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Lou Dobbs Tonight

Bush Acknowledges Difficulties in Iraq War; U.S. Working to Train Iraqi Troops; Police Arrest 50 in Iraq Bombings

Aired December 20, 2004 - 18:00 ET

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

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

(BEGIN VIDEOTAPE)
KITTY PILGRIM, HOST (voice-over): Tonight, after the bloodiest day in Iraq in months, President Bush acknowledges there are difficulties in the war against insurgents and terrorists.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: No question about it. The bombers are having an effect.

PILGRIM: The ranking Democrat on the Senate Armed Services Committee, Senator Carl Levin, has just returned from Iraq. He says the Iraqis themselves must defeat the insurgents. Senator Levin is my guest.

Three million illegal aliens will enter the United States this year. Critics say only a massive overhaul of our immigration agencies can secure our borders.

UNIDENTIFIED MALE: And if we don't fix it now, like anything else in Washington, we'll be stuck with it for a really long time.

PILGRIM: And the rising uproar over the United Nations oil-for- food scandal. Who's to blame? I'll be speaking with the former chief of the U.N. oil-for-food program, Denis Halliday.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, December 20. Here now for an hour of news, debate and opinion, is sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

President Bush today acknowledged there are difficulties in the war in Iraq. The president said the terrorists are having an effect; the efforts to train Iraqi troops and police have been mixed results.

But President Bush declared the Iraqi elections will be held as scheduled at the end of January.

The president also repeated his support for Defense Secretary Donald Rumsfeld.

White House correspondent Dana Bash reports.

(BEGIN VIDEOTAPE) DANA BASH, CNN CORRESPONDENT (voice-over): The president was strikingly candid about a problem in Iraq: the effort to build up its army so American troops can start coming home is not going to plan.

BUSH: I would call the results mixed, in terms of standing up Iraqi units who are willing to fight. There have been some cases where, when the heat got on, they left the battlefield. That's unacceptable.

BASH: One goal of the end of the year news conference was to talk up Iraq's progress. But he also conceded this about a spike in suicide bombings.

BUSH: No question about it, the bombers are having an effect.

BASH: Mr. Bush stood firmly by his embattled defense secretary, whom critics call responsible for Iraq's failures. Rumsfeld has been most recently under fire for ignoring pleas for more armored vehicles in Iraq and using an auto pen, not his own hand, to sign letters for families of troops killed there.

BUSH: I have seen the anguish in his -- or heard the anguish in his voice and seen his eyes when we talk about the danger in Iraq. Sometimes, perhaps, his demeanor is rough and gruff, but beneath that rough and gruff, no nonsense demeanor is a good human being.

BASH: The president expressed disappointment but no regret for the ill-fated choice of Bernard Kerik for homeland security secretary, offering a veiled nod to critics of the White House vetting process.

BUSH: The lesson learned is continue to vet and ask good questions.

BASH: Controversy over Kerik and Rumsfeld may already have dimmed the president's post-election glow. A new CNN/"USA Today"/Gallup poll shows his approval rating back below 49 percent, down six points in just a month.

Bush aides understand building up his standing is crucial to pushing second-term goals like reforming Social Security. There, the president deflected questions on specifics, beyond wanting private accounts for younger workers.

BUSH: I'll propose a solution at the appropriate time, but the law will be written in the halls of Congress.

(END VIDEOTAPE)

BASH: And another reason the president has to build back up his public support, White House aides know, is because he is insisting he's going to fulfill a promise, another promise from his campaign.

That is, of course to cut the deficit in half in five years. In his words today, that is going to require a tough budget, Kitty. That is code in Washington for some tough spending cuts, cuts that are likely to make those on both sides of the aisle unhappy -- Kitty. PILGRIM: All right. Thanks very much, Dana Bash.

Well, the president's news conference follows the worst day of violence in Iraq since July. A series of bomb attacks yesterday killed nearly 70 Iraqis. President Bush said the United States will continue to train Iraqi security forces so they can take responsibility for defeating terrorists.

Kathleen Koch reports from the Pentagon -- Kathleen.

KATHLEEN KOCH, CNN CORRESPONDENT: Kitty, Pentagon officials say that they understand that the dramatic attacks are aimed at intimidating the Iraqi people, at crippling the election process, but at the same time, they say they know that the U.S. military alone cannot stop every suicide bomber.

So they say the solution is a two-pronged approach. Pump in more U.S. Force, as was announced recently, taking the level temporarily up to 150,000. And at the same time, have 125,000 Iraqi troops trained and operational by the January 30th elections.

But as President Bush himself pointed out this morning, those Iraqi forces have not always performed as expected.

(BEGIN VIDEO CLIP)

BUSH: Full command structure necessary to have a viable military is not in place, and so they're going to spend a lot of time and effort on achieving that objective.

And so the American people are taking a look at Iraq and wondering whether the Iraqis are eventually able -- going to be able to fight off these bombers and killers. And our objective is to give them the tools and the training necessary to do so.

(END VIDEO CLIP)

KOCH: Senior Pentagon officials explain that it takes more than weapons for a fighting force to be successful, that it needs a clear chain of command and understanding of its mission and who and what it's fighting for.

And they say that in Iraq up until this point that has been, quote, "exceptionally lacking." And those officials say they don't know if this chain of command can be put into place by the January 30 elections.

But in order to compensate, a senior Pentagon official tells me that U.S. forces will soon not be just training the Iraqi forces but indeed be embedded with them. And it's hoped, Kitty, that that could make a difference.

Back to you.

PILGRIM: All right. Thanks very much, Kathleen Koch. In Iraq, police today arrested 50 people after the car bombings in Najaf and Karbala. Officials say the violence may escalate ahead of the Iraqi election at the end of January.

Chris Lawrence reports from Baghdad.

(BEGIN VIDEOTAPE)

CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): They were the deadliest attacks in Iraq since the summer. But the day after twin bombings in Najaf and Karbala, American and Iraqi officials are promising it won't derail the election.

By Monday, the survivors had all been accounted for in Najaf, where Iraqi authorities have arrested 50 suspects and banned cars from driving through downtown.

On Sunday a suicide bomber detonated his car in a central town square, crowded with people watching a funeral procession.

Fifty miles away, another bomb exploded at a bus station in Karbala. The bus destroyed buses, cars and buildings, and by Monday the cleanup was just getting started.

Both attacks occurred in cities considered holy by Shiite Muslims, but Iraqi officials they won't let insurgents start a civil war to disrupt the upcoming election.

IBRAHIM JAFARI, IRAQI VICE PRESIDENT (through translator): They are trying to incite such violence between the Sunnis and the Shias.

LAWRENCE: U.S. officials won't talk about the specifics of securing polling places, but the Iraqis confirm American troops will be heavily involved.

BARHAM SALIH, IRAQI DEPUTY PRIME MINISTER: We will have to depend on the presence of multinational forces and in significant numbers in certain areas in order to prevent the terrorists from destabilizing the process.

LAWRENCE: On Monday, Iraq's electoral commission drew balls from a drum and randomly selected where competing parties will rank on the paper ballot. It looked like a national lottery, but one in which the country as a whole can't afford to lose.

(on camera) Since Iraqis have no experience with democratic elections, the order of names on the ballot could influence voters.

Officials are still trying to keep up with away from long lines forming fearing that large crowds could attract insurgents.

Chris Lawrence, CNN, Baghdad.

(END VIDEOTAPE)

PILGRIM: The war in Iraq appears to be hurting President Bush's poll numbers, and that is according to the latest CNN/"USA Today"/Gallup poll. Senior political analyst Bill Schneider reports.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN CORRESPONDENT (voice-over): Second honeymoons are nice, but President Bush isn't getting one. One month after winning re-election, Bush's job approval has dropped below 50 percent.

Did other re-elected presidents get a second honeymoon?

Bill Clinton got one: 58 percent job approval after he got re- elected in 1996. Ronald Reagan, 59. Richard Nixon, also 59. Lyndon Johnson, 69. The greatest love affair on a second honeymoon? Dwight Eisenhower, 79 percent.

What's the difference with Bush? The answer is Iraq.

SEN. CHUCK HAGEL (R), NEBRASKA: The fact is we're in more trouble today than we've ever been in. We're putting 12,000 to 15,000 new troops there. We got 1,300 people killed.

SCHNEIDER: Senator Hagel's exasperation is shared by most Americans. Last January, 60 percent of the public approved of the way the U.S. was handling the situation in Iraq. That number is down to 39 percent. Nearly 60 percent now disapprove of U.S./Iraq policy.

BUSH: The bombers are having an effect. You know, these people are targeting innocent Iraqis. They're trying to shake the will of the Iraqi people, and frankly, trying to shake the will of the American people.

SCHNEIDER: The insurgents may be succeeding. In January, 63 percent of the public thought the U.S. decision to go war with Iraq was right. A majority now says it was wrong.

Secretary of Defense Donald Rumsfeld is an architect of U.S. policy in Iraq. Look at what's happened to Rumsfeld's job ratings. In April 2003, just after Saddam Hussein was overthrown, Rumsfeld got a 71 percent vote of approval.

By October, it was down to 58 percent; in May of this year, 46 percent; and now, just 41 percent approve of Rumsfeld.

SEN. JOE BIDEN (D), DELAWARE: I think the policy has to change. Secretary Rumsfeld seems reluctant to change the policy.

SCHNEIDER: Rumsfeld should go, most Americans feel. Fifty-two percent now say Rumsfeld should resign as secretary of defense.

(END VIDEOTAPE)

SCHNEIDER: Is there any good news for President Bush? Well, actually, yes. Seventy-seven percent of Americans believe President Bush won the election fair and square, and 60 percent of Democrats agree. The holdouts? Well, that's the one-third of Democrats who believe President Bush won the election only because of fraud or other illegal means -- Kitty.

PILGRIM: All right, Bill. And we'll see you a little bit later in the broadcast to go through some more of the poll numbers. Thanks very much.

Bill Schneider.

Still to come, can the United States win the war in Iraq? Well, Senator Carl Levin, ranking Democrat on the Armed Services Committee, has just returned from a visit to Iraq, and he is my guest.

This country faces an invasion of illegal aliens. Our immigration agencies are overwhelmed. Critics say only bold action can secure our borders.

And the world's biggest retailer takes on the world's biggest retail market. We'll have a special report.

(COMMERCIAL BREAK)

DOBBS: President Bush's news conference today also focused on the immigration crisis in this country. The president said our immigration system is "not working."

Now his comment comes as many Immigration and Customs officials are calling for a major overhaul of our border security system.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): They are the last line of defense at the border, but some Customs and Border Protection agents say they are the ones who feel under attack. The problem: a lack of coordination, inadequate funding and low morale.

T.J. BONNER, NATIONAL BORDER PATROL COUNCIL: You're not authorized to go out and chase or catch, and it just has a devastating impact on morale. People put up with that for a few months, and then they're looking around for another job. They're looking around for a real law-enforcement job.

SYLVESTER: The rank and file blame the dysfunction on a fractured system.

When the Department of Homeland Security was created, two organizations were assigned immigration, Customs and Border Protection to deal with issues along the border and the Immigration and Customs Enforcement in charge of interior enforcement.

But a new report says the system does not work, calling it the equivalent of separating the beat cops from the detectives. DAVID NEWMAN, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: The Border Patrols and the Immigration Enforcement officials have to solve the same crimes, the crime of a person coming into the country illegally.

SYLVESTER: But bringing the two agencies together may be difficult, due to Washington politics.

JAMES CARAFANO, HERITAGE FOUNDATION: There's more guys and gals with badges in DHS than there are in the FBI, and so I do think there was some concern that people potentially see DHS as a kind of a law- enforcement competitor with the FBI, and so part of the answer to that was split them up into little boxes so they'll be less of a threat to us.

SYLVESTER: Critics say the bureaucracy jeopardizes national security, wasting opportunities, resources and time.

(END VIDEOTAPE)

SYLVESTER: The Heritage Foundation and the Center for Strategic and International Studies both recommend restructuring the Department of Homeland Security.

But a spokesperson for DHS says there are no discussions at this time underway to bring the two agency together -- Kitty.

PILGRIM: Thanks very much.

Lisa Sylvester.

Well, during his news conference, President Bush claimed repeatedly that American citizens are unwilling to do the jobs now performed by millions of illegal aliens in this country.

The president first proposed his guest worker program a year ago. He said it would apply in situations "when no Americans can be found to fill the jobs."

Well, today, he made clear he believes that is the case already. He referred several times to jobs that "Americans will not do.:

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It makes sense to allow the good-hearted people who are coming here to do jobs that Americans won't do a legal way to do so.

We ought to have a system that recognizes people are coming here to do jobs that Americans will not do, and there ought to be a legal way for them to do so.

There are some jobs in America that Americans won't do and others are willing to do.

(END VIDEO CLIP) PILGRIM: Opponents of the guest worker and amnesty programs believe that Americans would fill those jobs if employers forced to pay market-level wages rather than pay illegal workers below-market wages.

Well, tonight, the world's largest retail retailer is trying to duplicate its booming success in the United States in China. But Wal- Mart faces competition to accommodate the Chinese consumer.

Eunice Yoon reports.

(BEGIN VIDEOTAPE)

EUNICE YOON, CNN CORRESPONDENT (voice-over): Turtles aren't something you expect to find at a Wal-Mart, especially in the food section. Selling these turtles is just one way Wal-Mart is adapting its famous stores to the world's fastest-growing economy. In many ways, Wal-Mart in China looks a lot like Wal-Mart in the U.S., selling everything from groceries and clothes to TVs and bicycles.

It's a two-way street. Last year, Wal-Mart bought $15 billion worth of Chinese goods. If the giant retailer were a country, it would be China's eighth largest trading partner, and 98 percent of what it sells in China is made here.

Joe Hatfield oversees Wal-Mart's business in Asia. He says making changes to fit the Chinese consumer is essential.

JOE HATFIELD, CEO, ASIA WAL-MART STORES: Our approach is to not bring a U.S. assortment of merchandise to China and sit it down just like the U.S. is, but to localize it to what's right for the customer here in China.

YOON (on camera): Wal-Mart's high-volume, low-pricing strategy is attracting many of China's 1.3 billion people to its superstores, such as this one in Shenzhen.

UNIDENTIFIED FEMALE: (through translator): I come shopping here every day for my glasses to my clothes to my socks and shoes. Everything I buy from Wal-Mart.

YOON (voice-over): Wal-Mart is betting on that kind of enthusiasm to expand business here, but some analysts say that right now French rival Carrefour has a better product mix and its stores are better designed.

With China allowing stores to open in more cities, Wal-Mart intends to grow, ready to marry American retailing know-how with Chinese tastes.

Eunice Yoon, CNN, Shenzhen, Southern China.

(END VIDEOTAPE)

PILGRIM: Tonight, Republicans and Democrats are divided on yet another issue, and the question during this holiday season: What would you say to someone you just met -- Merry Christmas or Happy Holidays?

Well, today's CNN-USA Today-Gallup poll shows Democrats nearly divided among themselves with more choosing the phrase "happy holidays," and the polls shows 71 percent of Republicans would say merry Christmas.

But one very well-known Republican today strayed from his party's pick.

(BEGIN VIDEO CLIP)

BUSH: ... and happy holidays to you all. Listen, thank you all very much. I wish everybody -- truly wish everybody a happy holidays.

(END VIDEO CLIP)

PILGRIM: Still ahead, spreading holiday joy to American troops serving overseas. How one Pennsylvania mom started a service that now sends gifts to thousands of troops around the world. Our special report is next.

And then, American troops in Iraq prepare for that country's election, now a little more than a month away. Senator Carl Levin has just returned from Iraq, and he is our guest. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Tonight, we begin our special report on the many Americans sending holiday joy to our troops serving overseas. Tonight, one Pennsylvania organization is sending more than 6,000 care packages to troops in Iraq, Afghanistan and around the world.

Christine Romans has the report.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Put this in the stocking, please.

UNIDENTIFIED FEMALE: Here you go.

UNIDENTIFIED FEMALE: Thank you.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT (voice-over): These stockings are stuffed with things most Americans can buy at their neighborhood drugstore -- toiletries, cookies, candy, DVDs and magazines -- but these stockings are for U.S. troops serving overseas who can't just stop at the local market. Much-needed holiday cheer courtesy of Keystone Soldiers.

KYLE LORD, KEYSTONE SOLDIERS: It's up to the people at home to let them know that we care, that we support them, that we want to be there and we want to do this for them.

ROMANS: Kyle Lord's living room is stocking central. She started keystonesoldiers.com three years ago to keep in touch with her son Brent while he was abroad. Since then, Keystone has grown. More than 1,200 worldwide volunteers now send well wishes and the comforts of home to thousands of soldiers stationed around the globe.

LORD: We're actually making them part of our large family. That's how I feel about all of the troops, and I feel like I personally have adopted every single one of these troops. They need us, and that's the bottom line.

ROMANS: Lisa Sloan's husband, Eric, a first lieutenant in the Pennsylvania National Guard, is stationed in Baghdad. This is the first Christmas Lisa, their daughter Arissa (ph) and son Joshua will be without Eric. The stockings help bridge the distance.

LISA SLOAN, KEYSTONE SOLDIERS: Sometimes it doesn't feel like anybody over here takes notice of what they are doing over there, and, by seeing something physical in their hands, the care packages, the stockings, the -- all the things that are sent, they have concrete proof that people back here are supporting them and do care.

(END VIDEOTAPE)

ROMANS: Keystone wants Americans to remember that whether or not you support the war, U.S. troops abroad need your encouragement all year long, not just during the holidays -- Kitty.

PILGRIM: All right. Thanks very much, Christine.

ROMANS: You're welcome.

PILGRIM: Coming up next, Senator Carl Levin will join us to talk about his visit last week to Iraq.

And then, warnings of a new possible terrorist target in the Middle East. Why U.S. officials in Kuwait say they are concerned.

And then, scandal at the United Nations. The man once in charge of the oil-for-food program in Iraq, Dennis Halliday, is my guest.

That and much more ahead.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues with more news, debate and opinion. Sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: In a moment, I'm joined by Senator Carl Levin who is just back from a trip to Iraq.

But, first, a look at some of the top stories tonight.

The Food and Drug Administration today issuing a warning for patients taking the painkiller Naproxen. That after a government study showed the over-the-counter drug can cause increased risk of heart problems. Naproxen is found in popular medications, such as Alleve and Naprosyn.

Well, another warning tonight. Health officials say the world is facing its next global pandemic with a highly contagious mix of the flu and the bird flu. Officials say the outbreak would center in Asia, and they also warn that humans, not animals, would be the carriers.

Bitterly cold temperatures stretching from the Northeast to Florida tonight, one day before the official start of winter. Several areas are already seeing snow, including a rare dusting over North Carolina's outer banks. Residents in Florida's Panhandle felt temperatures in the low 30s, and those in Atlanta, a chilling 16 degrees.

My guest tonight has just returned from visiting American troops in Iraq. Senator Carl Levin of Michigan traveled with fellow members of the Armed Service Committee, and he is the ranking member of that committee and joins me tonight from Capitol Hill. And thank you very much for joining us tonight, sir.

SEN. CARL LEVIN (D-MI), RANKING MEMBER, ARMED SERVICES COMMITTEE: Good to be with you, Kitty.

PILGRIM: What was your impression in Iraq?

LEVIN: Well, obviously, it's chaotic, it's dangerous, the insurgency is not slowing down at all, and that's going to continue, at least through the election, and maybe after the election.

On the other hand, election commission, which is that independent commission that the Iraqis have, is determined to proceed, and so is the U.N. representative there. He's confident that there can be a fair election, and I think everybody is determined that there be an election.

PILGRIM: Will that determination translate into them actually being able to hold the election, in your opinion?

LEVIN: Well, in 14 of the 18 provinces, there will not be a problem at all. In four of the provinces, including the most populated ones, there is going to be violence, and the issue's going to be whether or not the Sunni leadership and the -- both religious leadership and political leadership are going to support the election or not, whether they're going to boycott the election. Here's some good news on that front, because some of the key Sunni parties have now filed -- some of the key Sunni leaders, have now filed, and so at least there are some glimmers of hope that the Sunni community will, in fact, participate, despite the violence that some parts of that community are both perpetrating and supporting.

PILGRIM: Aren't recent numbers showing that many of the Sunnis would like to vote in the election?

LEVIN: Yes. People think that most of that community would like to vote. On the other hand, some of the former Baathist, the high Baathists that were part of the regime who had such great privileges, are determined to prevent that election from happening. They're trying to foment war, a civil war between Shia and Sunni by attacking the Shia shrines and the people there who -- and they hope that the Shia people will respond and retaliate. So far the Shia leadership and the population have shown tremendous restraint and determination that that election will go on, and they're not going to play into the hands of those mainly former Baathist leaders who are trying to destroy the election one way or another with the help of outside terrorists.

PILGRIM: Senator Levin, let me ask you something about what Senator Warner said recently. He has expressed serious concerns about the capability of Iraqi forces. He says they lack the willpower and the commitment to, quote, "really shoulder the heavy responsibilities." Do you agree with that, and isn't it critical that they do?

LEVIN: I agree it's been a very slow process. This administration made a lot of mistakes going in. The decision to go in without the international community's support, the decision to disband the Iraqi army was a fatal, I think, a very serious mistake, hopefully not fatal, but a very serious mistake on the part of the administration, and we're paying the price for these mistakes now. And one of the prices is they're starting to build this army from scratch. It's very slow, and the prime minister Mr. Allawi has an idea that we should call back, after proper screening, some of the former mid-level officers, and make sure they're not high Baathists but call them back to set up the headquarters both at brigade and division level and have them put together units with their leadership. What's missing in that army is Iraqi leadership. You can't just suddenly train that in four weeks. We've got big problems on that side. It's a gradual process and it's not going to be completed by the election, obviously, but it's, I think, if we follow two tracks, a bottom-up track which we're now following plus follow the Allawi initiative which is more of a top-down approach. If we follow both of those tracks I think we can make greater progress.

PILGRIM: Do you believe we have enough U.S. troops in Iraq right now?

LEVIN: Our commanders who we met with say we do. It's hard to make a judgment from this distance on that, because we're the target there now, and we've got to be less of a target, which means we've got to bring in -- do a lot better when it comes to training the Iraqis. For the life of me I don't know why we don't take up the offer of the Germans for instance to train Iraqi army and police outside of Iraq. I know we prefer they be trained in Iraq. But when some of our NATO allies all of whom by the way want this election to succeed, even though they opposed our going in, when some of our NATO allies are willing to train military folks outside of Iraq, for the Iraqi army, it seems to me we ought to grab that offer and not stand on the ceremony here and say, well, we prefer that they be trained in Iraq. I don't understand that decision.

PILGRIM: All right, thank you very much, Senator Levin, thank you for joining us.

LEVIN: Thank you, Kitty.

PILGRIM: That brings us to the subject of tonight's poll. Do you believe that the Iraqi elections should go on as scheduled on January 30? Yes or no. Cast your vote at loudobbs.CNN.

And returning to the new warning from the Food and Drug Administration. The FDA tonight issued a warning to patients taking the painkiller Naproxen. CNN medical correspondent Elizabeth Cohen has a report. And Elizabeth joins us now. What can you tell us about this latest warning?

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: As you said, the latest warning is about Naproxen, and Naproxen is a prescription as well as an over-the-counter drug. It's sold as Naproxen, over the counter it's sold as Alleve and also as other products. There was a study done by the National Institutes of Health. And what they found was that people who were taking this drug were 50 percent more likely to have a heart attack or stroke. To make things even more interesting and more confusing, there were also people in the study who were taking Celebrex. Those folks did not have an increased likelihood of having a heart attack or stroke. This contradicts the National Cancer Institute study that was done last week where people taking Celebrex did have more of a chance of having a heart attack or stroke. basically the message that people need to hear now, is that there are some concerns that there might be an increased likelihood of heart attack or stroke while taking Naproxen and doctors need to talk to their patients, and one thing the FDA folk said over and over again on a conference call is this drug should not be taken for longer than ten days. ask your doctor to give you something else.

PILGRIM: This is cutting down on the possibilities for people taking pain medication, isn't it?

COHEN: Certainly is. There were people who were taking Vioxx, and in September had to go off that drug because it got pulled off for similar concerns and the news about Celebrex just three days ago, now the news about Naproxen. A reporter on this conference call asked the FDA, are there concerns about drugs called monsteroidal anti- inflammatories. They are a very large (UNINTELLIGIBLE) prescriptions and over-the-counter drugs and the FDA said, yes, there are concerns, we need to go over the data. But there are concerns over this entire class of drugs.

PILGRIM: Thank you very, Elizabeth for helping us sort through it.

Tonight there are new concerns about a possible radical Islamist terrorist threat in the Middle East. U.S. officials say al Qaeda may be targeting the country that Saddam Hussein invaded ahead of the first Gulf War. Pentagon correspondent Barbara Starr reports from Kuwait.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): 14 years after Iraq's invasion of this country, Kuwait is peaceful and prosperous. There are no signs of the first Gulf War and the current war in Iraq lies some two hours north of Kuwait City. But beneath the placid surface, there are U.S. concerns that Kuwait could be the next target of an al Qaeda attack. Just days after the bold daylight assault against the U.S. consulate in Jeddah, Saudi Arabia, the U.S. embassy here in Kuwait said there was, quote, "credible information that terrorist groups are developing near-term plans for attacks against unspecified targets in Kuwait."

Now the 13,000 American citizens living and working here are warned to maintain a low profile. More than 20,000 U.S. troops are also in Kuwait routinely as they rotate in and out of Iraq. Diplomatic sources here tell CNN, the concern is very real. The attack in Jeddah was a wake-up call said one official. Worried that it could be repeated here, U.S. officials have closely analyzed the brazen assault by suspected al Qaeda supporters.

But are Kuwaitis apprehensive that al Qaeda might have other targets here, like businesses and the oil industry? Some in Kuwait say business has dropped off since the war with Iraq, but here, in the old Sukh, Kuwait's original marketplace, business is booming and no one seems terribly worried about the threat from al Qaeda.

This butcher says business is good. Kuwaitis seem confident, that if there is an attack, it will not be directly against them. But U.S. businesses in Kuwait are cautious. Western-owned hotels have stepped up security measures in recent days. In some hotels, everyone walking inside is screened. Business owners do not wish to talk on camera. U.S. officials say they will remain watchful. Barbara Starr, CNN, Kuwait.

(END VIDEOTAPE)

PILGRIM: Still ahead tonight, the widening scandal at the United Nations. The former head of the Oil-for-Food program scandal, Dennis Halliday will tell us what he knew about it and when.

Plus President Bush holds a final news conference in what has been an extraordinary year for him. We'll talk with three of the country's best journalists. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: The widening scandal over the United Nations oil-for- food program has raised serious questions about the integrity of the U.N.'s management. Well, at issue is whether senior U.N. managers helped Saddam Hussein divert money that was supposed to help ordinary Iraqis.

Joining me now is Denis Halliday. He was in charge of the oil- for-food program between 1997 and 1998, and thanks very much for joining us.

DENIS HALLIDAY, IN CHARGE OF OIL-FOR-FOOD, '97-'98: You're welcome.

PILGRIM: You must have special insight into how everything works. My understanding is some of it was a surcharge that the Iraqis asked companies to put on their oil, and then divert that surcharge money into accounts that were separate accounts. Is that an accurate... HALLIDAY: As a separate source of income, that's right.

PILGRIM: Does that surprise you, Mr. Halliday?

HALLIDAY: No, it doesn't. Under sanctions -- you know, sanctions are a form of warfare, and the Iraqis fought back with the only equipment they have, which was oil, oil revenue and hard currency. So when the demand for oil was sufficient, they could add a 50-cent surcharge per barrel, which they'd get under the table and then sell the oil below brand prices, and they went into the middle man arena, and branded up in Russia, France or United States.

PILGRIM: Why the big shock now, if someone like you says this was common practice?

HALLIDAY: See, that's what I -- is mysterious about this entire, quote, "scandal," unquote. There is no scandal. This is a well-known secret. And the whole smuggling with Turkey was condoned by the United States and deliberately so and consistent with the Charter Article 50, which says that if a country is under sanctions and its neighbors suffer the consequences economically, then there can be some compensation, in this case for Turkey, Jordan and Syria.

So in fact, what has happened is the U.S. has allowed the Turks to be compensated by getting cheap gasoline, paraffin and oil -- oil supplies from Baghdad. But of course, the breach of sanctions is, hard currency and to the tune we understand to, say, nine, 10 billion have poured into Baghdad from that smuggling.

PILGRIM: But the money that was diverted -- and it is billions and billion, tens of billions of dollars -- I assume...

HALLIDAY: Maybe.

PILGRIM: ... is money that did not go to the Iraqi people, and yet, so then it's very hard to say this is not a scandal and a great injustice was done to the Iraqi people, was it not?

HALLIDAY: Except that most of that money came into the country before oil-for-food began. Oil-for-food didn't begin until '97. The smuggling with Turkey began probably in 1991. In addition, you know, they did sell $64 billion worth of oil, which went into the accounts of the United Nations, that the U.N. takes off 35 percent. But the balance came back into Iraq in the form of various commodities, foodstuffs, equipment for various sectors, and $8 billion was given to the United States for the development fund, which Mr. Bremer managed or I fear mismanaged, it seems, during his period in Baghdad.

PILGRIM: Mr. Annan, Secretary-General Kofi Annan, has been linked with the oil-for-food scandal, maybe justifiably, maybe not in the press and in certain investigations. What's your opinion about his role?

HALLIDAY: Well, the secretary-general is a very fine, decent individual. I don't believe that he is involved in any scandal, per se. I cannot accept that, I must say. But we have to remember that this -- the U.N., you know, has two components. They're the shareholders, and the board of directors are member states. The secretary-general is the chief administrative officer. He's not actually even the CEO. He takes instructions. I was the servant of the servant, so to speak. He takes instructions from member states.

I don't believe he's involved in any scam, any devious activity. It just -- it would not be consistent with his pattern of work.

PILGRIM: Well, let me press you on this, because Secretary- General Kofi Annan has been outside of his role, the normal traditional role of the secretary-general, in taking the lead on many issues that normally did not fall to that office, and in making statements. Should he not have made statements about the oil-for-food situation?

HALLIDAY: Well, he has an opportunity, under Article 99 of the charter. He should speak up on issues that are definitely incompatible with the charter, or human rights or any aspect of the United Nations. I've been critical that he hasn't done that enough. When he announced that the war or the invasion of Iraq was illegal, that's correct. He has the right to do that, in my view. He did it very late in the day, however, unfortunately.

On oil-for-food, he informed the council that there were kickbacks on contracts. He informed the council that there was a surcharge on oil sales, because he got complaints from the contractors and countries who were involved in the process. So they knew about that. But for some reason, I can't explain, they decided it wasn't worth bothering about.

PILGRIM: All right. Thank you very much for helping us sort through a very complicated issue.

HALLIDAY: You're welcome.

PILGRIM: Denis Halliday, thank you.

Now, a reminder tonight to vote in tonight's poll. And the question is, do you believe Iraqi elections should go on as scheduled on January 30th? Yes or no. Cast your vote at loudobbs.cnn. And we'll bring you the results a little bit later in the show.

Still ahead, President Bush covers everything from the budget to illegal immigration in his year-end speech. And I'll talk with three of the nation's leading political journalists when we continue. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Joining me now are three of this country's finest journalists, and we're talking about the president's news conference and other issues. In Washington, we're joined by Matthew Cooper of "Time" magazine. In Los Angeles, CNN political analyst, Bill Schneider. And joining me right here in New York is Marcus Mabry of "Newsweek." And thank you all for joining me.

Let's start with today's year-end speech, and I'll go to the farthest away, which has to be, I guess, Bill Schneider -- Bill.

BILL SCHNEIDER, CNN SR. POLITICAL ANALYST: Yes. What's the question?

PILGRIM: The speech today. And the question is, what was your take on it? Do you think it covered all the issues that needed to be covered in a year-end speech?

SCHNEIDER: Well, not entirely. I think the issue of Iraq has got to be addressed more directly. And people want some recognition from the president that he understands the difficulties there and he has a program to deal with them.

What he's done repeatedly again and again and again is say things are, while there are setbacks in Iraq, things are more or less on track, that we're heading for these elections, and a lot of people are beginning to wonder, does he really -- is he acknowledging reality?

PILGRIM: Matt Cooper, let's ask you, one of the things that President Bush said was, don't expect this process to be trouble-free. He seemed to be very candid about it. What was your take?

MATT COOPER, TIME MAGAZINE: Yeah, I thought so. I thought one of the most telling lines is when he said the bombers are having an effect. For this administration that's a pretty big concession, that they're actually not only killing people but having an effect on slowing this election process down. And Bill's right, he hasn't laid out a plan for how we get to these elections in January, when there's this much violence.

PILGRIM: And he spoke about the Iraqi security efforts and said the results are mixed, Marcus. There's a certain degree of candor that's maybe new.

MARCUS MABRY, "NEWSWEEK": I think it is new, Kitty. It's not surprising to any of us that now, after the president is heading towards his second inauguration, he's talking with -- speaking with such candor about the difficulties we face in Iraq. This was obviously not the way he was talking during the campaign, and not surprising to anyone. At the same time, it's true, he's not laid out how we're going get out of this box we're in. And the president actually said that if the -- if we don't have the elections on January 30, the terrorists will have won. That means there can be no delay in the elections because if there is everyone will come back to the president and say we've lost to the terrorist, Mr. President because we're delaying these elections.

PILGRIM: I don't think there's much wiggle room on this date whatsoever because they have held so firm to it. Let's go to domestic issues, and on the economy, he said, President Bush said the economy is on solid footing. Bill Schneider, what's your assessment of how we're doing in the economy, and how President Bush is addressing it? SCHNEIDER: Well, let's go to the American people's assessment. Their assessment is things are pretty good but they're anxious about the future. This has not been a blockbuster Christmas shopping season. So far it looks like a bit of a disappointment. Which points to a kind of anxiety people have. People say the economy's pretty good right now, but they do -- the number who expect it to remain good or get better in the future is really down, so I think there's a very, very high level of anxiety about the future of this economy, particularly because of oil prices, they've begun to stabilize but made people very nervous.

PILGRIM: And the retail numbers of last weekend were supposed to be -- supposed to be the biggest weekend of the shopping season, and they were down from last year. On Social Security, this is a difficult issue, Matt. He basically said that there are going to be difficult choices but didn't give a lot of details. Do you think this is something that has to be hammered now the Congress?

COOPER: Yes, it's going to be. It's going to be one of the long legislative sausage making sessions and going to go on for a long time. Going to be proposals and counterproposals. But I think underlying it is what Bill was alluding to is the anxiety about the economy. He's asking Americans to make the most fundamental change in Social Security in almost 70 years, and that's to add these private savings accounts to the current system. I think people have to be feeling a certain degree of confidence in the markets for them to want to get in on that, and we're going to have to see whether they're feeling that kind of buoyant spirit that will make them want to take that risk.

PILGRIM: Marcus, anything to add on the domestic economy front while we're on domestic issues?

MABRY: I think it's really interesting. I think we -- since it's end of the year, this president was re-elected by a majority of the popular vote for his first time. You did not get a sense of buoyancy. You did not get a sense of joy to the world. This is a holiday season, we all should be feeling warm and optimistic and we're not. There was an underlying sense on the part of president and it translates out into the nation of the fact that Americans are not at ease right now. We do not feel confident and optimistic about our future. That's bad so the president hasn't even started a second term yet, and it's not a good way to be starting off.

PILGRIM: There were very sobering topics in the session today. One is the relationship with Russia, and President Putin, the whole issue of Ukraine. And he was pressed a bit on this. And he says it's a relationship that we have to agree that we can disagree. That's not the best possible endorsement of the U.S./Russia relationship.

MABRY: But he's absolutely right. It's true. The fact is we're not going to have a great relationship with Russia. But the only thing we have right now is the president's personal connection to Vladimir Putin. We are not sure we can keep Putin tamed and keep him from taking Russia on a very anti-Democratic direction, even more so than he already has. The only hope we have is the personal purchase President Bush has with President Putin.

PILGRIM: Matt, anything to add to that?

COOPER: I think it's such a different tone the president had today than a couple years ago when he had the Russian leader down to Crawford, Texas and said he looked into the man's soul and seen he was a good man. He's clearly putting a little daylight between him and Putin.

PILGRIM: Bill, we'll wind up with you as the last question. We're talking about the general tone of this session today. Anything to add?

SCHNEIDER: Well, I thought it was a little -- certainly more sober, little more realistic than during the campaign. But, look, this president has a big problem and the problem is conservatives. Conservatives feel as if they've come to power. They've been waiting for this moment for decades. They now have a solid majority of Republicans at least in the Senate, they have a stable majority in the House of Representatives. They control the White House, they've got a friendly president. They expect to control the Supreme Court. Finally, after many, many years, starting with Ronald Reagan who couldn't deliver because the Democrats had control over part of Congress, conservatives are saying, hey, what about the payoff? What's in it for us? We've been supporting Republicans for all these years. And they're going to be putting pressure on President Bush.

PILGRIM: Difficult times in a very sort of serious speech. Thank you very much for helping us analyze it all of you, Matt Cooper, Marcus Mabry and Bill Schneider. Thank you very much.

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

(COMMERCIAL BREAK)

PILGRIM: Now the results of tonight's poll. 53 percent of you believe Iraqi elections should go on as scheduled, January 30. And 47 percent do not. Thanks for being with us tonight. Please join us tomorrow. I will be talking with Senator Bob Graham, an outspoken critic of the U.S. intelligence system. He says the hardest part of intelligence reform still lies ahead.

International best-selling author Edwin Black joins me to talk about his new book "Banking on Baghdad" which is a chronicle of commerce and conflict in Iraq.

And we'll continue our series of special reports, holiday home front. Foreign competition threatens a fund-raising effort for our troops.

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

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

Aired December 20, 2004 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, HOST (voice-over): Tonight, after the bloodiest day in Iraq in months, President Bush acknowledges there are difficulties in the war against insurgents and terrorists.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: No question about it. The bombers are having an effect.

PILGRIM: The ranking Democrat on the Senate Armed Services Committee, Senator Carl Levin, has just returned from Iraq. He says the Iraqis themselves must defeat the insurgents. Senator Levin is my guest.

Three million illegal aliens will enter the United States this year. Critics say only a massive overhaul of our immigration agencies can secure our borders.

UNIDENTIFIED MALE: And if we don't fix it now, like anything else in Washington, we'll be stuck with it for a really long time.

PILGRIM: And the rising uproar over the United Nations oil-for- food scandal. Who's to blame? I'll be speaking with the former chief of the U.N. oil-for-food program, Denis Halliday.

(END VIDEOTAPE)

ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, December 20. Here now for an hour of news, debate and opinion, is sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: Good evening.

President Bush today acknowledged there are difficulties in the war in Iraq. The president said the terrorists are having an effect; the efforts to train Iraqi troops and police have been mixed results.

But President Bush declared the Iraqi elections will be held as scheduled at the end of January.

The president also repeated his support for Defense Secretary Donald Rumsfeld.

White House correspondent Dana Bash reports.

(BEGIN VIDEOTAPE) DANA BASH, CNN CORRESPONDENT (voice-over): The president was strikingly candid about a problem in Iraq: the effort to build up its army so American troops can start coming home is not going to plan.

BUSH: I would call the results mixed, in terms of standing up Iraqi units who are willing to fight. There have been some cases where, when the heat got on, they left the battlefield. That's unacceptable.

BASH: One goal of the end of the year news conference was to talk up Iraq's progress. But he also conceded this about a spike in suicide bombings.

BUSH: No question about it, the bombers are having an effect.

BASH: Mr. Bush stood firmly by his embattled defense secretary, whom critics call responsible for Iraq's failures. Rumsfeld has been most recently under fire for ignoring pleas for more armored vehicles in Iraq and using an auto pen, not his own hand, to sign letters for families of troops killed there.

BUSH: I have seen the anguish in his -- or heard the anguish in his voice and seen his eyes when we talk about the danger in Iraq. Sometimes, perhaps, his demeanor is rough and gruff, but beneath that rough and gruff, no nonsense demeanor is a good human being.

BASH: The president expressed disappointment but no regret for the ill-fated choice of Bernard Kerik for homeland security secretary, offering a veiled nod to critics of the White House vetting process.

BUSH: The lesson learned is continue to vet and ask good questions.

BASH: Controversy over Kerik and Rumsfeld may already have dimmed the president's post-election glow. A new CNN/"USA Today"/Gallup poll shows his approval rating back below 49 percent, down six points in just a month.

Bush aides understand building up his standing is crucial to pushing second-term goals like reforming Social Security. There, the president deflected questions on specifics, beyond wanting private accounts for younger workers.

BUSH: I'll propose a solution at the appropriate time, but the law will be written in the halls of Congress.

(END VIDEOTAPE)

BASH: And another reason the president has to build back up his public support, White House aides know, is because he is insisting he's going to fulfill a promise, another promise from his campaign.

That is, of course to cut the deficit in half in five years. In his words today, that is going to require a tough budget, Kitty. That is code in Washington for some tough spending cuts, cuts that are likely to make those on both sides of the aisle unhappy -- Kitty. PILGRIM: All right. Thanks very much, Dana Bash.

Well, the president's news conference follows the worst day of violence in Iraq since July. A series of bomb attacks yesterday killed nearly 70 Iraqis. President Bush said the United States will continue to train Iraqi security forces so they can take responsibility for defeating terrorists.

Kathleen Koch reports from the Pentagon -- Kathleen.

KATHLEEN KOCH, CNN CORRESPONDENT: Kitty, Pentagon officials say that they understand that the dramatic attacks are aimed at intimidating the Iraqi people, at crippling the election process, but at the same time, they say they know that the U.S. military alone cannot stop every suicide bomber.

So they say the solution is a two-pronged approach. Pump in more U.S. Force, as was announced recently, taking the level temporarily up to 150,000. And at the same time, have 125,000 Iraqi troops trained and operational by the January 30th elections.

But as President Bush himself pointed out this morning, those Iraqi forces have not always performed as expected.

(BEGIN VIDEO CLIP)

BUSH: Full command structure necessary to have a viable military is not in place, and so they're going to spend a lot of time and effort on achieving that objective.

And so the American people are taking a look at Iraq and wondering whether the Iraqis are eventually able -- going to be able to fight off these bombers and killers. And our objective is to give them the tools and the training necessary to do so.

(END VIDEO CLIP)

KOCH: Senior Pentagon officials explain that it takes more than weapons for a fighting force to be successful, that it needs a clear chain of command and understanding of its mission and who and what it's fighting for.

And they say that in Iraq up until this point that has been, quote, "exceptionally lacking." And those officials say they don't know if this chain of command can be put into place by the January 30 elections.

But in order to compensate, a senior Pentagon official tells me that U.S. forces will soon not be just training the Iraqi forces but indeed be embedded with them. And it's hoped, Kitty, that that could make a difference.

Back to you.

PILGRIM: All right. Thanks very much, Kathleen Koch. In Iraq, police today arrested 50 people after the car bombings in Najaf and Karbala. Officials say the violence may escalate ahead of the Iraqi election at the end of January.

Chris Lawrence reports from Baghdad.

(BEGIN VIDEOTAPE)

CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): They were the deadliest attacks in Iraq since the summer. But the day after twin bombings in Najaf and Karbala, American and Iraqi officials are promising it won't derail the election.

By Monday, the survivors had all been accounted for in Najaf, where Iraqi authorities have arrested 50 suspects and banned cars from driving through downtown.

On Sunday a suicide bomber detonated his car in a central town square, crowded with people watching a funeral procession.

Fifty miles away, another bomb exploded at a bus station in Karbala. The bus destroyed buses, cars and buildings, and by Monday the cleanup was just getting started.

Both attacks occurred in cities considered holy by Shiite Muslims, but Iraqi officials they won't let insurgents start a civil war to disrupt the upcoming election.

IBRAHIM JAFARI, IRAQI VICE PRESIDENT (through translator): They are trying to incite such violence between the Sunnis and the Shias.

LAWRENCE: U.S. officials won't talk about the specifics of securing polling places, but the Iraqis confirm American troops will be heavily involved.

BARHAM SALIH, IRAQI DEPUTY PRIME MINISTER: We will have to depend on the presence of multinational forces and in significant numbers in certain areas in order to prevent the terrorists from destabilizing the process.

LAWRENCE: On Monday, Iraq's electoral commission drew balls from a drum and randomly selected where competing parties will rank on the paper ballot. It looked like a national lottery, but one in which the country as a whole can't afford to lose.

(on camera) Since Iraqis have no experience with democratic elections, the order of names on the ballot could influence voters.

Officials are still trying to keep up with away from long lines forming fearing that large crowds could attract insurgents.

Chris Lawrence, CNN, Baghdad.

(END VIDEOTAPE)

PILGRIM: The war in Iraq appears to be hurting President Bush's poll numbers, and that is according to the latest CNN/"USA Today"/Gallup poll. Senior political analyst Bill Schneider reports.

(BEGIN VIDEOTAPE)

BILL SCHNEIDER, CNN CORRESPONDENT (voice-over): Second honeymoons are nice, but President Bush isn't getting one. One month after winning re-election, Bush's job approval has dropped below 50 percent.

Did other re-elected presidents get a second honeymoon?

Bill Clinton got one: 58 percent job approval after he got re- elected in 1996. Ronald Reagan, 59. Richard Nixon, also 59. Lyndon Johnson, 69. The greatest love affair on a second honeymoon? Dwight Eisenhower, 79 percent.

What's the difference with Bush? The answer is Iraq.

SEN. CHUCK HAGEL (R), NEBRASKA: The fact is we're in more trouble today than we've ever been in. We're putting 12,000 to 15,000 new troops there. We got 1,300 people killed.

SCHNEIDER: Senator Hagel's exasperation is shared by most Americans. Last January, 60 percent of the public approved of the way the U.S. was handling the situation in Iraq. That number is down to 39 percent. Nearly 60 percent now disapprove of U.S./Iraq policy.

BUSH: The bombers are having an effect. You know, these people are targeting innocent Iraqis. They're trying to shake the will of the Iraqi people, and frankly, trying to shake the will of the American people.

SCHNEIDER: The insurgents may be succeeding. In January, 63 percent of the public thought the U.S. decision to go war with Iraq was right. A majority now says it was wrong.

Secretary of Defense Donald Rumsfeld is an architect of U.S. policy in Iraq. Look at what's happened to Rumsfeld's job ratings. In April 2003, just after Saddam Hussein was overthrown, Rumsfeld got a 71 percent vote of approval.

By October, it was down to 58 percent; in May of this year, 46 percent; and now, just 41 percent approve of Rumsfeld.

SEN. JOE BIDEN (D), DELAWARE: I think the policy has to change. Secretary Rumsfeld seems reluctant to change the policy.

SCHNEIDER: Rumsfeld should go, most Americans feel. Fifty-two percent now say Rumsfeld should resign as secretary of defense.

(END VIDEOTAPE)

SCHNEIDER: Is there any good news for President Bush? Well, actually, yes. Seventy-seven percent of Americans believe President Bush won the election fair and square, and 60 percent of Democrats agree. The holdouts? Well, that's the one-third of Democrats who believe President Bush won the election only because of fraud or other illegal means -- Kitty.

PILGRIM: All right, Bill. And we'll see you a little bit later in the broadcast to go through some more of the poll numbers. Thanks very much.

Bill Schneider.

Still to come, can the United States win the war in Iraq? Well, Senator Carl Levin, ranking Democrat on the Armed Services Committee, has just returned from a visit to Iraq, and he is my guest.

This country faces an invasion of illegal aliens. Our immigration agencies are overwhelmed. Critics say only bold action can secure our borders.

And the world's biggest retailer takes on the world's biggest retail market. We'll have a special report.

(COMMERCIAL BREAK)

DOBBS: President Bush's news conference today also focused on the immigration crisis in this country. The president said our immigration system is "not working."

Now his comment comes as many Immigration and Customs officials are calling for a major overhaul of our border security system.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): They are the last line of defense at the border, but some Customs and Border Protection agents say they are the ones who feel under attack. The problem: a lack of coordination, inadequate funding and low morale.

T.J. BONNER, NATIONAL BORDER PATROL COUNCIL: You're not authorized to go out and chase or catch, and it just has a devastating impact on morale. People put up with that for a few months, and then they're looking around for another job. They're looking around for a real law-enforcement job.

SYLVESTER: The rank and file blame the dysfunction on a fractured system.

When the Department of Homeland Security was created, two organizations were assigned immigration, Customs and Border Protection to deal with issues along the border and the Immigration and Customs Enforcement in charge of interior enforcement.

But a new report says the system does not work, calling it the equivalent of separating the beat cops from the detectives. DAVID NEWMAN, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: The Border Patrols and the Immigration Enforcement officials have to solve the same crimes, the crime of a person coming into the country illegally.

SYLVESTER: But bringing the two agencies together may be difficult, due to Washington politics.

JAMES CARAFANO, HERITAGE FOUNDATION: There's more guys and gals with badges in DHS than there are in the FBI, and so I do think there was some concern that people potentially see DHS as a kind of a law- enforcement competitor with the FBI, and so part of the answer to that was split them up into little boxes so they'll be less of a threat to us.

SYLVESTER: Critics say the bureaucracy jeopardizes national security, wasting opportunities, resources and time.

(END VIDEOTAPE)

SYLVESTER: The Heritage Foundation and the Center for Strategic and International Studies both recommend restructuring the Department of Homeland Security.

But a spokesperson for DHS says there are no discussions at this time underway to bring the two agency together -- Kitty.

PILGRIM: Thanks very much.

Lisa Sylvester.

Well, during his news conference, President Bush claimed repeatedly that American citizens are unwilling to do the jobs now performed by millions of illegal aliens in this country.

The president first proposed his guest worker program a year ago. He said it would apply in situations "when no Americans can be found to fill the jobs."

Well, today, he made clear he believes that is the case already. He referred several times to jobs that "Americans will not do.:

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It makes sense to allow the good-hearted people who are coming here to do jobs that Americans won't do a legal way to do so.

We ought to have a system that recognizes people are coming here to do jobs that Americans will not do, and there ought to be a legal way for them to do so.

There are some jobs in America that Americans won't do and others are willing to do.

(END VIDEO CLIP) PILGRIM: Opponents of the guest worker and amnesty programs believe that Americans would fill those jobs if employers forced to pay market-level wages rather than pay illegal workers below-market wages.

Well, tonight, the world's largest retail retailer is trying to duplicate its booming success in the United States in China. But Wal- Mart faces competition to accommodate the Chinese consumer.

Eunice Yoon reports.

(BEGIN VIDEOTAPE)

EUNICE YOON, CNN CORRESPONDENT (voice-over): Turtles aren't something you expect to find at a Wal-Mart, especially in the food section. Selling these turtles is just one way Wal-Mart is adapting its famous stores to the world's fastest-growing economy. In many ways, Wal-Mart in China looks a lot like Wal-Mart in the U.S., selling everything from groceries and clothes to TVs and bicycles.

It's a two-way street. Last year, Wal-Mart bought $15 billion worth of Chinese goods. If the giant retailer were a country, it would be China's eighth largest trading partner, and 98 percent of what it sells in China is made here.

Joe Hatfield oversees Wal-Mart's business in Asia. He says making changes to fit the Chinese consumer is essential.

JOE HATFIELD, CEO, ASIA WAL-MART STORES: Our approach is to not bring a U.S. assortment of merchandise to China and sit it down just like the U.S. is, but to localize it to what's right for the customer here in China.

YOON (on camera): Wal-Mart's high-volume, low-pricing strategy is attracting many of China's 1.3 billion people to its superstores, such as this one in Shenzhen.

UNIDENTIFIED FEMALE: (through translator): I come shopping here every day for my glasses to my clothes to my socks and shoes. Everything I buy from Wal-Mart.

YOON (voice-over): Wal-Mart is betting on that kind of enthusiasm to expand business here, but some analysts say that right now French rival Carrefour has a better product mix and its stores are better designed.

With China allowing stores to open in more cities, Wal-Mart intends to grow, ready to marry American retailing know-how with Chinese tastes.

Eunice Yoon, CNN, Shenzhen, Southern China.

(END VIDEOTAPE)

PILGRIM: Tonight, Republicans and Democrats are divided on yet another issue, and the question during this holiday season: What would you say to someone you just met -- Merry Christmas or Happy Holidays?

Well, today's CNN-USA Today-Gallup poll shows Democrats nearly divided among themselves with more choosing the phrase "happy holidays," and the polls shows 71 percent of Republicans would say merry Christmas.

But one very well-known Republican today strayed from his party's pick.

(BEGIN VIDEO CLIP)

BUSH: ... and happy holidays to you all. Listen, thank you all very much. I wish everybody -- truly wish everybody a happy holidays.

(END VIDEO CLIP)

PILGRIM: Still ahead, spreading holiday joy to American troops serving overseas. How one Pennsylvania mom started a service that now sends gifts to thousands of troops around the world. Our special report is next.

And then, American troops in Iraq prepare for that country's election, now a little more than a month away. Senator Carl Levin has just returned from Iraq, and he is our guest. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Tonight, we begin our special report on the many Americans sending holiday joy to our troops serving overseas. Tonight, one Pennsylvania organization is sending more than 6,000 care packages to troops in Iraq, Afghanistan and around the world.

Christine Romans has the report.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Put this in the stocking, please.

UNIDENTIFIED FEMALE: Here you go.

UNIDENTIFIED FEMALE: Thank you.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT (voice-over): These stockings are stuffed with things most Americans can buy at their neighborhood drugstore -- toiletries, cookies, candy, DVDs and magazines -- but these stockings are for U.S. troops serving overseas who can't just stop at the local market. Much-needed holiday cheer courtesy of Keystone Soldiers.

KYLE LORD, KEYSTONE SOLDIERS: It's up to the people at home to let them know that we care, that we support them, that we want to be there and we want to do this for them.

ROMANS: Kyle Lord's living room is stocking central. She started keystonesoldiers.com three years ago to keep in touch with her son Brent while he was abroad. Since then, Keystone has grown. More than 1,200 worldwide volunteers now send well wishes and the comforts of home to thousands of soldiers stationed around the globe.

LORD: We're actually making them part of our large family. That's how I feel about all of the troops, and I feel like I personally have adopted every single one of these troops. They need us, and that's the bottom line.

ROMANS: Lisa Sloan's husband, Eric, a first lieutenant in the Pennsylvania National Guard, is stationed in Baghdad. This is the first Christmas Lisa, their daughter Arissa (ph) and son Joshua will be without Eric. The stockings help bridge the distance.

LISA SLOAN, KEYSTONE SOLDIERS: Sometimes it doesn't feel like anybody over here takes notice of what they are doing over there, and, by seeing something physical in their hands, the care packages, the stockings, the -- all the things that are sent, they have concrete proof that people back here are supporting them and do care.

(END VIDEOTAPE)

ROMANS: Keystone wants Americans to remember that whether or not you support the war, U.S. troops abroad need your encouragement all year long, not just during the holidays -- Kitty.

PILGRIM: All right. Thanks very much, Christine.

ROMANS: You're welcome.

PILGRIM: Coming up next, Senator Carl Levin will join us to talk about his visit last week to Iraq.

And then, warnings of a new possible terrorist target in the Middle East. Why U.S. officials in Kuwait say they are concerned.

And then, scandal at the United Nations. The man once in charge of the oil-for-food program in Iraq, Dennis Halliday, is my guest.

That and much more ahead.

(COMMERCIAL BREAK)

ANNOUNCER: LOU DOBBS TONIGHT continues with more news, debate and opinion. Sitting in for Lou Dobbs who is on vacation, Kitty Pilgrim.

PILGRIM: In a moment, I'm joined by Senator Carl Levin who is just back from a trip to Iraq.

But, first, a look at some of the top stories tonight.

The Food and Drug Administration today issuing a warning for patients taking the painkiller Naproxen. That after a government study showed the over-the-counter drug can cause increased risk of heart problems. Naproxen is found in popular medications, such as Alleve and Naprosyn.

Well, another warning tonight. Health officials say the world is facing its next global pandemic with a highly contagious mix of the flu and the bird flu. Officials say the outbreak would center in Asia, and they also warn that humans, not animals, would be the carriers.

Bitterly cold temperatures stretching from the Northeast to Florida tonight, one day before the official start of winter. Several areas are already seeing snow, including a rare dusting over North Carolina's outer banks. Residents in Florida's Panhandle felt temperatures in the low 30s, and those in Atlanta, a chilling 16 degrees.

My guest tonight has just returned from visiting American troops in Iraq. Senator Carl Levin of Michigan traveled with fellow members of the Armed Service Committee, and he is the ranking member of that committee and joins me tonight from Capitol Hill. And thank you very much for joining us tonight, sir.

SEN. CARL LEVIN (D-MI), RANKING MEMBER, ARMED SERVICES COMMITTEE: Good to be with you, Kitty.

PILGRIM: What was your impression in Iraq?

LEVIN: Well, obviously, it's chaotic, it's dangerous, the insurgency is not slowing down at all, and that's going to continue, at least through the election, and maybe after the election.

On the other hand, election commission, which is that independent commission that the Iraqis have, is determined to proceed, and so is the U.N. representative there. He's confident that there can be a fair election, and I think everybody is determined that there be an election.

PILGRIM: Will that determination translate into them actually being able to hold the election, in your opinion?

LEVIN: Well, in 14 of the 18 provinces, there will not be a problem at all. In four of the provinces, including the most populated ones, there is going to be violence, and the issue's going to be whether or not the Sunni leadership and the -- both religious leadership and political leadership are going to support the election or not, whether they're going to boycott the election. Here's some good news on that front, because some of the key Sunni parties have now filed -- some of the key Sunni leaders, have now filed, and so at least there are some glimmers of hope that the Sunni community will, in fact, participate, despite the violence that some parts of that community are both perpetrating and supporting.

PILGRIM: Aren't recent numbers showing that many of the Sunnis would like to vote in the election?

LEVIN: Yes. People think that most of that community would like to vote. On the other hand, some of the former Baathist, the high Baathists that were part of the regime who had such great privileges, are determined to prevent that election from happening. They're trying to foment war, a civil war between Shia and Sunni by attacking the Shia shrines and the people there who -- and they hope that the Shia people will respond and retaliate. So far the Shia leadership and the population have shown tremendous restraint and determination that that election will go on, and they're not going to play into the hands of those mainly former Baathist leaders who are trying to destroy the election one way or another with the help of outside terrorists.

PILGRIM: Senator Levin, let me ask you something about what Senator Warner said recently. He has expressed serious concerns about the capability of Iraqi forces. He says they lack the willpower and the commitment to, quote, "really shoulder the heavy responsibilities." Do you agree with that, and isn't it critical that they do?

LEVIN: I agree it's been a very slow process. This administration made a lot of mistakes going in. The decision to go in without the international community's support, the decision to disband the Iraqi army was a fatal, I think, a very serious mistake, hopefully not fatal, but a very serious mistake on the part of the administration, and we're paying the price for these mistakes now. And one of the prices is they're starting to build this army from scratch. It's very slow, and the prime minister Mr. Allawi has an idea that we should call back, after proper screening, some of the former mid-level officers, and make sure they're not high Baathists but call them back to set up the headquarters both at brigade and division level and have them put together units with their leadership. What's missing in that army is Iraqi leadership. You can't just suddenly train that in four weeks. We've got big problems on that side. It's a gradual process and it's not going to be completed by the election, obviously, but it's, I think, if we follow two tracks, a bottom-up track which we're now following plus follow the Allawi initiative which is more of a top-down approach. If we follow both of those tracks I think we can make greater progress.

PILGRIM: Do you believe we have enough U.S. troops in Iraq right now?

LEVIN: Our commanders who we met with say we do. It's hard to make a judgment from this distance on that, because we're the target there now, and we've got to be less of a target, which means we've got to bring in -- do a lot better when it comes to training the Iraqis. For the life of me I don't know why we don't take up the offer of the Germans for instance to train Iraqi army and police outside of Iraq. I know we prefer they be trained in Iraq. But when some of our NATO allies all of whom by the way want this election to succeed, even though they opposed our going in, when some of our NATO allies are willing to train military folks outside of Iraq, for the Iraqi army, it seems to me we ought to grab that offer and not stand on the ceremony here and say, well, we prefer that they be trained in Iraq. I don't understand that decision.

PILGRIM: All right, thank you very much, Senator Levin, thank you for joining us.

LEVIN: Thank you, Kitty.

PILGRIM: That brings us to the subject of tonight's poll. Do you believe that the Iraqi elections should go on as scheduled on January 30? Yes or no. Cast your vote at loudobbs.CNN.

And returning to the new warning from the Food and Drug Administration. The FDA tonight issued a warning to patients taking the painkiller Naproxen. CNN medical correspondent Elizabeth Cohen has a report. And Elizabeth joins us now. What can you tell us about this latest warning?

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: As you said, the latest warning is about Naproxen, and Naproxen is a prescription as well as an over-the-counter drug. It's sold as Naproxen, over the counter it's sold as Alleve and also as other products. There was a study done by the National Institutes of Health. And what they found was that people who were taking this drug were 50 percent more likely to have a heart attack or stroke. To make things even more interesting and more confusing, there were also people in the study who were taking Celebrex. Those folks did not have an increased likelihood of having a heart attack or stroke. This contradicts the National Cancer Institute study that was done last week where people taking Celebrex did have more of a chance of having a heart attack or stroke. basically the message that people need to hear now, is that there are some concerns that there might be an increased likelihood of heart attack or stroke while taking Naproxen and doctors need to talk to their patients, and one thing the FDA folk said over and over again on a conference call is this drug should not be taken for longer than ten days. ask your doctor to give you something else.

PILGRIM: This is cutting down on the possibilities for people taking pain medication, isn't it?

COHEN: Certainly is. There were people who were taking Vioxx, and in September had to go off that drug because it got pulled off for similar concerns and the news about Celebrex just three days ago, now the news about Naproxen. A reporter on this conference call asked the FDA, are there concerns about drugs called monsteroidal anti- inflammatories. They are a very large (UNINTELLIGIBLE) prescriptions and over-the-counter drugs and the FDA said, yes, there are concerns, we need to go over the data. But there are concerns over this entire class of drugs.

PILGRIM: Thank you very, Elizabeth for helping us sort through it.

Tonight there are new concerns about a possible radical Islamist terrorist threat in the Middle East. U.S. officials say al Qaeda may be targeting the country that Saddam Hussein invaded ahead of the first Gulf War. Pentagon correspondent Barbara Starr reports from Kuwait.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): 14 years after Iraq's invasion of this country, Kuwait is peaceful and prosperous. There are no signs of the first Gulf War and the current war in Iraq lies some two hours north of Kuwait City. But beneath the placid surface, there are U.S. concerns that Kuwait could be the next target of an al Qaeda attack. Just days after the bold daylight assault against the U.S. consulate in Jeddah, Saudi Arabia, the U.S. embassy here in Kuwait said there was, quote, "credible information that terrorist groups are developing near-term plans for attacks against unspecified targets in Kuwait."

Now the 13,000 American citizens living and working here are warned to maintain a low profile. More than 20,000 U.S. troops are also in Kuwait routinely as they rotate in and out of Iraq. Diplomatic sources here tell CNN, the concern is very real. The attack in Jeddah was a wake-up call said one official. Worried that it could be repeated here, U.S. officials have closely analyzed the brazen assault by suspected al Qaeda supporters.

But are Kuwaitis apprehensive that al Qaeda might have other targets here, like businesses and the oil industry? Some in Kuwait say business has dropped off since the war with Iraq, but here, in the old Sukh, Kuwait's original marketplace, business is booming and no one seems terribly worried about the threat from al Qaeda.

This butcher says business is good. Kuwaitis seem confident, that if there is an attack, it will not be directly against them. But U.S. businesses in Kuwait are cautious. Western-owned hotels have stepped up security measures in recent days. In some hotels, everyone walking inside is screened. Business owners do not wish to talk on camera. U.S. officials say they will remain watchful. Barbara Starr, CNN, Kuwait.

(END VIDEOTAPE)

PILGRIM: Still ahead tonight, the widening scandal at the United Nations. The former head of the Oil-for-Food program scandal, Dennis Halliday will tell us what he knew about it and when.

Plus President Bush holds a final news conference in what has been an extraordinary year for him. We'll talk with three of the country's best journalists. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: The widening scandal over the United Nations oil-for- food program has raised serious questions about the integrity of the U.N.'s management. Well, at issue is whether senior U.N. managers helped Saddam Hussein divert money that was supposed to help ordinary Iraqis.

Joining me now is Denis Halliday. He was in charge of the oil- for-food program between 1997 and 1998, and thanks very much for joining us.

DENIS HALLIDAY, IN CHARGE OF OIL-FOR-FOOD, '97-'98: You're welcome.

PILGRIM: You must have special insight into how everything works. My understanding is some of it was a surcharge that the Iraqis asked companies to put on their oil, and then divert that surcharge money into accounts that were separate accounts. Is that an accurate... HALLIDAY: As a separate source of income, that's right.

PILGRIM: Does that surprise you, Mr. Halliday?

HALLIDAY: No, it doesn't. Under sanctions -- you know, sanctions are a form of warfare, and the Iraqis fought back with the only equipment they have, which was oil, oil revenue and hard currency. So when the demand for oil was sufficient, they could add a 50-cent surcharge per barrel, which they'd get under the table and then sell the oil below brand prices, and they went into the middle man arena, and branded up in Russia, France or United States.

PILGRIM: Why the big shock now, if someone like you says this was common practice?

HALLIDAY: See, that's what I -- is mysterious about this entire, quote, "scandal," unquote. There is no scandal. This is a well-known secret. And the whole smuggling with Turkey was condoned by the United States and deliberately so and consistent with the Charter Article 50, which says that if a country is under sanctions and its neighbors suffer the consequences economically, then there can be some compensation, in this case for Turkey, Jordan and Syria.

So in fact, what has happened is the U.S. has allowed the Turks to be compensated by getting cheap gasoline, paraffin and oil -- oil supplies from Baghdad. But of course, the breach of sanctions is, hard currency and to the tune we understand to, say, nine, 10 billion have poured into Baghdad from that smuggling.

PILGRIM: But the money that was diverted -- and it is billions and billion, tens of billions of dollars -- I assume...

HALLIDAY: Maybe.

PILGRIM: ... is money that did not go to the Iraqi people, and yet, so then it's very hard to say this is not a scandal and a great injustice was done to the Iraqi people, was it not?

HALLIDAY: Except that most of that money came into the country before oil-for-food began. Oil-for-food didn't begin until '97. The smuggling with Turkey began probably in 1991. In addition, you know, they did sell $64 billion worth of oil, which went into the accounts of the United Nations, that the U.N. takes off 35 percent. But the balance came back into Iraq in the form of various commodities, foodstuffs, equipment for various sectors, and $8 billion was given to the United States for the development fund, which Mr. Bremer managed or I fear mismanaged, it seems, during his period in Baghdad.

PILGRIM: Mr. Annan, Secretary-General Kofi Annan, has been linked with the oil-for-food scandal, maybe justifiably, maybe not in the press and in certain investigations. What's your opinion about his role?

HALLIDAY: Well, the secretary-general is a very fine, decent individual. I don't believe that he is involved in any scandal, per se. I cannot accept that, I must say. But we have to remember that this -- the U.N., you know, has two components. They're the shareholders, and the board of directors are member states. The secretary-general is the chief administrative officer. He's not actually even the CEO. He takes instructions. I was the servant of the servant, so to speak. He takes instructions from member states.

I don't believe he's involved in any scam, any devious activity. It just -- it would not be consistent with his pattern of work.

PILGRIM: Well, let me press you on this, because Secretary- General Kofi Annan has been outside of his role, the normal traditional role of the secretary-general, in taking the lead on many issues that normally did not fall to that office, and in making statements. Should he not have made statements about the oil-for-food situation?

HALLIDAY: Well, he has an opportunity, under Article 99 of the charter. He should speak up on issues that are definitely incompatible with the charter, or human rights or any aspect of the United Nations. I've been critical that he hasn't done that enough. When he announced that the war or the invasion of Iraq was illegal, that's correct. He has the right to do that, in my view. He did it very late in the day, however, unfortunately.

On oil-for-food, he informed the council that there were kickbacks on contracts. He informed the council that there was a surcharge on oil sales, because he got complaints from the contractors and countries who were involved in the process. So they knew about that. But for some reason, I can't explain, they decided it wasn't worth bothering about.

PILGRIM: All right. Thank you very much for helping us sort through a very complicated issue.

HALLIDAY: You're welcome.

PILGRIM: Denis Halliday, thank you.

Now, a reminder tonight to vote in tonight's poll. And the question is, do you believe Iraqi elections should go on as scheduled on January 30th? Yes or no. Cast your vote at loudobbs.cnn. And we'll bring you the results a little bit later in the show.

Still ahead, President Bush covers everything from the budget to illegal immigration in his year-end speech. And I'll talk with three of the nation's leading political journalists when we continue. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Joining me now are three of this country's finest journalists, and we're talking about the president's news conference and other issues. In Washington, we're joined by Matthew Cooper of "Time" magazine. In Los Angeles, CNN political analyst, Bill Schneider. And joining me right here in New York is Marcus Mabry of "Newsweek." And thank you all for joining me.

Let's start with today's year-end speech, and I'll go to the farthest away, which has to be, I guess, Bill Schneider -- Bill.

BILL SCHNEIDER, CNN SR. POLITICAL ANALYST: Yes. What's the question?

PILGRIM: The speech today. And the question is, what was your take on it? Do you think it covered all the issues that needed to be covered in a year-end speech?

SCHNEIDER: Well, not entirely. I think the issue of Iraq has got to be addressed more directly. And people want some recognition from the president that he understands the difficulties there and he has a program to deal with them.

What he's done repeatedly again and again and again is say things are, while there are setbacks in Iraq, things are more or less on track, that we're heading for these elections, and a lot of people are beginning to wonder, does he really -- is he acknowledging reality?

PILGRIM: Matt Cooper, let's ask you, one of the things that President Bush said was, don't expect this process to be trouble-free. He seemed to be very candid about it. What was your take?

MATT COOPER, TIME MAGAZINE: Yeah, I thought so. I thought one of the most telling lines is when he said the bombers are having an effect. For this administration that's a pretty big concession, that they're actually not only killing people but having an effect on slowing this election process down. And Bill's right, he hasn't laid out a plan for how we get to these elections in January, when there's this much violence.

PILGRIM: And he spoke about the Iraqi security efforts and said the results are mixed, Marcus. There's a certain degree of candor that's maybe new.

MARCUS MABRY, "NEWSWEEK": I think it is new, Kitty. It's not surprising to any of us that now, after the president is heading towards his second inauguration, he's talking with -- speaking with such candor about the difficulties we face in Iraq. This was obviously not the way he was talking during the campaign, and not surprising to anyone. At the same time, it's true, he's not laid out how we're going get out of this box we're in. And the president actually said that if the -- if we don't have the elections on January 30, the terrorists will have won. That means there can be no delay in the elections because if there is everyone will come back to the president and say we've lost to the terrorist, Mr. President because we're delaying these elections.

PILGRIM: I don't think there's much wiggle room on this date whatsoever because they have held so firm to it. Let's go to domestic issues, and on the economy, he said, President Bush said the economy is on solid footing. Bill Schneider, what's your assessment of how we're doing in the economy, and how President Bush is addressing it? SCHNEIDER: Well, let's go to the American people's assessment. Their assessment is things are pretty good but they're anxious about the future. This has not been a blockbuster Christmas shopping season. So far it looks like a bit of a disappointment. Which points to a kind of anxiety people have. People say the economy's pretty good right now, but they do -- the number who expect it to remain good or get better in the future is really down, so I think there's a very, very high level of anxiety about the future of this economy, particularly because of oil prices, they've begun to stabilize but made people very nervous.

PILGRIM: And the retail numbers of last weekend were supposed to be -- supposed to be the biggest weekend of the shopping season, and they were down from last year. On Social Security, this is a difficult issue, Matt. He basically said that there are going to be difficult choices but didn't give a lot of details. Do you think this is something that has to be hammered now the Congress?

COOPER: Yes, it's going to be. It's going to be one of the long legislative sausage making sessions and going to go on for a long time. Going to be proposals and counterproposals. But I think underlying it is what Bill was alluding to is the anxiety about the economy. He's asking Americans to make the most fundamental change in Social Security in almost 70 years, and that's to add these private savings accounts to the current system. I think people have to be feeling a certain degree of confidence in the markets for them to want to get in on that, and we're going to have to see whether they're feeling that kind of buoyant spirit that will make them want to take that risk.

PILGRIM: Marcus, anything to add on the domestic economy front while we're on domestic issues?

MABRY: I think it's really interesting. I think we -- since it's end of the year, this president was re-elected by a majority of the popular vote for his first time. You did not get a sense of buoyancy. You did not get a sense of joy to the world. This is a holiday season, we all should be feeling warm and optimistic and we're not. There was an underlying sense on the part of president and it translates out into the nation of the fact that Americans are not at ease right now. We do not feel confident and optimistic about our future. That's bad so the president hasn't even started a second term yet, and it's not a good way to be starting off.

PILGRIM: There were very sobering topics in the session today. One is the relationship with Russia, and President Putin, the whole issue of Ukraine. And he was pressed a bit on this. And he says it's a relationship that we have to agree that we can disagree. That's not the best possible endorsement of the U.S./Russia relationship.

MABRY: But he's absolutely right. It's true. The fact is we're not going to have a great relationship with Russia. But the only thing we have right now is the president's personal connection to Vladimir Putin. We are not sure we can keep Putin tamed and keep him from taking Russia on a very anti-Democratic direction, even more so than he already has. The only hope we have is the personal purchase President Bush has with President Putin.

PILGRIM: Matt, anything to add to that?

COOPER: I think it's such a different tone the president had today than a couple years ago when he had the Russian leader down to Crawford, Texas and said he looked into the man's soul and seen he was a good man. He's clearly putting a little daylight between him and Putin.

PILGRIM: Bill, we'll wind up with you as the last question. We're talking about the general tone of this session today. Anything to add?

SCHNEIDER: Well, I thought it was a little -- certainly more sober, little more realistic than during the campaign. But, look, this president has a big problem and the problem is conservatives. Conservatives feel as if they've come to power. They've been waiting for this moment for decades. They now have a solid majority of Republicans at least in the Senate, they have a stable majority in the House of Representatives. They control the White House, they've got a friendly president. They expect to control the Supreme Court. Finally, after many, many years, starting with Ronald Reagan who couldn't deliver because the Democrats had control over part of Congress, conservatives are saying, hey, what about the payoff? What's in it for us? We've been supporting Republicans for all these years. And they're going to be putting pressure on President Bush.

PILGRIM: Difficult times in a very sort of serious speech. Thank you very much for helping us analyze it all of you, Matt Cooper, Marcus Mabry and Bill Schneider. Thank you very much.

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

(COMMERCIAL BREAK)

PILGRIM: Now the results of tonight's poll. 53 percent of you believe Iraqi elections should go on as scheduled, January 30. And 47 percent do not. Thanks for being with us tonight. Please join us tomorrow. I will be talking with Senator Bob Graham, an outspoken critic of the U.S. intelligence system. He says the hardest part of intelligence reform still lies ahead.

International best-selling author Edwin Black joins me to talk about his new book "Banking on Baghdad" which is a chronicle of commerce and conflict in Iraq.

And we'll continue our series of special reports, holiday home front. Foreign competition threatens a fund-raising effort for our troops.

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

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