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Lou Dobbs Tonight

Kerry Set to Announce Running Mate; American Fighter Jets Launch Attack on Insurgents in Fallujah

Aired July 05, 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.


KITTY PILGRIM, GUEST HOST: Tonight, a Democratic official tells CNN that Senator Kerry has made a decision on his running mate, and the announcement will come soon.
Senator Kerry is saying nothing in public about his choice. Senator Kerry's possible running mates are also keeping silent.

(BEGIN VIDEO CLIP)

SEN. JOHN F. KERRY (D-MA), PRESIDENTIAL CANDIDATE: I don't know anything. I'm just glad to be here.

PILGRIM: Iraq delays a controversial plan to offer amnesty to some insurgents. U.S. fighter jets launch a new strike against an insurgent stronghold. Daniel Pipes, director of the Middle East Forum, is my guest.

California signs a deal with a company that specializes in exporting jobs to cheap overseas labor markets. Critics say state- funded jobs could soon be shipped overseas.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The State of California, 35 million people, should not be legitimatizing the use of outsourcers.

(END VIDEO CLIP)

PILGRIM: And made in America. Our celebration of companies that choose to manufacture their products in this country. Tonight, a special report on a firm that's been making knives in the United States for 115 years.

ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, July 5. Here now for an hour of news, debate and opinion, sitting in for Lou Dobbs, who's on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

Tonight, Senator John Kerry may be close to making one of the most important announcements of his campaign: his running mate. The Kerry campaign says the senator has not decided yet who will join him on the ticket, but the decision may be imminent.

Congressional Correspondent Joe Johns is traveling with Senator Kerry in Pittsburgh. Joe, what's the latest?

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT: Kitty, Kerry seems to be keeping with the story he has been telling for the last several days. Just a few minutes ago, speaking to a local television interviewer, he said, "I have no comment at all in the public press. I don't know how people are reporting some of the things they are. I'll just tell you I've not made a decision at this point in time, and I'm going to continue to keep it a private and personal process until I announce it publicly."

Now Kerry earlier today attended a picnic with his wife at their farm in suburban Pittsburgh. With speculation raging about that VP pick, the campaign is officially sticking to the story that he has not made up his mind. However, he did talk just a little bit about a rally that is scheduled here in downtown Pittsburgh for tomorrow morning, which led to even more speculation.

Let's listen to what he had to say.

(BEGIN VIDEO CLIP)

KERRY: I'm heading to out to Indianapolis to give a speech tomorrow, but, before I go, we're going to do a little rally here in Pittsburgh in Market Square. So, if any of you can make it, I'm told the gates open at 7:00 in the morning, if you're up at that hour. But, at 9:00 tomorrow, we're going to have some fun, and then we'll head out to the Midwest again and back on the trail.

(END VIDEO CLIP)

JOHNS: Now a Democratic official who has spoken with Kerry has told CNN that he has, in fact, made up his mind and may announce that choice very soon. Still, the campaign has not changed any plans, given any indication that it's going to do anything differently.

He is supposed to go out to Indianapolis this week. He's also supposed to go to Ohio for a couple stops there -- Kitty.

PILGRIM: All right. Sounds like an early morning to you. Thanks.

Joe Johns.

Fear of a terrorist attack over the Fourth of July holiday has dominated the attention of counterterrorism experts for months, and now that attention will shift. The Democratic National Convention begins just three weeks from today.

And joining us tonight from Washington is Justice Correspondent Kelli Arena.

Kelli, what are the biggest concerns surrounding the convention at this point?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Kitty, officials say that the conventions make very inviting targets, and that's because of the symbolism involved and the large number of influential people who will be on hand. And security, as you can well imagine, is very tight in both Boston and New York City.

And terrorism experts say that a complicated attack would probably be very hard to pull off under those conditions. They say what's more likely is a conventional attack, like a truck bomb or a suicide bomber strapped with explosives, and so that, at this point, I think, is the biggest concern.

PILGRIM: Kelli, the FBI started to conduct interviews. What are they hoping to learn about that?

ARENA: Well, the -- after the FBI formed a task force to deal very specifically with this current threat information, agents did begin conducting interviews with individuals that they say may have information about possible operatives or possible attack plans.

Now there have only been a couple of interviews --- a handful -- conducted, according to officials, and more are expected toward the end of the month, as more intelligence is scrutinized. So that's -- it's very early in that process, Kitty.

PILGRIM: What has been the reaction of the Arab-American community to these interviews in all of this?

ARENA: Well, some groups that represent Muslims and Arab- Americans are very concerned about any sort of profiling. Even though the FBI says that these interviews will be intelligence-driven, those groups suspect that there will be a targeting of Muslim communities and individuals as part of this effort, which they say has not yielded results in the past and won't now, and it just causes more mistrust of law enforcement at a time that cooperation between the law-enforcement community and the Muslim community is essential.

PILGRIM: Kelli, is there any indication what intelligence officials are looking for? How do they know how to identify a suspected terrorist?

ARENA: Well, unfortunately, there's no pat answer to that question, and, in fact, terrorism experts say that the task has really gotten much harder because al Qaeda continues to adapt to the new security measures that the United States puts in place.

Now they say that al Qaeda is trying to recruit U.S. citizens, women, Europeans, people who will blend in with society here and won't draw any extra scrutiny. So it's very, very difficult to put a label on exactly what they're looking for. Of course, prior intelligence on an individual is always a good place to start.

PILGRIM: All right. Thanks very much.

Kelli Arena.

Turning to concerns about violence overseas, Iraq's interim government has delayed the announcement of a controversial amnesty plan for insurgents, and, also today, American fighter planes launched a new attack on insurgents in Fallujah.

Jane Arraf reports from Baghdad.

(BEGIN VIDEOTAPE)

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: U.S.-led forces say they dropped six bombs on a house in Fallujah that they believe is a Zarqawi network safehouse.

(voice-over): A senior U.S. military official tells us that the targets were suspected suicide bombers. The strikes involved four 500-pound bombs and two 1,000-pound bombs. At least eight people were killed, including one woman and at least three children.

Angry residents at the scene said they were not terrorists in the house, they were an ordinary family, and they pledged revenge against the interim prime minister Iyad Allawi and against the U.S.-led forces that are launching these air strikes.

It's the fifth similar strike in two weeks, and the U.S. says it's an indication that they are making headway against the Zarqawi network. In an unprecedented statement from the prime minister, Iyad Allawi made clear that this was not just a U.S. mission, that it was a joint operation that relied on Iraqi security intelligence information, and he said Iraq as a sovereign nation pledged to weed out these terrorists, to hunt them down and kill them one by one, and he called on Iraqis to provide information to help him do that.

He's also planning other security measures. A national security plan expected to be announced that would include measures allowing the new interim government greater powers of detention, the power to impose curfews and to mobilize the Iraqi armed forces. That was along with a proposal that would provide amnesty to lower-level insurgents.

Officials say they're working out the fine details, including how to guarantee human rights that Iraq, as a sovereign nation, has committed to.

Jane Arraf, CNN, reporting from Baghdad.

(END VIDEOTAPE)

PILGRIM: An Arab television network today said insurgents have not killed a U.S. Marine being held hostage in Iraq. Al Jazerra television said insurgents have taken Corporal Wassef Hassoun to," a place of safety," after a different militant group denied it had killed the Marine.

Rusty Dornin reports from near the Marine's home in West Jordan, Utah -- Rusty.

RUSTY DORNIN, CNN CORRESPONDENT: Well, Kitty, this family has been quite literally been to hell and back over the last week.

First, of course, they saw the video, heard he was captured. Then, on Saturday, they heard an unconfirmed report he was killed. On Sunday, a group denied they had killed him. And on Monday, they hear he's released.

The key emotion here is high anxiety, and, as a cousin of Corporal Hassoun, Tarek Nosseir, came out and told reporters a short time ago the family still doesn't really what's going on.

(BEGIN VIDEO CLIP)

TAREK NOSSEIR, HASSOUN FAMILY SPOKESMAN: We pray that the news of his safe release is true. If he is still in captivity, we remind the captors of the saying of our beloved prophet (unintelligible), be merciful to those on earth, mercy will come -- will descend upon you from heaven.

(END VIDEO CLIP)

DORNIN: The family spokesman would not take any questions from reporters.

All weekend long, family, friends, loved ones, neighbors, even a corporal from the Army came by to drop off notes of support, balloons, flowers, and that sort of thing. The whole community has really been trying to show their support for this family.

Now I did speak to someone close to the family before this news conference who said that it was very disturbing in this message when they talked about him being taken to a place of safety. They wanted to know, you know, what does that mean. It still doesn't give them any kind of assurance.

Also, of course, that message was followed by that he was taken to a place of return after he announced that he was forgiven and determined not to return to U.S. armed forces.

But, until we receive some kind of confirmed report, we see a video, we still do not know the fate of Corporal Wassef Hassoun -- Kitty.

PILGRIM: All right. Thanks very much.

Rusty Dornin.

Central Command today ordered the families of U.S. military personnel in Bahrain to leave the country within days. The military says there is "credible intelligence" that terrorists are planning to attack Americans in that country. Bahrain is an island state in the Persian Gulf and the headquarters of the U.S. Navy's Fifth Fleet. The departure order affects about 650 military dependents, but there are also no plans to withdraw any military personnel.

Still to come, the Iraqi government wants a limited amnesty for insurgents, and my guest says it could take decades to achieve reconciliation in Iraq. I will be joined by Daniel Pipes, director of the Middle East forum.

Senator John Kerry could soon announce his choice as running mate, and I will talk about Senator Kerry's options with two of the country's top political journalists.

And in Exporting America tonight, fears that thousands of taxpayer-funded jobs in California could soon be shipped overseas. We'll have a special report.

(COMMERCIAL BREAK)

PILGRIM: The Iraqi government today postponed the announcement of a limited amnesty for insurgents. The Iraqi prime minister, Iyad Allawi, hopes that an amnesty would weaken the ties between supporters of Saddam Hussein and the insurgent leaders. Iraqi officials say about 5,000 insurgents would be eligible for the amnesty, and, in return, those insurgents would have to provide information to Iraqi security forces.

Joining me now from Philadelphia is Daniel Pipes, director of the Middle East Forum.

And thanks very much for joining us tonight, Mr. Pipes. How do you assess the amnesty offer?

DANIEL PIPES, MIDDLE EAST FORUM: Well, Kitty, it's a very messy situation in Iraq, and it is hard from a distance to judge exactly what's taking place on the ground, but I think a move like this, a flexible move like this, is a good sign. We are hoping that Iraqis will come together rather than fight and have a civil war.

So, in principle, it's a good idea, but the terms of it are very important in that it actually lead to a change of actions, that the former insurgents no longer fight the government, provide intelligence. All that is critical.

PILGRIM: The quid pro quo is very critical, and it could go awry if not enough is offered, right?

PIPES: It could, indeed, go awry. In other words, I think in principle it's a good idea. Let's look at the details, let's look at the actual operation before we can judge it.

PILGRIM: Now, in your opinion, do you think it should include Muqtada al-Sadr, if there's a sort of limited amnesty?

PIPES: In principle, I'm not against it because I think, if he were to come into the fold, it would be advantageous. To keep him -- force him to stay outside and lead an insurrection is not a great idea.

PILGRIM: Nevertheless, he's been highly disruptive, and I think that would be a euphemism. It would be hard to reconcile what he's been doing with complete amnesty, wouldn't it?

PIPES: No question, but I think my attitude towards Iraq today is that we shouldn't have standards that are too high. This is a country that's come out of three decades of horrible conditions, and there are a lot of unsettled problems, a lot of tensions, and what we should do from the outside is encourage Iraqis to come together, to work together, to work for the long haul to improve their condition. We can't expect immediate democracy, we can't expect immediate free market, we can't expect free speech. These things are premature at this point.

PILGRIM: Let me refer back to something that you wrote in the "New York Sun" on April 27, and it was a quote that says that Iraq should not -- here it is, "Iraq made a democratically" -- no, here we are. Here's the right one, "The U.S. cannot be -- cannot have a free Iraq but an Iraq that does not endanger Americans." A free Iraq seems like it was the ultimate goal of the coalition going in. Do you think that was too ambitious?

PIPES: I think for the long term, it's a great ambition, but, for now, it's too ambitious. We should settle for something that is not dangerous to the Iraqi people, to the neighborhood, or to ourselves. For the long term, we should aspire to something higher, grander, but, for the short term, you know, democracy, freedom, these things are too much right away. The Iraqis are not ready for it.

PILGRIM: What are your projections for the elections that are supposed to happen in January 2005? And, of course, all hopes are pinned on this, an elected government in Iraq. Do you think that's too ambitious?

PIPES: I think it might well be too ambitious. I'm hoping that I'm wrong, but I'm very worried that the time between now and then, just a few months, is not enough for the Iraqis to sort themselves out to agree to the terms of an election, to agree to share power. These are complicated concepts that take time to evolve.

PILGRIM: Let me ask you about Interim Prime Minister Iyad Allawi, and the great hope was in him being able to lead forward until this period, and I'll also refer back to something that you wrote in the "New York Sun" on May 4, "Iraq needs a democratically minded strongman," and does Prime Minister Allawi fit that bill as Iraq's leader at this moment?

PIPES: He's just been in office for a few weeks. We don't know fully who he is yet, but I'm inclined to think not. I don't think he has the kind of strength to keep Iraq, which is a difficult country to rule -- I don't think he has the kind of strength to keep it in tow.

I'm afraid that there will be -- elements are going to go off and cause all sorts of trouble. I -- you know, it -- we're watching it as it unfolds, I'm hoping to be optimistic, but I'm a little bit not optimistic.

PILGRIM: We see reports about a network of Saddam Hussein's cousins and associates operating from Syria and Jordan, funding coming perhaps -- pretty much open borders. How do you assess that as a threat?

PIPES: Well, Kitty, the most remarkable thing here is that the Syrian government has constantly been supporting the anti-coalition, anti-Iraqi government forces the last months. I don't know what's in it for them. I don't know why they think this is a good idea, but it could lead to really serious consequences for the Assad government in Damascus, and I watch the news that the Syrians are supporting Iraqi insurgents with amazement. It's a very foolish step, in my view.

PILGRIM: All right. Thanks very much for your analysis this evening.

Daniel Pipes.

PIPES: Thank you.

PILGRIM: Still ahead here tonight, a looming announcement from Senator John Kerry. Who will be his running mate? We will talk to our panel of top political journalists about it.

Plus, Exporting America. Concerns in California that a new contract signed by Governor Schwarzenegger could ship American jobs overseas.

That and much more still ahead.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: Returning now to our top story, Senator John Kerry could soon announce his running mate. Senator Kerry's decision and the timing of the announcement could give his campaign a boost. Now Senior Political Analyst Bill Schneider has the report.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Why would John Kerry pick his running mate three weeks before the convention? He's looking for a little bounce in the polls.

The old idea is that you choose a running mate to balance the ticket. For Democrats, that meant making sure a southerner was on the ticket. In 1960, John Kennedy of Massachusetts balanced the ticket with a Texas Democrat and a rival for the nomination, Lyndon Johnson. Smart move. It got Kennedy Texas.

MICHAEL DUKAKIS, FORMER PRESIDENTIAL CANDIDATE: The next vice president of the United States of America...

SCHNEIDER: Another Massachusetts Democrat, Michael Dukakis, tried to do the same thing in 1988 when he picked Texas Democrat Lloyd Bentsen. It didn't work a second time.

Now we have yet another Massachusetts Democrat, with several southerners he could pick from, but there's not much pressure on Kerry to unify the party. President Bush has already done that.

In 1992, Bill Clinton certainly didn't pick Al Gore to balance the ticket. Gore was picked to reinforce Clinton's message that he was a new Democrat. Clinton got a little bounce in the polls when he named Gore.

Kerry would reinforce the message that he can keep the country safe with former general Wesley Clark. He could reinforce his economic message with labor favorite Dick Gephardt.

In 2000, Al Gore chose Joe Lieberman to help compensate for a weakness: his ties to Bill Clinton. Lieberman was Clinton's severest Democratic critic.

SEN. JOE LIEBERMAN (D), CONNECTICUT: He failed to show, I think, that he understood his behavior had diminished the office he holds and the country he serves.

SCHNEIDER: Gore got a bounce out of that choice, too, 5 points.

Does Kerry have a weakness he needs to compensate for? Yes. He lacks the common touch. Who has it? John Edwards.

JOHN EDWARDS (D), SOUTH CAROLINA: How are you all doing?

How are you doing there?

John Edwards. Nice to see you.

SCHNEIDER: Kerry is sometimes described as a conventional candidate, like Walter Mondale in 1984. When Mondale named the first woman to a major party ticket, it was a spectacularly unconventional move that made voters take a fresh look. Maybe he's a more interesting guy than we thought. A surprise move like that could get people to sit up and take notice.

(on camera): In the end, however, Mondale's bold move didn't work. He lost. So did Dukakis and Gore, even though their vice presidential choices were widely acclaimed, which all goes to prove, Americans don't vote for vice president.

What does the choice of a running mate really get you? Some attention.

Bill Schneider, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: And joining me now for more on Senator Kerry's search for a running mate are two leading political journalists. Karen Tumulty is a national political correspondent for "TIME" magazine, and Tom DeFrank is the Washington bureau chief for "The New York Daily News." Both of them join us from Washington.

And thanks very much for this little brainstorming session. So interesting. Let's start with Edwards. What's your assessment, Karen? I know that you were just on the campaign trail with Kerry in Wisconsin, Iowa and Minnesota. So what insights do you bring to the table here?

KAREN TUMULTY, "TIME" MAGAZINE: Well, I was struck, Kitty. It had been a few weeks since I'd been on the trail with Senator Kerry, and the size of the crowds that he was drawing were just phenomenal. Friday night, he managed to draw something like 5,000 people to a cornfield in Minnesota. It really does show that in these battleground states, people are really tuning into this election. It's -- there's a real intensity out there already of the sort that you don't normally see until October.

PILGRIM: Tom, let's go through some of the potential candidates for VP. What about Edwards? what's your assessment on that?

TOM DEFRANK, "NEW YORK DAILY NEWS": Well, Edwards -- you know, Kerry needs somebody who's not perceived as old Europe or old Democrat, and John Edwards fits that bill. He's a new Democrat. He's got a lot of energy, a lot of pizzazz. He doesn't have a big resume, probably wouldn't even carry his own state of North Carolina if he were on the ticket, but I do think that Edwards is the one guy you hear party pros, party regulars talk up the most. I think Kerry is under some amount of pressure to put Edwards on the ticket because of the new fresh face quality that Edwards would bring.

PILGRIM: OK. Let's -- Karen, let's talk about Gephardt.

TUMULTY: Well, Dick Gephardt and John Kerry have what appears to be a very good personal chemistry, and Kerry has said repeatedly that the first qualification that he is going to look at of any of these candidates to be his running mate is whether this candidate is actually ready to take over the job of president of the United States should they have to, and, in that sense, Dick Gephardt brings the most to the table. He's got the longest and deepest history of public service.

The problem is that he is sort of the anti-Edwards. He is the opposite of a fresh face, and he didn't do so well himself when he ran for the nomination. He was out after the first caucus.

PILGRIM: Should we read a whole lot into the fact that Kerry spent the weekend campaigning with Iowa Governor Tom Vilsack, Tom?

DEFRANK: I don't think we should -- I don't think we should read a lot into it. I mean, obviously, I don't know who the choice is going to be. My guess is Kerry would probably not want to have a ticket with two Catholics on it. Governor Vilsack's got a lot of qualities. He's -- a lot of good qualities.

He's got a compelling personal story, an orphan with a checkered family past, a really very compelling story, as I said, but I don't think you're going to -- I don't think Kerry's going to have two Catholics on the ticket, so it may well be that the fact that Vilsack and Kerry were out there together was really kind of like a consolation prize sort of tour for Governor Vilsack.

PILGRIM: Let's talk about some of the wild cards, and one of them is Hillary Clinton. What's your assessment, Karen?

TUMULTY: Oh, this was a rumor that came out on a Web site, The Drudge Report, last week. I know of absolutely nobody who thinks that there is any reason to think that Hillary Clinton is going to be the running mate.

PILGRIM: And, Tom, do you want to weigh in on that?

DEFRANK: Well, I mean, I agree with Karen. If you want to galvanize the dem -- if you want to galvanize the Republicans, you put Hillary on the ticket. There are those at the White House who say that would be great news. We had four million Christian conservatives who didn't vote last time. We could probably get 3.9 million of them out if Hillary were on the ticket. So I don't think that's going to happen.

PILGRIM: OK. Unknown, unknown to the general public, but any wild cards that you can think of?

DEFRANK: Well, there's -- there's a little buzz about former Georgia senator Sam Nunn, who would help with the southern equation, would help with the ready-to-be president calculation. But I just don't know. I guess my gut really tells me it's either going to be Edwards or a surprise, and I can't -- I can't fathom the surprise.

PILGRIM: All right. Karen, any...

TUMULTY: Although...

PILGRIM: ... names you want to throw on the table here?

TUMULTY: Well, it's just always worth thinking through the surprises because, four years ago, almost nobody would have picked Joe Lieberman and absolutely nobody would have picked Dick Cheney as running mates. I've heard -- I've heard a little bit of buzz around Senator Bob Graham of Florida, former chairman of the Senate Intelligence Committee, and you also do -- there was -- there was a little boomlet a few weeks ago for Wes Clark. I really do think that we shouldn't be surprised if there is a surprise.

DEFRANK: Kitty, if I may jump in for just for a second...

PILGRIM: Sure. Go ahead.

DEFRANK: ... I -- the Bob Graham thing is an interesting one because Graham is the most popular vote-getter, I think, in the history of Florida, and there are some Democrats who say Kerry should put Graham on the ticket and say to him for 15 weeks, Senator, never leave Florida on the theory that if -- that if Bob Graham could turn Florida into a Democratic state, then that might well be the election.

PILGRIM: One other point: The Internet users will find out first? That's a new wrinkle.

TUMULTY: Well, that was something that Senator Kerry announced, I think it was Friday. Basically he is saying that he is going to officially announce on his website JohnKerry.com. I have a feeling they are not going to be the very first. He was, by the next day, sort of couching that as they will be among the first to know.

PILGRIM: I think we should take that as a personal challenge, don't you? Thanks very much for joining us. Karen Tumulty and Tom DeFrank, thank you.

TUMULTY: Thank you.

PILGRIM: That brings us to the topic of tonight's poll. "Who do you think John Kerry should pick as a running mate? Richard Gephardt, John Edwards, Hillary Clinton, or someone else."

Cast your vote. CNN.com/lou. We'll bring you the results later in this show.

And tonight's thought is on democracy. "The spirit of democracy cannot be superimposed from the outside. It must come from within." And those are the words of Mohandas Gandhi.

Now, some of your thoughts. First on jobs in the United States.

Gary Ryan of Clearwater, Florida writes, "with yet another month of poor job growth and no end in sight, how can Bush say that we have such wonderful growth? The new jobs are of poor quality and low pay. We need to revise the jobs report to include the quality of jobs and some comparison to the ones that were lost so even if there are more jobs, are things really getting better?"

And we have one from Pam Hutchinson from Meridian, Ohio. "When discussing the major loss of jobs in the country we need to remember that finding a new job, even if it is comparable in salary which is doubtful for many, it doesn't address the irreparable loss of seniority, insurance, pension, years built up, self esteem, confidence, stress, interruption of lifestyle, and savings for the entire family towards school, retirement, et cetera."

We do love hearing from you. Send us your thoughts at loudobbs@cnn.com.

Still ahead here tonight, insurgents attack a key oil pipeline in Iraq. We'll talk to a Middle East expert who says the solution to sabotage will be a political response, not a military one.

Plus, outrage after Mexican soldiers disrupt a funeral for a U.S. marine killed in Iraq. We'll have that remarkable story.

And then in our Special Report, "Made in America," one American company has managed to stay in business for more than 100 years while keeping all of its production in the United States. We'll have that and much more still ahead here tonight.

(COMMERCIAL BREAK)

PILGRIM: Insurgents have sabotaged a key oil pipeline that links oil fields in southern Iraq with refineries further north. The Iraqi ministry of oil said the insurgents detonated a bomb under the pipeline south of Baghdad.

Engineers have shut down a pumping station so the fire can burn itself out. Coalition and Iraqi forces have increased security around oil installations to prevent insurgent attacks. Officials are particularly concerned about the threat of attacks against offshore facilities and ships. Brent Sadler reports from southern Iraq.

(BEGIN VIDEOTAPE)

BRENT SADLER, CNN SENIOR CORRESPONDENT (voice-over): Giant ships fill their tanks with Iraqi crude oil, exporting up to $3 million worth of oil an hour, if all works well. But all is not well. Crude oozes from a gaping hole after recent attacks on strategic pipelines near Basra in southern Iraq, sapping oil revenues.

IYAD ALLAWI, INTERIM PRIME MINISTER OF IRAQ: Anyone involved in these attacks is nothing more than a traitor to the cause of Iraq's freedom and the freedom of its people.

SADLER: Oil protection is supposed to be a top priority on land and at sea since last year's invasion of Iraq. But Iraqi officials claim it's been hit and miss, exposing a worrying shortfall in coalition planning.

JABBAR AL-LEABY, DIRECTOR GENERAL, SOUTH OIL COMPANY: So, they need security everywhere, and security in men, security in equipment, security in every aspect.

SADLER (on camera): The vast and often remote network of pipelines is vulnerable to attacks. No oil means no money to pay for the cost of war, reconstruction, and recovery.

As recently as two months ago, would-be suicide bombers tried, but failed, to hit these vital offshore terminals, now guarded by a fleet of coalition warships. U.S. soldiers help enforce a new exclusion zone patrolled by the American and British navies. Nothing is foolproof, though.

ADM. ALLAN WEST, BRITISH FIRST SEA LORD: Everything is always vulnerable if you get the right thing at the right time and you are lucky. But now they are much harder to crack.

SADLER: But on land, where saboteurs are getting through, a 15,000 strong Iraqi protection force, privately trained with coalition money, is paper-thin. With more than 7,000 miles of pipeline, and 260 facilities to guard.

KEVIN THOMAS, OIL ADVISER, CPA SOUTH: Our patrols can only walk through, we can monitor the patrol patterns, and attack when the patrol has moved on.

SADLER: The oil network has so far been hit more than 130 times in the past seven months alone, including a 6-day shutdown of all crude exports in June losing money Iraq and its coalition allies can ill afford.

Brent Sadler, CNN, Basra, southern Iraq.

(END VIDEOTAPE)

PILGRIM: My next guest says the recent insurgent attacks in Iraq are likely to continue for some time. That's despite the transfer of sovereignty to the interim Iraqi government. Crispin Hawes is the director of Middle East and Africa analysis at the Eurasia Group and he joins me now. Thanks very much for joining us, Crispin. First of all, what's your general assessment of how things are going?

CRISPIN HAWES, DIR. MIDDLE EAST ANALYSIS, EURASIA GROUP: Well, I think it's difficult to tell at this point whether there's been a change since sovereignty was passed over. I doubt very much that there will be. It's difficult to say that the insurgent groups will not regard the new Iraqi government as just as much of a target as the coalition provisional authorities, and we don't expect any great diminishing in violence over the short term.

Obviously, in the long term the solution to this insurgency is not simply the arrest or the capture of a number of individuals or cell groups. It's probably -- it's going to be a political solution. The proportion of the population that currently feels alienated or disenfranchised from this government needs to feel that they have a vested interest in joining and supporting the government and no longer in supporting or at least tacitly supporting the insurgency. In the short term, the progress is likely to be -- it's going to be difficult to see.

PILGRIM: And you have attempts at political solutions like amnesty and that sort of thing. Crispin, you go to Iraq frequently, you were there a few months ago, you are headed back shortly, perhaps. Tell us what we're really facing here.

We see people like Zarqawi taking credit for the beheadings, yet there's some discussion of Baathist elements. It's very hard to reconcile what the foes are. What's your insight into this?

HAWES: Well, I think it's a fallacy to see the insurgency as a single entity, a single group of people that have a common ideology. There's probably a degree of alliance of convenience here between perhaps the sort of hardline al Qaeda-type, Zarqawi-type ideologic committed Islamists pursuing the vague idea of an Islamic state. Former Baath officials that probably have a stake in the smuggling of criminal networks that they ran underneath Saddam, and there's certainly plenty of evidence to see. One only has to walk around Baghdad to see how much equipment of every type is being imported into Iraq. Someone is certainly benefiting from that.

PILGRIM: So they would have a vested interest in keeping things in chaos because they're profiting?

HAWES: Absolutely. And beyond that. There will be many other groups that have -- that see that they have at least one common enemy at this point, including if the coalition provisional authority previously or the Iraqi transitional government, they're, in some ways, a unifying factor for the insurgents.

In the future, it might well be that some of these currently insurgent groups will feel that they have an interest in joining the government or in supporting the government or supporting some aspect of the new government. So I doubt if we'll see this level of community, if you like, among the insurgents coming through but certainly at the moment you have a disparate group that do say they have a common goal.

PILGRIM: Let me just ask you about the Shiite cleric Muqtada al Sadr. He has been saying recently that he would like to be part of the government. Do you take that as a positive sign? What's his role going forward?

HAWES: I think his role has always been or his goal has always been to try and boost his own personal standing within Iraq. I think in some ways he's had that standing boosted for him by, in my view, perhaps the failure of other Iraqi Shia politicians particularly really to step up to the plate and make themselves better known across the country. They've stepped back and allowed probably a less influential person like himself to get more press, to get more airtime, to build a bigger persona for himself. In the long term, I think he's exactly the sort of person that may find that he needs to be on the inside rather than on the outside.

PILGRIM: All right. Thanks very much. Crispin Hawes of Eurasia Group. Thanks.

The U.S. ambassador to Mexico says he is outraged after Mexican soldiers interrupted the funeral of a U.S. marine killed in Iraq. The funeral for Marine Juan Lopez (ph) was held in a Mexican town where he was born. Four armed Mexican soldiers stopped the procession and demanded that U.S. marines taking part in the honor guard remove the replica rifles they were carrying. Mexican law prevents foreign troops from bearing arms in the country. After a 40-minute delay the procession was allowed to continue. Lopez immigrated to the United States when he was a teenager. He was killed last month in an ambush in Ramadi.

Still to come. A high-profile indictment in the Enron collapse could be just hours away. We'll have that story.

Also, exporting California. Governor Schwarzenegger makes a controversial deal that could cost the workers in the Golden State their jobs.

And taking the fight against the exporting of American jobs into the voting booth. One group of workers is determined to get Washington's attention. We'll have that report coming up.

(COMMERCIAL BREAK)

PILGRIM: Former Enron chairman and CEO Ken Lay is expected to be indicted this week. Sources close to the investigation tell CNN and Lay was the chairman when the company collapsed in late 2001. His attorney Michael Ramsey last week told the Associated Press that speculation about an indictment was designed to pressure the grand jury.

Nearly two dozen other Enron employees have been indicted including former chief financial officer Andrew Fastow and former CEO Jeffrey Skilling. Fastow was sentenced to ten years in prison and Skilling pleaded not guilty this year to fraud and insider trading. Let's turn now to the exporting of America tonight. The state of California has signed a deal with a well-known outsourcing company. The state faces a continuing budget crisis and Governor Schwarzenegger is looking for ways to cut cost. One solution could be the exporting of taxpayer funded government jobs to cheap foreign labor markets. Casey Wian reports from Los Angeles.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Newly inaugurated California Governor Arnold Schwarzenegger made this promise...

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I will not rest until California is a competitive job-creating machine.

WIAN: But was he talking about a job-creating machine for the people of India? That may be the effect now that the governor has signed a deal with a Canadian-owned company specializing in exporting jobs to cheap overseas labor markets.

California spends nearly $5 billion a year buying goods and service. Montreal-based CGIAMS will provide what it calls strategic sourcing analysis to streamline that purchasing power.

Some state lawmakers are worried the deal will also lead to taxpayer-funded jobs being sent overseas.

SEN. LIZ FIGUEROA (D), CALIFORNIA STATE SENATE: We're concerned about putting tax revenues back into the state's economy when we're having such difficulty in balancing a budget and budget constraints. We want to make sure that the tax money that is saved or generated here in California goes to California workers.

WIAN: CGI's website trumpets its pioneering global delivery centers in Mumbai and Bangalore, India. Still California officials say it's too early to tell if outsourcing will be included in the company's recommendations to the state.

RON JOSEPH, CA. DEPT OF GENERAL SERVICES: At this time, there is no given that any outsourcing or offshoring would occur out of these proposals. Ultimately, the state has the authority and the final decision of how to move forward with the proposals that AMS puts on the table.

WIAN: The governor's office cites examples of potential savings such as consolidating the purchase of tires for the California Highway Patrol and other state agencies under one contract. CGIAMS will receive a percentage of any savings it recommends under its three-year contract with the state.

JAMIE COURT, AUTHOR, "CORPORATEERING": The state of California, 35 million people, should not be legitimatizing the use of outsourcers and the exporting of American jobs elsewhere. I'm afraid the only reason we are is because the governor of California is acting a lot more like a CEO of California, and he's learned this tactic clearly from many of the very large Fortune 500 companies that he's been fund- raising among.

WIAN: Meanwhile, some state lawmakers are sponsoring a bill that would require any taxpayer-funded jobs stay in California. Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: The textile industry has been devastated by the exporting of American jobs to cheap foreign labor markets, and now one North Carolina company is fighting back at the ballot box. The Saunders Thread company has registered every one of its employees to vote in the upcoming election. Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Hal Rippie (ph) is a manager at the Saunders Thread Company in North Carolina. He voted for President Bush in the last election but now has harsh words for his presidential choice.

UNIDENTIFIED MALE: Anyone's got to be better than Bush. A pizza delivery man would be better than Bush.

SYLVESTER: Rippie not crazy about Kerry, either, but sees him as the candidate more likely to save the textile industry.

UNIDENTIFIED MALE: We've lost so many jobs in textiles it's pitiful. I've been in two plant closings, I don't want to be in another one.

SYLVESTER: Gaston County, North Carolina, has lost 8,000 manufacturing jobs since the last presidential election. Charles Saunders, the owner of the thread company, believes the only way to reverse the trend is by exercising the right to vote. He held a voter registration drive at his plant, the first since the company opened four decades ago. Now all 39 of his employees are registered.

CHARLES SAUNDERS, SAUDERS THREAD COMPANY: These are the people who are losing their jobs by policies that come out of Washington and the only way they're going to get their voice heard is at the ballot box.

SYLVESTER: The AFL-CIO is also tapping into workers' anger. This year the labor union started its voter registration drive early, reaching 500,000 workers in a door-to-door campaign in the 16 battleground states in the last month.

RICHARD TRUMKA, AFL-CIO: We've started earlier and we're seeing more enthusiasm and activism earlier this time because workers are so angry and so fed up about the economy, about the lack of good jobs, about the lack of affordable healthcare.

SYLVESTER: Republicans, not to be outdone by the Democrats, are also starting their voter registration drive early. They hope to register 3 million new voters by November. Their strategy includes using an 18-wheeler to target voters at NASCAR races, and trying to appeal to young conservatives on college campuses. Lisa Sylvester, CNN, Washington.

(END VIDEOTAPE)

PILGRIM: Here's a reminder to vote in our poll tonight. "Who do you think Kerry should pick as running mate? Richard Gephardt, John Edwards, Hillary Clinton, or someone else?" Cast your vote at CNN.com/lou. We'll bring you the results a little bit later in this show.

And when we return, "Made in America." We look at a company that chooses to make its products right here in the United States.

And a symbol of American freedom that wasn't made in America. We'll have the details when we return in a moment.

(COMMERCIAL BREAK)

PILGRIM: Tonight we begin our series of special reports "Made in America." We celebrate companies who choose to make their products in this country instead of shipping American jobs to cheap foreign labor markets and tonight the story of W.R. Case & Sons Cutlery. This company has manufactured products that have been carried into war, the White House even outer space. Philippa Holland reports.

(BEGIN VIDEOTAPE)

PHILIPPA HOLLAND, CNN CORRESPONDENT (voice-over): For 115 years, W.R. Case & Sons Cutlery Company has been making knives by hand in America, sometimes with generations working side by side.

UNIDENTIFIED FEMALE: Here, I cut these flush. Now, my job's done and I hand it up to my daughter.

UNIDENTIFIED FEMALE: OK. We're going to thread (ph) and spin it.

DOT COLLEY, 30-YEAR CASE EMPLOYEE: I've been here 30 years. I met my husband here. He's been here 34 years. My daughter works here with me. She's been here 12 years.

HOLLAND: There's both family and national history at Case. Members of the U.S. military have carried Case knives into every conflict of the past century. One of Case's loyal customers also happened to be to be a commander-in-chief, the 34th president of the United States, Dwight D. Eisenhower.

TOM ARROWSMITH, CEO & PRESIDENT, W.R. CASE &SONS CUTLERY: When he had a special guest, he gave them a gift of a Case pocketknife. We've since named the pattern the Eisenhower pattern, and it carries his signature on the blade.

HOLLAND: NASA commissioned a Case knife for its astronauts to carry on the first manned space missions. Case uses American raw materials in all of its knives. The only exception are exotic materials like mother of pearl, not found in the United States.

Buying American is a topic that Arrowsmith frequently faces.

ARROWSMITH: As recently as last week, we had a little medallion that was going into a product, the purchases people, as they need to, had shopped it a couple of ways, the domestic price was $1.25, the non-domestic price was 48 cents. We chose to use the $1.25 part, simply because that's how we do things.

HOLLAND: And if anyone at Case needs a reminder of the importance of buying American, they don't have far to look.

ARROWSMITH: Outside our doors is a quarter of a million square foot facility that used to manufacture electronic components. I worked in that facility as a production superintendent a number of years ago, and they sold it to another company that's moved everything offshore. It's easy for us to see every day when we leave the parking lot, the effect of outsourcing.

HOLLAND: Losing a job to outsourcing is one experience Arrowsmith promises his nearly 400 employees they will never have. Philippa Holland, CNN, Bradford, Pennsylvania.

(END VIDEOTAPE)

PILGRIM: Thousands turned out last night at a Capitol Fourth celebration in Washington, D.C.

"American Idol's" Clay Aiken sang "Proud To Be An American" and members of the audience waved American flags which were handed out at the event but it turns out those American flags weren't so American after all. As you can see, they were made in China.

Now, a look at the weekend box office, and more people went to see "Spiderman 2" than any other movie this holiday weekend. The blockbuster sequel has pulled in a record $180 million in just six days. That's $115 million of that was from this weekend alone. "Spiderman 2" pushed Michael Moore's "Fahrenheit 9/11" to number 2.

Still ahead, the results of tonight's poll. First, a reminder to check our website for the complete list of companies we've confirmed to be exporting America. CNN.com/lou.

(COMMERCIAL BREAK)

PILGRIM: Here are the results of tonight's poll. Seven percent of you think John Kerry should pick Richard Gephardt as a running mate. 69 percent say John Edwards. 10 percent Hillary Clinton, 14 percent picked someone else.

Thanks for joining us tonight. Please join us tomorrow. Former New York City Police Commissioner Bernard Kerrick will join us on the latest efforts to secure this country.

For all of 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 July 5, 2004 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KITTY PILGRIM, GUEST HOST: Tonight, a Democratic official tells CNN that Senator Kerry has made a decision on his running mate, and the announcement will come soon.
Senator Kerry is saying nothing in public about his choice. Senator Kerry's possible running mates are also keeping silent.

(BEGIN VIDEO CLIP)

SEN. JOHN F. KERRY (D-MA), PRESIDENTIAL CANDIDATE: I don't know anything. I'm just glad to be here.

PILGRIM: Iraq delays a controversial plan to offer amnesty to some insurgents. U.S. fighter jets launch a new strike against an insurgent stronghold. Daniel Pipes, director of the Middle East Forum, is my guest.

California signs a deal with a company that specializes in exporting jobs to cheap overseas labor markets. Critics say state- funded jobs could soon be shipped overseas.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The State of California, 35 million people, should not be legitimatizing the use of outsourcers.

(END VIDEO CLIP)

PILGRIM: And made in America. Our celebration of companies that choose to manufacture their products in this country. Tonight, a special report on a firm that's been making knives in the United States for 115 years.

ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, July 5. Here now for an hour of news, debate and opinion, sitting in for Lou Dobbs, who's on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

Tonight, Senator John Kerry may be close to making one of the most important announcements of his campaign: his running mate. The Kerry campaign says the senator has not decided yet who will join him on the ticket, but the decision may be imminent.

Congressional Correspondent Joe Johns is traveling with Senator Kerry in Pittsburgh. Joe, what's the latest?

JOE JOHNS, CNN CONGRESSIONAL CORRESPONDENT: Kitty, Kerry seems to be keeping with the story he has been telling for the last several days. Just a few minutes ago, speaking to a local television interviewer, he said, "I have no comment at all in the public press. I don't know how people are reporting some of the things they are. I'll just tell you I've not made a decision at this point in time, and I'm going to continue to keep it a private and personal process until I announce it publicly."

Now Kerry earlier today attended a picnic with his wife at their farm in suburban Pittsburgh. With speculation raging about that VP pick, the campaign is officially sticking to the story that he has not made up his mind. However, he did talk just a little bit about a rally that is scheduled here in downtown Pittsburgh for tomorrow morning, which led to even more speculation.

Let's listen to what he had to say.

(BEGIN VIDEO CLIP)

KERRY: I'm heading to out to Indianapolis to give a speech tomorrow, but, before I go, we're going to do a little rally here in Pittsburgh in Market Square. So, if any of you can make it, I'm told the gates open at 7:00 in the morning, if you're up at that hour. But, at 9:00 tomorrow, we're going to have some fun, and then we'll head out to the Midwest again and back on the trail.

(END VIDEO CLIP)

JOHNS: Now a Democratic official who has spoken with Kerry has told CNN that he has, in fact, made up his mind and may announce that choice very soon. Still, the campaign has not changed any plans, given any indication that it's going to do anything differently.

He is supposed to go out to Indianapolis this week. He's also supposed to go to Ohio for a couple stops there -- Kitty.

PILGRIM: All right. Sounds like an early morning to you. Thanks.

Joe Johns.

Fear of a terrorist attack over the Fourth of July holiday has dominated the attention of counterterrorism experts for months, and now that attention will shift. The Democratic National Convention begins just three weeks from today.

And joining us tonight from Washington is Justice Correspondent Kelli Arena.

Kelli, what are the biggest concerns surrounding the convention at this point?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Kitty, officials say that the conventions make very inviting targets, and that's because of the symbolism involved and the large number of influential people who will be on hand. And security, as you can well imagine, is very tight in both Boston and New York City.

And terrorism experts say that a complicated attack would probably be very hard to pull off under those conditions. They say what's more likely is a conventional attack, like a truck bomb or a suicide bomber strapped with explosives, and so that, at this point, I think, is the biggest concern.

PILGRIM: Kelli, the FBI started to conduct interviews. What are they hoping to learn about that?

ARENA: Well, the -- after the FBI formed a task force to deal very specifically with this current threat information, agents did begin conducting interviews with individuals that they say may have information about possible operatives or possible attack plans.

Now there have only been a couple of interviews --- a handful -- conducted, according to officials, and more are expected toward the end of the month, as more intelligence is scrutinized. So that's -- it's very early in that process, Kitty.

PILGRIM: What has been the reaction of the Arab-American community to these interviews in all of this?

ARENA: Well, some groups that represent Muslims and Arab- Americans are very concerned about any sort of profiling. Even though the FBI says that these interviews will be intelligence-driven, those groups suspect that there will be a targeting of Muslim communities and individuals as part of this effort, which they say has not yielded results in the past and won't now, and it just causes more mistrust of law enforcement at a time that cooperation between the law-enforcement community and the Muslim community is essential.

PILGRIM: Kelli, is there any indication what intelligence officials are looking for? How do they know how to identify a suspected terrorist?

ARENA: Well, unfortunately, there's no pat answer to that question, and, in fact, terrorism experts say that the task has really gotten much harder because al Qaeda continues to adapt to the new security measures that the United States puts in place.

Now they say that al Qaeda is trying to recruit U.S. citizens, women, Europeans, people who will blend in with society here and won't draw any extra scrutiny. So it's very, very difficult to put a label on exactly what they're looking for. Of course, prior intelligence on an individual is always a good place to start.

PILGRIM: All right. Thanks very much.

Kelli Arena.

Turning to concerns about violence overseas, Iraq's interim government has delayed the announcement of a controversial amnesty plan for insurgents, and, also today, American fighter planes launched a new attack on insurgents in Fallujah.

Jane Arraf reports from Baghdad.

(BEGIN VIDEOTAPE)

JANE ARRAF, CNN BAGHDAD BUREAU CHIEF: U.S.-led forces say they dropped six bombs on a house in Fallujah that they believe is a Zarqawi network safehouse.

(voice-over): A senior U.S. military official tells us that the targets were suspected suicide bombers. The strikes involved four 500-pound bombs and two 1,000-pound bombs. At least eight people were killed, including one woman and at least three children.

Angry residents at the scene said they were not terrorists in the house, they were an ordinary family, and they pledged revenge against the interim prime minister Iyad Allawi and against the U.S.-led forces that are launching these air strikes.

It's the fifth similar strike in two weeks, and the U.S. says it's an indication that they are making headway against the Zarqawi network. In an unprecedented statement from the prime minister, Iyad Allawi made clear that this was not just a U.S. mission, that it was a joint operation that relied on Iraqi security intelligence information, and he said Iraq as a sovereign nation pledged to weed out these terrorists, to hunt them down and kill them one by one, and he called on Iraqis to provide information to help him do that.

He's also planning other security measures. A national security plan expected to be announced that would include measures allowing the new interim government greater powers of detention, the power to impose curfews and to mobilize the Iraqi armed forces. That was along with a proposal that would provide amnesty to lower-level insurgents.

Officials say they're working out the fine details, including how to guarantee human rights that Iraq, as a sovereign nation, has committed to.

Jane Arraf, CNN, reporting from Baghdad.

(END VIDEOTAPE)

PILGRIM: An Arab television network today said insurgents have not killed a U.S. Marine being held hostage in Iraq. Al Jazerra television said insurgents have taken Corporal Wassef Hassoun to," a place of safety," after a different militant group denied it had killed the Marine.

Rusty Dornin reports from near the Marine's home in West Jordan, Utah -- Rusty.

RUSTY DORNIN, CNN CORRESPONDENT: Well, Kitty, this family has been quite literally been to hell and back over the last week.

First, of course, they saw the video, heard he was captured. Then, on Saturday, they heard an unconfirmed report he was killed. On Sunday, a group denied they had killed him. And on Monday, they hear he's released.

The key emotion here is high anxiety, and, as a cousin of Corporal Hassoun, Tarek Nosseir, came out and told reporters a short time ago the family still doesn't really what's going on.

(BEGIN VIDEO CLIP)

TAREK NOSSEIR, HASSOUN FAMILY SPOKESMAN: We pray that the news of his safe release is true. If he is still in captivity, we remind the captors of the saying of our beloved prophet (unintelligible), be merciful to those on earth, mercy will come -- will descend upon you from heaven.

(END VIDEO CLIP)

DORNIN: The family spokesman would not take any questions from reporters.

All weekend long, family, friends, loved ones, neighbors, even a corporal from the Army came by to drop off notes of support, balloons, flowers, and that sort of thing. The whole community has really been trying to show their support for this family.

Now I did speak to someone close to the family before this news conference who said that it was very disturbing in this message when they talked about him being taken to a place of safety. They wanted to know, you know, what does that mean. It still doesn't give them any kind of assurance.

Also, of course, that message was followed by that he was taken to a place of return after he announced that he was forgiven and determined not to return to U.S. armed forces.

But, until we receive some kind of confirmed report, we see a video, we still do not know the fate of Corporal Wassef Hassoun -- Kitty.

PILGRIM: All right. Thanks very much.

Rusty Dornin.

Central Command today ordered the families of U.S. military personnel in Bahrain to leave the country within days. The military says there is "credible intelligence" that terrorists are planning to attack Americans in that country. Bahrain is an island state in the Persian Gulf and the headquarters of the U.S. Navy's Fifth Fleet. The departure order affects about 650 military dependents, but there are also no plans to withdraw any military personnel.

Still to come, the Iraqi government wants a limited amnesty for insurgents, and my guest says it could take decades to achieve reconciliation in Iraq. I will be joined by Daniel Pipes, director of the Middle East forum.

Senator John Kerry could soon announce his choice as running mate, and I will talk about Senator Kerry's options with two of the country's top political journalists.

And in Exporting America tonight, fears that thousands of taxpayer-funded jobs in California could soon be shipped overseas. We'll have a special report.

(COMMERCIAL BREAK)

PILGRIM: The Iraqi government today postponed the announcement of a limited amnesty for insurgents. The Iraqi prime minister, Iyad Allawi, hopes that an amnesty would weaken the ties between supporters of Saddam Hussein and the insurgent leaders. Iraqi officials say about 5,000 insurgents would be eligible for the amnesty, and, in return, those insurgents would have to provide information to Iraqi security forces.

Joining me now from Philadelphia is Daniel Pipes, director of the Middle East Forum.

And thanks very much for joining us tonight, Mr. Pipes. How do you assess the amnesty offer?

DANIEL PIPES, MIDDLE EAST FORUM: Well, Kitty, it's a very messy situation in Iraq, and it is hard from a distance to judge exactly what's taking place on the ground, but I think a move like this, a flexible move like this, is a good sign. We are hoping that Iraqis will come together rather than fight and have a civil war.

So, in principle, it's a good idea, but the terms of it are very important in that it actually lead to a change of actions, that the former insurgents no longer fight the government, provide intelligence. All that is critical.

PILGRIM: The quid pro quo is very critical, and it could go awry if not enough is offered, right?

PIPES: It could, indeed, go awry. In other words, I think in principle it's a good idea. Let's look at the details, let's look at the actual operation before we can judge it.

PILGRIM: Now, in your opinion, do you think it should include Muqtada al-Sadr, if there's a sort of limited amnesty?

PIPES: In principle, I'm not against it because I think, if he were to come into the fold, it would be advantageous. To keep him -- force him to stay outside and lead an insurrection is not a great idea.

PILGRIM: Nevertheless, he's been highly disruptive, and I think that would be a euphemism. It would be hard to reconcile what he's been doing with complete amnesty, wouldn't it?

PIPES: No question, but I think my attitude towards Iraq today is that we shouldn't have standards that are too high. This is a country that's come out of three decades of horrible conditions, and there are a lot of unsettled problems, a lot of tensions, and what we should do from the outside is encourage Iraqis to come together, to work together, to work for the long haul to improve their condition. We can't expect immediate democracy, we can't expect immediate free market, we can't expect free speech. These things are premature at this point.

PILGRIM: Let me refer back to something that you wrote in the "New York Sun" on April 27, and it was a quote that says that Iraq should not -- here it is, "Iraq made a democratically" -- no, here we are. Here's the right one, "The U.S. cannot be -- cannot have a free Iraq but an Iraq that does not endanger Americans." A free Iraq seems like it was the ultimate goal of the coalition going in. Do you think that was too ambitious?

PIPES: I think for the long term, it's a great ambition, but, for now, it's too ambitious. We should settle for something that is not dangerous to the Iraqi people, to the neighborhood, or to ourselves. For the long term, we should aspire to something higher, grander, but, for the short term, you know, democracy, freedom, these things are too much right away. The Iraqis are not ready for it.

PILGRIM: What are your projections for the elections that are supposed to happen in January 2005? And, of course, all hopes are pinned on this, an elected government in Iraq. Do you think that's too ambitious?

PIPES: I think it might well be too ambitious. I'm hoping that I'm wrong, but I'm very worried that the time between now and then, just a few months, is not enough for the Iraqis to sort themselves out to agree to the terms of an election, to agree to share power. These are complicated concepts that take time to evolve.

PILGRIM: Let me ask you about Interim Prime Minister Iyad Allawi, and the great hope was in him being able to lead forward until this period, and I'll also refer back to something that you wrote in the "New York Sun" on May 4, "Iraq needs a democratically minded strongman," and does Prime Minister Allawi fit that bill as Iraq's leader at this moment?

PIPES: He's just been in office for a few weeks. We don't know fully who he is yet, but I'm inclined to think not. I don't think he has the kind of strength to keep Iraq, which is a difficult country to rule -- I don't think he has the kind of strength to keep it in tow.

I'm afraid that there will be -- elements are going to go off and cause all sorts of trouble. I -- you know, it -- we're watching it as it unfolds, I'm hoping to be optimistic, but I'm a little bit not optimistic.

PILGRIM: We see reports about a network of Saddam Hussein's cousins and associates operating from Syria and Jordan, funding coming perhaps -- pretty much open borders. How do you assess that as a threat?

PIPES: Well, Kitty, the most remarkable thing here is that the Syrian government has constantly been supporting the anti-coalition, anti-Iraqi government forces the last months. I don't know what's in it for them. I don't know why they think this is a good idea, but it could lead to really serious consequences for the Assad government in Damascus, and I watch the news that the Syrians are supporting Iraqi insurgents with amazement. It's a very foolish step, in my view.

PILGRIM: All right. Thanks very much for your analysis this evening.

Daniel Pipes.

PIPES: Thank you.

PILGRIM: Still ahead here tonight, a looming announcement from Senator John Kerry. Who will be his running mate? We will talk to our panel of top political journalists about it.

Plus, Exporting America. Concerns in California that a new contract signed by Governor Schwarzenegger could ship American jobs overseas.

That and much more still ahead.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues. Sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: Returning now to our top story, Senator John Kerry could soon announce his running mate. Senator Kerry's decision and the timing of the announcement could give his campaign a boost. Now Senior Political Analyst Bill Schneider has the report.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Why would John Kerry pick his running mate three weeks before the convention? He's looking for a little bounce in the polls.

The old idea is that you choose a running mate to balance the ticket. For Democrats, that meant making sure a southerner was on the ticket. In 1960, John Kennedy of Massachusetts balanced the ticket with a Texas Democrat and a rival for the nomination, Lyndon Johnson. Smart move. It got Kennedy Texas.

MICHAEL DUKAKIS, FORMER PRESIDENTIAL CANDIDATE: The next vice president of the United States of America...

SCHNEIDER: Another Massachusetts Democrat, Michael Dukakis, tried to do the same thing in 1988 when he picked Texas Democrat Lloyd Bentsen. It didn't work a second time.

Now we have yet another Massachusetts Democrat, with several southerners he could pick from, but there's not much pressure on Kerry to unify the party. President Bush has already done that.

In 1992, Bill Clinton certainly didn't pick Al Gore to balance the ticket. Gore was picked to reinforce Clinton's message that he was a new Democrat. Clinton got a little bounce in the polls when he named Gore.

Kerry would reinforce the message that he can keep the country safe with former general Wesley Clark. He could reinforce his economic message with labor favorite Dick Gephardt.

In 2000, Al Gore chose Joe Lieberman to help compensate for a weakness: his ties to Bill Clinton. Lieberman was Clinton's severest Democratic critic.

SEN. JOE LIEBERMAN (D), CONNECTICUT: He failed to show, I think, that he understood his behavior had diminished the office he holds and the country he serves.

SCHNEIDER: Gore got a bounce out of that choice, too, 5 points.

Does Kerry have a weakness he needs to compensate for? Yes. He lacks the common touch. Who has it? John Edwards.

JOHN EDWARDS (D), SOUTH CAROLINA: How are you all doing?

How are you doing there?

John Edwards. Nice to see you.

SCHNEIDER: Kerry is sometimes described as a conventional candidate, like Walter Mondale in 1984. When Mondale named the first woman to a major party ticket, it was a spectacularly unconventional move that made voters take a fresh look. Maybe he's a more interesting guy than we thought. A surprise move like that could get people to sit up and take notice.

(on camera): In the end, however, Mondale's bold move didn't work. He lost. So did Dukakis and Gore, even though their vice presidential choices were widely acclaimed, which all goes to prove, Americans don't vote for vice president.

What does the choice of a running mate really get you? Some attention.

Bill Schneider, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: And joining me now for more on Senator Kerry's search for a running mate are two leading political journalists. Karen Tumulty is a national political correspondent for "TIME" magazine, and Tom DeFrank is the Washington bureau chief for "The New York Daily News." Both of them join us from Washington.

And thanks very much for this little brainstorming session. So interesting. Let's start with Edwards. What's your assessment, Karen? I know that you were just on the campaign trail with Kerry in Wisconsin, Iowa and Minnesota. So what insights do you bring to the table here?

KAREN TUMULTY, "TIME" MAGAZINE: Well, I was struck, Kitty. It had been a few weeks since I'd been on the trail with Senator Kerry, and the size of the crowds that he was drawing were just phenomenal. Friday night, he managed to draw something like 5,000 people to a cornfield in Minnesota. It really does show that in these battleground states, people are really tuning into this election. It's -- there's a real intensity out there already of the sort that you don't normally see until October.

PILGRIM: Tom, let's go through some of the potential candidates for VP. What about Edwards? what's your assessment on that?

TOM DEFRANK, "NEW YORK DAILY NEWS": Well, Edwards -- you know, Kerry needs somebody who's not perceived as old Europe or old Democrat, and John Edwards fits that bill. He's a new Democrat. He's got a lot of energy, a lot of pizzazz. He doesn't have a big resume, probably wouldn't even carry his own state of North Carolina if he were on the ticket, but I do think that Edwards is the one guy you hear party pros, party regulars talk up the most. I think Kerry is under some amount of pressure to put Edwards on the ticket because of the new fresh face quality that Edwards would bring.

PILGRIM: OK. Let's -- Karen, let's talk about Gephardt.

TUMULTY: Well, Dick Gephardt and John Kerry have what appears to be a very good personal chemistry, and Kerry has said repeatedly that the first qualification that he is going to look at of any of these candidates to be his running mate is whether this candidate is actually ready to take over the job of president of the United States should they have to, and, in that sense, Dick Gephardt brings the most to the table. He's got the longest and deepest history of public service.

The problem is that he is sort of the anti-Edwards. He is the opposite of a fresh face, and he didn't do so well himself when he ran for the nomination. He was out after the first caucus.

PILGRIM: Should we read a whole lot into the fact that Kerry spent the weekend campaigning with Iowa Governor Tom Vilsack, Tom?

DEFRANK: I don't think we should -- I don't think we should read a lot into it. I mean, obviously, I don't know who the choice is going to be. My guess is Kerry would probably not want to have a ticket with two Catholics on it. Governor Vilsack's got a lot of qualities. He's -- a lot of good qualities.

He's got a compelling personal story, an orphan with a checkered family past, a really very compelling story, as I said, but I don't think you're going to -- I don't think Kerry's going to have two Catholics on the ticket, so it may well be that the fact that Vilsack and Kerry were out there together was really kind of like a consolation prize sort of tour for Governor Vilsack.

PILGRIM: Let's talk about some of the wild cards, and one of them is Hillary Clinton. What's your assessment, Karen?

TUMULTY: Oh, this was a rumor that came out on a Web site, The Drudge Report, last week. I know of absolutely nobody who thinks that there is any reason to think that Hillary Clinton is going to be the running mate.

PILGRIM: And, Tom, do you want to weigh in on that?

DEFRANK: Well, I mean, I agree with Karen. If you want to galvanize the dem -- if you want to galvanize the Republicans, you put Hillary on the ticket. There are those at the White House who say that would be great news. We had four million Christian conservatives who didn't vote last time. We could probably get 3.9 million of them out if Hillary were on the ticket. So I don't think that's going to happen.

PILGRIM: OK. Unknown, unknown to the general public, but any wild cards that you can think of?

DEFRANK: Well, there's -- there's a little buzz about former Georgia senator Sam Nunn, who would help with the southern equation, would help with the ready-to-be president calculation. But I just don't know. I guess my gut really tells me it's either going to be Edwards or a surprise, and I can't -- I can't fathom the surprise.

PILGRIM: All right. Karen, any...

TUMULTY: Although...

PILGRIM: ... names you want to throw on the table here?

TUMULTY: Well, it's just always worth thinking through the surprises because, four years ago, almost nobody would have picked Joe Lieberman and absolutely nobody would have picked Dick Cheney as running mates. I've heard -- I've heard a little bit of buzz around Senator Bob Graham of Florida, former chairman of the Senate Intelligence Committee, and you also do -- there was -- there was a little boomlet a few weeks ago for Wes Clark. I really do think that we shouldn't be surprised if there is a surprise.

DEFRANK: Kitty, if I may jump in for just for a second...

PILGRIM: Sure. Go ahead.

DEFRANK: ... I -- the Bob Graham thing is an interesting one because Graham is the most popular vote-getter, I think, in the history of Florida, and there are some Democrats who say Kerry should put Graham on the ticket and say to him for 15 weeks, Senator, never leave Florida on the theory that if -- that if Bob Graham could turn Florida into a Democratic state, then that might well be the election.

PILGRIM: One other point: The Internet users will find out first? That's a new wrinkle.

TUMULTY: Well, that was something that Senator Kerry announced, I think it was Friday. Basically he is saying that he is going to officially announce on his website JohnKerry.com. I have a feeling they are not going to be the very first. He was, by the next day, sort of couching that as they will be among the first to know.

PILGRIM: I think we should take that as a personal challenge, don't you? Thanks very much for joining us. Karen Tumulty and Tom DeFrank, thank you.

TUMULTY: Thank you.

PILGRIM: That brings us to the topic of tonight's poll. "Who do you think John Kerry should pick as a running mate? Richard Gephardt, John Edwards, Hillary Clinton, or someone else."

Cast your vote. CNN.com/lou. We'll bring you the results later in this show.

And tonight's thought is on democracy. "The spirit of democracy cannot be superimposed from the outside. It must come from within." And those are the words of Mohandas Gandhi.

Now, some of your thoughts. First on jobs in the United States.

Gary Ryan of Clearwater, Florida writes, "with yet another month of poor job growth and no end in sight, how can Bush say that we have such wonderful growth? The new jobs are of poor quality and low pay. We need to revise the jobs report to include the quality of jobs and some comparison to the ones that were lost so even if there are more jobs, are things really getting better?"

And we have one from Pam Hutchinson from Meridian, Ohio. "When discussing the major loss of jobs in the country we need to remember that finding a new job, even if it is comparable in salary which is doubtful for many, it doesn't address the irreparable loss of seniority, insurance, pension, years built up, self esteem, confidence, stress, interruption of lifestyle, and savings for the entire family towards school, retirement, et cetera."

We do love hearing from you. Send us your thoughts at loudobbs@cnn.com.

Still ahead here tonight, insurgents attack a key oil pipeline in Iraq. We'll talk to a Middle East expert who says the solution to sabotage will be a political response, not a military one.

Plus, outrage after Mexican soldiers disrupt a funeral for a U.S. marine killed in Iraq. We'll have that remarkable story.

And then in our Special Report, "Made in America," one American company has managed to stay in business for more than 100 years while keeping all of its production in the United States. We'll have that and much more still ahead here tonight.

(COMMERCIAL BREAK)

PILGRIM: Insurgents have sabotaged a key oil pipeline that links oil fields in southern Iraq with refineries further north. The Iraqi ministry of oil said the insurgents detonated a bomb under the pipeline south of Baghdad.

Engineers have shut down a pumping station so the fire can burn itself out. Coalition and Iraqi forces have increased security around oil installations to prevent insurgent attacks. Officials are particularly concerned about the threat of attacks against offshore facilities and ships. Brent Sadler reports from southern Iraq.

(BEGIN VIDEOTAPE)

BRENT SADLER, CNN SENIOR CORRESPONDENT (voice-over): Giant ships fill their tanks with Iraqi crude oil, exporting up to $3 million worth of oil an hour, if all works well. But all is not well. Crude oozes from a gaping hole after recent attacks on strategic pipelines near Basra in southern Iraq, sapping oil revenues.

IYAD ALLAWI, INTERIM PRIME MINISTER OF IRAQ: Anyone involved in these attacks is nothing more than a traitor to the cause of Iraq's freedom and the freedom of its people.

SADLER: Oil protection is supposed to be a top priority on land and at sea since last year's invasion of Iraq. But Iraqi officials claim it's been hit and miss, exposing a worrying shortfall in coalition planning.

JABBAR AL-LEABY, DIRECTOR GENERAL, SOUTH OIL COMPANY: So, they need security everywhere, and security in men, security in equipment, security in every aspect.

SADLER (on camera): The vast and often remote network of pipelines is vulnerable to attacks. No oil means no money to pay for the cost of war, reconstruction, and recovery.

As recently as two months ago, would-be suicide bombers tried, but failed, to hit these vital offshore terminals, now guarded by a fleet of coalition warships. U.S. soldiers help enforce a new exclusion zone patrolled by the American and British navies. Nothing is foolproof, though.

ADM. ALLAN WEST, BRITISH FIRST SEA LORD: Everything is always vulnerable if you get the right thing at the right time and you are lucky. But now they are much harder to crack.

SADLER: But on land, where saboteurs are getting through, a 15,000 strong Iraqi protection force, privately trained with coalition money, is paper-thin. With more than 7,000 miles of pipeline, and 260 facilities to guard.

KEVIN THOMAS, OIL ADVISER, CPA SOUTH: Our patrols can only walk through, we can monitor the patrol patterns, and attack when the patrol has moved on.

SADLER: The oil network has so far been hit more than 130 times in the past seven months alone, including a 6-day shutdown of all crude exports in June losing money Iraq and its coalition allies can ill afford.

Brent Sadler, CNN, Basra, southern Iraq.

(END VIDEOTAPE)

PILGRIM: My next guest says the recent insurgent attacks in Iraq are likely to continue for some time. That's despite the transfer of sovereignty to the interim Iraqi government. Crispin Hawes is the director of Middle East and Africa analysis at the Eurasia Group and he joins me now. Thanks very much for joining us, Crispin. First of all, what's your general assessment of how things are going?

CRISPIN HAWES, DIR. MIDDLE EAST ANALYSIS, EURASIA GROUP: Well, I think it's difficult to tell at this point whether there's been a change since sovereignty was passed over. I doubt very much that there will be. It's difficult to say that the insurgent groups will not regard the new Iraqi government as just as much of a target as the coalition provisional authorities, and we don't expect any great diminishing in violence over the short term.

Obviously, in the long term the solution to this insurgency is not simply the arrest or the capture of a number of individuals or cell groups. It's probably -- it's going to be a political solution. The proportion of the population that currently feels alienated or disenfranchised from this government needs to feel that they have a vested interest in joining and supporting the government and no longer in supporting or at least tacitly supporting the insurgency. In the short term, the progress is likely to be -- it's going to be difficult to see.

PILGRIM: And you have attempts at political solutions like amnesty and that sort of thing. Crispin, you go to Iraq frequently, you were there a few months ago, you are headed back shortly, perhaps. Tell us what we're really facing here.

We see people like Zarqawi taking credit for the beheadings, yet there's some discussion of Baathist elements. It's very hard to reconcile what the foes are. What's your insight into this?

HAWES: Well, I think it's a fallacy to see the insurgency as a single entity, a single group of people that have a common ideology. There's probably a degree of alliance of convenience here between perhaps the sort of hardline al Qaeda-type, Zarqawi-type ideologic committed Islamists pursuing the vague idea of an Islamic state. Former Baath officials that probably have a stake in the smuggling of criminal networks that they ran underneath Saddam, and there's certainly plenty of evidence to see. One only has to walk around Baghdad to see how much equipment of every type is being imported into Iraq. Someone is certainly benefiting from that.

PILGRIM: So they would have a vested interest in keeping things in chaos because they're profiting?

HAWES: Absolutely. And beyond that. There will be many other groups that have -- that see that they have at least one common enemy at this point, including if the coalition provisional authority previously or the Iraqi transitional government, they're, in some ways, a unifying factor for the insurgents.

In the future, it might well be that some of these currently insurgent groups will feel that they have an interest in joining the government or in supporting the government or supporting some aspect of the new government. So I doubt if we'll see this level of community, if you like, among the insurgents coming through but certainly at the moment you have a disparate group that do say they have a common goal.

PILGRIM: Let me just ask you about the Shiite cleric Muqtada al Sadr. He has been saying recently that he would like to be part of the government. Do you take that as a positive sign? What's his role going forward?

HAWES: I think his role has always been or his goal has always been to try and boost his own personal standing within Iraq. I think in some ways he's had that standing boosted for him by, in my view, perhaps the failure of other Iraqi Shia politicians particularly really to step up to the plate and make themselves better known across the country. They've stepped back and allowed probably a less influential person like himself to get more press, to get more airtime, to build a bigger persona for himself. In the long term, I think he's exactly the sort of person that may find that he needs to be on the inside rather than on the outside.

PILGRIM: All right. Thanks very much. Crispin Hawes of Eurasia Group. Thanks.

The U.S. ambassador to Mexico says he is outraged after Mexican soldiers interrupted the funeral of a U.S. marine killed in Iraq. The funeral for Marine Juan Lopez (ph) was held in a Mexican town where he was born. Four armed Mexican soldiers stopped the procession and demanded that U.S. marines taking part in the honor guard remove the replica rifles they were carrying. Mexican law prevents foreign troops from bearing arms in the country. After a 40-minute delay the procession was allowed to continue. Lopez immigrated to the United States when he was a teenager. He was killed last month in an ambush in Ramadi.

Still to come. A high-profile indictment in the Enron collapse could be just hours away. We'll have that story.

Also, exporting California. Governor Schwarzenegger makes a controversial deal that could cost the workers in the Golden State their jobs.

And taking the fight against the exporting of American jobs into the voting booth. One group of workers is determined to get Washington's attention. We'll have that report coming up.

(COMMERCIAL BREAK)

PILGRIM: Former Enron chairman and CEO Ken Lay is expected to be indicted this week. Sources close to the investigation tell CNN and Lay was the chairman when the company collapsed in late 2001. His attorney Michael Ramsey last week told the Associated Press that speculation about an indictment was designed to pressure the grand jury.

Nearly two dozen other Enron employees have been indicted including former chief financial officer Andrew Fastow and former CEO Jeffrey Skilling. Fastow was sentenced to ten years in prison and Skilling pleaded not guilty this year to fraud and insider trading. Let's turn now to the exporting of America tonight. The state of California has signed a deal with a well-known outsourcing company. The state faces a continuing budget crisis and Governor Schwarzenegger is looking for ways to cut cost. One solution could be the exporting of taxpayer funded government jobs to cheap foreign labor markets. Casey Wian reports from Los Angeles.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Newly inaugurated California Governor Arnold Schwarzenegger made this promise...

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I will not rest until California is a competitive job-creating machine.

WIAN: But was he talking about a job-creating machine for the people of India? That may be the effect now that the governor has signed a deal with a Canadian-owned company specializing in exporting jobs to cheap overseas labor markets.

California spends nearly $5 billion a year buying goods and service. Montreal-based CGIAMS will provide what it calls strategic sourcing analysis to streamline that purchasing power.

Some state lawmakers are worried the deal will also lead to taxpayer-funded jobs being sent overseas.

SEN. LIZ FIGUEROA (D), CALIFORNIA STATE SENATE: We're concerned about putting tax revenues back into the state's economy when we're having such difficulty in balancing a budget and budget constraints. We want to make sure that the tax money that is saved or generated here in California goes to California workers.

WIAN: CGI's website trumpets its pioneering global delivery centers in Mumbai and Bangalore, India. Still California officials say it's too early to tell if outsourcing will be included in the company's recommendations to the state.

RON JOSEPH, CA. DEPT OF GENERAL SERVICES: At this time, there is no given that any outsourcing or offshoring would occur out of these proposals. Ultimately, the state has the authority and the final decision of how to move forward with the proposals that AMS puts on the table.

WIAN: The governor's office cites examples of potential savings such as consolidating the purchase of tires for the California Highway Patrol and other state agencies under one contract. CGIAMS will receive a percentage of any savings it recommends under its three-year contract with the state.

JAMIE COURT, AUTHOR, "CORPORATEERING": The state of California, 35 million people, should not be legitimatizing the use of outsourcers and the exporting of American jobs elsewhere. I'm afraid the only reason we are is because the governor of California is acting a lot more like a CEO of California, and he's learned this tactic clearly from many of the very large Fortune 500 companies that he's been fund- raising among.

WIAN: Meanwhile, some state lawmakers are sponsoring a bill that would require any taxpayer-funded jobs stay in California. Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: The textile industry has been devastated by the exporting of American jobs to cheap foreign labor markets, and now one North Carolina company is fighting back at the ballot box. The Saunders Thread company has registered every one of its employees to vote in the upcoming election. Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Hal Rippie (ph) is a manager at the Saunders Thread Company in North Carolina. He voted for President Bush in the last election but now has harsh words for his presidential choice.

UNIDENTIFIED MALE: Anyone's got to be better than Bush. A pizza delivery man would be better than Bush.

SYLVESTER: Rippie not crazy about Kerry, either, but sees him as the candidate more likely to save the textile industry.

UNIDENTIFIED MALE: We've lost so many jobs in textiles it's pitiful. I've been in two plant closings, I don't want to be in another one.

SYLVESTER: Gaston County, North Carolina, has lost 8,000 manufacturing jobs since the last presidential election. Charles Saunders, the owner of the thread company, believes the only way to reverse the trend is by exercising the right to vote. He held a voter registration drive at his plant, the first since the company opened four decades ago. Now all 39 of his employees are registered.

CHARLES SAUNDERS, SAUDERS THREAD COMPANY: These are the people who are losing their jobs by policies that come out of Washington and the only way they're going to get their voice heard is at the ballot box.

SYLVESTER: The AFL-CIO is also tapping into workers' anger. This year the labor union started its voter registration drive early, reaching 500,000 workers in a door-to-door campaign in the 16 battleground states in the last month.

RICHARD TRUMKA, AFL-CIO: We've started earlier and we're seeing more enthusiasm and activism earlier this time because workers are so angry and so fed up about the economy, about the lack of good jobs, about the lack of affordable healthcare.

SYLVESTER: Republicans, not to be outdone by the Democrats, are also starting their voter registration drive early. They hope to register 3 million new voters by November. Their strategy includes using an 18-wheeler to target voters at NASCAR races, and trying to appeal to young conservatives on college campuses. Lisa Sylvester, CNN, Washington.

(END VIDEOTAPE)

PILGRIM: Here's a reminder to vote in our poll tonight. "Who do you think Kerry should pick as running mate? Richard Gephardt, John Edwards, Hillary Clinton, or someone else?" Cast your vote at CNN.com/lou. We'll bring you the results a little bit later in this show.

And when we return, "Made in America." We look at a company that chooses to make its products right here in the United States.

And a symbol of American freedom that wasn't made in America. We'll have the details when we return in a moment.

(COMMERCIAL BREAK)

PILGRIM: Tonight we begin our series of special reports "Made in America." We celebrate companies who choose to make their products in this country instead of shipping American jobs to cheap foreign labor markets and tonight the story of W.R. Case & Sons Cutlery. This company has manufactured products that have been carried into war, the White House even outer space. Philippa Holland reports.

(BEGIN VIDEOTAPE)

PHILIPPA HOLLAND, CNN CORRESPONDENT (voice-over): For 115 years, W.R. Case & Sons Cutlery Company has been making knives by hand in America, sometimes with generations working side by side.

UNIDENTIFIED FEMALE: Here, I cut these flush. Now, my job's done and I hand it up to my daughter.

UNIDENTIFIED FEMALE: OK. We're going to thread (ph) and spin it.

DOT COLLEY, 30-YEAR CASE EMPLOYEE: I've been here 30 years. I met my husband here. He's been here 34 years. My daughter works here with me. She's been here 12 years.

HOLLAND: There's both family and national history at Case. Members of the U.S. military have carried Case knives into every conflict of the past century. One of Case's loyal customers also happened to be to be a commander-in-chief, the 34th president of the United States, Dwight D. Eisenhower.

TOM ARROWSMITH, CEO & PRESIDENT, W.R. CASE &SONS CUTLERY: When he had a special guest, he gave them a gift of a Case pocketknife. We've since named the pattern the Eisenhower pattern, and it carries his signature on the blade.

HOLLAND: NASA commissioned a Case knife for its astronauts to carry on the first manned space missions. Case uses American raw materials in all of its knives. The only exception are exotic materials like mother of pearl, not found in the United States.

Buying American is a topic that Arrowsmith frequently faces.

ARROWSMITH: As recently as last week, we had a little medallion that was going into a product, the purchases people, as they need to, had shopped it a couple of ways, the domestic price was $1.25, the non-domestic price was 48 cents. We chose to use the $1.25 part, simply because that's how we do things.

HOLLAND: And if anyone at Case needs a reminder of the importance of buying American, they don't have far to look.

ARROWSMITH: Outside our doors is a quarter of a million square foot facility that used to manufacture electronic components. I worked in that facility as a production superintendent a number of years ago, and they sold it to another company that's moved everything offshore. It's easy for us to see every day when we leave the parking lot, the effect of outsourcing.

HOLLAND: Losing a job to outsourcing is one experience Arrowsmith promises his nearly 400 employees they will never have. Philippa Holland, CNN, Bradford, Pennsylvania.

(END VIDEOTAPE)

PILGRIM: Thousands turned out last night at a Capitol Fourth celebration in Washington, D.C.

"American Idol's" Clay Aiken sang "Proud To Be An American" and members of the audience waved American flags which were handed out at the event but it turns out those American flags weren't so American after all. As you can see, they were made in China.

Now, a look at the weekend box office, and more people went to see "Spiderman 2" than any other movie this holiday weekend. The blockbuster sequel has pulled in a record $180 million in just six days. That's $115 million of that was from this weekend alone. "Spiderman 2" pushed Michael Moore's "Fahrenheit 9/11" to number 2.

Still ahead, the results of tonight's poll. First, a reminder to check our website for the complete list of companies we've confirmed to be exporting America. CNN.com/lou.

(COMMERCIAL BREAK)

PILGRIM: Here are the results of tonight's poll. Seven percent of you think John Kerry should pick Richard Gephardt as a running mate. 69 percent say John Edwards. 10 percent Hillary Clinton, 14 percent picked someone else.

Thanks for joining us tonight. Please join us tomorrow. Former New York City Police Commissioner Bernard Kerrick will join us on the latest efforts to secure this country.

For all of us here, good night from New York. "ANDERSON COOPER 360" is next.

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