now, "Made in America," our series of special reports recognizing companies that carry the made in the USA label. Tonight an American classic popular with discriminating businessmen worldwide. The Alden Shoe Company has been making shoes for more than a century. Every single pair made in New England.

Peter Viles reports from Middleborough, Massachusetts.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): If you ever want to go back in time, get a good map and find the Alden Shoe factory south of Boston where they make men's shoes as they did a century ago, by hand, one stitch at a time.

ART TARLOW, CEO, ALDEN SHOES: We're here to accomplish something, something that's a little bit special, and not common.

VILES: Nothing common about Alden Shoes. They're made with the finest leathers, including shelled cordova from Chicago, fashioned by a 100 craftsman, priced at $275 a pair and higher.

BRIAN COATS, FASHION EDITOR, GQ: They recognize what's important to their customer and, you know, to their customer, what's important is a classic, well-made shoe that's comfortable, and, you know, something that doesn't go out of style.

TARLOW: Hi, Walter, got some shoes to (UNINTELLIGIBLE)?

VILES: The CEO, Art Tarlow, is a throwback, a third generation shoe maker. His grandfather bought the company from Mr. Alden in '30s. His father invented the tassel loafer in the '50s. He says fine leather has character and shoes, if they're well made, they have personality and integrity. Could you outsource all of this? Of course, you could, as long as you don't care about the personality, character and the integrity.

TARLOW: We need to make this product where we can make it best. And we need to make it where we all are, and that means we're in New England.

VILES: Workers belong the Shoe Makers Union. Many have been here for decades.

SHIRLEY QUAGAN, ALDEN SHOE EMPLOYEE: I came here when I was 43, I'm 75 now. And I work eight hours a day. I started out cutting linings 14 years ago they decided I was boss material because I'm very well organized. I like it. They've been very, very good to me.

VILES (on camera): Shoe making has a rich history in New England. Alden believes it has a bright future. In fact, the company is a partner in a brand new shoe company up in Maine.

Peter Viles, CNN, Middleborough, Massachusetts.

(END VIDEOTAPE)

DOBBS: Where it's "Made in America."

That brings us to tonight's poll. The question tonight, do you believe free trade works for America? Yes or no. Cast your vote at cnn.com/lou. We'll have the results a little later in the broadcast.

Now, let's look at some of your thoughts on "Broken Borders."

Mike Mallory of Oregon says, "How Secure is the United States if people can cross the southern border in the amounts that they are doing? It's just a matter of time before terrorist start seeing how easy it is and exploiting it. Is that what it will take for us to enforce the laws of our land?

Oren Arends of New Lisbon, Wisconsin. Sorry about that pronunciation. "If we are to win the war in Iraq, we first need to close the borders.

William Latz in Austin, Texas, "I like many others am tired of hearing about what the next president is going to do about Iraq. I want to know what the next president is going to do about the United States of America."

Again, e-mail us at loudobb@cnn.com.

In tonight's "Face-off," two different views on the issue of free trade. The debate over free trade is intensifying as the United States is preparing to sign yet another agreement, this time with Central America.

Joining me now, Congressman Jim Demint, he's Republican from South Carolina who supports free trade and says the United States has actually, had a lack of trade agreements. He says more than 100,000 jobs have been created his states since NAFTA passed a decade ago.

And on the other side of the issue, Congresswoman Marcy Kaptur, Democrat of Ohio. She is against free trade saying it destroys American jobs, 3 million jobs over the past four years. They both join us from Washington, D.C. I know you both just finished a vote in the House. We thank you for rushing to get out here.

Let me start on the issue of the new CAFT agreement, the Central American Free Trade agreement.

Congressman Demint, why is this going to be any better -- more effective as a free trade agreement than, say, NAFTA? REP. JIM DEMINT (R), SOUTH CAROLINA: Lou, I'm surprised that the information is sometimes used on this show and with politicians. Our unemployment rate in this country is 1 percent lower than before NAFTA. And our manufacturing output has increased 40 percent. And we've got about 6.5 million jobs that are American job that is came from outsourcing of other countries. As you continue to talk about trade, let's just look at the facts. In South Carolina, we're expanding exports of 2.5 times the national average. And most of the jobs now in South Carolina and a quarter of the jobs in this country are dependent on exports. So I do believe that expanding our relationships in this hemisphere with the Central American countries will help us be competitive with the Asians, particularly in industries important to South Carolina like textiles.

DOBBS: Congresswoman Kaptur, your thoughts?

REP. MARCY KAPTUR (D), OHIO: My thoughts are from the statistics I've looked at, South Carolina has lost 250,000 jobs during the 1990s. And when you look at NAFTA as the template for the trade, we have gone into deeper deficit with Mexico and Canada since NAFTA signing. With all the jobs we've lost to Mexico and Canada, why would we want to expand it to CAFTA?

We ought to fix what's wrong with NAFTA and stop the hemorrhage of good jobs in this country. Over the last three years we've lost 3 million more jobs at an accelerating rate. Our standard of living is going down. People are losing their health insurance benefits. And even education is more unaffordable to our youth who want to go on to college. We have a huge trade deficit, which is actually a job deficit, and a huge growing budget deficit.

Our trade deficit with China, Mexico and Canada really has cost us millions and millions of jobs. We ought to have trade reciprocity, a balance, not these huge deficits.

DOBBS: Congressman.

DEMINT: Lou, I can assure you the sky not falling. There are more Americans working today than ever in our history. We are gaining more jobs from exporting. Certainly, jobs have always been changing. That's nothing new. We blamed it on the Japanese years ago and then Mexico. Mexico and Canada have become our second and third leading customer of South Carolina products. America has so much overcapacity if we don't sell to other nations, we're not going to be able to produce and have manufacturing in this country. I really think if you put the facts on the table, you will see that the only way to grow our economy in the future is to expand our exports. To do that, we have to become the best place in the world to do business. The problem is not trade. That's the opportunity. The problem is we make it too expensive to do business in this country through our tax code, our junk lawsuits, the cost of energy. You go down the list. It's 22 percent more expensive to do business in America. Not in China but our leading trading partners.

DOBBS: Congressman, I work hard to be neutral on these issues in our face-offs. I have to say this to you. We have not run a trade surplus in this country for 28 years.

DEMINT: I'm not saying we have a trade surplus.

DOBBS: I know you're not. I'm saying to you, we've had a massive trade deficit. What are we going to do about it?

DEMINT: South Carolina has a trade deficit with North Carolina and Georgia and New York.

DOBBS: Congressman, you're not going to compare a trade deficit among states of this nation to a trade deficit with, you just mentioned Mexico, with Canada, the European Union, China, Japan, a half a trillion dollars, Congressman.

DEMINT: We are the wealthiest country in the world and we buy more than these others.

REP. MARCY KAPTUR (D), OHIO: You know what's happening is we are exporting our jobs, not our products. The Congressman might have a few examples he can point to where they're exporting a little bit. The imports so dwarf the exports going out. If you look at the last month of job creation in this country, half of the 200,000 new jobs are temporary jobs with no benefits. They're part-time jobs with no benefits. They're service jobs, not jobs that produce real additional wealth for our country. So I think he's sort of not looking at the whole ledger. He's not looking at the imports, only at the exports of jobs, not products.

LEMINT: You are looking at the jobs lost, blaming it on trade. A lot of that is automation, lean manufacturing. Manufacturing output in this country has increased 40 percent...

KAPTUR: But that doesn't mean the jobs have increased. They're going elsewhere.

LEMINT: That's not a problem with trade. It is lean manufacturing, modernization. We're producing more with fewer people.

KAPTUR: Jim, what about when they move the jobs to Mexico, jobs from Ohio, jobs from South Carolina?

(CROSSTALK)

DOBBS: Congressman DeMint, Congresswoman Kaptur, we thank you very much for being here. We are absolutely out of time. We really do appreciate...

DEMINT: Let's come back and argue some more. The facts are on our side.

DOBBS: Come on back. There are plenty of facts to consider. Thank you both.

Tonight's thought is on America. "There is nothing wrong with America that faith, love of freedom, intelligence and energy of her citizens cannot cure." So said the 34th president of the United States, Dwight David Eisenhower.

Still ahead here. Workers of one company fighting back against the exporting of America.

(COMMERCIAL BREAK)

DOBBS: Stocks closed, little change on Wall Street today. The Dow down 30 points, the NASDAQ up a fraction. The S&P fell almost 3. Although the Dow had been up significantly as had the NASDAQ. Record- high gasoline prices as we reported showing no signs of falling. Christine Romans with that story -- Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Already record gasoline futures rose another 5 percent today. Supplies just not building fast enough to satisfy our demand for gasoline. That demand surged more than 4 percent in April but supply is 5 percent below the five-year average. Lou, trading data shows speculators have been heavy buyers in the futures markets. That makes this whole thing worse.

The government does expects $2.03 gasoline this summer. We're there. The summer driving season has yet to begin. As Americans are squeezed by the rise in gas prices, SBC workers are fighting against the exporting of America. 100,000 SBC workers are prepared to strike Friday for job security and benefits. The Communication Workers of America says 29,000 of its members have lost their jobs at SBC in the past three years, yet thousands of high tech SBC jobs have gone to India and The Philippines. Healthcare, pensions, wages also at issue. That strike scheduled to begin midnight on Friday. 13 states will be affected.

DOBBS: 13 states. Thank you very much, Christine.

Still ahead, the results of our poll. We continue in a moment.

(COMMERCIAL BREAK)

DOBBS: The results now of our poll. 15 percent of you say free trade works for America. 85 percent do not. That's our show for tonight. Thanks for being with us. Please join us tomorrow. Colorado governor Bill Owens will be here to tell us why he says tapping the Strategic Petroleum Reserve is not the answer to high gasoline prices.

Former deputy national security adviser James Steinberg says the United States should immediately set a date to pull out of Iraq. Please join us. For all us here, good night from New York. "Anderson Cooper 360" is next.

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