Return to Transcripts main page
Lou Dobbs Tonight
Supreme Court Changes Rules on Federal Sentencing Guidelines; Rescue Crews Still Hope for Mudslide Survivors; Storms Sweep Through West, Causing Floods
Aired January 12, 2005 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
LOU DOBBS, HOST (voice-over): It's nothing less than a disaster. Shocking new numbers tonight on our huge trade deficit with the rest of the world.
UNIDENTIFIED FEMALE: When you think about where the U.S. comparative advantage is today, it is debt and shopping. But not much else.
DOBBS: Tonight, two congressmen join us for a debate on the high cost of so-called free trade.
And court chaos, a major Supreme Court ruling today. It cast out federal sentences for tens of thousands of criminals and may cause chaos in our legal system. We'll tell you why.
A desperate search underway tonight for mudslide victims in California. Rescuers say there's still hope of finding survivors.
GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: In the past few days we hare seen the power of nature cause damage and despair, but we will match that power with our own resolve.
DOBBS: And crisis in the National Guard. The guard is stretched almost to the breaking point by wars in Iraq and Afghanistan. I'll be talking with the guard's top general about the scale of the problem and whether it can be fixed.
(END VIDEOTAPE)
ANNOUNCER: This is LOU DOBBS TONIGHT for Wednesday, January 12. Here for now an hour of news, debate and opinion is Lou Dobbs.
DOBBS: Good evening.
The Supreme Court today declared a key part of this country's sentencing laws to be unconstitutional.
In a 5-4 ruling, the Supreme Court ruled that juries, not judges should have the power to increase the sentences of defendant. The ruling could cause chaos throughout our legal systems. Thousands, possibly hundreds of thousands of convicted criminals may appeal their sentences now.
Bob Franken has our report.
(BEGIN VIDEOTAPE)
BOB FRANKEN, CNN CORRESPONDENT (voice-over): For 17 years, federal guidelines have set specific standards for thousands of prison sentences annually. And while this decision does not completely strike them down, Justice Antonin Scalia wrote it would wreak havoc on federal district and appellate courts quite needlessly and for the indefinite future.
The administration wasn't too pleased either.
CHRISTOPHER WRAY, ASSISTANT ATTORNEY GENERAL: The risk increases that sentences across the country will become wildly inconsistent.
FRANKEN: The guidelines were an effort to ensure that similar crimes got similar sentences. But the fractured 5-4 ruling said because these guidelines require judges to decide sentences based on facts they determine, that denies a defendant's right to have a jury decide those facts.
It tracked with the decision last year that overturned similar state guidelines. In this one, the federal rules were not thrown out, but they can no longer be mandatory.
Lawyers and lower court judges have pleaded for quick action after last year's state sentencing ruling caused confusion over whether any guidelines were valid. Now many sentenced under the federal guidelines can be expected to go back into court.
RICHARD SAUBER, DEFENSE ATTORNEY: I think that it's going to trigger an explosion of post-verdict litigation that will take at least several months and maybe several years for the court system to work its way through and to gain some clarity for.
FRANKEN: The latest ruling is an invitation to Congress to take another stab at the guidelines. But Democrat Patrick Leahy insisted Congress should resist the urge to rush in with quick fixes.
(END VIDEOTAPE)
FRANKEN: An interesting personal note. Since a tiebreaker was needed, Chief Justice William Rehnquist, who is working mainly at home while fighting thyroid cancer, voted and made the difference in a 5-4 majority -- Lou.
DOBBS: Bob, thank you very much. Bob Franken.
We'll have much more on this story tonight. Our senior legal analyst, Jeffrey Toobin, will join me. We'll be talking about the impact of this ruling and exactly just how much chaos this ruling will create in our legal system.
In California tonight, a desperate search is under way for victims of the mudslide disaster in La Conchita. Rescue workers still haven't given up hope of finding survivors two days after the mudslide killed at least 10 people.
Eric Philips reports from the scene.
(BEGIN VIDEOTAPE)
ERIC PHILIPS, CNN CORRESPONDENT (voice-over): Governor Arnold Schwarzenegger toured the area by air and by ground to see for himself the devastation the mudslides caused.
SCHWARZENEGGER: In the past few days we have seen the power of nature cause damage and despair. But we will match that power with our own resolve.
PHILIPS: So far officials have confirmed 10 deaths as a result of Monday's mudslides. The bodies of the latest victims, those of a mother and her three daughters, found early this morning.
But authorities say as many as 10 people are still missing, and they are using dogs, cameras, listening devices and radar equipment to seek out air pockets where survivors may still be trapped.
BOB ROPER, VENTURA COUNTY FIRE CHIEF: As long as the rescuers continue to find these voids, we're holding out hope that we can find somebody still alive.
PHILIPS: In the hours after the mudslide, the Ventura County Sheriff's Department said 10 people were pulled out of the rubble alive. None, though, since Tuesday morning.
Fifteen homes were destroyed and more than a dozen others damaged when tons of mud, uprooted trees and debris came crashing down.
UNIDENTIFIED MALE: I watched telephone poles just lift up out of the ground and shake like French fries in the air going down. And that's when I grabbed my kid. And all we tried to do was just get out of the house as fast as we can.
(END VIDEOTAPE)
PHILIPS: Tonight officials will make a decision on whether to switch gears here from a search and rescue mission to a recovery effort -- Lou.
DOBBS: Eric, thank you very much.
The huge storm system that caused that deadly mudslide in La Conchita has brought chaos to much of the West. The storm has destroyed homes, bridges and roads and dumped massive amounts of snow in mountainous areas.
Casey Wian has the story from Los Angeles.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): They're still digging out in the High Sierras, where the snow pack is the deepest it's been in 89 years.
UNIDENTIFIED FEMALE: It's a lot of snow. Really a lot of snow.
WIAN: So much that homes are buried up to their roofs.
In Colorado, rescue cruise continue to search for two skiers lost in separate incidents. They believe helicopters have spotted one. No word on the other.
In Nevada, the town of Overton is almost completely submerged. Nearby a cargo train derailed because of high water.
Fifteen Arizona counties have declared states of emergency after storms there caused seven deaths.
Storms have even flooded homes as far east as Ohio.
And in California, the death toll has passed 25. And 800,000 homes have lost power.
Much of the nation is wondering why Californians live in the path of so many natural disasters.
ROPER: We have oceans that cause wave issues on homes. Earthquake faults, rivers and the mountains. It's part of the beauty of the state of California, and I don't believe that there's a way to really prevent people from evoking their private property rights and living where they want to.
WIAN: California motorists, already used to driving on some of the nation's worst roads, now find even fewer options to move around their soggy state.
UNIDENTIFIED MALE: One twenty-six is closed; 166 is closed; 150 and probably any other number you can think of. Anything that way is closed.
UNIDENTIFIED MALE: We've been stranded here since yesterday. We thought the roads and everything would be open by today.
UNIDENTIFIED FEMALE: They were telling me an alternate route which will be eight hours. I really don't want to do that.
WIAN: Driving conditions aren't likely to improve anytime soon. Governor Schwarzenegger's new budget, released during the storm, cuts funding for transportation projects by a billion dollars a year. That could mean delays in fixing storm-ravaged roads.
(END VIDEOTAPE)
WIAN: Even before the storm, a commission appointed by the governor warned that the state's transportation system is in crisis and on the verge of collapse. Now that some roads here have literally collapsed, paying for their repairs will be a big challenge, Lou.
DOBBS: Casey, thank you very much. Casey Wian. Thousands of American troops are helping tsunami victims in Indonesia. But incredibly, the Indonesian government has placed limits on what our troops can do.
U.S. Marines in Banda Aceh have scaled back their relief efforts because the Indonesian government has declared it wants foreign troops to keep a, quote, "low profile." The Marines have agreed not to carry their weapons, and the Marines will not set up a camp on Indonesian soil.
At the same time, the carrier USS Abraham Lincoln has steamed out of Indonesian waters. That's because Indonesian officials say the carrier can only conduct flight operations that are directly related to the recovery effort.
The United States, of course, has provided Indonesians with more assistance than any other country. And without that assistance, many more Indonesians would have died as a result of the tsunami.
Still ahead here, trade disaster. Our exploding trade deficit has set a new record. And in our "Face Off" tonight, we'll debate the issue of so-called free trade with two leading congressmen. And we'll ask why so few people realize that free trade is anything but free.
And a crisis in our National Guard. Is the National Guard in danger of becoming a broken force? The guard's top general will answer that question and more, next.
(COMMERCIAL BREAK)
DOBBS: Cubans who were apprehended, illegal aliens from Cuba during the boat lift. What happens there?
TOOBIN: Well, that's a really difficult problem. Because often you've had people convicted of relatively minor offenses. Their prison terms are up. But they are still held in custody year after year, because they can't be deported. The court essentially said, 6 months is it for holding them after they served their sentence.
DOBBS: And then what happens?
TOOBIN: Then, unfortunately, they're released into American society.
DOBBS: Well, that's absolutely nuts because you -- I mean, that's a Supreme Court making a decision, one that's well beyond its purview.
TOOBIN: And what you have, particularly with Justice O'Connor saying Congress please, step into the breech here, pass a law so that we can solve this problem rather than release these people willy nilly. DOBBS: It would be nice to find someone, Jeffrey, in charge either on Capitol Hill or at the Supreme Court. That would be very nice indeed.
TOOBIN: Today is not a day where rationality seems to have had a big day at the Supreme Court.
DOBBS: Jeffrey Toobin, as always, thank you for bringing your insight.
TOOBIN: OK, Lou.
DOBBS: President Bush tonight promising to spend his political capital in order to give millions of illegal aliens in this country legal status. The president told the "Washington Times" that he plans to force a debate in Congress on his controversial immigration proposals. The president predicted he would win that debate just as he did with tax cuts.
President Bush also said giving millions of illegal aliens in this country legal status would in, his words, take a lot of pressure off our borders. Hard to argue.
One Republican in Congress, however, is already leading a revolt against the president's plan. Congressman Tom Tancredo of Colorado said the plan will only encourage more illegal aliens to cross our borders and break more of our laws. Congressman Tancredo says he has the support of at least 180 of Republicans in this Congress to defeat the president's proposals.
In our special report tonight, "Overmedicated Nation" big drug companies are under attack for putting profits ahead of patient safety. Critics say the industry brought the problem on itself by promoting high-cost prescription drugs and hiding negative research reports. Drug company executives now say they are working to change all of that. Christine Romans has the story.
(BEGIN VIDEOTAPE)
CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): The most profitable, powerful industry in America has an image problem.
FRAN HAWTHORNE, AUTHOR: They make products that save people's lives, that cure people, that make people better. And they are down there in the dumps with tobacco, which makes a product that kills people.
The industry that strives to find cures for cancer is so hated, and they've really done it themselves. It's completely their fault.
ROMANS: Their fault, she says, because drug prices are too high. Drugmakers push the newest, most expensive pills. They fight against reimportation from Canada and tie up cheaper generics in court. Drugmaker Eli Lilly says it needs profitable blockbusters to fund new medicines. SIDNEY TAUREL, CHMN & CEO ELI LILLY: It takes us 12 to 15 years to put a new drug on the market. It costs about a billion dollars. And those costs have to be recouped. You need a few of these very successful products to pay for the failures.
ROMANS: And there are many failures. According to Eli Lilly, of 5,000 molecules in the lab, just one makes it to market and only 30 percent of drugs ever make a profit.
But it's not just profits and prices that has given the industry a bad reputation. It's also safety. Vioxx was recalled. Celebrex and Bextra have serious cardiovascular problems. At best, drug companies downplay unfavorable clinical data. At worst, critics say they hide it.
The industry says that is changing. Bristol-Myers and Eli Lilly recently began listing all trial results on their Web sites.
DR. PAUL ANTONY, PHRMA: We're committed to making sure that that information is made available as quickly as possible to the people who can benefit from it.
ROMANS: Yet, public opinion is increasingly critical. The pharmaceutical industry's reputation is in steady decline. Less than half of those surveyed think the industry is doing a good job.
(END VIDEOTAPE)
ROMANS: Part of that may be their own marketing blitz has backfired. They spent millions marketing Vioxx and Bextra and Celebrex as if they were as commonplace as shampoo or toothpaste. And tonight the FDA has warned Pfizer, Lou, that its TV and magazine ads for its painkillers misled consumers.
DOBBS: As you say, it is a problem. And often perception and reality do have some relationship. Thank you very much, Christine.
Taking a look now at some of your thoughts on the issue of Social Security reform.
Elmer Read in Federal Way, Washington wrote to say, "I can't believe we are spending so much time and effort worrying about Social Security, a program which is self-funded through 2042. The conservatives are manufacturing a problem that doesn't exist at the expense of other more pressing issues."
Valerie Hunter-Bequette of Middletown, New York, "The president seems to have his priorities wrong. He isn't worried about outsourcing overseas. The loss of manufacturing to China or illegal aliens taking our jobs. But he is worried about Social Security. Doesn't he realize it won't matter if we don't have jobs?"
And Donna in Shelton, Ohio, "Lou, do you think Social Security might be in somewhat less jeopardy if all the jobs currently held by illegal immigrants were instead held by tax-paying citizens and legal immigrants?" We love hearing from you. E-mail us at loudobbs.com.
Turning now to a crisis in the national guard. The number of national guardsmen deployed overseas has risen from 5,000 to 120,000 in the past 3 years. That's left the force stretched and a lot of help is needed.
Last year the National Guard failed to meet its recruiting goals for the first time since September 11. In an effort to reverse the trend, guard officials have asked for $20 billion to raise the number of recruiters and replace damaged equipment, to increase training and provide greater resources.
Lieutenant General Steven Blum is chief of the National Guard Bureau. He's the head man joining us tonight from the Pentagon. General, good to have you with us.
LIEUTENANT GENERAL STEVEN BLUM, NATIONAL GUARD BUREAU: Well thank you, Lou.
DOBBS: Let me begin first, before we get into the money you need to provide for your force, the National Guard is in a role that it's never been in before certainly in the last 50 years. It is an active, significant, essential part of the war on terror, the wars in Iraq and Afghanistan, right?
BLUM: Absolutely, Lou. As it should be.
DOBBS: Why do you say as it should be.
BLUM: Well, because this nation should never go to war any time, any place for any reason without the National Guard. Because when you call up the guard, you call up America. And I think that has had a significant impact and sent a strong message to our adversaries and bolsters and makes and strengthens the fighting spirit of our soldiers.
DOBBS: Well general, as you assert that, let me give you a little push back, if I may.
BLUM: Sure.
DOBBS: The fact you say we should never go without the Guard, even when a situation as we have now, when we could not, in point of fact, carry out the mission without the Guard because we don't have enough regular Army soldiers.
BLUM: Well, it was never designed that the defense of this nation would be all done by active forces. Our founding fathers clearly wanted a strong citizen militia that would augment a small regular Army so that the citizenry would be behind the American soldiers when they had to go in harm's way.
DOBBS: You know, general, this brings up the other issue. Then I'm going to move on to others. The fact is through world wars, and from the beginning of the National Guard and the citizen militia and the citizen soldier, which is part of this country's very tradition, the fact is, we had a draft when we needed more men and women in uniform, isn't that correct?
BLUM: Absolutely, Lou. And I served in that draft Army. And I will tell you, 31 1/2 years ago, this country made a very good decision to walk away from the draft and to go to an all-volunteer force. These young men and women that are in service today are magnificent.
DOBBS: Oh, I believe you. And I completely agree with you about the quality of the men and women we have in uniform and the quality of our fighting force. I will tell you, general, frankly, I'm not as confident about all the decisions being made at the Pentagon, but I have absolute faith in our men and women in uniform and the ways in which they are carrying out their duties.
BLUM: We are in total agreement with that.
DOBBS: We are in agreement?
BLUM: We are in total agreement with the support of our troops and the quality and the fighting spirit they possess.
DOBBS: Outstanding.
General, let's turn to that $20 billion and why you need it.
BLUM: Well, I need it, Lou, to prevent this crisis that you've advertised. I didn't really know the National Guard was in crisis. I don't see it that way.
Actually, what I'm trying to do is to alert our political leaders and our military leaders and our policymakers that if we do not take some measures now, and we ignore the problems that are starting to develop, we could be in crisis. But we're far from in crisis.
Matter of fact, today you have the best National Guard this country has ever seen, most capable, most professional, most experienced force we've ever had.
DOBBS: When I use the word crisis, I hope I haven't fallen or lapsed into, if you will, the hyperbole that is so common in Washington today and the overuse of the word crisis. And if I have, I want to apologize to both you and our viewers tonight.
But in terms of the issues before you, you also have men and women in uniform, in the Guard, who are saying that there is not adequate training, there isn't adequate body armor, that they don't have the adequate resources.
While that may not be, as you suggest, a crisis, it is certainly a deep-seeded need that you are trying to address. How quickly do you need the $20 billion? And how soon will our fighting men and women in the Guard get that equipment and training?
BLUM: Well, frankly, I needed 20 billion over the next -- I don't need the whole 20 billion over the next three years, but I need about 5.5 billion over the next three years so that we can sustain our operations overseas, as you rightfully stated. We have about 120,000 citizen soldiers and airmen deployed all over the world. And right now there's about and will be very soon, about 50 percent of the combat force in Iraq and Afghanistan will be national guard and reserves. So it's very important that we get them the equipment and the funding they need to be ready.
The other 15 billion that we're talking about existed prior to 9/11 when we were a strategic reserve intended to show up to World War III in the late innings of the game, so to speak. But now we're being used as an operational force both here at home and abroad. Those shortages of equipment, which total up to about $15 billion, need to be addressed over the next years so that we have a ready and fully equipped national guard.
DOBBS: General Blum we thank you for being here to talk. We thank you for your service and of that of all the men and women you command.
BLUM: Thanks, Lou. Thank you very much.
DOBBS: NASA's deep Impact Space probe tonight has entered a safe mode because of a technical glitch on board. NASA launched the spacecraft on a $330 million collision course with a comet this afternoon. Deep Impact blasted off from Cape Canaveral this afternoon. Its mission is to slam into the comet Tempel 1 on the 4th of July. And it will capture a picture of what's inside. Scientists hope this mission will provide details about the makeup of the solar system. Deep Impact is now awaiting a signal from earth to repair whatever damage there was to the system. We'll keep you posted.
And still ahead -- this country is exporting its wealth to China in record amounts. Next in our face-off, a debate on whether we need to drastically overhaul our trade relationship with China and come to terms with what is clearly failed trade policy.
And securing your future. A former commerce secretary will tell us why he says the president's social security reform proposals send a dangerous signal.
(COMMERCIAL BREAK)
DOBBS: In our "Face-off" tonight, the cost of so called free trade. Our nation's trade deficit is expected to reach a staggering $600 billion plus for 2004. Our deficit with China accounts for just about a quarter of that. This exploding trade deficit has caused many to call for an overhaul of our trade relationship with China, reform of our trade policies.
Congresswoman Marcy Kaptur is among those calling for such changes. She said our trade deficit with China is got to be dealt with -- has got to be dealt with and this country can't afford to lose anymore jobs.
But congressman Matt Foley of Florida changing our trade relationship with China could lead to higher prices in this country, not necessarily lead to more jobs.
We thank for being here. Good to have you here. Let me begin with you, Congresswoman Kaptur, you have been focused on this for a lodge time. This isn't getting any better, is it.
REP. MARCY KAPTUR (D), OHIO: No, it's getting substantially worse and there is nothing normal about our trade relations with China. We've lost over 1.5 million jobs in the last decade. We're slated to lose another 875,000 by the year 2010. We now have the largest trade deficit between two nations of the world in the history of the world. This past year, 160 billion with China, and two years ago, the first Chinese company to be listed on the New York Stock exchange had its assets seized in Yaling (ph) Province in China by the then-governor, who was promoted, Mr. Bo Xilai to the current minister of commerce in the nation of China. There is nothing normal about that plunder.
Congressman Foley, your response response?
You're a bright, sensible, able servant. You believe in the concept of free trade. This isn't free trade, is it.
REP. MARK FOLEY (R), FLORIDA: No, it's not free trade and it's not fair trade and that's why Secretary Evans is there today to insist that china live by the rules in which they negotiate. They sign an agreement and then the Chinese negotiate that agreement. It's really a one-sided one-size fits all. And we have to become more direct and more combative with them. Because they have to start cracking down on property rights and some other things that they fail to do.
DOBBS: Lets go through some things, Congressman Foley, if I may interject here. One, lets face facts, there are communist nation. Two, there are no intellectual property rights, there are no property rights, there are no labor protection, of any kind there, there is no environmental protection. They have amongst the lowest wages in the world and we're being forced by U.S. multinationals, this administration, and the previous administration, the Clinton administration, to put our middle class into direct competition with that kind of nation with that kind of labor force.
How can anyone rationalize it?
You said to get tougher, how about smarter?
FOLEY: Well, I agree getting smarter but the double-edge sword here we have is constituents want to buy products cheaper at Wal-Mart or somewhere else and the only place we can get them cheaper is through China. Now, I would urge the Democrats as well, to look at trying to repair and reform tax rules in America, work on product liability reform. And not continue to increase minimum wage and other kind of benefits, family and medical leave act, if we are going to be competitive with nations like China who don't wear about their employers and don't care about workers' safeguards.
DOBBS: Congresswoman. KAPTUR: Well, I guess the way I would respond is I don't want to pull the American worker or small business person down to Chinese standards. I want to raise the world up. Where you have free trade among free nations, you have benefits to all. When you have managed trade with authoritarian regimes that have controlled currencies, you have a few winners and many, many losers. The United States ought to operate by the golden rule, free trade among free people. And where we ratchet up these gigantic trade deficits with authoritarian regimes, we ought to have special negotiations going on by our U.S. trade representatives in every single sector where these closed markets and closed currencies have not allowed our products to compete on a level playing field. Those are not going on.
DOBBS: Congressman Foley, you get the last word.
FOLEY: And I agree, Marcy. Marcy, I agree with you on those points but I also want you to ask your constituent, are they willing to forego the purchase of Chinese merchandise? Because that is what is driving the market.
KAPTUR: Well, let me just say this. My workers would like to make those goods not just buy them. We need to be more peddler, we need to be producers.
DOBBS: Congresswoman Kaptur, and Congressman Foley, we thank you both for being here.
FOLEY: Thanks, Lou.
DOBBS: We hope is part of a debate that will be resolved very quickly. Maybe this year, what do you think?
FOLEY: Well, it's heating up. It's heating up, Lou, very much on all sides of both aisles are worried about the Chinese trade deficit. You're not alone.
DOBBS: Thank you, we appreciate it. Thank you both for being here. Just ahead, just how secure is our Social Security?
Is the Social Security broken or is the government broken?
Former commerce secretary Pete Peterson joins us next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Social Security reform looks to be the key political issue of the early part of this year in Washington. President Bush said the system will go bankrupt unless Congress acts and acts immediately. My next guest has been sounding the alarm on entitlement programs, fiscal responsibility for a very considerable period of time. Pete Peterson is the president of the Concord Coalition and the chairman of the Blackstone Group, he was commerce secretary under president Nixon and it's good to have you here. Social Security, by golly, it's a mess and the president wants to fix it. Is it a mess? I thought it was fixed in 1983. PETE PETERSON, PRESIDENT, THE CONCORD COALITION: I noticed that letter that one of your listeners put in that the Social Security trust fund is going to keep solvent until 2042, what's the problem? I think it is time we told the American people the rather melancholy truth. The Social Security trust fund...
DOBBS: Wait a minute. Let's let America get ready because they're not getting a lot of it.
PETERSON: The Social Security trust fund is what I call a fiscal oxymoron. It shouldn't be trusted and it's not funded. And whether you have one or not you still have to go out and do the same thing three things. You either have to try to borrow the money or you're going to increase taxes or you are going to cut the benefits. Now, how much would you have to borrow? Preparing for this occasion, I asked the Concord people. In 2018, the system starts moving cash flowed deficit. Between 2018 and 2042, we would have to borrow $5.4 trillion in current dollars to finance those deficits. Or if you want to increase taxes to pay for the benefits, taxes would have to go up from 11 percent of payroll to 18.
DOBBS: You have a lot of folks hearing these numbers and they're saying my god it sounds like a problem. It is a problem.
PETERSON: It's not a crisis today but it is a problem.
DOBBS: Let's talk about the truth. The Social Security system right now has a surplus approaching $2 trillion. The Medicare/Medicaid has a surplus of about a quarter of a trillion dollars and it's dwindling faster than Social Security. Which is the greater issue in terms of unfunded liability, which is the greater crisis?
PETERSON: Medicare is the big elephant in the room.
DOBBS: Why isn't anyone talking about it?
PETERSON: That's a good question. We all pretend we don't see it and we hope nobody else points it out.
DOBBS: Well, I'm going to point something else out. You want to talk truth, I want to talk truth and that's why we're friends.
PETERSON: Medicare is three to five times the serious problem in terms of...
DOBBS: Why in the world isn't the administration talking about that?
PETERSON: Because it's so tough to solve.
DOBBS: Exactly.
PETERSON: It's a much tougher problem to solve than Social Security. Much tougher because we're dealing with critical life and death, ethical choices. DOBBS: Let's talk about another important choice, and that is, the fact is that -- that tax that we all pay on Social Security every month, that money is brought in by the government, we have a surplus, where is that money?
PETERSON: We've spent it.
DOBBS: Oh!
PETERSON: We may have told the American people that we were setting it aside in a quote, "trust fund." We spent it on other subjects. Shock of all shocks.
DOBBS: Oh, my goodness.
PETERSON: And you can't spend the same money twice I don't think.
DOBBS: Not even the federal government?
PETERSON: Not even the federal government.
DOBBS: So the fact is we have invested that money in securities in the United States government, for example. So we have let the government borrow from our trust fund. As you say it's neither funded nor should we trust it and we're talking about adding $2 trillion in transition cost to a fiscal, fiscal arrangement that's already broken.
PETERSON: Let's talk about that. One of the most serious problems facing this country is this huge trade deficit and the current account deficit we're borrowing $2.5 (UNINTELLIGIBLE) a day.
DOBBS: Yes, sir.
PETERSON: The last thing in the world we ought to be doing is telling financial markets, oh, folks, what's another $2 trillion or so? Paul Voelker has told me that he thinks there's a 75 percent chance of a dollar crisis within five years. We should not be telling them we are nonchalant about borrowing another $2 trillion.
DOBBS: Well and when I hear Pete Peterson say it, that's good enough for me. Pete, it's good to have you here. We will talk more about this. I hope you will come back soon as we will start finding out where the real crisis, who's got the money, and what's really broken. I think we agree that Social Security has some problems.
PETERSON: Medicare is the big one, baby!
DOBBS: Pete Peterson, thank you.
PETERSON: Thank you.
DOBBS: Still ahead, the results of tonight's poll and a preview of what's ahead tomorrow.
(COMMERCIAL BREAK) DOBBS: Now the results of our poll tonight. Sixty-seven percent of you say it is time for both political parties to reevaluate existing trade policies. A third say not.
Thanks for being with us tonight. Please join us here tomorrow. We'll be talking about the politics of tsunami relief. Why some countries, including France, have come under fire for their donations or their lack of donations. The head of the USAID will be my guest.
And tomorrow why one of the president's fellow conservatives wants to undo President Bush's most trumpeted accomplishments and how our trade policies with China are leaving some of our most vital industries eviscerated.
For all of us here thanks for being with us. 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 January 12, 2005 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
LOU DOBBS, HOST (voice-over): It's nothing less than a disaster. Shocking new numbers tonight on our huge trade deficit with the rest of the world.
UNIDENTIFIED FEMALE: When you think about where the U.S. comparative advantage is today, it is debt and shopping. But not much else.
DOBBS: Tonight, two congressmen join us for a debate on the high cost of so-called free trade.
And court chaos, a major Supreme Court ruling today. It cast out federal sentences for tens of thousands of criminals and may cause chaos in our legal system. We'll tell you why.
A desperate search underway tonight for mudslide victims in California. Rescuers say there's still hope of finding survivors.
GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: In the past few days we hare seen the power of nature cause damage and despair, but we will match that power with our own resolve.
DOBBS: And crisis in the National Guard. The guard is stretched almost to the breaking point by wars in Iraq and Afghanistan. I'll be talking with the guard's top general about the scale of the problem and whether it can be fixed.
(END VIDEOTAPE)
ANNOUNCER: This is LOU DOBBS TONIGHT for Wednesday, January 12. Here for now an hour of news, debate and opinion is Lou Dobbs.
DOBBS: Good evening.
The Supreme Court today declared a key part of this country's sentencing laws to be unconstitutional.
In a 5-4 ruling, the Supreme Court ruled that juries, not judges should have the power to increase the sentences of defendant. The ruling could cause chaos throughout our legal systems. Thousands, possibly hundreds of thousands of convicted criminals may appeal their sentences now.
Bob Franken has our report.
(BEGIN VIDEOTAPE)
BOB FRANKEN, CNN CORRESPONDENT (voice-over): For 17 years, federal guidelines have set specific standards for thousands of prison sentences annually. And while this decision does not completely strike them down, Justice Antonin Scalia wrote it would wreak havoc on federal district and appellate courts quite needlessly and for the indefinite future.
The administration wasn't too pleased either.
CHRISTOPHER WRAY, ASSISTANT ATTORNEY GENERAL: The risk increases that sentences across the country will become wildly inconsistent.
FRANKEN: The guidelines were an effort to ensure that similar crimes got similar sentences. But the fractured 5-4 ruling said because these guidelines require judges to decide sentences based on facts they determine, that denies a defendant's right to have a jury decide those facts.
It tracked with the decision last year that overturned similar state guidelines. In this one, the federal rules were not thrown out, but they can no longer be mandatory.
Lawyers and lower court judges have pleaded for quick action after last year's state sentencing ruling caused confusion over whether any guidelines were valid. Now many sentenced under the federal guidelines can be expected to go back into court.
RICHARD SAUBER, DEFENSE ATTORNEY: I think that it's going to trigger an explosion of post-verdict litigation that will take at least several months and maybe several years for the court system to work its way through and to gain some clarity for.
FRANKEN: The latest ruling is an invitation to Congress to take another stab at the guidelines. But Democrat Patrick Leahy insisted Congress should resist the urge to rush in with quick fixes.
(END VIDEOTAPE)
FRANKEN: An interesting personal note. Since a tiebreaker was needed, Chief Justice William Rehnquist, who is working mainly at home while fighting thyroid cancer, voted and made the difference in a 5-4 majority -- Lou.
DOBBS: Bob, thank you very much. Bob Franken.
We'll have much more on this story tonight. Our senior legal analyst, Jeffrey Toobin, will join me. We'll be talking about the impact of this ruling and exactly just how much chaos this ruling will create in our legal system.
In California tonight, a desperate search is under way for victims of the mudslide disaster in La Conchita. Rescue workers still haven't given up hope of finding survivors two days after the mudslide killed at least 10 people.
Eric Philips reports from the scene.
(BEGIN VIDEOTAPE)
ERIC PHILIPS, CNN CORRESPONDENT (voice-over): Governor Arnold Schwarzenegger toured the area by air and by ground to see for himself the devastation the mudslides caused.
SCHWARZENEGGER: In the past few days we have seen the power of nature cause damage and despair. But we will match that power with our own resolve.
PHILIPS: So far officials have confirmed 10 deaths as a result of Monday's mudslides. The bodies of the latest victims, those of a mother and her three daughters, found early this morning.
But authorities say as many as 10 people are still missing, and they are using dogs, cameras, listening devices and radar equipment to seek out air pockets where survivors may still be trapped.
BOB ROPER, VENTURA COUNTY FIRE CHIEF: As long as the rescuers continue to find these voids, we're holding out hope that we can find somebody still alive.
PHILIPS: In the hours after the mudslide, the Ventura County Sheriff's Department said 10 people were pulled out of the rubble alive. None, though, since Tuesday morning.
Fifteen homes were destroyed and more than a dozen others damaged when tons of mud, uprooted trees and debris came crashing down.
UNIDENTIFIED MALE: I watched telephone poles just lift up out of the ground and shake like French fries in the air going down. And that's when I grabbed my kid. And all we tried to do was just get out of the house as fast as we can.
(END VIDEOTAPE)
PHILIPS: Tonight officials will make a decision on whether to switch gears here from a search and rescue mission to a recovery effort -- Lou.
DOBBS: Eric, thank you very much.
The huge storm system that caused that deadly mudslide in La Conchita has brought chaos to much of the West. The storm has destroyed homes, bridges and roads and dumped massive amounts of snow in mountainous areas.
Casey Wian has the story from Los Angeles.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): They're still digging out in the High Sierras, where the snow pack is the deepest it's been in 89 years.
UNIDENTIFIED FEMALE: It's a lot of snow. Really a lot of snow.
WIAN: So much that homes are buried up to their roofs.
In Colorado, rescue cruise continue to search for two skiers lost in separate incidents. They believe helicopters have spotted one. No word on the other.
In Nevada, the town of Overton is almost completely submerged. Nearby a cargo train derailed because of high water.
Fifteen Arizona counties have declared states of emergency after storms there caused seven deaths.
Storms have even flooded homes as far east as Ohio.
And in California, the death toll has passed 25. And 800,000 homes have lost power.
Much of the nation is wondering why Californians live in the path of so many natural disasters.
ROPER: We have oceans that cause wave issues on homes. Earthquake faults, rivers and the mountains. It's part of the beauty of the state of California, and I don't believe that there's a way to really prevent people from evoking their private property rights and living where they want to.
WIAN: California motorists, already used to driving on some of the nation's worst roads, now find even fewer options to move around their soggy state.
UNIDENTIFIED MALE: One twenty-six is closed; 166 is closed; 150 and probably any other number you can think of. Anything that way is closed.
UNIDENTIFIED MALE: We've been stranded here since yesterday. We thought the roads and everything would be open by today.
UNIDENTIFIED FEMALE: They were telling me an alternate route which will be eight hours. I really don't want to do that.
WIAN: Driving conditions aren't likely to improve anytime soon. Governor Schwarzenegger's new budget, released during the storm, cuts funding for transportation projects by a billion dollars a year. That could mean delays in fixing storm-ravaged roads.
(END VIDEOTAPE)
WIAN: Even before the storm, a commission appointed by the governor warned that the state's transportation system is in crisis and on the verge of collapse. Now that some roads here have literally collapsed, paying for their repairs will be a big challenge, Lou.
DOBBS: Casey, thank you very much. Casey Wian. Thousands of American troops are helping tsunami victims in Indonesia. But incredibly, the Indonesian government has placed limits on what our troops can do.
U.S. Marines in Banda Aceh have scaled back their relief efforts because the Indonesian government has declared it wants foreign troops to keep a, quote, "low profile." The Marines have agreed not to carry their weapons, and the Marines will not set up a camp on Indonesian soil.
At the same time, the carrier USS Abraham Lincoln has steamed out of Indonesian waters. That's because Indonesian officials say the carrier can only conduct flight operations that are directly related to the recovery effort.
The United States, of course, has provided Indonesians with more assistance than any other country. And without that assistance, many more Indonesians would have died as a result of the tsunami.
Still ahead here, trade disaster. Our exploding trade deficit has set a new record. And in our "Face Off" tonight, we'll debate the issue of so-called free trade with two leading congressmen. And we'll ask why so few people realize that free trade is anything but free.
And a crisis in our National Guard. Is the National Guard in danger of becoming a broken force? The guard's top general will answer that question and more, next.
(COMMERCIAL BREAK)
DOBBS: Cubans who were apprehended, illegal aliens from Cuba during the boat lift. What happens there?
TOOBIN: Well, that's a really difficult problem. Because often you've had people convicted of relatively minor offenses. Their prison terms are up. But they are still held in custody year after year, because they can't be deported. The court essentially said, 6 months is it for holding them after they served their sentence.
DOBBS: And then what happens?
TOOBIN: Then, unfortunately, they're released into American society.
DOBBS: Well, that's absolutely nuts because you -- I mean, that's a Supreme Court making a decision, one that's well beyond its purview.
TOOBIN: And what you have, particularly with Justice O'Connor saying Congress please, step into the breech here, pass a law so that we can solve this problem rather than release these people willy nilly. DOBBS: It would be nice to find someone, Jeffrey, in charge either on Capitol Hill or at the Supreme Court. That would be very nice indeed.
TOOBIN: Today is not a day where rationality seems to have had a big day at the Supreme Court.
DOBBS: Jeffrey Toobin, as always, thank you for bringing your insight.
TOOBIN: OK, Lou.
DOBBS: President Bush tonight promising to spend his political capital in order to give millions of illegal aliens in this country legal status. The president told the "Washington Times" that he plans to force a debate in Congress on his controversial immigration proposals. The president predicted he would win that debate just as he did with tax cuts.
President Bush also said giving millions of illegal aliens in this country legal status would in, his words, take a lot of pressure off our borders. Hard to argue.
One Republican in Congress, however, is already leading a revolt against the president's plan. Congressman Tom Tancredo of Colorado said the plan will only encourage more illegal aliens to cross our borders and break more of our laws. Congressman Tancredo says he has the support of at least 180 of Republicans in this Congress to defeat the president's proposals.
In our special report tonight, "Overmedicated Nation" big drug companies are under attack for putting profits ahead of patient safety. Critics say the industry brought the problem on itself by promoting high-cost prescription drugs and hiding negative research reports. Drug company executives now say they are working to change all of that. Christine Romans has the story.
(BEGIN VIDEOTAPE)
CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): The most profitable, powerful industry in America has an image problem.
FRAN HAWTHORNE, AUTHOR: They make products that save people's lives, that cure people, that make people better. And they are down there in the dumps with tobacco, which makes a product that kills people.
The industry that strives to find cures for cancer is so hated, and they've really done it themselves. It's completely their fault.
ROMANS: Their fault, she says, because drug prices are too high. Drugmakers push the newest, most expensive pills. They fight against reimportation from Canada and tie up cheaper generics in court. Drugmaker Eli Lilly says it needs profitable blockbusters to fund new medicines. SIDNEY TAUREL, CHMN & CEO ELI LILLY: It takes us 12 to 15 years to put a new drug on the market. It costs about a billion dollars. And those costs have to be recouped. You need a few of these very successful products to pay for the failures.
ROMANS: And there are many failures. According to Eli Lilly, of 5,000 molecules in the lab, just one makes it to market and only 30 percent of drugs ever make a profit.
But it's not just profits and prices that has given the industry a bad reputation. It's also safety. Vioxx was recalled. Celebrex and Bextra have serious cardiovascular problems. At best, drug companies downplay unfavorable clinical data. At worst, critics say they hide it.
The industry says that is changing. Bristol-Myers and Eli Lilly recently began listing all trial results on their Web sites.
DR. PAUL ANTONY, PHRMA: We're committed to making sure that that information is made available as quickly as possible to the people who can benefit from it.
ROMANS: Yet, public opinion is increasingly critical. The pharmaceutical industry's reputation is in steady decline. Less than half of those surveyed think the industry is doing a good job.
(END VIDEOTAPE)
ROMANS: Part of that may be their own marketing blitz has backfired. They spent millions marketing Vioxx and Bextra and Celebrex as if they were as commonplace as shampoo or toothpaste. And tonight the FDA has warned Pfizer, Lou, that its TV and magazine ads for its painkillers misled consumers.
DOBBS: As you say, it is a problem. And often perception and reality do have some relationship. Thank you very much, Christine.
Taking a look now at some of your thoughts on the issue of Social Security reform.
Elmer Read in Federal Way, Washington wrote to say, "I can't believe we are spending so much time and effort worrying about Social Security, a program which is self-funded through 2042. The conservatives are manufacturing a problem that doesn't exist at the expense of other more pressing issues."
Valerie Hunter-Bequette of Middletown, New York, "The president seems to have his priorities wrong. He isn't worried about outsourcing overseas. The loss of manufacturing to China or illegal aliens taking our jobs. But he is worried about Social Security. Doesn't he realize it won't matter if we don't have jobs?"
And Donna in Shelton, Ohio, "Lou, do you think Social Security might be in somewhat less jeopardy if all the jobs currently held by illegal immigrants were instead held by tax-paying citizens and legal immigrants?" We love hearing from you. E-mail us at loudobbs.com.
Turning now to a crisis in the national guard. The number of national guardsmen deployed overseas has risen from 5,000 to 120,000 in the past 3 years. That's left the force stretched and a lot of help is needed.
Last year the National Guard failed to meet its recruiting goals for the first time since September 11. In an effort to reverse the trend, guard officials have asked for $20 billion to raise the number of recruiters and replace damaged equipment, to increase training and provide greater resources.
Lieutenant General Steven Blum is chief of the National Guard Bureau. He's the head man joining us tonight from the Pentagon. General, good to have you with us.
LIEUTENANT GENERAL STEVEN BLUM, NATIONAL GUARD BUREAU: Well thank you, Lou.
DOBBS: Let me begin first, before we get into the money you need to provide for your force, the National Guard is in a role that it's never been in before certainly in the last 50 years. It is an active, significant, essential part of the war on terror, the wars in Iraq and Afghanistan, right?
BLUM: Absolutely, Lou. As it should be.
DOBBS: Why do you say as it should be.
BLUM: Well, because this nation should never go to war any time, any place for any reason without the National Guard. Because when you call up the guard, you call up America. And I think that has had a significant impact and sent a strong message to our adversaries and bolsters and makes and strengthens the fighting spirit of our soldiers.
DOBBS: Well general, as you assert that, let me give you a little push back, if I may.
BLUM: Sure.
DOBBS: The fact you say we should never go without the Guard, even when a situation as we have now, when we could not, in point of fact, carry out the mission without the Guard because we don't have enough regular Army soldiers.
BLUM: Well, it was never designed that the defense of this nation would be all done by active forces. Our founding fathers clearly wanted a strong citizen militia that would augment a small regular Army so that the citizenry would be behind the American soldiers when they had to go in harm's way.
DOBBS: You know, general, this brings up the other issue. Then I'm going to move on to others. The fact is through world wars, and from the beginning of the National Guard and the citizen militia and the citizen soldier, which is part of this country's very tradition, the fact is, we had a draft when we needed more men and women in uniform, isn't that correct?
BLUM: Absolutely, Lou. And I served in that draft Army. And I will tell you, 31 1/2 years ago, this country made a very good decision to walk away from the draft and to go to an all-volunteer force. These young men and women that are in service today are magnificent.
DOBBS: Oh, I believe you. And I completely agree with you about the quality of the men and women we have in uniform and the quality of our fighting force. I will tell you, general, frankly, I'm not as confident about all the decisions being made at the Pentagon, but I have absolute faith in our men and women in uniform and the ways in which they are carrying out their duties.
BLUM: We are in total agreement with that.
DOBBS: We are in agreement?
BLUM: We are in total agreement with the support of our troops and the quality and the fighting spirit they possess.
DOBBS: Outstanding.
General, let's turn to that $20 billion and why you need it.
BLUM: Well, I need it, Lou, to prevent this crisis that you've advertised. I didn't really know the National Guard was in crisis. I don't see it that way.
Actually, what I'm trying to do is to alert our political leaders and our military leaders and our policymakers that if we do not take some measures now, and we ignore the problems that are starting to develop, we could be in crisis. But we're far from in crisis.
Matter of fact, today you have the best National Guard this country has ever seen, most capable, most professional, most experienced force we've ever had.
DOBBS: When I use the word crisis, I hope I haven't fallen or lapsed into, if you will, the hyperbole that is so common in Washington today and the overuse of the word crisis. And if I have, I want to apologize to both you and our viewers tonight.
But in terms of the issues before you, you also have men and women in uniform, in the Guard, who are saying that there is not adequate training, there isn't adequate body armor, that they don't have the adequate resources.
While that may not be, as you suggest, a crisis, it is certainly a deep-seeded need that you are trying to address. How quickly do you need the $20 billion? And how soon will our fighting men and women in the Guard get that equipment and training?
BLUM: Well, frankly, I needed 20 billion over the next -- I don't need the whole 20 billion over the next three years, but I need about 5.5 billion over the next three years so that we can sustain our operations overseas, as you rightfully stated. We have about 120,000 citizen soldiers and airmen deployed all over the world. And right now there's about and will be very soon, about 50 percent of the combat force in Iraq and Afghanistan will be national guard and reserves. So it's very important that we get them the equipment and the funding they need to be ready.
The other 15 billion that we're talking about existed prior to 9/11 when we were a strategic reserve intended to show up to World War III in the late innings of the game, so to speak. But now we're being used as an operational force both here at home and abroad. Those shortages of equipment, which total up to about $15 billion, need to be addressed over the next years so that we have a ready and fully equipped national guard.
DOBBS: General Blum we thank you for being here to talk. We thank you for your service and of that of all the men and women you command.
BLUM: Thanks, Lou. Thank you very much.
DOBBS: NASA's deep Impact Space probe tonight has entered a safe mode because of a technical glitch on board. NASA launched the spacecraft on a $330 million collision course with a comet this afternoon. Deep Impact blasted off from Cape Canaveral this afternoon. Its mission is to slam into the comet Tempel 1 on the 4th of July. And it will capture a picture of what's inside. Scientists hope this mission will provide details about the makeup of the solar system. Deep Impact is now awaiting a signal from earth to repair whatever damage there was to the system. We'll keep you posted.
And still ahead -- this country is exporting its wealth to China in record amounts. Next in our face-off, a debate on whether we need to drastically overhaul our trade relationship with China and come to terms with what is clearly failed trade policy.
And securing your future. A former commerce secretary will tell us why he says the president's social security reform proposals send a dangerous signal.
(COMMERCIAL BREAK)
DOBBS: In our "Face-off" tonight, the cost of so called free trade. Our nation's trade deficit is expected to reach a staggering $600 billion plus for 2004. Our deficit with China accounts for just about a quarter of that. This exploding trade deficit has caused many to call for an overhaul of our trade relationship with China, reform of our trade policies.
Congresswoman Marcy Kaptur is among those calling for such changes. She said our trade deficit with China is got to be dealt with -- has got to be dealt with and this country can't afford to lose anymore jobs.
But congressman Matt Foley of Florida changing our trade relationship with China could lead to higher prices in this country, not necessarily lead to more jobs.
We thank for being here. Good to have you here. Let me begin with you, Congresswoman Kaptur, you have been focused on this for a lodge time. This isn't getting any better, is it.
REP. MARCY KAPTUR (D), OHIO: No, it's getting substantially worse and there is nothing normal about our trade relations with China. We've lost over 1.5 million jobs in the last decade. We're slated to lose another 875,000 by the year 2010. We now have the largest trade deficit between two nations of the world in the history of the world. This past year, 160 billion with China, and two years ago, the first Chinese company to be listed on the New York Stock exchange had its assets seized in Yaling (ph) Province in China by the then-governor, who was promoted, Mr. Bo Xilai to the current minister of commerce in the nation of China. There is nothing normal about that plunder.
Congressman Foley, your response response?
You're a bright, sensible, able servant. You believe in the concept of free trade. This isn't free trade, is it.
REP. MARK FOLEY (R), FLORIDA: No, it's not free trade and it's not fair trade and that's why Secretary Evans is there today to insist that china live by the rules in which they negotiate. They sign an agreement and then the Chinese negotiate that agreement. It's really a one-sided one-size fits all. And we have to become more direct and more combative with them. Because they have to start cracking down on property rights and some other things that they fail to do.
DOBBS: Lets go through some things, Congressman Foley, if I may interject here. One, lets face facts, there are communist nation. Two, there are no intellectual property rights, there are no property rights, there are no labor protection, of any kind there, there is no environmental protection. They have amongst the lowest wages in the world and we're being forced by U.S. multinationals, this administration, and the previous administration, the Clinton administration, to put our middle class into direct competition with that kind of nation with that kind of labor force.
How can anyone rationalize it?
You said to get tougher, how about smarter?
FOLEY: Well, I agree getting smarter but the double-edge sword here we have is constituents want to buy products cheaper at Wal-Mart or somewhere else and the only place we can get them cheaper is through China. Now, I would urge the Democrats as well, to look at trying to repair and reform tax rules in America, work on product liability reform. And not continue to increase minimum wage and other kind of benefits, family and medical leave act, if we are going to be competitive with nations like China who don't wear about their employers and don't care about workers' safeguards.
DOBBS: Congresswoman. KAPTUR: Well, I guess the way I would respond is I don't want to pull the American worker or small business person down to Chinese standards. I want to raise the world up. Where you have free trade among free nations, you have benefits to all. When you have managed trade with authoritarian regimes that have controlled currencies, you have a few winners and many, many losers. The United States ought to operate by the golden rule, free trade among free people. And where we ratchet up these gigantic trade deficits with authoritarian regimes, we ought to have special negotiations going on by our U.S. trade representatives in every single sector where these closed markets and closed currencies have not allowed our products to compete on a level playing field. Those are not going on.
DOBBS: Congressman Foley, you get the last word.
FOLEY: And I agree, Marcy. Marcy, I agree with you on those points but I also want you to ask your constituent, are they willing to forego the purchase of Chinese merchandise? Because that is what is driving the market.
KAPTUR: Well, let me just say this. My workers would like to make those goods not just buy them. We need to be more peddler, we need to be producers.
DOBBS: Congresswoman Kaptur, and Congressman Foley, we thank you both for being here.
FOLEY: Thanks, Lou.
DOBBS: We hope is part of a debate that will be resolved very quickly. Maybe this year, what do you think?
FOLEY: Well, it's heating up. It's heating up, Lou, very much on all sides of both aisles are worried about the Chinese trade deficit. You're not alone.
DOBBS: Thank you, we appreciate it. Thank you both for being here. Just ahead, just how secure is our Social Security?
Is the Social Security broken or is the government broken?
Former commerce secretary Pete Peterson joins us next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Social Security reform looks to be the key political issue of the early part of this year in Washington. President Bush said the system will go bankrupt unless Congress acts and acts immediately. My next guest has been sounding the alarm on entitlement programs, fiscal responsibility for a very considerable period of time. Pete Peterson is the president of the Concord Coalition and the chairman of the Blackstone Group, he was commerce secretary under president Nixon and it's good to have you here. Social Security, by golly, it's a mess and the president wants to fix it. Is it a mess? I thought it was fixed in 1983. PETE PETERSON, PRESIDENT, THE CONCORD COALITION: I noticed that letter that one of your listeners put in that the Social Security trust fund is going to keep solvent until 2042, what's the problem? I think it is time we told the American people the rather melancholy truth. The Social Security trust fund...
DOBBS: Wait a minute. Let's let America get ready because they're not getting a lot of it.
PETERSON: The Social Security trust fund is what I call a fiscal oxymoron. It shouldn't be trusted and it's not funded. And whether you have one or not you still have to go out and do the same thing three things. You either have to try to borrow the money or you're going to increase taxes or you are going to cut the benefits. Now, how much would you have to borrow? Preparing for this occasion, I asked the Concord people. In 2018, the system starts moving cash flowed deficit. Between 2018 and 2042, we would have to borrow $5.4 trillion in current dollars to finance those deficits. Or if you want to increase taxes to pay for the benefits, taxes would have to go up from 11 percent of payroll to 18.
DOBBS: You have a lot of folks hearing these numbers and they're saying my god it sounds like a problem. It is a problem.
PETERSON: It's not a crisis today but it is a problem.
DOBBS: Let's talk about the truth. The Social Security system right now has a surplus approaching $2 trillion. The Medicare/Medicaid has a surplus of about a quarter of a trillion dollars and it's dwindling faster than Social Security. Which is the greater issue in terms of unfunded liability, which is the greater crisis?
PETERSON: Medicare is the big elephant in the room.
DOBBS: Why isn't anyone talking about it?
PETERSON: That's a good question. We all pretend we don't see it and we hope nobody else points it out.
DOBBS: Well, I'm going to point something else out. You want to talk truth, I want to talk truth and that's why we're friends.
PETERSON: Medicare is three to five times the serious problem in terms of...
DOBBS: Why in the world isn't the administration talking about that?
PETERSON: Because it's so tough to solve.
DOBBS: Exactly.
PETERSON: It's a much tougher problem to solve than Social Security. Much tougher because we're dealing with critical life and death, ethical choices. DOBBS: Let's talk about another important choice, and that is, the fact is that -- that tax that we all pay on Social Security every month, that money is brought in by the government, we have a surplus, where is that money?
PETERSON: We've spent it.
DOBBS: Oh!
PETERSON: We may have told the American people that we were setting it aside in a quote, "trust fund." We spent it on other subjects. Shock of all shocks.
DOBBS: Oh, my goodness.
PETERSON: And you can't spend the same money twice I don't think.
DOBBS: Not even the federal government?
PETERSON: Not even the federal government.
DOBBS: So the fact is we have invested that money in securities in the United States government, for example. So we have let the government borrow from our trust fund. As you say it's neither funded nor should we trust it and we're talking about adding $2 trillion in transition cost to a fiscal, fiscal arrangement that's already broken.
PETERSON: Let's talk about that. One of the most serious problems facing this country is this huge trade deficit and the current account deficit we're borrowing $2.5 (UNINTELLIGIBLE) a day.
DOBBS: Yes, sir.
PETERSON: The last thing in the world we ought to be doing is telling financial markets, oh, folks, what's another $2 trillion or so? Paul Voelker has told me that he thinks there's a 75 percent chance of a dollar crisis within five years. We should not be telling them we are nonchalant about borrowing another $2 trillion.
DOBBS: Well and when I hear Pete Peterson say it, that's good enough for me. Pete, it's good to have you here. We will talk more about this. I hope you will come back soon as we will start finding out where the real crisis, who's got the money, and what's really broken. I think we agree that Social Security has some problems.
PETERSON: Medicare is the big one, baby!
DOBBS: Pete Peterson, thank you.
PETERSON: Thank you.
DOBBS: Still ahead, the results of tonight's poll and a preview of what's ahead tomorrow.
(COMMERCIAL BREAK) DOBBS: Now the results of our poll tonight. Sixty-seven percent of you say it is time for both political parties to reevaluate existing trade policies. A third say not.
Thanks for being with us tonight. Please join us here tomorrow. We'll be talking about the politics of tsunami relief. Why some countries, including France, have come under fire for their donations or their lack of donations. The head of the USAID will be my guest.
And tomorrow why one of the president's fellow conservatives wants to undo President Bush's most trumpeted accomplishments and how our trade policies with China are leaving some of our most vital industries eviscerated.
For all of us here thanks for being with us. 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
