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Lou Dobbs Tonight

Peace Agreement Reached in Najaf; Are Attack Politics Working?

Aired August 26, 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, CNN ANCHOR: Tonight, a peace agreement in Najaf. Iraq's most powerful Shiite cleric returns to the holy city and reaches a deal with an anti-American cleric and his militia.
Are attack politics working? President Bush reaches out to Senator John McCain on the Swift Boat Veterans for Truth controversy. We'll have the latest poll numbers on how the attacks are impacting voters.

Poverty in America. A new report finds the wealthiest nation on earth is home to millions of people living without poverty and without health insurance.

(BEGIN VIDEO CLIP)

KATHLEEN STOHL, FAMILIES USA: The sad thing is that when people don't have health insurance, they go into debt, and they become sick, and they don't get health care.

(END VIDEO CLIP)

PILGRIM: And preparing for the next global flu outbreak. The government releases a sobering new report on what needs to be done to save thousands of lives.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Three times in the last century, we had pandemic influenza outbreaks, and we do believe it's only a matter of time before we see another one.

(END VIDEO CLIP)

PILGRIM: And Broken Borders. Outrage over a possible plan to give Social Security benefits to illegal aliens. We'll talk with one congressman who says the move would cause nothing short of a financial crisis.

CNN ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, August 26. Here now for an hour of news, debate and opinion, sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

Tonight, a major development in Iraq. The country's top Shiite cleric, Ayatollah al Sistani, has reached a deal to end weeks of violence in Najaf. Sistani negotiated today with anti-American cleric Muqtada al Sadr. Al Sadr's militia has been battling with American forces in and around the holy city for weeks.

Matthew Chance reports from Najaf.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN INTERNATIONAL CORRESPONDENT: Well, many had hoped that with the return of the Grand Ayatollah Ali al Sistani to Najaf, the start of the peace process could actually begin, but few believed that it would be concluded so soon.

But that seems exactly what has happened within hours of his return to Najaf. There has been an agreement with Muqtada al Sadr and his Mehdi Army to bring to an end hostilities in Najaf that have ravaged that holy city for more than three weeks now. It's a five- point agreement that's been reached and agreed by all the factions, all the warring parties in this conflict.

The first two points look at how Najaf and Kufa should be declared weapons-free zones. All armed people to leave Najaf as well. The third point: Foreign forces, by which they mean the U.S. troops that are here in some considerable strength, should withdraw, and security should be taken over by the Iraqi police.

Now that's an important point for the interim Iraqi government because, all along, they've been arguing about the illegitimacy of the Mehdi Army to patrol the streets of Najaf. The Mehdi Army will now be gone under the terms of this peace deal and security be turned over to the hands of the Iraqi police forces.

Also in this deal, compensation is to be paid to members of families who have lost loved ones, to people who have lost property in the fierce fighting that has really ravaged areas of Najaf for that period of three weeks.

And the final term: Legitimate elections are to be held. Now, of course, the interim Iraqi government is already planning to hold these elections, planning to hold them next year early in January perhaps.

But that last term holding out the possibility that Muqtada al Sadr himself may take up the offer that's been extended to him by the government to join the political mainstream and to contest in those elections when the time to do that comes around.

So, certainly, a peace deal that seems to be a face-saving truce for all sides here, but particularly the interim Iraqi government because they've avoided that very controversial move of sending in some kind of military force to take by force the Imam Ali Shrine. That would have been very controversial. They wanted above all else to avoid that, and they seem to have done it with this peace deal.

Matthew Chance, CNN, Najaf.

(END VIDEOTAPE)

PILGRIM: We will have much more on the developments in Najaf and what it means for U.S. military strategy there. We'll have that later in the broadcast. General David Grange will join us in Grange on Point.

Well, the war in Iraq is a major issue for the presidential campaign in this country, and a new CNN/"USA Today"/Gallup poll finds the race is closer than ever. However, it also finds the attack politics that have dominated the campaign in recent weeks are having an impact on voters.

Bill Schneider reports.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Coming out of the Democratic Convention, the race was a dead heat. Now going into the Republican convention, after weeks of controversy over John Kerry's military service in Vietnam, where do things stand? Still a tight race. Looks like nothing has changed. Or has it?

Before the Democratic Convention, people said they trusted Bush more than Kerry as commander in chief. After the convention, Kerry and Bush were tied.

SEN. JOHN F. KERRY (D-MA), PRESIDENTIAL NOMINEE: I defended this country as a young man, and I will defend it as president.

SCHNEIDER: Now Bush has moved back into the lead. What happened?

The Democratic Convention had one central theme.

SEN. TED KENNEDY (D), MASSACHUSETTS: John is a war hero.

TERESA HEINZ KERRY, WIFE OF SENATOR KERRY: John is a fighter.

SCHNEIDER: That point came through. Immediately after the convention, 42 percent of voters said Kerry's military service made them more likely to vote for him, especially when they heard testimony like this.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL NOMINEE: Just spend three minutes with the men who served with him then and who stand with him now.

SCHNEIDER: A group calling themselves Swift Boat Veterans for Truth quickly took up the challenge.

UNIDENTIFIED MALE: John Kerry is no war hero.

UNIDENTIFIED MALE: He betrayed all his shipmates. He lied before the Senate.

SCHNEIDER: The debate over the charges monopolized press coverage. The poll shows more than 80 percent of Americans saw or heard about the ad. Do they believe the charges? No. By better than 2 to 1, people believe Kerry is telling the truth about his service in Vietnam. But the controversy still had an impact. The number who say Kerry's military service makes them more likely to vote for him fell by half, from 42 percent to 21 percent. The Swift Boat Veterans' ad not only hijacked the campaign, it raised doubts about Kerry, reinforcing the Republican message that Kerry may not be trustworthy.

After the Democratic Convention, Kerry held a slight lead over Bush as someone who is honest and trustworthy. Now he's lost it. The ad controversy neutralized the message of the Democratic Convention.

(END VIDEOTAPE)

SCHNEIDER: Did the ad change the horse race? No. But neither did the Democratic Convention. The war hero theme touted by the Democrats at their convention, challenged by the Swift Boat Veterans, has turned out to be a distraction and, for Kerry, a lost opportunity to score points on other issues.

PILGRIM: So do you think that the Democrats made a strategic mistake in featuring this issue?

SCHNEIDER: I think they did. I think they made the whole convention about Kerry being a war hero, and while the voters were inclined to believe it initially -- and then they had some doubts -- it didn't make any difference. It didn't score any points in the race against George Bush.

This race is not about the Vietnam War 35 years ago. It's about Bush's record as president and the next four years. And, basically, that was all a distraction, and it ended up meaning very little.

PILGRIM: Well, perhaps you can move to the future going forward now.

SCHNEIDER: Yes. It's a real lost opportunity for Kerry because this was his one chance to get out on the national stage, talk about what he would do differently, criticize the Bush record, and that just didn't happen.

PILGRIM: All right. Thanks very much.

Bill Schneider.

SCHNEIDER: Sure.

PILGRIM: Well, another CNN/"USA Today"/Gallup poll found that most Americans, 56 percent, say President Bush should denounce the Swift Boat Veterans' ads. Now one American who has called on President Bush to condemn the ads is Senator John McCain. And, today, President Bush reached out to Senator McCain on the issue.

Kathleen Koch is traveling with the president in Albuquerque, New Mexico. She joins us live with the report -- Kathleen.

KATHLEEN KOCH, CNN WHITE HOUSE CORRESPONDENT: Kitty, both campaigns have been saying that they really do want to get back to the issues, but, this time, it was President Bush who brought up these attack ads, in a surprise move, calling Senator John McCain from Air Force One, as the president was heading here to campaign in New Mexico, and asking the senator to join him in taking legal action to stop all of these attack ads. Now spokesman Scott McClellan said that if that doesn't work, Mr. Bush asked the senator to join him in pursuing legislative action to block those ads.

Both the White House and the Kerry campaign have filed official complaints with the Federal Election Commission against these so- called 527 ads, and McClellan explained, "Since the FEC failed to act, we would now be asking the courts to force the FEC to act to shut down these -- shut down all this activity."

And Senator McCain has agreed, saying that it is a good idea that the two men cooperate on this issue, and that coming from a man who was quoted in this morning's "New York Times" as saying he was planning on contacting President Bush himself to express his "displeasure at the president's failure to specifically condemn the exact content of the Swift Boat Veterans for Truth ad condemning John Kerry's service in Vietnam."

Now -- so President Bush this morning -- what you really saw here was him trying to reposition himself on the positive side of this issue, and that as he's launching an eight-state campaign swing leading up to the Republican National Convention in New York City on Monday.

This campaign swing through these battle ground states like New Mexico -- it's a state that he lost by 366 votes in 2000 to Al Gore. The president wants to avoid that outcome this year, but he's got a tough job ahead of him, though he brought in some heavy ammunition, a taste of the Big Apple here to New Mexico, with former Mayor Rudolph Giuliani introducing President Bush at every single event today.

But the president knows he's got his work cut out for him in this state. This is a state that, when you take a look at the latest polls, shows that John Kerry is leading the president by a 10-point margin with likely voters in November.

Also, this is a state that is very heavily Hispanic, the most heavily Hispanic state in the country, some 42 percent of its population being Hispanic, and that's a group that normally votes by a 2-to-1 margin for the Democrats -- Kitty.

PILGRIM: All right. Thanks very much.

Kathleen Koch.

One controversial television ad is being pulled from the airwaves. The Kerry campaign will no longer run its political ad showing Senator John McCain calling on then Governor George Bush to denounce attacks on his military service in the 2000 primary season. Senator McCain asked the Kerry campaign to stop running the ad. A Kerry spokesman said the ad was being pulled because the senator wanted to respect Senator McCain's wishes. Well, Senator Kerry today challenged President Bush to weekly debates from now until the election. At a campaign stop at a community college near Minneapolis, the Democratic candidate said the country deserves a serious discussion about the future. The Bush campaign has not directly responded to today's challenge.

The special Commission on Presidential Debates has recommended three such debates beginning in late September. The Kerry campaign has accepted the format, but the Bush campaign is waiting until the Republican Convention is over before making a decision.

Well, the Republican Convention begins here in New York in just four days, and, while the Republicans are fine-tuning their platform and preparing to rally around the president, Democrats are busy as well.

And Ed Henry has the report.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): When President Bush landed on the USS Lincoln, Republicans thought his reelection was taking flight. But on the eve of the Republican National Convention, Democrats plan to turn the president's own words against him.

TERRY MCAULIFFE, DNC CHAIRMAN: Now Bush is heading to New York to brag about all that he has done for America. He probably won't use that sign. So we've appropriated it. So we changed one little word.

HENRY: The Democrats' rapid response team at the convention will pound away at this theme, countering the president's claims that he has done well on everything from the war in Iraq to domestic issues like health care.

McAuliffe's self-proclaimed truth squad will be a few blocks from Madison Square Garden in a makeshift war room. Republicans had a similar operation in Boston last month to push back on the Democratic claims launched from the podium at the FleetCenter.

ED GILLESPIE, RNC CHAIRMAN: Last night, as predicted, the extreme makeover began, but John Kerry cannot run from his 20 years out of the mainstream record in the Senate.

HENRY: Next week's Democratic counterspin will be led by Iowa Governor Tom Vilsack with help from the Big Apple's own senators, Hillary Clinton and Chuck Schumer. During the convention, Democrats will be running a TV ad in 21 states charging the president has mishandled the economy.

BUSH: This economy of ours is steady and strong. Steady and strong.

SCHNEIDER: With Rudy Giuliani and John McCain getting podium time, Democrats will also highlight their differences with the president. MCAULIFFE: Instead of a convention, he's going to have a masquerade ball in New York City.

HENRY (on camera): But the Democratic counterspin team will be missing one of its biggest guns, Bill Clinton. The former president is in Europe on the international portion of his book tour and will not be politically active during the Republican Convention. But Mr. Clinton has already committed to headline at least 10 events for the DNC this fall.

Ed Henry, CNN, Washington.

(END VIDEOTAPE)

PILGRIM: When we return, the Middle Class Assault. Working men and women are one of the most important voting blocks in this country, and we'll have a special report on what both presidential candidates say they will do to help the middle class.

Plus, poverty rates are soaring in the wealthiest nation on earth. We'll have the findings of an astonishing new report.

And then peace in Najaf. We'll talk to General David Grange about what that will mean for U.S. military strategy in Iraq.

Those stories and a great deal more still ahead here tonight.

(COMMERCIAL BREAK)

PILGRIM: With the election just over two months away, President Bush and Senator Kerry are both actively trying to win the support of the nation's middle class. Fifty million American families fit into what many consider to be the bedrock of our democracy.

In our series of special reports, the Middle Class Assault, Bill Tucker now looks at how the Kerry-Edwards campaign hopes to win the middle class vote.

(BEGIN VIDEOTAPE)

KERRY: We're going to have people who actually stand up and fight for the middle class, for the average worker of this country, so we make America a place of fairness again.

BILL TUCKER, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Precisely the point that recent polls indicate John Kerry should hammer home with voters. Those polls show the economy as the number one issue, higher than national security, higher than health care or the war in Iraq.

And in a poll released earlier this month, the Pew Research Center found that, among people describing their financial situation as good to excellent, Bush is the clear choice. But among families who see their finances as only fair to poor, Kerry's the winner.

JARED BERNSTEIN, ECONOMIC POLICY INSTITUTE: Kerry and Edwards would probably do well to raise the question are you better off than you were four years ago because there's lots of folks in the middle class who are not. The Bush campaign is going to be saying, you know, are you better off than you were four months ago.

TUCKER: Real wages did drop over the last four years, but they've been declining for the past 30 years. The Kerry campaign doesn't address that issue. But it is promising to roll back tax cuts for incomes above $200,000 and giving the money to the middle class, while also providing tax cuts for health care, child care, and increasing the tax credit on college tuition to $4,000.

The message is sewn in fertile ground.

ANDREW KOHUT, DIRECTOR, PEW RESEARCH CENTER: Discontent with the economy has led the American voter and middle class voters to have more confidence in Kerry than Bush going forward on the economy by a margin of 37 percent to 52 percent, and this is a big hurdle for President Bush to overcome.

TUCKER: But the economy is not the only issue, and that's what makes the polls so close.

(on camera): The middle class cares deeply about Homeland Security, and, on the issues of who can best handle terrorism and the situation in Iraq, the Pew Poll puts President Bush well in front of Senator Kerry.

Bill Tucker, CNN, New York.

(END VIDEOTAPE)

PILGRIM: And President Bush is also targeting the middle class in his campaign for another four years in the White House, but a different approach to taxes are the central issue for the president's reelection campaign.

(BEGIN VIDEOTAPE)

PILGRIM (voice-over): The majority of Americans call themselves middle class. Psychologically, it's a comfortable place for people to identify with, and appealing to that group is high political science.

KEVIN HASSETT, AMERICAN ENTERPRISE INSTITUTE: The middle class vote is always very, very important. They call it the middle class because that's where most people are, and, if the people in the middle class are happy, then incumbents tend to win.

PILGRIM: President Bush's economic selling point to the middle class: tax cuts. That was the perception from a random poll of Bush supporters in Chicago and Washington.

UNIDENTIFIED FEMALE: I think it's in recovery mode. I feel very comfortable right now with the economy.

UNIDENTIFIED MALE: I believe economic growth is the most important thing, especially job creation, and I believe in tax cuts. I believe in trying to get the money to get to the people who can create jobs and make the economy work.

UNIDENTIFIED MALE: The last I spend on federal taxes, the more I'm going to be spending on the economy.

PILGRIM: Pundits say President Bush's emphasis on conservative values and faith also appeals to solid middle class voters, but it's his stance on national security that many feel will give him his greatest advantage with the middle class.

Even if voters are critical of the way Iraq has been handled, a recent Pew Research poll finds Bush beats Kerry by 10 points in perceived ability to fight terrorism, while they are fairly even on Iraq.

JENNIFER DUFFY, THE COOK POLITICAL REPORT: Voters manage to separate the two out, and I think that that is a big asset to the president at this point. I mean, the suburban women, who in 2000 cared about education and the environment, now really care about safety and security.

(END VIDEOTAPE)

PILGRIM: Now that recent poll also found 48 percent of people found Bush down to earth and 50 percent, good in a crisis.

Well, an alarming report released today by the U.S. Census Bureau shows poverty is on the rise in this country. It's not just poverty that's spreading. The number of Americans living without health insurance is also growing.

Louise Schiavone reports from Washington.

(BEGIN VIDEOTAPE)

LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): Poverty is up in the wealthiest nation on the face of the earth. Census figures from 2003 show American households losing ground in earnings and health coverage.

UNIDENTIFIED MALE: The official poverty rate rose from 12.1 percent in 2002 to 12.5 percent in 2003.

SCHIAVONE: The latest Census Bureau population report shows 35.9 million Americans lived at or below poverty in 2003, up 1.3 million from the previous year. The problem is especially acute for children, with 17.6 percent in poverty, up from 16.7 percent in 2002.

The government defines poverty as roughly $12,000 a year for a household of two and around $19,000 annually for a family of four. The report is a political windfall for Democrats.

EDWARDS: I can't believe that the American people are actually going to rehire a president that cost 1.4 million Americans their health care in the last year. They sent 1.3 million more Americans into poverty. They drove your wages down by $1,500 just in the last year alone. SCHIAVONE: On the hot-button issue of health care, the Census Bureau finds that about 45 million Americans had no health insurance last year, up 1.5 million from the year before.

STOHL: When people don't have health insurance, they go into debt, and they become sick, and they don't get health care. They -- 50 percent of personal bankruptcies in this country are at least related to medical debt.

SCHIAVONE: The Bush administration notes that the economic picture has improved since these statistics were drawn. The unemployment rate, then at 6.3 percent, now stands at 5.5 percent.

(END VIDEOTAPE)

SCHIAVONE: Kitty, the median income for American families was virtually unchanged from last year, at roughly $43,000, but the wage gap between men and women continues to widen, with women earning 76 percent of what men earn -- Kitty.

PILGRIM: All right. Thanks very much.

Louise Schiavone.

Well, tonight's thought is on poverty. "Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is in an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe."

Those are the words of American abolitionist Frederick Douglass.

Just ahead, after weeks of violence, a peace agreement in Najaf. What does it mean for the U.S. military operation? I'll be talking with General David Grange.

And health officials say it's just a matter of time. A sobering new report on the deadly virus that could strike this country and kill hundreds of thousands of people.

And in Broken Borders tonight, they're in this country illegally, but some people say illegal aliens should receive Social Security benefits. Congressman Dana Rohrabacher says such a deal would cause a financial crisis in this country.

(COMMERCIAL BREAK)

CNN ANNOUNCER: LOU DOBBS TONIGHT continues with more news, debate and opinion. Here now, Kitty Pilgrim.

PILGRIM: Returning now to our top story, a peace agreement in Najaf. Iraq's leading Shiite cleric Ayatollah al Sistani reached a deal today with anti-American cleric Muqtada al Sadr. Now al Sadr's militia has been battling with American forces in Najaf for weeks.

Joining me now for more on the peace deal and how it could impact U.S. strategy in Iraq is General David Grange, and he joins us for Grange on Point.

General Grange, are the U.S. troops -- they're basically sidelined at this point? They're pulled out of the conflict. Foreign forces have to leave Najaf, according to this deal. Are they somewhat vulnerable at this point?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, any time you withdraw, Kitty, you're very vulnerable to any enemy action. I'm not saying there will be, but it's very difficult in a city like this, troops spread out all over, insurgents everywhere, not to have some type of a skirmish.

It is dangerous, but it's probably a good point in the negotiated process, though keep in mind it won't be totally out of the area, just on the outskirts of the city.

PILGRIM: This has been a pitched battle. In fact, in the last 24 hours, 90 people were killed. American forces were pressing very hard on Muqtada al Sadr's Mehdi Army. They did their job. They cornered him, and now it appears the peace deal is brokered to let him go free, an amnesty of sorts. How do you assess that?

GRANGE: Well, it's pretty hard to -- not to argue with any kind of success that brings peace in a faster manner. However, I believe that Sadr will be one to -- we'll have to deal with again. When I say we, I'm talking about the Iraqis and the American forces there, and, you know, he's one that can't be trusted. He's broken deals in the past, and he -- I believe he was ready to crack.

The pressure was on him. I don't think he was ready to die as a martyr. I think that he had a lot of dissension in the ranks, desertion, and it was about to happen, and it will have a little bit of an effect on the morale of the U.S. troops and even maybe the prime minister, but we'll see how that works out.

But I can assure you that there's plenty being done in case it doesn't hold.

PILGRIM: Well, what do you think that planning could be? Al Sadr could withdraw and re-galvanize. He is a lightning rod for discontent in the country.

GRANGE: He is, and, you know, it's going to be interesting to see if the interim government presses the charges for murder when she is one of the accused and one of the other ayatollahs. So that still has to be addressed somewhere down the road.

PILGRIM: They've said they will give him amnesty and not press the murder charge. If everyone disarms and lays down their weapons, they'll even let the fighters go. Do you think that this strategically, militarily is a problem?

GRANGE: Well, I think it's better to stamp it out up front and get it over with because it's going to reappear again. But we'll see how it turns down. The hard thing is how do you measure the -- or confirm laying down the arms. In other words, if you have an insurgent fighter lay down an AK- 47, he may have three more buried in the tomb. You don't know if they'll do that.

But if they can make both of these cities weapons free, and they can get them to turn in their weapons and move out of the area, that will be an accomplishment.

But you're going to have to watch it closely, because I think there will be issues that occur again, obviously.

PILGRIM: General Grange, Iraqi forces will now patrol these cities. Foreign forces will not be allowed in. Do you think they're up to the job?

GRANGE: I think they're getting pretty close. This last assault, they were doing much better than they have in the past. Some very good units trained, Iraqi units that are trained, both National Guard and police, with U.S. advisers.

I think there are plans in place for the U.S. to back them up and go in again if the prime minister asks for assistance if, in fact, those forces are attacked by insurgents.

PILGRIM: All right. Thank you very much. General David Grange.

GRANGE: My pleasure. Thank you.

PILGRIM: In southern Iraq, insurgents have again sabotaged key oil pipe lines. An attack on 20 pipelines southwest of Basra will cut output from Southern Iraq by half. That's according to one oil official. Now, that official said it will take at least three days to repair the damage. Iraq's southern oil fields produce about 90 percent of the country's exports.

Government health officials today issued a much needed draft report on how this nation would respond if there is a global flu outbreak, a deadly flu virus. Now, the response could include closing schools, limiting travel, rationing scarce medicines. Health officials believe such an outbreak, known as a pandemic, is inevitable. But there's no way to predict when or where it might happen. Peter Viles has the report.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): First it was SARS, now the bird flu in Asia, which has led to the deaths of tens of millions of chicken and ducks. These are a pandemic, a deadly flu outbreak which spreads around the world, but American health officials believe it is now time to prepare for the next global outbreak.

JULIE GERBERDING, DIR. CTRS FOR DISEASE CONTROL: Three times in the last century, we had pandemic influenza outbreaks. And we do believe it's only a matter of time before we see another one. But right now, we've just come out of a SARS problem that taught us how important preparedness was for any kind of contagious respiratory infection.

And in addition, we're seeing the in the chicken and the bird population in Asia continue to persist and spread into humans.

VILES: Health officials still study the worst case scenario in pandemic flus, the Spanish flu of 1918, so deadly and so fast that some victims woke up healthy and died the same day. At least 500,000 Americans died.

The next pandemic, the Asian Flu of 1957, was spread in American schools: 69,000 Americans died. The most recent, the Hong Kong flu of 1968, killed 33,000 Americans.

Now, no one knows when the next pandemic will hit, but the government now estimates it could kill as many as 207,000 Americans, which is why HHS secretary Tommy Thompson is pushing for a preparedness plan.

BRUCE GELLIN, DIR. NATIONAL VACCINE PROGRAM: I've been in this job for a year and a half, and from the day I got here, the secretary of Health and Human Services, Secretary Thompson told me this is your first, second and third priority. And we've been working on it ever since.

VILES: The plan suggests officials be ready to close down schools and limit travel and begin dealing with a touchy issue. If anti-viral medicine is in scarce supply, who gets it? The sick? Women and children? Or health workers first.

(END VIDEOTAPE)

VILES: A more immediate concern, word today that roughly half the nation's supply of flu vaccine for this fall is being held up by a contamination problem at a factory in Liverpool, England. The company involved, Chiron, says it now hopes to ship the vaccine about a month late in Kitty, in October.

PILGRIM: All right. Thanks very much, Pete Viles.

Our next guest is one of the country's leading experts on infectious diseases. Anthony Fauci is the director of the National Institute of Allergy and Infectious Diseases. And he joins us from the Washington studios. Thanks for joining us Dr. Fauci.

DR. ANTHONY FAUCI, DIR, NIAID: It's good to be here.

PILGRIM: This is disturbing stuff. The government plan was published today. Why is it important that everyone have access to this? And it's public?

FAUCI: Well, it's public because we want to get comments from the appropriate people: from state, local health authorities, medical societies, institutions and even the consumer, general public. This is going to be something that might ultimately affect the lives of all Americans. And so, when you have a plan as comprehensive as this, you really want to put it out for public comment, which is exactly what we did today. And it will be out for 60 days in public comment, and then it will be ultimately finalized.

PILGRIM: Presumably, we learned a lot from the SARS virus, and also from the avian flu, which was a bit of a surprise for everyone. What have we learned from that? And are we better prepared, do you think?

FAUCI: We certainly are better prepared. But when you have something like a pandemic flu, as you just mentioned on the show a few moments ago, a pandemic flu is one that's entirely pervasive throughout the world.

One of the immediate concerns is what was just mentioned on the top of the piece, was the fact that there's bird flu now that's pervasive in several Asian countries. And it has jumped in some unusual rare instances from the bird to the human. There have been now 37 cases of which 26 have died. That's a very high mortality.

It has not gone from human to human. If it does, then we could be faced with a situation where there's an influenza out there that virtually nobody has any immunity to. We call it naive to a particular type of an influenza, because we don't have any prior experience because it actually comes from a chicken in this case. That's one of the major concerns.

So this plan, though it transcends the particular situation we're dealing with now in Asia, it certainly is directly applicable to the challenges we'll be facing now.

PILGRIM: And as we've seen, these are very fluid situations. We had the SARS virus a jump from animal to human and then human to human contagion. And we may see this rapidly again with some other strain.

Let's talk about the supply of vaccine, and it is disturbing that half of the vaccines are made outside of this country. So stockpiling may be problematic in a pandemic, don't you agree?

FAUCI: Well, if you have a pandemic and the vaccine -- right now, for example, the vaccine that's being made that we just heard about is the vaccine for an interpandemic flu, or the regular seasonal flu that we have. We're right now dealing with small pilot lots of the actual virus that has jumped from the chicken to the human in anticipation, if god forbid, we do have a pandemic, we might be able to rev that up.

But you're quite right. When you have a pandemic situation, there's a lapse of several months from the time you isolate the virus in question to the time that you could actual scale up to commercial levels of a vaccine. And that's the reason why you have to have a plan like this, so that if something like that happens, everything is place to make the important steps.

PILGRIM: How worrisome is it to you that we may stockpile a entire stock of vaccines that are applicable to a flu that doesn't exist and yet be hit with another strain?

FAUCI: Well, first of all, the influenza vaccines that are being made now is for a flu that almost invariably, in fact, invariably we will see this winter, and that's the standard seasonal flu. Stockpiling of a vaccine that you don't know whether or not this is going to be the virus that's going to attack is a chance that you take.

And when you do see the actual virus that looks like it's going to turn into a pandemic, then you have to really rev things up.

But the preparation for getting the vaccine for a particular strain -- in this case, the bird flu that we're dealing with now -- is going on in parallel with the development of the vaccine of the flu that we know we're going to get, because it's the standard seasonal flu this year. So we're doing both at the same time.

You can't do a full court press on both. You can't make tens and tens of millions of doses of both times -- of both vaccines simultaneously. And that's going to be the challenge, that certain cutoff point when you realize you're dealing with a different situation. So you could turn the knob and go in the direction of the vaccine you're interested in.

But the standard interpandemic vaccine development goes on each year, and you make a decision about what the most likely strain you're going to be dealing with. That's not pandemic flu. Pandemic flu is something different. It's something that's entirely new to the population.

PILGRIM: All right. Thanks for helping us understand it better. Dr. Anthony Fauci, thank you.

Still ahead, fears of Social Security funds could run out has not stopped the federal government from making a shocking proposal to illegal aliens.

And "Exporting America." Several highly contested outsourcing bills are making their way to the desk of the California governor. We'll have the report on that.

(COMMERCIAL BREAK)

PILGRIM: My next guest says a government proposal to give Social Security benefits to illegal aliens would cause a financial crisis in this country. The proposal would include not only illegal aliens, but anyone working in violation of their visa, and could cost the United States hundreds of billions of dollars. Now Congressman Dana Rohrabacher has written a bill to derail the proposal, and he joins us to talk more on this issue. Thank you, Congressman Rohrabacher, for joining us.

I hate to paraphrase the measure, but it would basically give Social Security benefits to people who are not legal workers here in the United States, wouldn't it? REP. DANA ROHRABACHER (R), CALIFORNIA: That's precisely correct. What we've done -- it's even worse actually. What it does is a totalization agreement with Mexico, which says that a Mexican who comes here and works -- let me check my figures here -- only has to work six quarters in order to be eligible for a Social Security benefit while an American citizen at the same time has to work 40 quarters in order to be eligible for Social Security.

Again, we are actually treating our own people worse than we're treating someone who's come here illegally. And I think it's quite apropos. We have this story right after you started talking about endemics that may be coming here from other countries. People who come here illegally also carry diseases. This is a catastrophe. Hopefully, the fact that they're now attacking Social Security should wake the American people up to -- that we got to do something about it. And the elite in this country are taking us down exactly the wrong road.

PILGRIM: How much do you think it could cost the American taxpayers?

ROHRABACHER: We're talking about the American people, this could destroy the Social Security system. Once people all over the world realize that we're going to provide a Social Security retirement for anybody who comes from anywhere in the world who manages to work -- what was it, six quarters in the United States, will then be eligible for some kind of a Social Security benefit. They're not even calculating now what the stimulant effect this will have, meaning how many more millions of people will want to come here when they realize we're providing for their retirement.

PILGRIM: Let's talk about -- you used a term that maybe not everyone is familiar with. The totalization agreement. We've had 20 since the '70s with other countries. What purpose do they serve, and why do one now?

ROHRABACHER: Well, totalization agreements are supposed to be designed to make sure countries that are basically equal to us economically, when their citizens come over here and work for a short period of time or we go over there and work for a short period of time, that they get credit in their own Social Security systems. That's not what's happening with this totalization agreement with Mexico.

What's happening is we have countries with -- those economies are so different that an agreement with that country ends up being a drain on the resources available for our own people. It's going to dramatically hurt the American people. And if this then becomes the model for Third World countries, we're in big trouble. The American people have to realize the elite -- the people who are supposed to be watching out for their interests, their elected officials, both Democrat and Republican, are not watching out for them. And they're even attacking Social Security now.

PILGRIM: Let me give you the alternate argument, and some people argue that Mexican immigrants, both legal and illegal, do pay into the Social Security system so they should be allowed to collect. What do you say to them?

ROHRABACHER: Well, first of all, I believe that a lot of Mexican Americans are American citizens. They're not Mexicans. We treat -- and legal immigrants deserve to be treated just like American citizens. That's not what we're talking about. We're talking about people who have come here illegally, and in this case with the Social Security, we're talking about from Mexico because it's a totalization agreement with Mexico.

But the general problem of illegal immigration is one that people coming from Asia, et cetera. In this particular case, we are going to have Americans who should be paying into Social Security and having jobs that pay into Social Security, Mexican citizens are going to be getting those jobs. They already are. And now we're going to give them Social Security benefits, and you can bet there's going to be a lot more of them coming here in order to get those jobs, and our own citizens can't get the work, and they're not being able to pay into the system. It's terrible.

PILGRIM: What is the status of your bill right now?

ROHRABACHER: Well, my legislation -- I have actually introduced the legislation in order to combat this totalization agreement, and the trouble is the leadership of the Republican party and the leadership of the Democratic party are on the wrong side of the issue.

They do not understand that illegal immigration is causing great damage to the well-being of the American people. In California, our health care system is breaking down. Our education system is going to hell. The criminal justice system is breaking down. And all over the country we see this.

Now they're going to -- they're attacking the Social Security system. And if the leadership of either party wants to handle this issue I'm sure there will be a tide -- there will be a huge wave that crosses the country in support of what they're trying to do. Instead, for whatever reason, the Democrats want to have illegals here to use as political pawns. On the Republican side, big business wants to have lower wages. And unfortunately, who's watching out for the American people?

PILGRIM: Thanks very much for drawing it to our attention. Congressman Dana Rohrabacher. Thank you, sir.

That brings us to the subject of tonight's poll. "Do you believe illegal aliens should be able to collect Social Security benefits?" Cast your vote at CNN.com/lou. And we'll bring you the results later in the broadcast.

When we return, some California lawmakers are trying to fight the exporting of American jobs, but will the state governor support their efforts?

And two significant new discoveries trillions of miles away from earth.

(COMMERCIAL BREAK)

PILGRIM: In California, five controversial pieces of legislation are likely to reach the desk of Governor Arnold Schwarzenegger in the next few days. These bills are aimed at drastically reducing the number of state jobs sent to cheap overseas labor markets. Casey Wian has the story from Los Angeles.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): California food stamp recipients who can't get their questions answered by an automated phone system are transferred to operators in Bangalore, India, if they speak English or Tijuana, Mexico, if they are Spanish speaking. That practice would end under one of several anti- outsourcing bills that have either passed or are about to pass the state legislature.

Others would require that consumers be notified if their calls are being handled overseas, force employers to notify the state if they're exporting jobs, block medical information from being sent overseas, and prohibit California homeland security work from being done outside the United States. State Senator Joe Dunn authored two of the bills.

JOSEPH DUNN (D), CALIFORNIA STATE SENATE: No one is trying to stand up and say we should not participate in the global economy. Of course the United States must participate in it. But we can't do it at an unrestrained loss of American jobs.

WIAN: Dunn also cites national security concerns, such as the case of a California utility that shipped engineering work on the state's electrical grid to India. The California Chamber of Commerce is lobbying hard against the bills, calling them politically motivated job killers. It says one quarter of the state's jobs depend on international trade.

ALLAN ZAREMBERG, PRES., CALIFORNIA CHAMBER OF COMMERCE: When California starts to create arbitrary and unnecessary trade barriers, we invite retaliation. These jobs then are placed in jeopardy.

WIAN: All five bills are expected to reach Governor Arnold Schwarzenegger's desk by the time the legislature adjourns at the end of the month. The governor's office says he will stick with his practice of not taking a practice on pending legislation.

(on camera): Governor Schwarzenegger has often promised to make California job creation a priority. However, both sides in the outsourcing debate say that gives them the advantage.

Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: An amazing discovery this week by researchers in Chile. Astronomers have found one of the smallest planets known outside our solar system. The planet, which is 50 light years away, is considered significant, since no planet so small has ever been detected around a normal star.

Giant telescopes, however, aren't always the source of planetary finds. A planet circling a far away star was discovered this week with a four-inch telescope. The new planet is about the size of Jupiter.

Here's a reminder now to vote in tonight's poll. And the question is, do you believe illegal aliens should be able to collect Social Security benefits? Yes or no? Cast your vote at cnn.com/lou, and we'll bring you the results a little bit later in this broadcast.

Still ahead, the high cost of outsourcing. Protesters take to the streets in India, forcing outsourcing offices to call up contingency plans. We'll have the story next.

(COMMERCIAL BREAK)

PILGRIM: Stocks fell slightly today on Wall Street. The Dow Industrials slipped about 8 points. The Nasdaq also down 8. And the S&P 500 virtually unchanged. Oil prices fell for the fifth straight session. Christine Romans is here with this report.

CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Kitty, this is now the longest losing streak for oil all year. It's down five days in a row, and just above $43 a barrel now. Since flirting with $50, crude is down 13 percent.

But it is still well above OPEC's target range, and it's 38 percent more expensive today than a year ago.

Now, those cool and crude prices should be good news for stocks, but today that was overshadowed by a sharp rise in jobless claims. Ten thousand more people lined up to get unemployment benefits in the latest week. It's a number likely skewed by Hurricane Charley. Economists say maybe 5,000 claims were related to the storm. But economists also say watch out for Charley as the latest excuse for slowing jobs growth. It should have only minimal impact on next week's jobs reports.

From Americans filing for unemployment to American jobs in India, an update on the work shutdown in Bangalore we told you about last night. Brief protests around the country a day after a popular politician was arrested. But the outsourcing companies stayed open. One of the biggest, Accenture, told me they were delighted to report no work stoppage for them in Bangalore. Accenture brought in food and security contingency plans. Already they provide transportation to and from the office for their Indian workers. Business as usual in Bangalore -- Kitty.

PILGRIM: All right, thanks a lot, Christine Romans.

Still ahead, the results of tonight's poll and a preview of what's ahead tomorrow.

(COMMERCIAL BREAK) PILGRIM: Now, the results of tonight's poll. Seven percent of you believe illegal aliens should be able to collect Social Security benefits; 93 percent do not.

Thanks for joining us tonight. Please join us tomorrow for our special report, "Exporting America." We'll tell you why thousands more American call center jobs are in danger of being shipped overseas. And our panel of top journalists join us for a week of -- a wrap-up of the week's headlines.

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 August 26, 2004 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KITTY PILGRIM, CNN ANCHOR: Tonight, a peace agreement in Najaf. Iraq's most powerful Shiite cleric returns to the holy city and reaches a deal with an anti-American cleric and his militia.
Are attack politics working? President Bush reaches out to Senator John McCain on the Swift Boat Veterans for Truth controversy. We'll have the latest poll numbers on how the attacks are impacting voters.

Poverty in America. A new report finds the wealthiest nation on earth is home to millions of people living without poverty and without health insurance.

(BEGIN VIDEO CLIP)

KATHLEEN STOHL, FAMILIES USA: The sad thing is that when people don't have health insurance, they go into debt, and they become sick, and they don't get health care.

(END VIDEO CLIP)

PILGRIM: And preparing for the next global flu outbreak. The government releases a sobering new report on what needs to be done to save thousands of lives.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Three times in the last century, we had pandemic influenza outbreaks, and we do believe it's only a matter of time before we see another one.

(END VIDEO CLIP)

PILGRIM: And Broken Borders. Outrage over a possible plan to give Social Security benefits to illegal aliens. We'll talk with one congressman who says the move would cause nothing short of a financial crisis.

CNN ANNOUNCER: This is LOU DOBBS TONIGHT for Thursday, August 26. Here now for an hour of news, debate and opinion, sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

Tonight, a major development in Iraq. The country's top Shiite cleric, Ayatollah al Sistani, has reached a deal to end weeks of violence in Najaf. Sistani negotiated today with anti-American cleric Muqtada al Sadr. Al Sadr's militia has been battling with American forces in and around the holy city for weeks.

Matthew Chance reports from Najaf.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN INTERNATIONAL CORRESPONDENT: Well, many had hoped that with the return of the Grand Ayatollah Ali al Sistani to Najaf, the start of the peace process could actually begin, but few believed that it would be concluded so soon.

But that seems exactly what has happened within hours of his return to Najaf. There has been an agreement with Muqtada al Sadr and his Mehdi Army to bring to an end hostilities in Najaf that have ravaged that holy city for more than three weeks now. It's a five- point agreement that's been reached and agreed by all the factions, all the warring parties in this conflict.

The first two points look at how Najaf and Kufa should be declared weapons-free zones. All armed people to leave Najaf as well. The third point: Foreign forces, by which they mean the U.S. troops that are here in some considerable strength, should withdraw, and security should be taken over by the Iraqi police.

Now that's an important point for the interim Iraqi government because, all along, they've been arguing about the illegitimacy of the Mehdi Army to patrol the streets of Najaf. The Mehdi Army will now be gone under the terms of this peace deal and security be turned over to the hands of the Iraqi police forces.

Also in this deal, compensation is to be paid to members of families who have lost loved ones, to people who have lost property in the fierce fighting that has really ravaged areas of Najaf for that period of three weeks.

And the final term: Legitimate elections are to be held. Now, of course, the interim Iraqi government is already planning to hold these elections, planning to hold them next year early in January perhaps.

But that last term holding out the possibility that Muqtada al Sadr himself may take up the offer that's been extended to him by the government to join the political mainstream and to contest in those elections when the time to do that comes around.

So, certainly, a peace deal that seems to be a face-saving truce for all sides here, but particularly the interim Iraqi government because they've avoided that very controversial move of sending in some kind of military force to take by force the Imam Ali Shrine. That would have been very controversial. They wanted above all else to avoid that, and they seem to have done it with this peace deal.

Matthew Chance, CNN, Najaf.

(END VIDEOTAPE)

PILGRIM: We will have much more on the developments in Najaf and what it means for U.S. military strategy there. We'll have that later in the broadcast. General David Grange will join us in Grange on Point.

Well, the war in Iraq is a major issue for the presidential campaign in this country, and a new CNN/"USA Today"/Gallup poll finds the race is closer than ever. However, it also finds the attack politics that have dominated the campaign in recent weeks are having an impact on voters.

Bill Schneider reports.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Coming out of the Democratic Convention, the race was a dead heat. Now going into the Republican convention, after weeks of controversy over John Kerry's military service in Vietnam, where do things stand? Still a tight race. Looks like nothing has changed. Or has it?

Before the Democratic Convention, people said they trusted Bush more than Kerry as commander in chief. After the convention, Kerry and Bush were tied.

SEN. JOHN F. KERRY (D-MA), PRESIDENTIAL NOMINEE: I defended this country as a young man, and I will defend it as president.

SCHNEIDER: Now Bush has moved back into the lead. What happened?

The Democratic Convention had one central theme.

SEN. TED KENNEDY (D), MASSACHUSETTS: John is a war hero.

TERESA HEINZ KERRY, WIFE OF SENATOR KERRY: John is a fighter.

SCHNEIDER: That point came through. Immediately after the convention, 42 percent of voters said Kerry's military service made them more likely to vote for him, especially when they heard testimony like this.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL NOMINEE: Just spend three minutes with the men who served with him then and who stand with him now.

SCHNEIDER: A group calling themselves Swift Boat Veterans for Truth quickly took up the challenge.

UNIDENTIFIED MALE: John Kerry is no war hero.

UNIDENTIFIED MALE: He betrayed all his shipmates. He lied before the Senate.

SCHNEIDER: The debate over the charges monopolized press coverage. The poll shows more than 80 percent of Americans saw or heard about the ad. Do they believe the charges? No. By better than 2 to 1, people believe Kerry is telling the truth about his service in Vietnam. But the controversy still had an impact. The number who say Kerry's military service makes them more likely to vote for him fell by half, from 42 percent to 21 percent. The Swift Boat Veterans' ad not only hijacked the campaign, it raised doubts about Kerry, reinforcing the Republican message that Kerry may not be trustworthy.

After the Democratic Convention, Kerry held a slight lead over Bush as someone who is honest and trustworthy. Now he's lost it. The ad controversy neutralized the message of the Democratic Convention.

(END VIDEOTAPE)

SCHNEIDER: Did the ad change the horse race? No. But neither did the Democratic Convention. The war hero theme touted by the Democrats at their convention, challenged by the Swift Boat Veterans, has turned out to be a distraction and, for Kerry, a lost opportunity to score points on other issues.

PILGRIM: So do you think that the Democrats made a strategic mistake in featuring this issue?

SCHNEIDER: I think they did. I think they made the whole convention about Kerry being a war hero, and while the voters were inclined to believe it initially -- and then they had some doubts -- it didn't make any difference. It didn't score any points in the race against George Bush.

This race is not about the Vietnam War 35 years ago. It's about Bush's record as president and the next four years. And, basically, that was all a distraction, and it ended up meaning very little.

PILGRIM: Well, perhaps you can move to the future going forward now.

SCHNEIDER: Yes. It's a real lost opportunity for Kerry because this was his one chance to get out on the national stage, talk about what he would do differently, criticize the Bush record, and that just didn't happen.

PILGRIM: All right. Thanks very much.

Bill Schneider.

SCHNEIDER: Sure.

PILGRIM: Well, another CNN/"USA Today"/Gallup poll found that most Americans, 56 percent, say President Bush should denounce the Swift Boat Veterans' ads. Now one American who has called on President Bush to condemn the ads is Senator John McCain. And, today, President Bush reached out to Senator McCain on the issue.

Kathleen Koch is traveling with the president in Albuquerque, New Mexico. She joins us live with the report -- Kathleen.

KATHLEEN KOCH, CNN WHITE HOUSE CORRESPONDENT: Kitty, both campaigns have been saying that they really do want to get back to the issues, but, this time, it was President Bush who brought up these attack ads, in a surprise move, calling Senator John McCain from Air Force One, as the president was heading here to campaign in New Mexico, and asking the senator to join him in taking legal action to stop all of these attack ads. Now spokesman Scott McClellan said that if that doesn't work, Mr. Bush asked the senator to join him in pursuing legislative action to block those ads.

Both the White House and the Kerry campaign have filed official complaints with the Federal Election Commission against these so- called 527 ads, and McClellan explained, "Since the FEC failed to act, we would now be asking the courts to force the FEC to act to shut down these -- shut down all this activity."

And Senator McCain has agreed, saying that it is a good idea that the two men cooperate on this issue, and that coming from a man who was quoted in this morning's "New York Times" as saying he was planning on contacting President Bush himself to express his "displeasure at the president's failure to specifically condemn the exact content of the Swift Boat Veterans for Truth ad condemning John Kerry's service in Vietnam."

Now -- so President Bush this morning -- what you really saw here was him trying to reposition himself on the positive side of this issue, and that as he's launching an eight-state campaign swing leading up to the Republican National Convention in New York City on Monday.

This campaign swing through these battle ground states like New Mexico -- it's a state that he lost by 366 votes in 2000 to Al Gore. The president wants to avoid that outcome this year, but he's got a tough job ahead of him, though he brought in some heavy ammunition, a taste of the Big Apple here to New Mexico, with former Mayor Rudolph Giuliani introducing President Bush at every single event today.

But the president knows he's got his work cut out for him in this state. This is a state that, when you take a look at the latest polls, shows that John Kerry is leading the president by a 10-point margin with likely voters in November.

Also, this is a state that is very heavily Hispanic, the most heavily Hispanic state in the country, some 42 percent of its population being Hispanic, and that's a group that normally votes by a 2-to-1 margin for the Democrats -- Kitty.

PILGRIM: All right. Thanks very much.

Kathleen Koch.

One controversial television ad is being pulled from the airwaves. The Kerry campaign will no longer run its political ad showing Senator John McCain calling on then Governor George Bush to denounce attacks on his military service in the 2000 primary season. Senator McCain asked the Kerry campaign to stop running the ad. A Kerry spokesman said the ad was being pulled because the senator wanted to respect Senator McCain's wishes. Well, Senator Kerry today challenged President Bush to weekly debates from now until the election. At a campaign stop at a community college near Minneapolis, the Democratic candidate said the country deserves a serious discussion about the future. The Bush campaign has not directly responded to today's challenge.

The special Commission on Presidential Debates has recommended three such debates beginning in late September. The Kerry campaign has accepted the format, but the Bush campaign is waiting until the Republican Convention is over before making a decision.

Well, the Republican Convention begins here in New York in just four days, and, while the Republicans are fine-tuning their platform and preparing to rally around the president, Democrats are busy as well.

And Ed Henry has the report.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT (voice-over): When President Bush landed on the USS Lincoln, Republicans thought his reelection was taking flight. But on the eve of the Republican National Convention, Democrats plan to turn the president's own words against him.

TERRY MCAULIFFE, DNC CHAIRMAN: Now Bush is heading to New York to brag about all that he has done for America. He probably won't use that sign. So we've appropriated it. So we changed one little word.

HENRY: The Democrats' rapid response team at the convention will pound away at this theme, countering the president's claims that he has done well on everything from the war in Iraq to domestic issues like health care.

McAuliffe's self-proclaimed truth squad will be a few blocks from Madison Square Garden in a makeshift war room. Republicans had a similar operation in Boston last month to push back on the Democratic claims launched from the podium at the FleetCenter.

ED GILLESPIE, RNC CHAIRMAN: Last night, as predicted, the extreme makeover began, but John Kerry cannot run from his 20 years out of the mainstream record in the Senate.

HENRY: Next week's Democratic counterspin will be led by Iowa Governor Tom Vilsack with help from the Big Apple's own senators, Hillary Clinton and Chuck Schumer. During the convention, Democrats will be running a TV ad in 21 states charging the president has mishandled the economy.

BUSH: This economy of ours is steady and strong. Steady and strong.

SCHNEIDER: With Rudy Giuliani and John McCain getting podium time, Democrats will also highlight their differences with the president. MCAULIFFE: Instead of a convention, he's going to have a masquerade ball in New York City.

HENRY (on camera): But the Democratic counterspin team will be missing one of its biggest guns, Bill Clinton. The former president is in Europe on the international portion of his book tour and will not be politically active during the Republican Convention. But Mr. Clinton has already committed to headline at least 10 events for the DNC this fall.

Ed Henry, CNN, Washington.

(END VIDEOTAPE)

PILGRIM: When we return, the Middle Class Assault. Working men and women are one of the most important voting blocks in this country, and we'll have a special report on what both presidential candidates say they will do to help the middle class.

Plus, poverty rates are soaring in the wealthiest nation on earth. We'll have the findings of an astonishing new report.

And then peace in Najaf. We'll talk to General David Grange about what that will mean for U.S. military strategy in Iraq.

Those stories and a great deal more still ahead here tonight.

(COMMERCIAL BREAK)

PILGRIM: With the election just over two months away, President Bush and Senator Kerry are both actively trying to win the support of the nation's middle class. Fifty million American families fit into what many consider to be the bedrock of our democracy.

In our series of special reports, the Middle Class Assault, Bill Tucker now looks at how the Kerry-Edwards campaign hopes to win the middle class vote.

(BEGIN VIDEOTAPE)

KERRY: We're going to have people who actually stand up and fight for the middle class, for the average worker of this country, so we make America a place of fairness again.

BILL TUCKER, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Precisely the point that recent polls indicate John Kerry should hammer home with voters. Those polls show the economy as the number one issue, higher than national security, higher than health care or the war in Iraq.

And in a poll released earlier this month, the Pew Research Center found that, among people describing their financial situation as good to excellent, Bush is the clear choice. But among families who see their finances as only fair to poor, Kerry's the winner.

JARED BERNSTEIN, ECONOMIC POLICY INSTITUTE: Kerry and Edwards would probably do well to raise the question are you better off than you were four years ago because there's lots of folks in the middle class who are not. The Bush campaign is going to be saying, you know, are you better off than you were four months ago.

TUCKER: Real wages did drop over the last four years, but they've been declining for the past 30 years. The Kerry campaign doesn't address that issue. But it is promising to roll back tax cuts for incomes above $200,000 and giving the money to the middle class, while also providing tax cuts for health care, child care, and increasing the tax credit on college tuition to $4,000.

The message is sewn in fertile ground.

ANDREW KOHUT, DIRECTOR, PEW RESEARCH CENTER: Discontent with the economy has led the American voter and middle class voters to have more confidence in Kerry than Bush going forward on the economy by a margin of 37 percent to 52 percent, and this is a big hurdle for President Bush to overcome.

TUCKER: But the economy is not the only issue, and that's what makes the polls so close.

(on camera): The middle class cares deeply about Homeland Security, and, on the issues of who can best handle terrorism and the situation in Iraq, the Pew Poll puts President Bush well in front of Senator Kerry.

Bill Tucker, CNN, New York.

(END VIDEOTAPE)

PILGRIM: And President Bush is also targeting the middle class in his campaign for another four years in the White House, but a different approach to taxes are the central issue for the president's reelection campaign.

(BEGIN VIDEOTAPE)

PILGRIM (voice-over): The majority of Americans call themselves middle class. Psychologically, it's a comfortable place for people to identify with, and appealing to that group is high political science.

KEVIN HASSETT, AMERICAN ENTERPRISE INSTITUTE: The middle class vote is always very, very important. They call it the middle class because that's where most people are, and, if the people in the middle class are happy, then incumbents tend to win.

PILGRIM: President Bush's economic selling point to the middle class: tax cuts. That was the perception from a random poll of Bush supporters in Chicago and Washington.

UNIDENTIFIED FEMALE: I think it's in recovery mode. I feel very comfortable right now with the economy.

UNIDENTIFIED MALE: I believe economic growth is the most important thing, especially job creation, and I believe in tax cuts. I believe in trying to get the money to get to the people who can create jobs and make the economy work.

UNIDENTIFIED MALE: The last I spend on federal taxes, the more I'm going to be spending on the economy.

PILGRIM: Pundits say President Bush's emphasis on conservative values and faith also appeals to solid middle class voters, but it's his stance on national security that many feel will give him his greatest advantage with the middle class.

Even if voters are critical of the way Iraq has been handled, a recent Pew Research poll finds Bush beats Kerry by 10 points in perceived ability to fight terrorism, while they are fairly even on Iraq.

JENNIFER DUFFY, THE COOK POLITICAL REPORT: Voters manage to separate the two out, and I think that that is a big asset to the president at this point. I mean, the suburban women, who in 2000 cared about education and the environment, now really care about safety and security.

(END VIDEOTAPE)

PILGRIM: Now that recent poll also found 48 percent of people found Bush down to earth and 50 percent, good in a crisis.

Well, an alarming report released today by the U.S. Census Bureau shows poverty is on the rise in this country. It's not just poverty that's spreading. The number of Americans living without health insurance is also growing.

Louise Schiavone reports from Washington.

(BEGIN VIDEOTAPE)

LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): Poverty is up in the wealthiest nation on the face of the earth. Census figures from 2003 show American households losing ground in earnings and health coverage.

UNIDENTIFIED MALE: The official poverty rate rose from 12.1 percent in 2002 to 12.5 percent in 2003.

SCHIAVONE: The latest Census Bureau population report shows 35.9 million Americans lived at or below poverty in 2003, up 1.3 million from the previous year. The problem is especially acute for children, with 17.6 percent in poverty, up from 16.7 percent in 2002.

The government defines poverty as roughly $12,000 a year for a household of two and around $19,000 annually for a family of four. The report is a political windfall for Democrats.

EDWARDS: I can't believe that the American people are actually going to rehire a president that cost 1.4 million Americans their health care in the last year. They sent 1.3 million more Americans into poverty. They drove your wages down by $1,500 just in the last year alone. SCHIAVONE: On the hot-button issue of health care, the Census Bureau finds that about 45 million Americans had no health insurance last year, up 1.5 million from the year before.

STOHL: When people don't have health insurance, they go into debt, and they become sick, and they don't get health care. They -- 50 percent of personal bankruptcies in this country are at least related to medical debt.

SCHIAVONE: The Bush administration notes that the economic picture has improved since these statistics were drawn. The unemployment rate, then at 6.3 percent, now stands at 5.5 percent.

(END VIDEOTAPE)

SCHIAVONE: Kitty, the median income for American families was virtually unchanged from last year, at roughly $43,000, but the wage gap between men and women continues to widen, with women earning 76 percent of what men earn -- Kitty.

PILGRIM: All right. Thanks very much.

Louise Schiavone.

Well, tonight's thought is on poverty. "Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is in an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe."

Those are the words of American abolitionist Frederick Douglass.

Just ahead, after weeks of violence, a peace agreement in Najaf. What does it mean for the U.S. military operation? I'll be talking with General David Grange.

And health officials say it's just a matter of time. A sobering new report on the deadly virus that could strike this country and kill hundreds of thousands of people.

And in Broken Borders tonight, they're in this country illegally, but some people say illegal aliens should receive Social Security benefits. Congressman Dana Rohrabacher says such a deal would cause a financial crisis in this country.

(COMMERCIAL BREAK)

CNN ANNOUNCER: LOU DOBBS TONIGHT continues with more news, debate and opinion. Here now, Kitty Pilgrim.

PILGRIM: Returning now to our top story, a peace agreement in Najaf. Iraq's leading Shiite cleric Ayatollah al Sistani reached a deal today with anti-American cleric Muqtada al Sadr. Now al Sadr's militia has been battling with American forces in Najaf for weeks.

Joining me now for more on the peace deal and how it could impact U.S. strategy in Iraq is General David Grange, and he joins us for Grange on Point.

General Grange, are the U.S. troops -- they're basically sidelined at this point? They're pulled out of the conflict. Foreign forces have to leave Najaf, according to this deal. Are they somewhat vulnerable at this point?

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: Well, any time you withdraw, Kitty, you're very vulnerable to any enemy action. I'm not saying there will be, but it's very difficult in a city like this, troops spread out all over, insurgents everywhere, not to have some type of a skirmish.

It is dangerous, but it's probably a good point in the negotiated process, though keep in mind it won't be totally out of the area, just on the outskirts of the city.

PILGRIM: This has been a pitched battle. In fact, in the last 24 hours, 90 people were killed. American forces were pressing very hard on Muqtada al Sadr's Mehdi Army. They did their job. They cornered him, and now it appears the peace deal is brokered to let him go free, an amnesty of sorts. How do you assess that?

GRANGE: Well, it's pretty hard to -- not to argue with any kind of success that brings peace in a faster manner. However, I believe that Sadr will be one to -- we'll have to deal with again. When I say we, I'm talking about the Iraqis and the American forces there, and, you know, he's one that can't be trusted. He's broken deals in the past, and he -- I believe he was ready to crack.

The pressure was on him. I don't think he was ready to die as a martyr. I think that he had a lot of dissension in the ranks, desertion, and it was about to happen, and it will have a little bit of an effect on the morale of the U.S. troops and even maybe the prime minister, but we'll see how that works out.

But I can assure you that there's plenty being done in case it doesn't hold.

PILGRIM: Well, what do you think that planning could be? Al Sadr could withdraw and re-galvanize. He is a lightning rod for discontent in the country.

GRANGE: He is, and, you know, it's going to be interesting to see if the interim government presses the charges for murder when she is one of the accused and one of the other ayatollahs. So that still has to be addressed somewhere down the road.

PILGRIM: They've said they will give him amnesty and not press the murder charge. If everyone disarms and lays down their weapons, they'll even let the fighters go. Do you think that this strategically, militarily is a problem?

GRANGE: Well, I think it's better to stamp it out up front and get it over with because it's going to reappear again. But we'll see how it turns down. The hard thing is how do you measure the -- or confirm laying down the arms. In other words, if you have an insurgent fighter lay down an AK- 47, he may have three more buried in the tomb. You don't know if they'll do that.

But if they can make both of these cities weapons free, and they can get them to turn in their weapons and move out of the area, that will be an accomplishment.

But you're going to have to watch it closely, because I think there will be issues that occur again, obviously.

PILGRIM: General Grange, Iraqi forces will now patrol these cities. Foreign forces will not be allowed in. Do you think they're up to the job?

GRANGE: I think they're getting pretty close. This last assault, they were doing much better than they have in the past. Some very good units trained, Iraqi units that are trained, both National Guard and police, with U.S. advisers.

I think there are plans in place for the U.S. to back them up and go in again if the prime minister asks for assistance if, in fact, those forces are attacked by insurgents.

PILGRIM: All right. Thank you very much. General David Grange.

GRANGE: My pleasure. Thank you.

PILGRIM: In southern Iraq, insurgents have again sabotaged key oil pipe lines. An attack on 20 pipelines southwest of Basra will cut output from Southern Iraq by half. That's according to one oil official. Now, that official said it will take at least three days to repair the damage. Iraq's southern oil fields produce about 90 percent of the country's exports.

Government health officials today issued a much needed draft report on how this nation would respond if there is a global flu outbreak, a deadly flu virus. Now, the response could include closing schools, limiting travel, rationing scarce medicines. Health officials believe such an outbreak, known as a pandemic, is inevitable. But there's no way to predict when or where it might happen. Peter Viles has the report.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): First it was SARS, now the bird flu in Asia, which has led to the deaths of tens of millions of chicken and ducks. These are a pandemic, a deadly flu outbreak which spreads around the world, but American health officials believe it is now time to prepare for the next global outbreak.

JULIE GERBERDING, DIR. CTRS FOR DISEASE CONTROL: Three times in the last century, we had pandemic influenza outbreaks. And we do believe it's only a matter of time before we see another one. But right now, we've just come out of a SARS problem that taught us how important preparedness was for any kind of contagious respiratory infection.

And in addition, we're seeing the in the chicken and the bird population in Asia continue to persist and spread into humans.

VILES: Health officials still study the worst case scenario in pandemic flus, the Spanish flu of 1918, so deadly and so fast that some victims woke up healthy and died the same day. At least 500,000 Americans died.

The next pandemic, the Asian Flu of 1957, was spread in American schools: 69,000 Americans died. The most recent, the Hong Kong flu of 1968, killed 33,000 Americans.

Now, no one knows when the next pandemic will hit, but the government now estimates it could kill as many as 207,000 Americans, which is why HHS secretary Tommy Thompson is pushing for a preparedness plan.

BRUCE GELLIN, DIR. NATIONAL VACCINE PROGRAM: I've been in this job for a year and a half, and from the day I got here, the secretary of Health and Human Services, Secretary Thompson told me this is your first, second and third priority. And we've been working on it ever since.

VILES: The plan suggests officials be ready to close down schools and limit travel and begin dealing with a touchy issue. If anti-viral medicine is in scarce supply, who gets it? The sick? Women and children? Or health workers first.

(END VIDEOTAPE)

VILES: A more immediate concern, word today that roughly half the nation's supply of flu vaccine for this fall is being held up by a contamination problem at a factory in Liverpool, England. The company involved, Chiron, says it now hopes to ship the vaccine about a month late in Kitty, in October.

PILGRIM: All right. Thanks very much, Pete Viles.

Our next guest is one of the country's leading experts on infectious diseases. Anthony Fauci is the director of the National Institute of Allergy and Infectious Diseases. And he joins us from the Washington studios. Thanks for joining us Dr. Fauci.

DR. ANTHONY FAUCI, DIR, NIAID: It's good to be here.

PILGRIM: This is disturbing stuff. The government plan was published today. Why is it important that everyone have access to this? And it's public?

FAUCI: Well, it's public because we want to get comments from the appropriate people: from state, local health authorities, medical societies, institutions and even the consumer, general public. This is going to be something that might ultimately affect the lives of all Americans. And so, when you have a plan as comprehensive as this, you really want to put it out for public comment, which is exactly what we did today. And it will be out for 60 days in public comment, and then it will be ultimately finalized.

PILGRIM: Presumably, we learned a lot from the SARS virus, and also from the avian flu, which was a bit of a surprise for everyone. What have we learned from that? And are we better prepared, do you think?

FAUCI: We certainly are better prepared. But when you have something like a pandemic flu, as you just mentioned on the show a few moments ago, a pandemic flu is one that's entirely pervasive throughout the world.

One of the immediate concerns is what was just mentioned on the top of the piece, was the fact that there's bird flu now that's pervasive in several Asian countries. And it has jumped in some unusual rare instances from the bird to the human. There have been now 37 cases of which 26 have died. That's a very high mortality.

It has not gone from human to human. If it does, then we could be faced with a situation where there's an influenza out there that virtually nobody has any immunity to. We call it naive to a particular type of an influenza, because we don't have any prior experience because it actually comes from a chicken in this case. That's one of the major concerns.

So this plan, though it transcends the particular situation we're dealing with now in Asia, it certainly is directly applicable to the challenges we'll be facing now.

PILGRIM: And as we've seen, these are very fluid situations. We had the SARS virus a jump from animal to human and then human to human contagion. And we may see this rapidly again with some other strain.

Let's talk about the supply of vaccine, and it is disturbing that half of the vaccines are made outside of this country. So stockpiling may be problematic in a pandemic, don't you agree?

FAUCI: Well, if you have a pandemic and the vaccine -- right now, for example, the vaccine that's being made that we just heard about is the vaccine for an interpandemic flu, or the regular seasonal flu that we have. We're right now dealing with small pilot lots of the actual virus that has jumped from the chicken to the human in anticipation, if god forbid, we do have a pandemic, we might be able to rev that up.

But you're quite right. When you have a pandemic situation, there's a lapse of several months from the time you isolate the virus in question to the time that you could actual scale up to commercial levels of a vaccine. And that's the reason why you have to have a plan like this, so that if something like that happens, everything is place to make the important steps.

PILGRIM: How worrisome is it to you that we may stockpile a entire stock of vaccines that are applicable to a flu that doesn't exist and yet be hit with another strain?

FAUCI: Well, first of all, the influenza vaccines that are being made now is for a flu that almost invariably, in fact, invariably we will see this winter, and that's the standard seasonal flu. Stockpiling of a vaccine that you don't know whether or not this is going to be the virus that's going to attack is a chance that you take.

And when you do see the actual virus that looks like it's going to turn into a pandemic, then you have to really rev things up.

But the preparation for getting the vaccine for a particular strain -- in this case, the bird flu that we're dealing with now -- is going on in parallel with the development of the vaccine of the flu that we know we're going to get, because it's the standard seasonal flu this year. So we're doing both at the same time.

You can't do a full court press on both. You can't make tens and tens of millions of doses of both times -- of both vaccines simultaneously. And that's going to be the challenge, that certain cutoff point when you realize you're dealing with a different situation. So you could turn the knob and go in the direction of the vaccine you're interested in.

But the standard interpandemic vaccine development goes on each year, and you make a decision about what the most likely strain you're going to be dealing with. That's not pandemic flu. Pandemic flu is something different. It's something that's entirely new to the population.

PILGRIM: All right. Thanks for helping us understand it better. Dr. Anthony Fauci, thank you.

Still ahead, fears of Social Security funds could run out has not stopped the federal government from making a shocking proposal to illegal aliens.

And "Exporting America." Several highly contested outsourcing bills are making their way to the desk of the California governor. We'll have the report on that.

(COMMERCIAL BREAK)

PILGRIM: My next guest says a government proposal to give Social Security benefits to illegal aliens would cause a financial crisis in this country. The proposal would include not only illegal aliens, but anyone working in violation of their visa, and could cost the United States hundreds of billions of dollars. Now Congressman Dana Rohrabacher has written a bill to derail the proposal, and he joins us to talk more on this issue. Thank you, Congressman Rohrabacher, for joining us.

I hate to paraphrase the measure, but it would basically give Social Security benefits to people who are not legal workers here in the United States, wouldn't it? REP. DANA ROHRABACHER (R), CALIFORNIA: That's precisely correct. What we've done -- it's even worse actually. What it does is a totalization agreement with Mexico, which says that a Mexican who comes here and works -- let me check my figures here -- only has to work six quarters in order to be eligible for a Social Security benefit while an American citizen at the same time has to work 40 quarters in order to be eligible for Social Security.

Again, we are actually treating our own people worse than we're treating someone who's come here illegally. And I think it's quite apropos. We have this story right after you started talking about endemics that may be coming here from other countries. People who come here illegally also carry diseases. This is a catastrophe. Hopefully, the fact that they're now attacking Social Security should wake the American people up to -- that we got to do something about it. And the elite in this country are taking us down exactly the wrong road.

PILGRIM: How much do you think it could cost the American taxpayers?

ROHRABACHER: We're talking about the American people, this could destroy the Social Security system. Once people all over the world realize that we're going to provide a Social Security retirement for anybody who comes from anywhere in the world who manages to work -- what was it, six quarters in the United States, will then be eligible for some kind of a Social Security benefit. They're not even calculating now what the stimulant effect this will have, meaning how many more millions of people will want to come here when they realize we're providing for their retirement.

PILGRIM: Let's talk about -- you used a term that maybe not everyone is familiar with. The totalization agreement. We've had 20 since the '70s with other countries. What purpose do they serve, and why do one now?

ROHRABACHER: Well, totalization agreements are supposed to be designed to make sure countries that are basically equal to us economically, when their citizens come over here and work for a short period of time or we go over there and work for a short period of time, that they get credit in their own Social Security systems. That's not what's happening with this totalization agreement with Mexico.

What's happening is we have countries with -- those economies are so different that an agreement with that country ends up being a drain on the resources available for our own people. It's going to dramatically hurt the American people. And if this then becomes the model for Third World countries, we're in big trouble. The American people have to realize the elite -- the people who are supposed to be watching out for their interests, their elected officials, both Democrat and Republican, are not watching out for them. And they're even attacking Social Security now.

PILGRIM: Let me give you the alternate argument, and some people argue that Mexican immigrants, both legal and illegal, do pay into the Social Security system so they should be allowed to collect. What do you say to them?

ROHRABACHER: Well, first of all, I believe that a lot of Mexican Americans are American citizens. They're not Mexicans. We treat -- and legal immigrants deserve to be treated just like American citizens. That's not what we're talking about. We're talking about people who have come here illegally, and in this case with the Social Security, we're talking about from Mexico because it's a totalization agreement with Mexico.

But the general problem of illegal immigration is one that people coming from Asia, et cetera. In this particular case, we are going to have Americans who should be paying into Social Security and having jobs that pay into Social Security, Mexican citizens are going to be getting those jobs. They already are. And now we're going to give them Social Security benefits, and you can bet there's going to be a lot more of them coming here in order to get those jobs, and our own citizens can't get the work, and they're not being able to pay into the system. It's terrible.

PILGRIM: What is the status of your bill right now?

ROHRABACHER: Well, my legislation -- I have actually introduced the legislation in order to combat this totalization agreement, and the trouble is the leadership of the Republican party and the leadership of the Democratic party are on the wrong side of the issue.

They do not understand that illegal immigration is causing great damage to the well-being of the American people. In California, our health care system is breaking down. Our education system is going to hell. The criminal justice system is breaking down. And all over the country we see this.

Now they're going to -- they're attacking the Social Security system. And if the leadership of either party wants to handle this issue I'm sure there will be a tide -- there will be a huge wave that crosses the country in support of what they're trying to do. Instead, for whatever reason, the Democrats want to have illegals here to use as political pawns. On the Republican side, big business wants to have lower wages. And unfortunately, who's watching out for the American people?

PILGRIM: Thanks very much for drawing it to our attention. Congressman Dana Rohrabacher. Thank you, sir.

That brings us to the subject of tonight's poll. "Do you believe illegal aliens should be able to collect Social Security benefits?" Cast your vote at CNN.com/lou. And we'll bring you the results later in the broadcast.

When we return, some California lawmakers are trying to fight the exporting of American jobs, but will the state governor support their efforts?

And two significant new discoveries trillions of miles away from earth.

(COMMERCIAL BREAK)

PILGRIM: In California, five controversial pieces of legislation are likely to reach the desk of Governor Arnold Schwarzenegger in the next few days. These bills are aimed at drastically reducing the number of state jobs sent to cheap overseas labor markets. Casey Wian has the story from Los Angeles.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): California food stamp recipients who can't get their questions answered by an automated phone system are transferred to operators in Bangalore, India, if they speak English or Tijuana, Mexico, if they are Spanish speaking. That practice would end under one of several anti- outsourcing bills that have either passed or are about to pass the state legislature.

Others would require that consumers be notified if their calls are being handled overseas, force employers to notify the state if they're exporting jobs, block medical information from being sent overseas, and prohibit California homeland security work from being done outside the United States. State Senator Joe Dunn authored two of the bills.

JOSEPH DUNN (D), CALIFORNIA STATE SENATE: No one is trying to stand up and say we should not participate in the global economy. Of course the United States must participate in it. But we can't do it at an unrestrained loss of American jobs.

WIAN: Dunn also cites national security concerns, such as the case of a California utility that shipped engineering work on the state's electrical grid to India. The California Chamber of Commerce is lobbying hard against the bills, calling them politically motivated job killers. It says one quarter of the state's jobs depend on international trade.

ALLAN ZAREMBERG, PRES., CALIFORNIA CHAMBER OF COMMERCE: When California starts to create arbitrary and unnecessary trade barriers, we invite retaliation. These jobs then are placed in jeopardy.

WIAN: All five bills are expected to reach Governor Arnold Schwarzenegger's desk by the time the legislature adjourns at the end of the month. The governor's office says he will stick with his practice of not taking a practice on pending legislation.

(on camera): Governor Schwarzenegger has often promised to make California job creation a priority. However, both sides in the outsourcing debate say that gives them the advantage.

Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: An amazing discovery this week by researchers in Chile. Astronomers have found one of the smallest planets known outside our solar system. The planet, which is 50 light years away, is considered significant, since no planet so small has ever been detected around a normal star.

Giant telescopes, however, aren't always the source of planetary finds. A planet circling a far away star was discovered this week with a four-inch telescope. The new planet is about the size of Jupiter.

Here's a reminder now to vote in tonight's poll. And the question is, do you believe illegal aliens should be able to collect Social Security benefits? Yes or no? Cast your vote at cnn.com/lou, and we'll bring you the results a little bit later in this broadcast.

Still ahead, the high cost of outsourcing. Protesters take to the streets in India, forcing outsourcing offices to call up contingency plans. We'll have the story next.

(COMMERCIAL BREAK)

PILGRIM: Stocks fell slightly today on Wall Street. The Dow Industrials slipped about 8 points. The Nasdaq also down 8. And the S&P 500 virtually unchanged. Oil prices fell for the fifth straight session. Christine Romans is here with this report.

CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Kitty, this is now the longest losing streak for oil all year. It's down five days in a row, and just above $43 a barrel now. Since flirting with $50, crude is down 13 percent.

But it is still well above OPEC's target range, and it's 38 percent more expensive today than a year ago.

Now, those cool and crude prices should be good news for stocks, but today that was overshadowed by a sharp rise in jobless claims. Ten thousand more people lined up to get unemployment benefits in the latest week. It's a number likely skewed by Hurricane Charley. Economists say maybe 5,000 claims were related to the storm. But economists also say watch out for Charley as the latest excuse for slowing jobs growth. It should have only minimal impact on next week's jobs reports.

From Americans filing for unemployment to American jobs in India, an update on the work shutdown in Bangalore we told you about last night. Brief protests around the country a day after a popular politician was arrested. But the outsourcing companies stayed open. One of the biggest, Accenture, told me they were delighted to report no work stoppage for them in Bangalore. Accenture brought in food and security contingency plans. Already they provide transportation to and from the office for their Indian workers. Business as usual in Bangalore -- Kitty.

PILGRIM: All right, thanks a lot, Christine Romans.

Still ahead, the results of tonight's poll and a preview of what's ahead tomorrow.

(COMMERCIAL BREAK) PILGRIM: Now, the results of tonight's poll. Seven percent of you believe illegal aliens should be able to collect Social Security benefits; 93 percent do not.

Thanks for joining us tonight. Please join us tomorrow for our special report, "Exporting America." We'll tell you why thousands more American call center jobs are in danger of being shipped overseas. And our panel of top journalists join us for a week of -- a wrap-up of the week's headlines.

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

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