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Lou Dobbs Tonight
Bush Expands Authority of CIA Director; Peace Agreement in Najaf
Aired August 27, 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, President Bush expands the authority of the CIA director. The White House says they're following the recommendations of the 9/11 commission. Critics say it's not enough.
Uneasy peace in Najaf. Militiamen tied to anti-American cleric Muqtada al Sadr begin to turn in their weapons and leave the holy city.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): We are 100 percent in control of the holy cities of Najaf and Kufa.
(END VIDEO CLIP)
PILGRIM: But skeptics, including some at the Pentagon doubt the peace will last.
The Middle Class Assault. Like the presidential candidates, members of Congress are making promises to working men and women in this country, but critics question whether they can deliver. We'll have a special report.
Exporting America. A new report finds thousands more American call centers will soon move overseas, taking thousands of American jobs with them.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: There's more to come. It's far from over.
(END VIDEO CLIP)
PILGRIM: We'll have a special report, and we'll talk to the head of one company that's fighting against and beating the trend of sending American jobs overseas.
ANNOUNCER: This is LOU DOBBS TONIGHT for Friday, August 27. 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, President Bush has signed an executive order giving more power to the head of the CIA. The White House says the order will help reform the nation's intelligence services, as recommended by the 9/11 commission. But some officials in the intelligence community and elsewhere, say the president didn't go far enough.
David Ensor has the report.
(BEGIN VIDEOTAPE)
DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): With a few strokes of the pen, President Bush increased the powers of the nation's top intelligence officer, while following well short of changes proposed by the 9/11 commission.
Acting Director of Central Intelligence John McLaughlin, who was at the White House, now has more power over the budgets of the nation's 15 intelligence agencies, though the change is only incremental, as one official puts it.
The executive orders and directives strengthen his ability to develop, determine and present the whole intelligence budget. They also create a new national counterterrorism center, and they promote sharing by federal agencies of information on terrorism and create a presidential board to safeguard civil liberties.
White House officials touted the changes as a signal of the president's intentions, saying they give the top intelligence officer a whole set of enhanced authorities that didn't exist before.
(END VIDEOTAPE)
ENSOR: But some intelligence professionals were distinctly underwhelmed, saying the executive orders do not really change much. Only Congress can do that. They're waiting to see what the White House puts into proposed legislation, creating a national intelligence director. That will be the real test, they say, of whether the president wants the kind of changes that the 9/11 commission proposed -- Kitty.
PILGRIM: Thanks.
David Ensor.
The executive orders come just days before a key political event for the president, the Republican Convention here in New York City. Now Senior White House Correspondent John King is in New York ahead of the convention. He joins us with more on the political impact.
Now, John, should we read anything into the timing of these orders?
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Absolutely. The White House says, Kitty, that substantively this is important business, but it's also important politically. The president will be here in New York in a few days. Senator Kerry has been criticizing him, saying the administration is foot dragging when it comes to intelligence reform. So the president wanted to act. And, of course, coming to New York you have the spectacle of 9/11, if you will, the symbolism of 9/11 around this convention. The last thing the president wanted, with all the thousands of demonstrators and critics on the streets of New York City, is to have families from 9/11 out criticizing him, saying he has not done enough to implement the recommendations of the 9/11 commission.
So much more to be done, but the administration believes both from a policy perspective and from a political perspective, it has taken important steps.
PILGRIM: Do you think it's enough to silence the critics?
KING: Absolutely not. The Kerry-Edwards campaign is out tonight, Democrats in Congress out tonight, saying this is fine. It's a place holder. All can see that, even the administration. But will this president stand up to Secretary of Defense Rumsfeld and the CIA and say you must give power to the new national intelligence director? Will he reach an agreement with Congress to get that post created?
One of the fascinating debates now is you have one leading Republican say abolish the CIA, you have other leading Republicans say let's take our time. You have Democrats say let's do this next week, why didn't we do it last week.
There are some thinking that perhaps what the president did today is all you will get for months to come because there is so much of a policy disagreement -- legitimate policy disagreement -- between lawmakers and then layer over that the heated political debate.
PILGRIM: So attempt to table it for a moment, but maybe not successfully.
KING: Democrats want the Congress to come back now and do this this year. That's still an open question.
PILGRIM: All right. Thanks very much.
John King.
In tonight's Campaign Journal, Senator John Kerry wrapped up a week of campaigning on the economy. Stumping in California today, Kerry said the president is neglecting the middle class and is out of touch with ordinary Americans.
(BEGIN VIDEO CLIP)
SEN. JOHN F. KERRY (D-MA), PRESIDENTIAL NOMINEE: In the last four years, under this administration, the tax burden of the middle class in America has gone up, and the tax burden of the wealthiest people in the country has gone down. John Edwards and I believe it should be the other way around, and, when we're in there, it will be.
(END VIDEO CLIP)
PILGRIM: President Bush, meanwhile, is in Florida tonight. He's kicking off his preconvention tour through eight battleground states. The president will arrive in New York on Wednesday night and will deliver his acceptance speech to the convention on Thursday night.
Well, New York City is bracing for the convention. Thousands of extra police and other security teams will be on duty next week, and, as Jason Carroll reports, much of their time will likely be spent rounding up protesters.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: And here we go!
JASON CARROLL, CNN NATIONAL CORRESPONDENT (voice-over): A mother from New York.
UNIDENTIFIED MALE: People are going to hear our voices.
CARROLL: A student from the University of Hawaii.
Those coming to New York City to protest are as varied as the groups they represent.
On Friday morning, mothers opposing Bush marched across the Brooklyn Bridge, pushing strollers, their children carrying banners.
UNIDENTIFIED FEMALE: I think it's very important to teach my children about the power of democracy and action.
CARROLL: Thursday night, DNC to RNC, a lose mix of environmentalists and labor leader rallied against Democrats and Republicans for not supporting real people.
LESLIE CAGAN, UNITED FOR PEACE AND JUSTICE: OK. Great. Good. Take care.
CARROLL: But, by far, the largest demonstration is likely to come from this group, United for Peace and Justice. They're anti-war. Leslie Cagan...
CAGAN: We talked to the police this morning. We said we wanted...
CARROLL: ... is the group's spokeswoman.
CAGAN: We and millions of Americans are fed up. So, this Sunday, we will march and say no to the Bush agenda, no to their policies of war, greed, hate and lies.
CARROLL: Cagan predicts 250,000 people will peacefully march up 7th Avenue to Madison Square Garden where the convention will be held. Some 800 smaller groups will march under UPJ's banner, organizations like Iraq's Veterans Against War and Green Dragon, who protest corporate greed.
UNIDENTIFIED MALE: We are celebrating the American revolution from corporate monarch George II. CARROLL: The city denied UPJ a permit to rally in Central Park after their Sunday march, but word is many will go there anyway. Police are also concerned about anarchists, or so-called fringe groups, who they say want to cause trouble.
COMM. RAYMOND KELLY, NEW YORK CITY POLICE DEPARTMENT: If people break the law, we're going to deal with it. We're going to arrest them. The court system is ready to receive large numbers of people, if that's necessary.
UNIDENTIFIED MALE: People power!
UNIDENTIFIED MALE: People power!
CARROLL: Most protesters say, hopefully, it won't be.
(END VIDEOTAPE)
CARROLL: And police have arrested 22 demonstrators so far, and, in the event that they do have to make large-scale arrests, what they've done is they set up a temporary holding pen on Manhattan's West Side. That pen opens tomorrow, and it can hold up to 1,000 people -- Kitty.
PILGRIM: All right. Thanks very much.
Jason Carroll.
Well, the protests over the Iraq war come as a peace deal appears to be holding in Najaf. Insurgents loyal to the anti-American cleric Muqtada al Sadr today began turning in their weapons and leaving Najaf and neighboring Kufa. Iraqi police and religious officials took control of the Imam Ali Mosque where the militants had been holed up for weeks.
However, there are reports that some fighters are not turning in their weapons, and, tonight, some Pentagon officials say they are skeptical about whether the peace will last.
Barbara Starr has the report.
(BEGIN VIDEOTAPE)
BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): As the dead are removed from the Imam Ali Mosque, the citizens of Najaf rejoice at the peace deal -- at least for now. The Grand Ayatollah Ali al Sistani's intervention led Muqtada al Sadr and his followers to stop fighting, a victory for the interim government.
But a senior U.S. defense official calls the peace plan a face- saving gesture for everybody. Further blood shed avoided, but no guarantee of lasting peace. Did heavily armed U.S. troops and Iraqis at the last minute walk away from a military victory against a lightly armed insurgency?
MICHAEL O'HANLON, BROOKINGS INSTITUTION: I think it was correct to avoid that final showdown, sort of an alamo-style finally showdown, that might have brought down the building with the last elements of the resistance. But, frankly, I think we were very close to a complete annihilation of what part of the Mehdi Army that was in Najaf.
STARR: The concern: not sparking a wider Shia resistance. But overwhelming defeat of al Sadr and his fighters was the strategy back in April.
LT. GEN. RICARDO SANCHEZ, FORMER COMMANDER MULTINATIONAL FORCES: The mission of the U.S. forces is to kill or capture Muqtada al Sadr. That's our mission.
STARR: U.S. troops set up a cordon outside the holy shrine as fighting raged. Guerrillas using light weapons and hit-and-run sniper attacks, proven insurgency tactics. In an effort to support the new government, the U.S. military is now focused not just on defeating the insurgents but on achieving broader objectives.
O'HANLON: You have to avoid confusing tactical success with strategic success. They're two different things when you're fighting a counterinsurgency.
STARR: Al Sadr still a power the U.S. and Iraqis will have to watch.
AKBAR AHMED, AMERICAN UNIVERSITY: Muqtada al Sadr has emerged from nowhere, but he's a very ambitious man. He obviously has now a taste of power, of street power.
(END VIDEOTAPE)
STARR: And, Kitty, keeping U.S. forces out of that final showdown may have worked, but only if the peace holds -- Kitty.
PILGRIM: All right. Thanks very much.
Barbara Starr.
We will have much more on the uneasy peace in Najaf when we return. Middle East expert Ken Pollack will join us.
Also ahead, high security at military bases could cause terrorists to strike other military targets. We'll have the details of a new terror alert next.
Plus, a quiet Oregon town sends four of its own to Iraq. We'll have a special report on how the community has come together in support.
And then, new poll numbers find one of the presidential candidates has pulled ahead in some key battleground states.
We'll have that story, a great deal more. Stay with us.
(COMMERCIAL BREAK) PILGRIM: Evidence tonight of terrorism in one of two Russian plane crashes. Russian officials today say they found explosives in the wreckage of at least one of the planes. Nearly 90 people were killed when the aircraft went down almost simultaneously on Tuesday night. A Russian security spokesman said the experts found traces of the same explosive used in 1999 bombings blamed on Chechen separatists.
Well, there are new terror warnings tonight in this country. The FBI and the Department of Homeland Security say the next terror targets could be veterans affairs hospitals. A terror bulletin mentions reports of "suspicious activity" at military medical facilities, specifically ones in Bethesda, Maryland, and Aurora, Colorado. Counterterrorism officials warn, however, that they are not aware of any credible information indicating a specific terrorist threat.
Returning now to Iraq where a peace deal appears to have ended weeks of fighting in Najaf. Militants tied to the anti-American cleric Muqtada al Sadr today began turning in their weapons and leaving Najaf.
Joining me now for more on whether the truce will hold and what it means for U.S. policy in institution is CNN Analyst Ken Pollack, and he is the director of research at the Saban Center for Middle East Policy at Brookings Institution. Ken Pollack joins us from Washington.
Nice to see you, Ken.
KEN POLLACK, BROOKINGS INSTITUTION: Hi, Kitty. How are you?
PILGRIM: What is your assessment of the deal so far?
POLLACK: Well, assuming it holds -- and I think it will, given the fact that you're seeing those fighters come out of the mosque and surrender their weapons -- this is an important victory for the United States, but we also can't make too much of it.
It's a victory for three reasons.
First, the U.S. didn't have to assault the mosque, which is one of the two holiest sites in all Shia Islam.
Two, it has shown that the Mehdi Army can't confront the United States openly. Muqtada al Sadr is not down -- sorry. He's not out, but he's down. He's going to have to change his tactics.
And, three, the Iraqis demonstrated that they can come up with a solution to their problems, which is very important for their people. So, for all those reasons, it is an important tactical victory.
PILGRIM: I would agree with you on all of your points. However, it's -- it does occur to me that the Iraqi government and Prime Minister Allawi were not that instrumental in brokering this peace. It was Shiite cleric Sistani who did it. Does that in some way delegitimize the Iraqi government?
POLLACK: It doesn't delegitimize them, but you're absolutely right to point it out because it would have been much better for them if they could have been the ones to broker the deal. Sistani is someone who's been outside the process. He has been cautiously critical of the process. This does reinforce his own status.
But we need to remember that Sistani was always the most important political figure inside of Iraq. So all this does is make clear that he continues to be the most important political figure inside Iraq.
Let's talk about Muqtada al Sadr for a bit. He was wanted, actually, for killing a rival cleric, and many of the powers involved in Iraq were very concerned that he be allowed to continue. Now he's been given amnesty. How do you assess that in terms of his ability to reform a group somewhere else?
POLLACK: I'll put it -- I think there are two important points to get at with that question. The first one is we should not assume Muqtada al Sadr is done. His Medhi Army will disperse. They probably won't confront the U.S. or the Iraqi government again in the near term, but he can recall them to the colors very easily whenever he wants to.
The fact that they're surrendering their weapons ultimately is meaningless in Iraq. It is easy to get new weapons. By the same token, the hope is that he will recognize that this open policy of confrontation, which he has mounted over the past 16 months, isn't working.
And I think one of the things that's hard for Americans to understand is that, in Iraq, in the Middle East, in a country like this, where the political situation is so fluid and is only kind of evolving over time, the best solution for all involved is to bring Muqtada al Sadre into that political process, make him captive of it, co-opt him into it.
That will be the best thing for all involved, even though it means that someone who is probably guilty of several murders is not going to face the consequences for them.
PILGRIM: Yet he has a taste of street power, and, if things do not go his way politically, he is -- he may be inclined to regress.
POLLACK: Absolutely. And that, of course, is the fear. He seems to recognize right now that the cards were not in his favor this time around.
But, again, he can recall the Mehdi Army at some point in the future if he does believe that things are either going his way in terms of a better situation for him or if they're really not going his way, if participating in the political process is marginalizing him and not allowing him to gain the political power that he wants to.
As I said, we have not seen the last of Muqtada al Sadr. PILGRIM: Well, for the moment, we at least celebrate the cease- fire.
Thanks very much.
Ken Pollack.
In tonight's Heroes, instead of an individual member of the military, we bring you a story of an entire town. Now the town bonded together to support the families of four of its own who have been called to serve their country in Iraq.
Casey Wian reports from Adams, Oregon.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN BUSINESS CORRESPONDENT (voice-over): Adams, Oregon, is the kind of place time seems to have missed. It's a peaceful farming community of 297 people and no traffic lights. The only business on main street is a restaurant and general store that opened in 1885. But lately, something has changed here. Townsfolk say they're closer than ever.=
MAYOR PAT BRYSON, ADAMS, OREGON: We're not dramatically affected by, you know, world events, but now we are. There's four servicemen that come from this town that are headed over to Iraq. They deserve a huge amount of respect and support. You know, there ain't much you can do to support them. You know, they're going to go. You know, what are you going to do? So the best thing we can do is show them.
WIAN: American flags and yellow ribbons seem to be everywhere, including these on the town square bearing the names Brian Phillips, Ryan Lennert and the Chase brothers, Travis and Jack.
(on camera): Four young men called up to active duty may not sound like that many, but it is when you consider the fact that the entire town of Adams only has about four dozen men between the ages of 18 and 44.
(voice-over): The Chases leave behind their wives and seven kids between them, plus siblings and parents.
WENDY CHASE, WIFE OF NATIONAL GUARDSMAN: I'm worried about it every day, constantly wondering whether he's going to come home or not.
WIAN: Wendy says her community support goes beyond yellow ribbons.
CHASE: Everybody's come together. They've offered services in any way they can.
WIAN: Jeannie Chase expects her husband to be gone for at least a year.
JEANNIE CHASE, WIFE OF NATIONAL GUARDSMAN: We didn't realize it was going to be so long.
BRYSON: It's hard on the families. You know, that's a lot of stress, to have your children over in a foreign country where they're definitely going to get probably shot at, you know, and possibly killed, and that's -- that's so far removed from where we live and what we do in this town. It's pretty traumatic.
WIAN: Especially since the call-up came right before harvest time in Adams. 1st Sergeant Ryan Lennert didn't have time to finish the yard of his new house. His wife, Janie, can't do it. She's expecting a child. So locals called a town meeting to pitch in and finish the job.
JANIE LENNERT, WIFE OF NATIONAL GUARDSMAN: You hear people talk about Mayberry. Well, you know, everybody knows your name, and they know what you're doing, and they care. They genuinely care.
WIAN: Adams even came up with a name, Operation Homeland Compassion. They hope the name and their actions spread throughout the country.
Casey Wian, CNN, Adams, Oregon.
(END VIDEOTAPE)
PILGRIM: Tonight's thought is on courage. "Courage is the ladder on which all other virtues mount." And those are the words of American playwright and diplomat Clare Boothe Luce.
Just ahead, they were in a dead heat last month, but the presidential poll numbers have changed since then, and Bill Schneider will be here with the very latest on that.
They've been called the backbone of America, but some say the middle class is more likely the forgotten class when it comes to Washington. A special report when we continue.
(COMMERCIAL BREAK)
CNN ANNOUNCER: LOU DOBBS TONIGHT continues with more news, debate and opinion. Here now Kitty Pilgrim.
PILGRIM: With just over two months to go the presidential race appears too close to call, but, for more on that -- and there is more -- we turn to our Senior Political Analyst Bill Schneider.
Nice to have you here in New York -- Bill.
WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Nice to be here with all the Republicans.
Let's take a look at the map of America for this election. We have a lot of the so-called red states. There are 22 of them. These are the states that George Bush carried last time, in 2000, and he's expected to carry them this time. A lot of them are small states in the Midwest and the South, but one great big one there is the State of Texas.
Then we have 11 blue states, just half as many states, but those Gore states from 2000 include some powerhouses like Illinois in the middle there, California on the West Coast and New York on the East Coast.
And then, of course, the battle battlegrounds. Those are the so- called purple states because, if you mix red and blue, which these states do, you get purple. These are the states where the campaign is taking place. Your probably notice that Bush and Kerry are appearing mostly in those states.
I call it Forgotten America, the red and blue states, that everybody knows how they're going to vote, and Favored America, those purple states, where the election is really at stake.
Let's take a look at a few polls. Ohio -- this is the new Florida, ground zero in this election. Where is Ohio? Well, let's take a look. The latest poll is Ohio, Bush 49 percent and Kerry 44 percent. Not quite a majority for Bush, but he is leading by 5 points which is a pretty good showing for Bush. He carried Ohio last time.
Another battleground state Bush carried last time, Missouri. Closely contested, but there just the narrowest lead -- Bush 46 percent, Kerry still 44 percent, just like he was in Ohio. Not quite a majority for Bush, but he is leading there.
And finally, here -- and Missouri went for Bush last time. The third one, Wisconsin. Wisconsin was a Gore state in 2000, and Bush appears slightly ahead there, too, 48 percent, with Kerry again at 44 percent. The message here is Kerry seems to be stuck at 44 percent, Bush is slightly ahead of him in these states, but not quite at 50 percent. When an incumbent is not quite at 50 percent, that could be a problem because he's got to get over 50 percent to breathe freely.
PILGRIM: Interesting shift, though. We'll keep our eye on that.
Thanks very much.
Bill Schneider.
And joining us now is Ron Brownstein from the "L.A. Times," Karen Tumulty from "TIME" magazine, and from "BusinessWeek" Jim Ellis for our roundtable.
Let's start with Ron because he's not sitting at the table with us right now.
Ron, what do you make of the poll numbers that we just went through and -- Bush 49 percent approval rating compared to 46 percent for Kerry. What's your analysis of this?
RON BROWNSTEIN, "LOS ANGELES TIMES": I think you can start with me because I wrote the story on those polls this morning in the "Los Angeles Times." Well, look, I think there's a consistent pattern here in the three states, as well as in the national poll that we put out, and the NBC/"Wall Street Journal" poll that came out today as well. All point to the same thing.
A lot of voters are uncertain about the policy direction that President Bush has set out, but they are even more uncertain whether they want to go with John Kerry. In all three of the states -- Missouri, Wisconsin, Ohio -- a majority said that they believe the president's policy direction has not made the country better off and we need to move -- set a different course.
But John Kerry is only winning about 80 percent or less of those change voters, and it's that change gap, the gap between the constituency for change and the constituency for Kerry that right now has President Bush back in the lead.
PILGRIM: All right. Let's turn to Karen.
What do you think about the Vietnam factor and how this has played out in the Kerry camp?
KAREN TUMULTY, "TIME" MAGAZINE: Well, something is going on here. A few weeks ago -- the polls are still within the margin of error, and, of course, we need to keep saying that over and over and over again because this race is very, very close. But a few weeks ago, all those polls that were within a margin of error seemed to be showing Kerry slightly ahead. Now it's Bush who's slightly ahead.
And you look at what has happened in the last two weeks, and the biggest factor, the thing that has dominated the news, has been this furor over the -- these charges by these Swift Boat Veterans regarding both Kerry's Vietnam record and also what he did after the war, and I think that what that has done is perhaps temporarily, but really has undercut his argument as to his effectiveness as commander in chief.
PILGRIM: Jim, the economy is such a critical -- this politics aside, the economy, and we have Greenspan today suggesting trimming Social Security, Medicare benefits to baby boomers. How does that play into the whole campaign?
JIM ELLIS, "BUSINESSWEEK": Well, I still think that there's enough time left before election day that the economy can actually work against the administration. The economy is still strong, even with the reduced GDP growth numbers out today.
But the problem is that, in a key area, jobs, particularly a key area in the Midwest, we're not building jobs up the way you normally do. That and the next couple months, if we stay sort of slow on jobs, that's going to start to hurt the administration.
Likewise, lot of people are starting to worry about small bits of inflation. The overall inflation numbers are great, but when it comes to things like health-care expenses, college tuition, things that a lot of people can relate to, such as gasoline prices, they really do feel it, and they're going start saying am I really better. PILGRIM: So kitchen table economics. Let me ask Ron. The 2003 Census report on poverty came out, and, Ron, I know you have very distinct opinions about the results that came out.
BROWNSTEIN: Well, you know, when you look at these numbers, it really goes to the point Jim made, which is, I think, can John Kerry make an economic case against President Bush given the raw material he has to work with.
The numbers here were disappointing. Once again, if you look at the first 3 years of Bush's presidency, the number of people in poverty increased more than during the first three years of any president in the last 30 years except Ronald Reagan. Also, much bigger increases in the number uninsured than -- on the first 3 years of President Bush, or Bill Clinton.
Now, this would seem to argue for a greater focus on some of these issues, particularly healthcare, which reaches beyond the poor to affect the middle class. And I think the question is very much framed, can John Kerry force some attention on these issues and drive them into the campaign in a way he hasn't been able to do so far. Healthcare is the central piece of his domestic agenda. That's where he puts most of his money from repealing the top provisions of the Bush tax cut. But he really hasn't found any way to sustain a debate on it. And it's been, I think, a failing of the campaign.
PILGRIM: Karen, is it your perception that healthcare is a critical issue in this campaign?
KAREN TUMULTY, "TIME": Oh absolutely. Because in a campaign where the watch work has been security, security, security, people's economic security is very much tied up in their jobs and the healthcare benefits that come with those jobs.
And the third factor that we saw in that census report is a growing gap between the rich and the poor in this country. And John Kerry's efforts to sort of hone his argument toward the middle class, his economic policies toward the middle class, I think is going to be key to his getting any kind of traction on economic issues.
PILGRIM: Let's turn to Jim for an interpretation on the reasons for the slow GDP growth in the second quarter.
JIM ELLIS, "BUSINESSWEEK": Well, a big piece of that is that a lot of companies are having to redeploy assets toward higher energy cost. One reason that a lot of us sort of forget that energy is like a tax. And it's not just a tax on drivers, it's a tax on business. It's sort of a component on everything we do. That's slowing things down.
It's also, a lot of people are starting to worry that higher energy prices are going to affect the way that businesses and consumers buy, so therefore, businesses don't want to expand. So people aren't investing nearly as much as they did before.
So, as that happens, the whole engine slows down. And lot of people are sort of afraid to put more money on the table which slows down growth. Now, whether that happens before November is the big question.
PILGRIM: We have the healthcare tax, but no one creating jobs because they are afraid of the healthcare costs, now the energy.
Ron, how much do you think this will factor into the debate as it goes forward, or maybe be side tracked by politics once again?
BROWNSTEIN: Well, I don't think we know what the ultimate balance is going to be in the mind of the electorate. Sort of 4 baskets in this campaign: Iraq and terror, the economy, including healthcare, values related issue we, which we haven't talked about much, which can be a real asset for the president, perhaps in some of these midwestern states with the swing voters, tend to be culturally conservative, and finally, assessments of these candidates personally, their kind of strength of leadership and whether people feel connected to them.
It's really -- there are a variety of moving pieces in this campaign in the last month, I think as Karen has said, the big moving piece has been the new doubts raised about Kerry by these accusations on his Vietnam experience. I think the questions about whether he earned his medals, polls show most people believe he did earn his medals.
The questions about what he did when he came back are tougher for him, and precisely with the kind of constituencies that we're talking about, more socially conservative swing voters who aren't happy with President Bush's record on a number of fronts, but may feel that John Kerry isn't someone who really shares their values. In some ways he has to do a better job of appealing to those voters to harvest this change vote that he hasn't fully maximized.
PILGRIM: We've been somewhat interpretive turf on character and values and some of the softer side. Yet we do have these hard-headed issues about healthcare and job creation. Do you think the voters will increasingly turn to the hard-headed issues, or will they be more seduced in the ultimate when they push the lever by these sort of more interpretive values?
TUMULTY: Well, it depends on what voters you're talking about. Because the fact is that there are very few voters left up for grabs any more. Some polls it's as few as 3 percent of the electorate is still undecided.
PILGRIM: Yet such a big number of purple states, as Bill Schneider points out.
TUMULTY: But so few voters in them who are truly undecided. So, I think that it's almost impossible at this point to even get reliable polling data on that small of slice of the electorate.
PILGRIM: You are the numbers guys.
ELLIS: Well, it's also difficult for a lot of voters to really feel that either side can do a lot. Because of deficit concerns, there's not a lot of leeway for either person.
So one party is saying it will do this. Everybody says it's going to dig a hole. It just depends on whether you want to go with this guy's hole or that guy's hole. That's the problem. And it's difficult for either party now to sort of energize anybody other than their own base.
PILGRIM: Let's give Ron the last word. Ron, the debates seem to be very key coming up, right?
BROWNSTEIN: I think so. I mean, look, there are a few key moments in the campaign. We've got one coming up next week, President Bush's convention. What's happened over the last month is doubts have been raised about John Kerry. And I think that has moved President Bush back into the lead.
But in the long run, I think he ultimately has to resolve the doubts that exist about himself as well. And that is probably a higher priority for him both at the convention and the debates I think at this point than solidifying or accentuating the doubts about Kerry.
PILGRIM: All right. Thanks very much. And we look forward to the next week. Karen Tumulty of "TIME", Ron Brownstein from the "L.A. Times," and from "Businessweek," Jim Ellis. Thank you.
And that brings us to the topic of tonight's poll. "What events could still influence your vote before the election? The Republican Convention, events in Iraq, jobs and the economy or poll results." Cast your vote at cnn.com/lou. And we'll bring you the results later in the broadcast.
Just ahead, defending the middle class. It's a practice some say Washington doesn't do well. We'll have a special report looking at the performance of Congress.
And the "Exporting of America." U.S. based jobs are being shipped to call centers around the world. I'll speak with one chief executive who's trying to turn the tide.
And if you're in the market for a '95 Mustang you may be in luck. The story of one unbelievable garage sale when we return.
(COMMERCIAL BREAK)
PILGRIM: Tonight, "Middle Class Assault." For any politician, getting elected takes the support of the nation's middle class. Well, as this year's election approaches, we look at how members of Congress are working to secure middle class votes. Louise Schiavone reports from Washington.
(BEGIN VIDEOTAPE)
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): In a nation struggling with millions out of work, rising healthcare costs, diminishing benefits and an aging population, the challenges before Congress are clear. How they have done in the eyes of middle class American will become evident in November, but some early grades are already out.
DANIEL MITCHELL, HERITAGE FOUNDATION: I would give Congress a B, and that's an average, because they might get an A on tax policy, but at best they get a gentleman's C on spending policy, because boy, whether it's the Farm Bill, whether it's the No Bureaucrat Left Behind Bill, whether it's the Giant Medicare Entitlement Program they created, Congress is not done a very good job on spending.
SCHIAVONE: Congress passed an extravagant prescription drug benefit and sweeping tax breaks, although support was far from unanimous.
SEN. JOHN KERRY, (D-MA) PRESIDENTIAL CANDIDATE: Over the last four years, the burden of taxes has shifted from the wealthy to the middle class. The middle class is paying more taxes.
SCHIAVONE: Heading into the elections, Congress is working on the next stage of the Bush agenda. This includes making middle class tax breaks permanent as well as privatizing Social Security and health care spending.
BUSH: We want people owning and managing their own retirement accounts and owning and managing their own health care accounts. We want more people to own their own small businesses.
SCHIAVONE: But critics say that before that can happen, Congress has to get control of spending.
FERNANDO FERRER, DRUM MAJOR INSTITUTE: Let's pay our bills. Let's do the responsible thing. Let's make the responsible choices now so that our grandchildren and great grandchildren won't have to pay for our excesses.
SCHIAVONE: Other middle class issues awaiting action, efforts to ease the burden of college tuition, extend jobless benefits for the longterm unemployed and slow down the outsourcing of American jobs.
(END VIDEOTAPE)
SCHIAVONE: Kitty, there's not a lot of time left on the congressional calender to accomplish much, so once again the middle class finds itself with many of its issues on the back burner -- Kitty.
PILGRIM: Louise, what are the prospects for Congress doing anything for the middle class when they return from summer break?
SCHIAVONE: You know, it's very tough to get anything done at this point in the year, especially in an election year. The overriding public sentiment is that the less Congress does, the better, so lawmakers are pretty much inclined to just hold the line and try not to do much at this point.
PILGRIM: All right. Thank you very much, Louise Schiavone.
Let's take a look at some of your thoughts. Many of you wrote about the assault on the middle class. And Robert of Arlington, Virginia wrote, "the middle class is squeezed because it's fragmented, overworked, and lacks an effective powerful lobbying arm within an activist constituency."
P. Lober of Palm Desert, California writes, "What will it take to get our country back from corporate control? Will American citizens forever be at their mercy and fooled into believing we have a say in our government?"
And Toni Boutwell of Myrtle Beach, South Carolina says, "We're stuck in a war in Iraq, we have a failed economy, our jobs have been outsourced, our most private information is scattered around the world, our population is exploding, and our resources are shrinking. Instead of a standard of living, maybe we should measure our chances of survival."
We love hearing from you. E-mail us at loudobbs@CNN.com.
Still ahead a dangerous trend for call centers is on the rise. It could affect hundreds of thousands of American workers.
And it's a bargain hunters paradise in California as Governor Schwarzenegger tries to eliminate the excess. We'll tell you just what he's doing when we return.
(COMMERCIAL BREAK)
PILGRIM: In "Exporting America" tonight a look at the rapid migration of this country's call centers. 3,000 are expected to leave the United States over the next five years. For Americans, that means the loss of hundreds of thousands of jobs.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Hi. How may I help you today?
PILGRIM (voice-over): Call centers offer help to consumers on everything from computers to loans and more and more of those jobs are moving offshore following manufacturing and IT jobs outside our borders.
A study released today expects a loss of more than 133,000 call center positions over the next five years, the first projected loss of call center jobs in nearly a decade.
MARK BEST, DATAMONITOR: There are three main reasons for the decline in American call center industry. One is offshore outsourcing. The second is the use of self-service technologies and then, to a lesser extent, the federal "Do Not Call List."
PILGRIM: Experts say India, with its large labor pool of English speakers is a prime location. But the Caribbean, Canada and for Spanish calls, South America are increasingly competitive.
PROF. STEPHEN COHEN, UNIV. OF CALIF. BERKELEY: Call centers are cheaper by a lot. It costs you almost nothing to run a telephone call through to India. And wages are substantially less sometimes down to a fifth and even cheaper. That's the big, big difference. You also have the night shift easily covered.
PILGRIM: The trend to send call centers offshore is far from over. In fact, those who study it say it's accelerating. The problem is the U.S. economy is not generating new jobs for those people who have lost their call center positions. Those tend to be single wage earners for families, often women, and people who are between jobs trying to make their bills.
(END VIDEOTAPE)
PILGRIM: Well, my next guest heads up an information technology company that runs directly counter to those companies that send American jobs overseas. Aelara has added a new word to an outsourcing vocabulary. That word is homeshoring. The company says that it homeshores highly skilled IT labor to its clients from small metro markets in the United States. Now, joining me now from Salt Lake City is the president and CEO of Aelara, Dustin Crane. Thank you very much for joining us, Mr. Crane.
Why did you decide not to outsource? Was it direct observation?
DUSTIN CRANE, PRESIDENT & CEO, AELERA: You know, like most companies in the United States, we received many, many calls from India with claims that they could lower our software development costs if we shifted it to an offshore software development center. So I went firsthand to investigate to see if that was true. What I discovered was some amazing things.
First, there are some very capable people offshore and they are certainly competing with onshore technical resources. But there are some things that they didn't highlight in the calls that we received, for example, additional costs not associated with labor rates that kind of negated some of the labor savings.
PILGRIM: Did you feel that you just wouldn't make money if you did it ultimately?
CRANE: Well, they kind of beat on one drum, which is low labor rates, low labor rates. It's one thing to have a call center offshore where the conversation lasts for a minute or two and you repeat that multiple times during the day. It's a very different thing to do software development which you're trying to solve a complex business process, communicate the requirements and do this stream of consciousness over three or four months.
So software development is a little bit different than call center work. What I found was, yes, the labor rates are lower, but the additional cost of translation of the requirements, understanding what the business paradigms are here in the United States, the infrastructure issues and other things really kind of chipped away at those labor rate savings. What we found when we did our initial analysis was that it was going to cost us a little bit more money to do business over there, or if we did do a very good job of it, we would just save maybe 10 or 15 percent. PILGRIM: And yet there are many companies in your industry that are doing it. Did you ever have a qualm and think, oh gosh, I might be missing the boat, I might be missing an opportunity?
CRANE: Well, certainly. That's why I went to Armenia and China and India. But what I found was when we did our analysis, for the type of work that we do for our clients it would be very difficult to bring those cost savings up above maybe a 15 percent, perhaps if we got very efficient, maybe 20 percent savings.
And then I realized, well, if that's our analysis, is that true? We actually commissioned a study and that study went across the United States. We asked CEOs, CIOs and CFOs what their experience was because I needed some validation. What we found was kind of amazing. Three things. Number one, those that are doing offshoring expected to have a 30 percent to 50 percent cost savings that would drop to their bottom line.
What we found across the board is that they are not receiving that much savings. Many of them are between 0 and 20 percent. We asked in our survey if people were losing money and I think we were the first company to do so. Surprisingly, many were losing money. And so we looked at that and said, this is validation. Second thing is most companies in the United States hear the sales pitch from these companies like Tata and others that say they could save a lot of money. What they don't realize is that there are additional costs. When we looked at those costs, it took away those savings.
PILGRIM: So a very hard-headed decision. Do you think, in your experience that other companies will repatriate their operations to the United States?
CRANE: We're finding that. The second thing that's happening over there is that labor rates continue to go up. I know of one company where they have to pay 15 percent year over year just to retain their people. Here in the United States, it's post-dot.com. Labor rates have come down for technology people. They've been either stagnant or they're kind of trending down a little bit. So as that difference pinches down, then the opportunity isn't as great offshore.
We found that we could offer out of these small metropolitan areas the same savings, which is about 20 percent. Like a place like Savannah. They call that the Creative Coast. Well, they're very creative, they're very flexible, and we can offer the same kind of things in Savannah that companies are going to Bangalore to obtain when it comes to the total cost of delivery. It's not just about rates.
PILGRIM: Well, thank you so much for sharing your experience with us, Dustin Crane of Aelera. Thank you.
Governor -- California Governor Arnold Schwarzenegger, he is cleaning house, literally. Governor Schwarzenegger has ordered a 100,000 square foot warehouse filled with surplus items to be emptied and the items to be sold at auction. This sale is part of the governor's effort to make the state more efficient. Some of the items were seized in foreclosures, arrests, even airport security checks. And the sale is today and tomorrow at the state warehouse in Sacramento.
Some of the items already sold include a forklift, an airplane engine, an electric cattle prod. Now, plenty of items are still available at the warehouse in Sacramento, and on Ebay, including a 30- pound box of scissors, jewelry, and a 1995 Ford Mustang.
Here's a reminder now to vote in tonight's poll. What events could still influence your vote before the election? The Republican Convention? Events in Iraq? Jobs and the economy? Or poll results? Cast your vote at cnn.com/lou, and we will bring you the results a little bit later in the broadcast.
Coming up next, a stark warning to baby boomers looking forward to retirement. We'll have that story next.
(COMMERCIAL BREAK)
PILGRIM: Stocks rose today on Wall Street. The Dow gained nearly 22 points. Nasdaq added 9; the S&P 500 up nearly 3. Blue chips rose for the third straight week, while oil prices eased for the first week in more than two months. Christine Romans has the report -- Christine.
CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Kitty, finally some relief from oil prices. Oil prices fell 12 percent this week. And that helped stocks. Blue chips weekly winning streak now the longest since June.
But a stark warning today from Alan Greenspan about baby boomer retirement. If you're looking for a comfortable retirement and expect to enjoy Social Security and Medicare benefits like your parents, think again. Greenspan says the government is promising more to future retirees than it can possibly deliver, even under the best circumstances. He suggested Americans may have to work longer, and the age you have to get benefits may have to be raised if Congress doesn't fix this now.
There will be abrupt and painful changes ahead, he says, for people who should be enjoying their golden years.
Now, Greenspan is 78 years old. Just signed on for five more years in his job. Unless something changes, more Americans, he says, will be forced to follow his lead and work much later in life. The difference is, of course, Greenspan has the choice. He is a wealthy man. Many Americans don't.
PILGRIM: Now, is Greenspan's warning getting attention, especially ahead of the convention?
ROMANS: John Kerry says this is a wakeup call that President Bush's policies aren't working. We know that Alan Greenspan has sounded this alarm before. Earlier this year, he said essentially the same thing. Something's got to be fixed. You know, we're not paying enough into this system to give retirees what the government has been promising.
President Bush has said he'd like to see partial privatization for younger workers of their payroll taxes, but as yet, Kerry is sort of opposed to that privatization. And on the campaign trail, this is a sticky thing to be talking about. These are all painful choices, no matter what they do.
PILGRIM: No easy solution. I'm not sure they're going to embrace it.
ROMANS: No.
PILGRIM: Thanks very much, Christine Romans.
Still ahead, we have the results of tonight's poll. Stay with us.
(COMMERCIAL BREAK)
PILGRIM: Now the results of tonight's poll. Three percent of you say the Republican Convention could still influence your vote before the election. Nine percent say the events in Iraq; 87 percent jobs and the economy, and just 1 percent poll results.
Well, thanks for joining us tonight. Please join us on Monday, when Senator Trent Lott is our guest, and Congressman Tom Tancredo talks about his fight to stop the Bush administration from giving amnesty to illegal aliens.
And then, our panel of top political journalists joins us live from the Republican National Convention. For all of us here, good night from New York. Have a great weekend. "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 27, 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, President Bush expands the authority of the CIA director. The White House says they're following the recommendations of the 9/11 commission. Critics say it's not enough.
Uneasy peace in Najaf. Militiamen tied to anti-American cleric Muqtada al Sadr begin to turn in their weapons and leave the holy city.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): We are 100 percent in control of the holy cities of Najaf and Kufa.
(END VIDEO CLIP)
PILGRIM: But skeptics, including some at the Pentagon doubt the peace will last.
The Middle Class Assault. Like the presidential candidates, members of Congress are making promises to working men and women in this country, but critics question whether they can deliver. We'll have a special report.
Exporting America. A new report finds thousands more American call centers will soon move overseas, taking thousands of American jobs with them.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: There's more to come. It's far from over.
(END VIDEO CLIP)
PILGRIM: We'll have a special report, and we'll talk to the head of one company that's fighting against and beating the trend of sending American jobs overseas.
ANNOUNCER: This is LOU DOBBS TONIGHT for Friday, August 27. 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, President Bush has signed an executive order giving more power to the head of the CIA. The White House says the order will help reform the nation's intelligence services, as recommended by the 9/11 commission. But some officials in the intelligence community and elsewhere, say the president didn't go far enough.
David Ensor has the report.
(BEGIN VIDEOTAPE)
DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT (voice-over): With a few strokes of the pen, President Bush increased the powers of the nation's top intelligence officer, while following well short of changes proposed by the 9/11 commission.
Acting Director of Central Intelligence John McLaughlin, who was at the White House, now has more power over the budgets of the nation's 15 intelligence agencies, though the change is only incremental, as one official puts it.
The executive orders and directives strengthen his ability to develop, determine and present the whole intelligence budget. They also create a new national counterterrorism center, and they promote sharing by federal agencies of information on terrorism and create a presidential board to safeguard civil liberties.
White House officials touted the changes as a signal of the president's intentions, saying they give the top intelligence officer a whole set of enhanced authorities that didn't exist before.
(END VIDEOTAPE)
ENSOR: But some intelligence professionals were distinctly underwhelmed, saying the executive orders do not really change much. Only Congress can do that. They're waiting to see what the White House puts into proposed legislation, creating a national intelligence director. That will be the real test, they say, of whether the president wants the kind of changes that the 9/11 commission proposed -- Kitty.
PILGRIM: Thanks.
David Ensor.
The executive orders come just days before a key political event for the president, the Republican Convention here in New York City. Now Senior White House Correspondent John King is in New York ahead of the convention. He joins us with more on the political impact.
Now, John, should we read anything into the timing of these orders?
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Absolutely. The White House says, Kitty, that substantively this is important business, but it's also important politically. The president will be here in New York in a few days. Senator Kerry has been criticizing him, saying the administration is foot dragging when it comes to intelligence reform. So the president wanted to act. And, of course, coming to New York you have the spectacle of 9/11, if you will, the symbolism of 9/11 around this convention. The last thing the president wanted, with all the thousands of demonstrators and critics on the streets of New York City, is to have families from 9/11 out criticizing him, saying he has not done enough to implement the recommendations of the 9/11 commission.
So much more to be done, but the administration believes both from a policy perspective and from a political perspective, it has taken important steps.
PILGRIM: Do you think it's enough to silence the critics?
KING: Absolutely not. The Kerry-Edwards campaign is out tonight, Democrats in Congress out tonight, saying this is fine. It's a place holder. All can see that, even the administration. But will this president stand up to Secretary of Defense Rumsfeld and the CIA and say you must give power to the new national intelligence director? Will he reach an agreement with Congress to get that post created?
One of the fascinating debates now is you have one leading Republican say abolish the CIA, you have other leading Republicans say let's take our time. You have Democrats say let's do this next week, why didn't we do it last week.
There are some thinking that perhaps what the president did today is all you will get for months to come because there is so much of a policy disagreement -- legitimate policy disagreement -- between lawmakers and then layer over that the heated political debate.
PILGRIM: So attempt to table it for a moment, but maybe not successfully.
KING: Democrats want the Congress to come back now and do this this year. That's still an open question.
PILGRIM: All right. Thanks very much.
John King.
In tonight's Campaign Journal, Senator John Kerry wrapped up a week of campaigning on the economy. Stumping in California today, Kerry said the president is neglecting the middle class and is out of touch with ordinary Americans.
(BEGIN VIDEO CLIP)
SEN. JOHN F. KERRY (D-MA), PRESIDENTIAL NOMINEE: In the last four years, under this administration, the tax burden of the middle class in America has gone up, and the tax burden of the wealthiest people in the country has gone down. John Edwards and I believe it should be the other way around, and, when we're in there, it will be.
(END VIDEO CLIP)
PILGRIM: President Bush, meanwhile, is in Florida tonight. He's kicking off his preconvention tour through eight battleground states. The president will arrive in New York on Wednesday night and will deliver his acceptance speech to the convention on Thursday night.
Well, New York City is bracing for the convention. Thousands of extra police and other security teams will be on duty next week, and, as Jason Carroll reports, much of their time will likely be spent rounding up protesters.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: And here we go!
JASON CARROLL, CNN NATIONAL CORRESPONDENT (voice-over): A mother from New York.
UNIDENTIFIED MALE: People are going to hear our voices.
CARROLL: A student from the University of Hawaii.
Those coming to New York City to protest are as varied as the groups they represent.
On Friday morning, mothers opposing Bush marched across the Brooklyn Bridge, pushing strollers, their children carrying banners.
UNIDENTIFIED FEMALE: I think it's very important to teach my children about the power of democracy and action.
CARROLL: Thursday night, DNC to RNC, a lose mix of environmentalists and labor leader rallied against Democrats and Republicans for not supporting real people.
LESLIE CAGAN, UNITED FOR PEACE AND JUSTICE: OK. Great. Good. Take care.
CARROLL: But, by far, the largest demonstration is likely to come from this group, United for Peace and Justice. They're anti-war. Leslie Cagan...
CAGAN: We talked to the police this morning. We said we wanted...
CARROLL: ... is the group's spokeswoman.
CAGAN: We and millions of Americans are fed up. So, this Sunday, we will march and say no to the Bush agenda, no to their policies of war, greed, hate and lies.
CARROLL: Cagan predicts 250,000 people will peacefully march up 7th Avenue to Madison Square Garden where the convention will be held. Some 800 smaller groups will march under UPJ's banner, organizations like Iraq's Veterans Against War and Green Dragon, who protest corporate greed.
UNIDENTIFIED MALE: We are celebrating the American revolution from corporate monarch George II. CARROLL: The city denied UPJ a permit to rally in Central Park after their Sunday march, but word is many will go there anyway. Police are also concerned about anarchists, or so-called fringe groups, who they say want to cause trouble.
COMM. RAYMOND KELLY, NEW YORK CITY POLICE DEPARTMENT: If people break the law, we're going to deal with it. We're going to arrest them. The court system is ready to receive large numbers of people, if that's necessary.
UNIDENTIFIED MALE: People power!
UNIDENTIFIED MALE: People power!
CARROLL: Most protesters say, hopefully, it won't be.
(END VIDEOTAPE)
CARROLL: And police have arrested 22 demonstrators so far, and, in the event that they do have to make large-scale arrests, what they've done is they set up a temporary holding pen on Manhattan's West Side. That pen opens tomorrow, and it can hold up to 1,000 people -- Kitty.
PILGRIM: All right. Thanks very much.
Jason Carroll.
Well, the protests over the Iraq war come as a peace deal appears to be holding in Najaf. Insurgents loyal to the anti-American cleric Muqtada al Sadr today began turning in their weapons and leaving Najaf and neighboring Kufa. Iraqi police and religious officials took control of the Imam Ali Mosque where the militants had been holed up for weeks.
However, there are reports that some fighters are not turning in their weapons, and, tonight, some Pentagon officials say they are skeptical about whether the peace will last.
Barbara Starr has the report.
(BEGIN VIDEOTAPE)
BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): As the dead are removed from the Imam Ali Mosque, the citizens of Najaf rejoice at the peace deal -- at least for now. The Grand Ayatollah Ali al Sistani's intervention led Muqtada al Sadr and his followers to stop fighting, a victory for the interim government.
But a senior U.S. defense official calls the peace plan a face- saving gesture for everybody. Further blood shed avoided, but no guarantee of lasting peace. Did heavily armed U.S. troops and Iraqis at the last minute walk away from a military victory against a lightly armed insurgency?
MICHAEL O'HANLON, BROOKINGS INSTITUTION: I think it was correct to avoid that final showdown, sort of an alamo-style finally showdown, that might have brought down the building with the last elements of the resistance. But, frankly, I think we were very close to a complete annihilation of what part of the Mehdi Army that was in Najaf.
STARR: The concern: not sparking a wider Shia resistance. But overwhelming defeat of al Sadr and his fighters was the strategy back in April.
LT. GEN. RICARDO SANCHEZ, FORMER COMMANDER MULTINATIONAL FORCES: The mission of the U.S. forces is to kill or capture Muqtada al Sadr. That's our mission.
STARR: U.S. troops set up a cordon outside the holy shrine as fighting raged. Guerrillas using light weapons and hit-and-run sniper attacks, proven insurgency tactics. In an effort to support the new government, the U.S. military is now focused not just on defeating the insurgents but on achieving broader objectives.
O'HANLON: You have to avoid confusing tactical success with strategic success. They're two different things when you're fighting a counterinsurgency.
STARR: Al Sadr still a power the U.S. and Iraqis will have to watch.
AKBAR AHMED, AMERICAN UNIVERSITY: Muqtada al Sadr has emerged from nowhere, but he's a very ambitious man. He obviously has now a taste of power, of street power.
(END VIDEOTAPE)
STARR: And, Kitty, keeping U.S. forces out of that final showdown may have worked, but only if the peace holds -- Kitty.
PILGRIM: All right. Thanks very much.
Barbara Starr.
We will have much more on the uneasy peace in Najaf when we return. Middle East expert Ken Pollack will join us.
Also ahead, high security at military bases could cause terrorists to strike other military targets. We'll have the details of a new terror alert next.
Plus, a quiet Oregon town sends four of its own to Iraq. We'll have a special report on how the community has come together in support.
And then, new poll numbers find one of the presidential candidates has pulled ahead in some key battleground states.
We'll have that story, a great deal more. Stay with us.
(COMMERCIAL BREAK) PILGRIM: Evidence tonight of terrorism in one of two Russian plane crashes. Russian officials today say they found explosives in the wreckage of at least one of the planes. Nearly 90 people were killed when the aircraft went down almost simultaneously on Tuesday night. A Russian security spokesman said the experts found traces of the same explosive used in 1999 bombings blamed on Chechen separatists.
Well, there are new terror warnings tonight in this country. The FBI and the Department of Homeland Security say the next terror targets could be veterans affairs hospitals. A terror bulletin mentions reports of "suspicious activity" at military medical facilities, specifically ones in Bethesda, Maryland, and Aurora, Colorado. Counterterrorism officials warn, however, that they are not aware of any credible information indicating a specific terrorist threat.
Returning now to Iraq where a peace deal appears to have ended weeks of fighting in Najaf. Militants tied to the anti-American cleric Muqtada al Sadr today began turning in their weapons and leaving Najaf.
Joining me now for more on whether the truce will hold and what it means for U.S. policy in institution is CNN Analyst Ken Pollack, and he is the director of research at the Saban Center for Middle East Policy at Brookings Institution. Ken Pollack joins us from Washington.
Nice to see you, Ken.
KEN POLLACK, BROOKINGS INSTITUTION: Hi, Kitty. How are you?
PILGRIM: What is your assessment of the deal so far?
POLLACK: Well, assuming it holds -- and I think it will, given the fact that you're seeing those fighters come out of the mosque and surrender their weapons -- this is an important victory for the United States, but we also can't make too much of it.
It's a victory for three reasons.
First, the U.S. didn't have to assault the mosque, which is one of the two holiest sites in all Shia Islam.
Two, it has shown that the Mehdi Army can't confront the United States openly. Muqtada al Sadr is not down -- sorry. He's not out, but he's down. He's going to have to change his tactics.
And, three, the Iraqis demonstrated that they can come up with a solution to their problems, which is very important for their people. So, for all those reasons, it is an important tactical victory.
PILGRIM: I would agree with you on all of your points. However, it's -- it does occur to me that the Iraqi government and Prime Minister Allawi were not that instrumental in brokering this peace. It was Shiite cleric Sistani who did it. Does that in some way delegitimize the Iraqi government?
POLLACK: It doesn't delegitimize them, but you're absolutely right to point it out because it would have been much better for them if they could have been the ones to broker the deal. Sistani is someone who's been outside the process. He has been cautiously critical of the process. This does reinforce his own status.
But we need to remember that Sistani was always the most important political figure inside of Iraq. So all this does is make clear that he continues to be the most important political figure inside Iraq.
Let's talk about Muqtada al Sadr for a bit. He was wanted, actually, for killing a rival cleric, and many of the powers involved in Iraq were very concerned that he be allowed to continue. Now he's been given amnesty. How do you assess that in terms of his ability to reform a group somewhere else?
POLLACK: I'll put it -- I think there are two important points to get at with that question. The first one is we should not assume Muqtada al Sadr is done. His Medhi Army will disperse. They probably won't confront the U.S. or the Iraqi government again in the near term, but he can recall them to the colors very easily whenever he wants to.
The fact that they're surrendering their weapons ultimately is meaningless in Iraq. It is easy to get new weapons. By the same token, the hope is that he will recognize that this open policy of confrontation, which he has mounted over the past 16 months, isn't working.
And I think one of the things that's hard for Americans to understand is that, in Iraq, in the Middle East, in a country like this, where the political situation is so fluid and is only kind of evolving over time, the best solution for all involved is to bring Muqtada al Sadre into that political process, make him captive of it, co-opt him into it.
That will be the best thing for all involved, even though it means that someone who is probably guilty of several murders is not going to face the consequences for them.
PILGRIM: Yet he has a taste of street power, and, if things do not go his way politically, he is -- he may be inclined to regress.
POLLACK: Absolutely. And that, of course, is the fear. He seems to recognize right now that the cards were not in his favor this time around.
But, again, he can recall the Mehdi Army at some point in the future if he does believe that things are either going his way in terms of a better situation for him or if they're really not going his way, if participating in the political process is marginalizing him and not allowing him to gain the political power that he wants to.
As I said, we have not seen the last of Muqtada al Sadr. PILGRIM: Well, for the moment, we at least celebrate the cease- fire.
Thanks very much.
Ken Pollack.
In tonight's Heroes, instead of an individual member of the military, we bring you a story of an entire town. Now the town bonded together to support the families of four of its own who have been called to serve their country in Iraq.
Casey Wian reports from Adams, Oregon.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN BUSINESS CORRESPONDENT (voice-over): Adams, Oregon, is the kind of place time seems to have missed. It's a peaceful farming community of 297 people and no traffic lights. The only business on main street is a restaurant and general store that opened in 1885. But lately, something has changed here. Townsfolk say they're closer than ever.=
MAYOR PAT BRYSON, ADAMS, OREGON: We're not dramatically affected by, you know, world events, but now we are. There's four servicemen that come from this town that are headed over to Iraq. They deserve a huge amount of respect and support. You know, there ain't much you can do to support them. You know, they're going to go. You know, what are you going to do? So the best thing we can do is show them.
WIAN: American flags and yellow ribbons seem to be everywhere, including these on the town square bearing the names Brian Phillips, Ryan Lennert and the Chase brothers, Travis and Jack.
(on camera): Four young men called up to active duty may not sound like that many, but it is when you consider the fact that the entire town of Adams only has about four dozen men between the ages of 18 and 44.
(voice-over): The Chases leave behind their wives and seven kids between them, plus siblings and parents.
WENDY CHASE, WIFE OF NATIONAL GUARDSMAN: I'm worried about it every day, constantly wondering whether he's going to come home or not.
WIAN: Wendy says her community support goes beyond yellow ribbons.
CHASE: Everybody's come together. They've offered services in any way they can.
WIAN: Jeannie Chase expects her husband to be gone for at least a year.
JEANNIE CHASE, WIFE OF NATIONAL GUARDSMAN: We didn't realize it was going to be so long.
BRYSON: It's hard on the families. You know, that's a lot of stress, to have your children over in a foreign country where they're definitely going to get probably shot at, you know, and possibly killed, and that's -- that's so far removed from where we live and what we do in this town. It's pretty traumatic.
WIAN: Especially since the call-up came right before harvest time in Adams. 1st Sergeant Ryan Lennert didn't have time to finish the yard of his new house. His wife, Janie, can't do it. She's expecting a child. So locals called a town meeting to pitch in and finish the job.
JANIE LENNERT, WIFE OF NATIONAL GUARDSMAN: You hear people talk about Mayberry. Well, you know, everybody knows your name, and they know what you're doing, and they care. They genuinely care.
WIAN: Adams even came up with a name, Operation Homeland Compassion. They hope the name and their actions spread throughout the country.
Casey Wian, CNN, Adams, Oregon.
(END VIDEOTAPE)
PILGRIM: Tonight's thought is on courage. "Courage is the ladder on which all other virtues mount." And those are the words of American playwright and diplomat Clare Boothe Luce.
Just ahead, they were in a dead heat last month, but the presidential poll numbers have changed since then, and Bill Schneider will be here with the very latest on that.
They've been called the backbone of America, but some say the middle class is more likely the forgotten class when it comes to Washington. A special report when we continue.
(COMMERCIAL BREAK)
CNN ANNOUNCER: LOU DOBBS TONIGHT continues with more news, debate and opinion. Here now Kitty Pilgrim.
PILGRIM: With just over two months to go the presidential race appears too close to call, but, for more on that -- and there is more -- we turn to our Senior Political Analyst Bill Schneider.
Nice to have you here in New York -- Bill.
WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Nice to be here with all the Republicans.
Let's take a look at the map of America for this election. We have a lot of the so-called red states. There are 22 of them. These are the states that George Bush carried last time, in 2000, and he's expected to carry them this time. A lot of them are small states in the Midwest and the South, but one great big one there is the State of Texas.
Then we have 11 blue states, just half as many states, but those Gore states from 2000 include some powerhouses like Illinois in the middle there, California on the West Coast and New York on the East Coast.
And then, of course, the battle battlegrounds. Those are the so- called purple states because, if you mix red and blue, which these states do, you get purple. These are the states where the campaign is taking place. Your probably notice that Bush and Kerry are appearing mostly in those states.
I call it Forgotten America, the red and blue states, that everybody knows how they're going to vote, and Favored America, those purple states, where the election is really at stake.
Let's take a look at a few polls. Ohio -- this is the new Florida, ground zero in this election. Where is Ohio? Well, let's take a look. The latest poll is Ohio, Bush 49 percent and Kerry 44 percent. Not quite a majority for Bush, but he is leading by 5 points which is a pretty good showing for Bush. He carried Ohio last time.
Another battleground state Bush carried last time, Missouri. Closely contested, but there just the narrowest lead -- Bush 46 percent, Kerry still 44 percent, just like he was in Ohio. Not quite a majority for Bush, but he is leading there.
And finally, here -- and Missouri went for Bush last time. The third one, Wisconsin. Wisconsin was a Gore state in 2000, and Bush appears slightly ahead there, too, 48 percent, with Kerry again at 44 percent. The message here is Kerry seems to be stuck at 44 percent, Bush is slightly ahead of him in these states, but not quite at 50 percent. When an incumbent is not quite at 50 percent, that could be a problem because he's got to get over 50 percent to breathe freely.
PILGRIM: Interesting shift, though. We'll keep our eye on that.
Thanks very much.
Bill Schneider.
And joining us now is Ron Brownstein from the "L.A. Times," Karen Tumulty from "TIME" magazine, and from "BusinessWeek" Jim Ellis for our roundtable.
Let's start with Ron because he's not sitting at the table with us right now.
Ron, what do you make of the poll numbers that we just went through and -- Bush 49 percent approval rating compared to 46 percent for Kerry. What's your analysis of this?
RON BROWNSTEIN, "LOS ANGELES TIMES": I think you can start with me because I wrote the story on those polls this morning in the "Los Angeles Times." Well, look, I think there's a consistent pattern here in the three states, as well as in the national poll that we put out, and the NBC/"Wall Street Journal" poll that came out today as well. All point to the same thing.
A lot of voters are uncertain about the policy direction that President Bush has set out, but they are even more uncertain whether they want to go with John Kerry. In all three of the states -- Missouri, Wisconsin, Ohio -- a majority said that they believe the president's policy direction has not made the country better off and we need to move -- set a different course.
But John Kerry is only winning about 80 percent or less of those change voters, and it's that change gap, the gap between the constituency for change and the constituency for Kerry that right now has President Bush back in the lead.
PILGRIM: All right. Let's turn to Karen.
What do you think about the Vietnam factor and how this has played out in the Kerry camp?
KAREN TUMULTY, "TIME" MAGAZINE: Well, something is going on here. A few weeks ago -- the polls are still within the margin of error, and, of course, we need to keep saying that over and over and over again because this race is very, very close. But a few weeks ago, all those polls that were within a margin of error seemed to be showing Kerry slightly ahead. Now it's Bush who's slightly ahead.
And you look at what has happened in the last two weeks, and the biggest factor, the thing that has dominated the news, has been this furor over the -- these charges by these Swift Boat Veterans regarding both Kerry's Vietnam record and also what he did after the war, and I think that what that has done is perhaps temporarily, but really has undercut his argument as to his effectiveness as commander in chief.
PILGRIM: Jim, the economy is such a critical -- this politics aside, the economy, and we have Greenspan today suggesting trimming Social Security, Medicare benefits to baby boomers. How does that play into the whole campaign?
JIM ELLIS, "BUSINESSWEEK": Well, I still think that there's enough time left before election day that the economy can actually work against the administration. The economy is still strong, even with the reduced GDP growth numbers out today.
But the problem is that, in a key area, jobs, particularly a key area in the Midwest, we're not building jobs up the way you normally do. That and the next couple months, if we stay sort of slow on jobs, that's going to start to hurt the administration.
Likewise, lot of people are starting to worry about small bits of inflation. The overall inflation numbers are great, but when it comes to things like health-care expenses, college tuition, things that a lot of people can relate to, such as gasoline prices, they really do feel it, and they're going start saying am I really better. PILGRIM: So kitchen table economics. Let me ask Ron. The 2003 Census report on poverty came out, and, Ron, I know you have very distinct opinions about the results that came out.
BROWNSTEIN: Well, you know, when you look at these numbers, it really goes to the point Jim made, which is, I think, can John Kerry make an economic case against President Bush given the raw material he has to work with.
The numbers here were disappointing. Once again, if you look at the first 3 years of Bush's presidency, the number of people in poverty increased more than during the first three years of any president in the last 30 years except Ronald Reagan. Also, much bigger increases in the number uninsured than -- on the first 3 years of President Bush, or Bill Clinton.
Now, this would seem to argue for a greater focus on some of these issues, particularly healthcare, which reaches beyond the poor to affect the middle class. And I think the question is very much framed, can John Kerry force some attention on these issues and drive them into the campaign in a way he hasn't been able to do so far. Healthcare is the central piece of his domestic agenda. That's where he puts most of his money from repealing the top provisions of the Bush tax cut. But he really hasn't found any way to sustain a debate on it. And it's been, I think, a failing of the campaign.
PILGRIM: Karen, is it your perception that healthcare is a critical issue in this campaign?
KAREN TUMULTY, "TIME": Oh absolutely. Because in a campaign where the watch work has been security, security, security, people's economic security is very much tied up in their jobs and the healthcare benefits that come with those jobs.
And the third factor that we saw in that census report is a growing gap between the rich and the poor in this country. And John Kerry's efforts to sort of hone his argument toward the middle class, his economic policies toward the middle class, I think is going to be key to his getting any kind of traction on economic issues.
PILGRIM: Let's turn to Jim for an interpretation on the reasons for the slow GDP growth in the second quarter.
JIM ELLIS, "BUSINESSWEEK": Well, a big piece of that is that a lot of companies are having to redeploy assets toward higher energy cost. One reason that a lot of us sort of forget that energy is like a tax. And it's not just a tax on drivers, it's a tax on business. It's sort of a component on everything we do. That's slowing things down.
It's also, a lot of people are starting to worry that higher energy prices are going to affect the way that businesses and consumers buy, so therefore, businesses don't want to expand. So people aren't investing nearly as much as they did before.
So, as that happens, the whole engine slows down. And lot of people are sort of afraid to put more money on the table which slows down growth. Now, whether that happens before November is the big question.
PILGRIM: We have the healthcare tax, but no one creating jobs because they are afraid of the healthcare costs, now the energy.
Ron, how much do you think this will factor into the debate as it goes forward, or maybe be side tracked by politics once again?
BROWNSTEIN: Well, I don't think we know what the ultimate balance is going to be in the mind of the electorate. Sort of 4 baskets in this campaign: Iraq and terror, the economy, including healthcare, values related issue we, which we haven't talked about much, which can be a real asset for the president, perhaps in some of these midwestern states with the swing voters, tend to be culturally conservative, and finally, assessments of these candidates personally, their kind of strength of leadership and whether people feel connected to them.
It's really -- there are a variety of moving pieces in this campaign in the last month, I think as Karen has said, the big moving piece has been the new doubts raised about Kerry by these accusations on his Vietnam experience. I think the questions about whether he earned his medals, polls show most people believe he did earn his medals.
The questions about what he did when he came back are tougher for him, and precisely with the kind of constituencies that we're talking about, more socially conservative swing voters who aren't happy with President Bush's record on a number of fronts, but may feel that John Kerry isn't someone who really shares their values. In some ways he has to do a better job of appealing to those voters to harvest this change vote that he hasn't fully maximized.
PILGRIM: We've been somewhat interpretive turf on character and values and some of the softer side. Yet we do have these hard-headed issues about healthcare and job creation. Do you think the voters will increasingly turn to the hard-headed issues, or will they be more seduced in the ultimate when they push the lever by these sort of more interpretive values?
TUMULTY: Well, it depends on what voters you're talking about. Because the fact is that there are very few voters left up for grabs any more. Some polls it's as few as 3 percent of the electorate is still undecided.
PILGRIM: Yet such a big number of purple states, as Bill Schneider points out.
TUMULTY: But so few voters in them who are truly undecided. So, I think that it's almost impossible at this point to even get reliable polling data on that small of slice of the electorate.
PILGRIM: You are the numbers guys.
ELLIS: Well, it's also difficult for a lot of voters to really feel that either side can do a lot. Because of deficit concerns, there's not a lot of leeway for either person.
So one party is saying it will do this. Everybody says it's going to dig a hole. It just depends on whether you want to go with this guy's hole or that guy's hole. That's the problem. And it's difficult for either party now to sort of energize anybody other than their own base.
PILGRIM: Let's give Ron the last word. Ron, the debates seem to be very key coming up, right?
BROWNSTEIN: I think so. I mean, look, there are a few key moments in the campaign. We've got one coming up next week, President Bush's convention. What's happened over the last month is doubts have been raised about John Kerry. And I think that has moved President Bush back into the lead.
But in the long run, I think he ultimately has to resolve the doubts that exist about himself as well. And that is probably a higher priority for him both at the convention and the debates I think at this point than solidifying or accentuating the doubts about Kerry.
PILGRIM: All right. Thanks very much. And we look forward to the next week. Karen Tumulty of "TIME", Ron Brownstein from the "L.A. Times," and from "Businessweek," Jim Ellis. Thank you.
And that brings us to the topic of tonight's poll. "What events could still influence your vote before the election? The Republican Convention, events in Iraq, jobs and the economy or poll results." Cast your vote at cnn.com/lou. And we'll bring you the results later in the broadcast.
Just ahead, defending the middle class. It's a practice some say Washington doesn't do well. We'll have a special report looking at the performance of Congress.
And the "Exporting of America." U.S. based jobs are being shipped to call centers around the world. I'll speak with one chief executive who's trying to turn the tide.
And if you're in the market for a '95 Mustang you may be in luck. The story of one unbelievable garage sale when we return.
(COMMERCIAL BREAK)
PILGRIM: Tonight, "Middle Class Assault." For any politician, getting elected takes the support of the nation's middle class. Well, as this year's election approaches, we look at how members of Congress are working to secure middle class votes. Louise Schiavone reports from Washington.
(BEGIN VIDEOTAPE)
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): In a nation struggling with millions out of work, rising healthcare costs, diminishing benefits and an aging population, the challenges before Congress are clear. How they have done in the eyes of middle class American will become evident in November, but some early grades are already out.
DANIEL MITCHELL, HERITAGE FOUNDATION: I would give Congress a B, and that's an average, because they might get an A on tax policy, but at best they get a gentleman's C on spending policy, because boy, whether it's the Farm Bill, whether it's the No Bureaucrat Left Behind Bill, whether it's the Giant Medicare Entitlement Program they created, Congress is not done a very good job on spending.
SCHIAVONE: Congress passed an extravagant prescription drug benefit and sweeping tax breaks, although support was far from unanimous.
SEN. JOHN KERRY, (D-MA) PRESIDENTIAL CANDIDATE: Over the last four years, the burden of taxes has shifted from the wealthy to the middle class. The middle class is paying more taxes.
SCHIAVONE: Heading into the elections, Congress is working on the next stage of the Bush agenda. This includes making middle class tax breaks permanent as well as privatizing Social Security and health care spending.
BUSH: We want people owning and managing their own retirement accounts and owning and managing their own health care accounts. We want more people to own their own small businesses.
SCHIAVONE: But critics say that before that can happen, Congress has to get control of spending.
FERNANDO FERRER, DRUM MAJOR INSTITUTE: Let's pay our bills. Let's do the responsible thing. Let's make the responsible choices now so that our grandchildren and great grandchildren won't have to pay for our excesses.
SCHIAVONE: Other middle class issues awaiting action, efforts to ease the burden of college tuition, extend jobless benefits for the longterm unemployed and slow down the outsourcing of American jobs.
(END VIDEOTAPE)
SCHIAVONE: Kitty, there's not a lot of time left on the congressional calender to accomplish much, so once again the middle class finds itself with many of its issues on the back burner -- Kitty.
PILGRIM: Louise, what are the prospects for Congress doing anything for the middle class when they return from summer break?
SCHIAVONE: You know, it's very tough to get anything done at this point in the year, especially in an election year. The overriding public sentiment is that the less Congress does, the better, so lawmakers are pretty much inclined to just hold the line and try not to do much at this point.
PILGRIM: All right. Thank you very much, Louise Schiavone.
Let's take a look at some of your thoughts. Many of you wrote about the assault on the middle class. And Robert of Arlington, Virginia wrote, "the middle class is squeezed because it's fragmented, overworked, and lacks an effective powerful lobbying arm within an activist constituency."
P. Lober of Palm Desert, California writes, "What will it take to get our country back from corporate control? Will American citizens forever be at their mercy and fooled into believing we have a say in our government?"
And Toni Boutwell of Myrtle Beach, South Carolina says, "We're stuck in a war in Iraq, we have a failed economy, our jobs have been outsourced, our most private information is scattered around the world, our population is exploding, and our resources are shrinking. Instead of a standard of living, maybe we should measure our chances of survival."
We love hearing from you. E-mail us at loudobbs@CNN.com.
Still ahead a dangerous trend for call centers is on the rise. It could affect hundreds of thousands of American workers.
And it's a bargain hunters paradise in California as Governor Schwarzenegger tries to eliminate the excess. We'll tell you just what he's doing when we return.
(COMMERCIAL BREAK)
PILGRIM: In "Exporting America" tonight a look at the rapid migration of this country's call centers. 3,000 are expected to leave the United States over the next five years. For Americans, that means the loss of hundreds of thousands of jobs.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Hi. How may I help you today?
PILGRIM (voice-over): Call centers offer help to consumers on everything from computers to loans and more and more of those jobs are moving offshore following manufacturing and IT jobs outside our borders.
A study released today expects a loss of more than 133,000 call center positions over the next five years, the first projected loss of call center jobs in nearly a decade.
MARK BEST, DATAMONITOR: There are three main reasons for the decline in American call center industry. One is offshore outsourcing. The second is the use of self-service technologies and then, to a lesser extent, the federal "Do Not Call List."
PILGRIM: Experts say India, with its large labor pool of English speakers is a prime location. But the Caribbean, Canada and for Spanish calls, South America are increasingly competitive.
PROF. STEPHEN COHEN, UNIV. OF CALIF. BERKELEY: Call centers are cheaper by a lot. It costs you almost nothing to run a telephone call through to India. And wages are substantially less sometimes down to a fifth and even cheaper. That's the big, big difference. You also have the night shift easily covered.
PILGRIM: The trend to send call centers offshore is far from over. In fact, those who study it say it's accelerating. The problem is the U.S. economy is not generating new jobs for those people who have lost their call center positions. Those tend to be single wage earners for families, often women, and people who are between jobs trying to make their bills.
(END VIDEOTAPE)
PILGRIM: Well, my next guest heads up an information technology company that runs directly counter to those companies that send American jobs overseas. Aelara has added a new word to an outsourcing vocabulary. That word is homeshoring. The company says that it homeshores highly skilled IT labor to its clients from small metro markets in the United States. Now, joining me now from Salt Lake City is the president and CEO of Aelara, Dustin Crane. Thank you very much for joining us, Mr. Crane.
Why did you decide not to outsource? Was it direct observation?
DUSTIN CRANE, PRESIDENT & CEO, AELERA: You know, like most companies in the United States, we received many, many calls from India with claims that they could lower our software development costs if we shifted it to an offshore software development center. So I went firsthand to investigate to see if that was true. What I discovered was some amazing things.
First, there are some very capable people offshore and they are certainly competing with onshore technical resources. But there are some things that they didn't highlight in the calls that we received, for example, additional costs not associated with labor rates that kind of negated some of the labor savings.
PILGRIM: Did you feel that you just wouldn't make money if you did it ultimately?
CRANE: Well, they kind of beat on one drum, which is low labor rates, low labor rates. It's one thing to have a call center offshore where the conversation lasts for a minute or two and you repeat that multiple times during the day. It's a very different thing to do software development which you're trying to solve a complex business process, communicate the requirements and do this stream of consciousness over three or four months.
So software development is a little bit different than call center work. What I found was, yes, the labor rates are lower, but the additional cost of translation of the requirements, understanding what the business paradigms are here in the United States, the infrastructure issues and other things really kind of chipped away at those labor rate savings. What we found when we did our initial analysis was that it was going to cost us a little bit more money to do business over there, or if we did do a very good job of it, we would just save maybe 10 or 15 percent. PILGRIM: And yet there are many companies in your industry that are doing it. Did you ever have a qualm and think, oh gosh, I might be missing the boat, I might be missing an opportunity?
CRANE: Well, certainly. That's why I went to Armenia and China and India. But what I found was when we did our analysis, for the type of work that we do for our clients it would be very difficult to bring those cost savings up above maybe a 15 percent, perhaps if we got very efficient, maybe 20 percent savings.
And then I realized, well, if that's our analysis, is that true? We actually commissioned a study and that study went across the United States. We asked CEOs, CIOs and CFOs what their experience was because I needed some validation. What we found was kind of amazing. Three things. Number one, those that are doing offshoring expected to have a 30 percent to 50 percent cost savings that would drop to their bottom line.
What we found across the board is that they are not receiving that much savings. Many of them are between 0 and 20 percent. We asked in our survey if people were losing money and I think we were the first company to do so. Surprisingly, many were losing money. And so we looked at that and said, this is validation. Second thing is most companies in the United States hear the sales pitch from these companies like Tata and others that say they could save a lot of money. What they don't realize is that there are additional costs. When we looked at those costs, it took away those savings.
PILGRIM: So a very hard-headed decision. Do you think, in your experience that other companies will repatriate their operations to the United States?
CRANE: We're finding that. The second thing that's happening over there is that labor rates continue to go up. I know of one company where they have to pay 15 percent year over year just to retain their people. Here in the United States, it's post-dot.com. Labor rates have come down for technology people. They've been either stagnant or they're kind of trending down a little bit. So as that difference pinches down, then the opportunity isn't as great offshore.
We found that we could offer out of these small metropolitan areas the same savings, which is about 20 percent. Like a place like Savannah. They call that the Creative Coast. Well, they're very creative, they're very flexible, and we can offer the same kind of things in Savannah that companies are going to Bangalore to obtain when it comes to the total cost of delivery. It's not just about rates.
PILGRIM: Well, thank you so much for sharing your experience with us, Dustin Crane of Aelera. Thank you.
Governor -- California Governor Arnold Schwarzenegger, he is cleaning house, literally. Governor Schwarzenegger has ordered a 100,000 square foot warehouse filled with surplus items to be emptied and the items to be sold at auction. This sale is part of the governor's effort to make the state more efficient. Some of the items were seized in foreclosures, arrests, even airport security checks. And the sale is today and tomorrow at the state warehouse in Sacramento.
Some of the items already sold include a forklift, an airplane engine, an electric cattle prod. Now, plenty of items are still available at the warehouse in Sacramento, and on Ebay, including a 30- pound box of scissors, jewelry, and a 1995 Ford Mustang.
Here's a reminder now to vote in tonight's poll. What events could still influence your vote before the election? The Republican Convention? Events in Iraq? Jobs and the economy? Or poll results? Cast your vote at cnn.com/lou, and we will bring you the results a little bit later in the broadcast.
Coming up next, a stark warning to baby boomers looking forward to retirement. We'll have that story next.
(COMMERCIAL BREAK)
PILGRIM: Stocks rose today on Wall Street. The Dow gained nearly 22 points. Nasdaq added 9; the S&P 500 up nearly 3. Blue chips rose for the third straight week, while oil prices eased for the first week in more than two months. Christine Romans has the report -- Christine.
CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Kitty, finally some relief from oil prices. Oil prices fell 12 percent this week. And that helped stocks. Blue chips weekly winning streak now the longest since June.
But a stark warning today from Alan Greenspan about baby boomer retirement. If you're looking for a comfortable retirement and expect to enjoy Social Security and Medicare benefits like your parents, think again. Greenspan says the government is promising more to future retirees than it can possibly deliver, even under the best circumstances. He suggested Americans may have to work longer, and the age you have to get benefits may have to be raised if Congress doesn't fix this now.
There will be abrupt and painful changes ahead, he says, for people who should be enjoying their golden years.
Now, Greenspan is 78 years old. Just signed on for five more years in his job. Unless something changes, more Americans, he says, will be forced to follow his lead and work much later in life. The difference is, of course, Greenspan has the choice. He is a wealthy man. Many Americans don't.
PILGRIM: Now, is Greenspan's warning getting attention, especially ahead of the convention?
ROMANS: John Kerry says this is a wakeup call that President Bush's policies aren't working. We know that Alan Greenspan has sounded this alarm before. Earlier this year, he said essentially the same thing. Something's got to be fixed. You know, we're not paying enough into this system to give retirees what the government has been promising.
President Bush has said he'd like to see partial privatization for younger workers of their payroll taxes, but as yet, Kerry is sort of opposed to that privatization. And on the campaign trail, this is a sticky thing to be talking about. These are all painful choices, no matter what they do.
PILGRIM: No easy solution. I'm not sure they're going to embrace it.
ROMANS: No.
PILGRIM: Thanks very much, Christine Romans.
Still ahead, we have the results of tonight's poll. Stay with us.
(COMMERCIAL BREAK)
PILGRIM: Now the results of tonight's poll. Three percent of you say the Republican Convention could still influence your vote before the election. Nine percent say the events in Iraq; 87 percent jobs and the economy, and just 1 percent poll results.
Well, thanks for joining us tonight. Please join us on Monday, when Senator Trent Lott is our guest, and Congressman Tom Tancredo talks about his fight to stop the Bush administration from giving amnesty to illegal aliens.
And then, our panel of top political journalists joins us live from the Republican National Convention. For all of us here, good night from New York. Have a great weekend. "ANDERSON COOPER 360" is next.
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