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Lou Dobbs Tonight
The State of Our Union: The View Outside the Beltway; Free Trade Endangering U.S. Jobs; U.S. Medical Technology And Health Insurance; Quality Teachers And Good Pay; U.S. Dependence on Foreign Oil
Aired January 31, 2006 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is a special edition of LOU DOBBS TONIGHT for Tuesday, January 31, "The State of Our Union: The View Outside the Beltway."
Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening, everybody.
Three hours from now, President Bush will deliver his fifth State of the Union speech. Tonight on this broadcast we will report on the real state of our union, no spin, no denial, but a nonpartisan, non- ideological view of the reality that makes up this country coast to coast.
We're live all across the nation with our special reports on the issues that matters most to working men and women, middle class Americans, from health care to educational opportunity, to the outright war on our middle class.
We'll also be talking with a former adviser to four presidents and three of the finest political commentators in the country.
We begin tonight with the anticipation of the president's speech.
President Bush hopes his address will lift his poll numbers and set the tone for the midterm, congressional and senatorial election campaigns. President Bush and Republicans face major challenges.
The American electorate is dissatisfied with the president's conduct of the war in Iraq and frustrated with the rising cost of health care, unchecked illegal immigration, and record budget and trade deficits, deficits that threaten the short and long-term health of our economy. This is an economy that's not creating high-paying jobs, and those who have jobs are watching their real wages decline.
Tonight, we turn first to Dana Bash at the White House, who has obtained excerpts of what the president will say this evening -- Dana.
DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Lou, the president is going to talk about all of the issues in some shape or form that you just talked about. But the White House has been making it clear that the president wants tonight to start a debate about America's role in the world and talk about the need to stay engaged.
So here is an excerpt of what he'll say.
He'll say, "In a complex challenge time, the road of isolationism and protectionism may seem broad and inviting, but yet it ends in danger and decline. The only way to protect our people, the only way to secure the peace, the only way to control our destiny is by our leadership. So the United States of America will continue to lead."
That's his message on the leadership around the world.
Here's his message on his personal leadership in this country.
(BEGIN VIDEOTAPE)
BASH (voice over): It will be a more humbled George W. Bush in this State of the Union, with a domestic agenda designed to be consumer friendly and less risky than before.
UNIDENTIFIED MALE: You don't throw things that are unachievable. You don't line up Don Quixote missions. But what you do is you go back to your basics, you go back to your roots.
BASH: Mr. Bush will pitch new initiatives that will be met with resistance, but nothing on the sweeping scale of his first term tax cuts and his bold failed call last year.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... that solve the financial problems of Social Security once and for all.
DAN BARTLETT, COUNSELOR TO THE PRESIDENT: I think on Social Security particularly is that we have found that Congress doesn't act typically unless there's a crisis.
BASH: Bush aides describe the speech as a national pep talk for a country plagued by pessimism after a year of violence in Iraq, a sluggish government response to tragedy at home, layoffs and pinched pocketbooks.
At home, Mr. Bush will propose giving individuals more help with health care costs and choices and push more alternative fuel like ethanol. He will say point blank, "America is addicted to oil, which is often imported from unstable parts of the world. The best way to break this addiction is through technology."
Aides say one election year promise is more narrowly focused at antsy conservatives.
TOM RATH, RNC: And continued reduction in spending, continued reduction in the growth of government, I think that is something that the rank and file Republicans very much want to hear.
BASH: On the international front, Mr. Bush will challenge Iran to give up its nuclear ambitions, spend extensive time trying to reassure the country about the Iraq war and his stewardship, and make the case for America staying engaged around the world on the security front, and announce new initiatives to stay competitive on the economic front. BARTLETT: I think the best way to say it is that when America leads, America wins.
(END VIDEOTAPE)
BASH: And on that note, we have another excerpt of what Mr. Bush will say. He will say, "The American economy is preeminent, but we cannot afford to be complacent. In a dynamic world economy, we are seeing new competitors like China and India."
"We must continue to lead the world in human talent and creativity. Our greatest advantage in the world has always been our educated, hard-working, ambitious people, and we're going to keep that edge."
And to that end, Lou, Mr. Bush will propose some initiatives, talk about the need for more money for research and development to continue with innovation in the United States, and also more money for math and science education, even more teachers to help out on the high school level and elsewhere on those particular issues, math and science -- Lou.
DOBBS: Thank you very much.
Dana Bash, from the White House.
It is difficult to imagine that President Bush tonight will address the issue of class warfare in the United States. But the war on our middle class is real, and it is intensifying. And middle class working Americans are losing their struggle against special interests, the dominant political power of corporate America in Washington and business practices that seem designed to destroy the foundation of this economy and our society.
Our middle class is the least represented group in Washington, and middle class families are under a tremendous financial and social strain to remain in our middle class, a struggle that is far more difficult for them than for their parents.
Christine Romans has the story of one American middle class family from Clermont, Florida.
(BEGIN VIDEOTAPE)
CHRISTINE ROMANS, CNN CORRESPONDENT (voice over): The Simmens family is today's middle class American family.
ADAM SIMMENS, MIDDLE CLASS FAMILY: Middle class is living paycheck to paycheck. It is struggling to get by.
ROMANS: Adam works for a private security firm. Stephanie teaches third grade and tutors after school. At $55,000 a year, they're above the median household income of $44,000.
(on camera): You're above -- you know, you're above average.
SIMMENS: Right, but I'm also working almost 70 hours a week to do it.
ROMANS: Right.
SIMMENS: And she's working, you know, eight, nine, 10, 11-hour days at school, too, besides tutoring.
ROMANS (voice over): Long hours to pay Stephanie's college loans, the family's health insurance, two car payments and a $1,600 mortgage. Then there's gas and diapers.
Brooke (ph) is 17 months old, and another child is on the way. Stephanie's original plan was to take time off to raise her kids.
STEPHANIE SIMMENS, MIDDLE CLASS FAMILY: When we first had Brooke (ph), we had sat down, we mapped out our bills, done we had everything, how much, you know, everything was going to cost for me to stay home. And for quite a while, it was a possibility.
ROMANS: But now they depend on grandma for childcare.
Author Elizabeth Warren says there are tens of millions of family just like the Simmens.
ELIZABETH WARREN, AUTHOR: This is the story of middle class America today. You have to have an upper class income in order to support a middle class life.
ROMANS (on camera): The Simmens family lives in one of the fastest-growing states in the country with jobs growth, a housing boom. Why then is it so hard to stay in the middle class?
(voice over): It's easy to say that American families are spending themselves into debt, but the Simmens live modestly and avoid credit card debt. What's hammering American families, the basics.
Last year, health care cost rose four times faster than income. College costs, three and a half times faster. Child care, double the rate of income growth.
UNIDENTIFIED FEMALE: Classically middle class folks, people who are our firefighters, our teachers and our police officers, cannot survive in the middle class today without a second income.
ROMANS: Classically middle class folks like the Simmens family.
A. SIMMENS: For now, I will -- I'll keep doing whatever I got to do to provide for my family. I will do whatever I have to, you know, make sure there's food on the table, make sure, you know, we keep the roof over our heads, and try not to let my kids wants for much. But it's going to be hard.
ROMANS: Christine Romans, CNN, Clermont, Florida.
(END VIDEOTAPE)
DOBBS: David Gergen served as adviser to four presidents, both Republican and Democrat. Few people better understand better the daunting task facing a president with the lowest approval ratings in his second term since Richard Nixon. That is the situation for President Bush tonight. And few presidents have experienced poll numbers that reflect such a decided concern about the direction of this country.
David Gergen, with such profound malaise apparent in the nation, it's unrealistic, is it not, for the president to be expected to reverse his poll numbers without reversing his policies? Certainly the tone of his leadership?
DAVID GERGEN, FMR. PRESIDENTIAL ADVISER: It's very difficult, Lou. I don't think he can do it in one speech. And moreover, you know, his hands are somewhat tied in terms of what he can do because he has no more money. This government has run up such big deficits, there is nothing left in the till to address this middle class squeeze that they assault on the middle class you've been talking about.
One initiative the president will put on the table tonight is on health care savings accounts to try to reduce the inflation rate, enable people to cope better with the rising cost of health care. Many people will say, listen, I don't have money to pay for those savings accounts. What money do I have left to save? You know, the savings rate in this country has gone to zero, as you know.
DOBBS: The savings rate, we should point out, is the lowest since 1933 in this country.
GERGEN: Absolutely. And it's -- and one of the reasons the Chinese are doing so well is that they -- and the Asians, is their savings rates are much, much higher than ours. And we don't have the savings rate -- people don't have the savings to put aside.
But the other thing, Lou, is there's nothing in this speech tonight that we've heard about that would curb special interest groups in Washington. There's nothing here that at least so far that we've heard about that would curb the lobbying that has been so -- I think so excessive and has been reflected in the Abramoff case.
So whether the middle class will hear this speech tonight and say that relief is on the way or not I think is a big, big question just a couple of hours before the speech.
DOBBS: And the middle class should be, one would think, the center of the focus of both the Democrats and the Republicans. To this point, they've given themselves up to their corporate masters, and, in fact, neither party, even the Democratic Party with its traditions, is focusing on the needs of what is the foundation of this country, our middle class.
GERGEN: Well, that's right. There's a fellow named Ernie Cortez (ph) who's a big organizer of the Hispanic community in the South, and he told me once a couple years ago, you know, the Republican Party increasingly speaks for people who make more than $200,000 a year and the Democratic Party increasingly speaks for people who make more than $100,000 a year. Who speaks for people who make $40,000 to $50,000? DOBBS: David Gergen, thank you.
GERGEN: Thank you.
DOBBS: Coming up next here, the reality of our borders and our lack of border security. The long battle against illegal aliens, drug smugglers and the prospects of terrorists, the view tonight from Yuma, Arizona, next.
And to the West, Silicon Valley, a crisis in America's technological capital. We'll have that special report.
And American public schools continue to fail our students four years after No Child Left Behind.
We'll be right back.
(COMMERCIAL BREAK)
DOBBS: President Bush has a chance tonight to show the country that he is finally committed to solving our nation's border emergency. But instead, President Bush is expected to push for his unworkable guest worker program which even fellow Republicans refer to as amnesty for illegal aliens. It will be a missed opportunity in an ever- worsening crisis.
Casey Wian reports from the border town of Yuma, Arizona.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice over): This lonely stretch of the Colorado River near Yuma, Arizona, is one of the gaping holes along our nation's southern border. Chief Deputy Sheriff Leon Wilmot takes us down a freshly cut dirt road, the work of smugglers.
LEON WILMOT, YUMA CHIEF DEPUTY SHERIFF: They're coming up here, clearing out certain areas along this river where they can actually transport either their drugs and/or or the illegal aliens.
WIAN: Tire tracks and sandbags used as makeshift bridges a virtual welcome mat to cross the border illegally.
WILMOT: There's no fences. There's nothing that would stop anybody from crossing anywhere along here.
WIAN: That's true for vast stretches of Yuma County's 90-mile border with Mexico. Here, a Pemex gas station off a busy Mexican interstate highway offers a convenient entry to the United States. There's no fence, no border patrol for miles, only tire tracks and footprints heading north.
Just inside the United States we find this abandoned pickup truck. It's stolen, the rear windows are blacked out, a typical smuggler's ride. A few miles north off a dirt road, another find.
UNIDENTIFIED MALE: Come on, senior. Get up. We see you. WIAN: An illegal alien hiding in the brush. Another man emerges. Behind him, two women. In all, there are six who say they crossed back near that Pemex station three hours earlier. Some were heading to Phoenix, others to L.A.
Deputies call the Border Patrol and are told agents will arrive in 10 minutes. Instead, it takes well over an hour. The Border Patrol says agents were busy on other calls. The aliens will be checked for criminal records, deported, then try again tomorrow.
MAYOR LARRY NELSON, YUMA, ARIZONA: The people of this nation, I don't think, will accept any immigration policy that does not include sealing the border.
WIAN (on camera): And when you say sealing the border, what do you mean?
NELSON: I am saying...
WIAN: You're talking about...
NELSON: ... securing the border so people can't just at will get through that border with any of the bad stuff.
WIAN (voice over): Last year alone, about 2,400 cars drove across the border illegally in Yuma County. Half of those resulted in law enforcement pursuits. More than 100 officers were assaulted.
Yuma's sheriff estimates 75 percent of the crime here is related to illegal immigration.
RALPH OGDEN, YUMA COUNTY SHERIFF: It just seems like everybody from the ground level up is talking about it. And they say, we've really got a problem, we've really got to address it. We've got to address not only the people coming in, but what we're going to do with the ones that are here.
And then it sort of goes out in an ozone layer somewhere and nothing gets done. And it's very frustrating from our level.
WIAN: Farmers here depend on labor from Mexico, but they're fed up with smugglers trespassing on their land, stealing their tractors and driving them back into Mexico.
JIM CUMING, FARMER: We just need to enforce our laws. It's time that we quit pussyfooting around.
WIAN: Washington has made some efforts. More border patrol agents are here. They're building barriers to stop cars from crossing, but it's clearly not enough.
(END VIDEOTAPE)
WIAN: Locals we talked to say they want the president to offer a comprehensive solution to the border security crisis in his State of the Union Address tonight. But they're not expecting much because so little progress has been made so far -- Lou.
DOBBS: Casey, thank you very much.
Casey Wian, from Yuma, Arizona.
Joining us tonight throughout this broadcast with their thoughts on the state of our union, former White House political director Ed Rollins; "Wall Street Journal" columnist John Fund; Democratic political consultant, Hank Sheinkopf.
Gentlemen, thanks for being here.
Let me turn to you first, Ed Rollins.
The president, as David Gergen said, has opportunity. We have highlighted some of the issues.
What do you expect of the president on the issues that we've raised to this point?
ED ROLLINS, FMR. WHITE HOUSE POLITICAL DIRECTOR: Well, I think his immigration is going to be dead on arrival if it does contain guest workers. And I think the reality is that there will be nothing in here that will be about blue collar.
I mean, the health care crisis, to try and do it alone, is not -- is not solvable. The Democrats found that out. So I think he's going to have a tough time. The best thing for him is to project some leadership and some strength by talking about something that they can actually do.
DOBBS: Hank Sheinkopf?
HANK SHEINKOPF, DEMOCRATIC POLITICAL CONSULTANT: The president's got to talk about middle income people in the heartland, particularly in the Midwest, or the Republicans will be in significant trouble in this midterm election. It's just that simple. He needs to talk about hard and fast economic changes and things he will do to protect those people.
DOBBS: John Fund, the president tells us that everything is just hunky-dory, that the economy is booming.
What do you think he's got to do tonight?
JOHN FUND, "WALL STREET JOURNAL" COLUMNIST: I think he also has to address the long-term problems, including entitlements, because he had the Social Security problem.
On immigration, Casey mentioned the people want a comprehensive solution. I'll agree.
I was born in Arizona. I was down there a few weeks ago. I know the border issues. You need enforcement, but you also -- and the polls show this -- two- thirds of people also say in the long term you need an enforceable, identifiable guest worker program without amnesty.
DOBBS: An important qualifier.
FUND: But you can do both, and you have to do both. You can't just do it with enforcement alone. And the polls show that. People know that.
DOBBS: Let's talk about a little later in the broadcast what people do know in this country, people considerably smarter than often given credit for by our politicians.
And we thank you, gentlemen.
Ed, John and Hank will be with us throughout the broadcast here.
In our poll tonight, tell us, do you expect hear President Bush tonight say anything approaching these words: "The middle class is the foundation of American society"?
Cast your vote at loudobbs.com. We'll bring you the results here later in the broadcast.
Coming right up, free traders told us not to worry about the loss of millions of manufacturing jobs in this country, but the American economy is now a technology economy, they said. Now the United States is number two to communist China.
How can we have allowed this to happen? What are we going to do to fix it?
Also tonight, cutting-edge medicine that could save your life out of reach to many middle class Americans.
That's story coming up as our examination of the state of our union continues.
(COMMERCIAL BREAK)
DOBBS: One of the fundamental threats to this country and our economy, the explosive rise in our trade deficit. For many years now, the Chinese have been overtaking the United States in manufacturing. Now communist China is threatening U.S. leadership in technology.
Peter Viles reports from Silicon Valley, California.
(BEGIN VIDEOTAPE)
PETER VILES, CNN CORRESPONDENT (voice over): In Silicon Valley, signs of life. New software firms like Cassatt moving into vacant office spaces.
But look closely. Empty cubicles, office spaces so cheap, Cassatt rents way more space than it needs. And overall, the valley has lost 212,000 jobs since 2000.
PETE BENNETT, SOFTWARE PROGRAMMER: I run into people that were laid off and then they lost their position at X wage, and when they went out to get a new job, they came back in at another company sometimes 30, 40 percent lower than they did before.
VILES: Economic pressure coming from a surprising source: China.
BILL COLEMAN, CEO, CASSATT CORP.: Basically what surprised me is how fast China is moving.
VILES: Bill Coleman doesn't feel the pressure yet, not in cutting-edge software. But he knows it's coming.
COLEMAN: It will take several generations, as a recent study at Stanford pointed out, to get the level of innovation and the innovation climate to what -- to a parallel of what's happening here in Silicon Valley, but it will happen. This is the challenge that America faces.
VILES: Right now that challenge looks more like a row. Last year, China zoomed past the United States as the world's biggest exporter of information and communication technology. And head to head, China's been winning for years.
In information and communication technology, America ran a $14 billion trade deficit with China in 2002, $24 billion in '03, $39 billion in '04, and nearly $46 billion in the first 11 months of last year.
ALAN TONELSON, AUTHOR, "RACE TO THE BOTTOM": China is still very much a student in technology policy, but it's learning very quickly, in large part because it's got the world's best teachers, that is to say, U.S. multinational companies in technology areas. They have been transferring much of their very best and most militarily relevant technology not only to Chinese factories, but to Chinese laboratories.
VILES: At a time when foreign competition is increasing, American schools are failing, failing to produce enough software engineers.
UNIDENTIFIED MALE: Today, over 53 percent of the engineers that work in Silicon Valley are foreign-born. They were mostly educated in the U.S. university education system, but they're foreign-born. That is an indication of the challenge we have of educating K through 12.
VILES: Software engineering is one of the most lucrative jobs in America, paying well over $100,000 a year, and yet American schools can't prepare enough kids to do it.
(END VIDEOTAPE)
VILES: A lot of different ways to measure economic health. But here's a very basic one, median household income. And in Silicon Valley, Lou, median household income has declined now for four consecutive years -- Lou.
DOBBS: Peter, thank you very much.
Peter Viles from Silicon Valley.
Coming up next here, we'll have more details about what President Bush will likely say in his State of the Union Address tonight. We'll be live at the White House. We'll have more from our distinguished panel.
And then, life-saving medical innovations, but can you afford them?
And a record trade deficit, a record budget deficit. American small business in peril. Is our entire economy?
That story is coming up next.
(COMMERCIAL BREAK)
ANNOUNCER: This special edition of LOU DOBBS TONIGHT, "The State of Our Union," continues.
Here again, Lou Dobbs.
DOBBS: President Bush is counting on tonight's State of the Union Address to bolster his sagging poll numbers. Tonight, the White House is giving new details of what the president will say in his speech. We're going live now to the White House and our Dana Bash -- Dana.
BASH: Well, Lou, we talked a short while ago about the fact that the president is going to make the case for staying engaged around the world in terms of economics and in terms of national security. And on that note, we do have another excerpt from what the president will say tonight.
He will say, "Abroad, our nation is committed to an historic, long-term goal. We seek the end of tyranny in our world. The future security of America depends on it."
Now, the president will talk about some of the hotspots you would expect. He will, we are told, be very forceful when it comes to Iran, talk about the need for that country to stop its nuclear program, but also try to speak out to the people of Iran, rather than the leadership of Iran as well.
We also know that he is going to talk extensively, as you would imagine, Lou, about the war in Iraq, once again urging American patience and saying that the commitment, now almost four years, is worth it -- Lou.
DOBBS: Dana Bash from the White House.
Thank you.
President Bush tonight is expected to address the issue of runaway health care costs and eroding medical benefits for working men and women in this country. Ironically, America's leadership in medical care remains unchallenged. Our nation's medical facilities offer life saving treatment that are the envy of the world, but at the same time, millions of us can't even afford a checkup. Kitty Pilgrim reports from Cleveland, Ohio.
(BEGIN VIDEOTAPE)
DR. TOBY COSGROVE, CEO, THE CLEVELAND CLINIC: OK, I have a hole in the micro valve here. Can you see what I'm holding onto?
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Dr. Toby Cosgrove has stopped this man for nearly an hour to reconstruct a heart valve. It's a technique pioneered here at the Cleveland Clinic, and many of the instruments being used in this operation, Dr. Cosgrove developed himself.
This patient has had the same operation the day before and is already well into recovery. He's grateful for the skill found here at the clinic, and even more grateful his insurance covered it.
UNIDENTIFIED MALE: Phenomenal. Phenomenal.
UNIDENTIFIED MALE: I'm very pleased.
UNIDENTIFIED MALE: Thank you.
PILGRIM: But 46 million people in this country have no insurance. That has been increasing an estimated million people a year since 2000. A mile way at the Cleveland Free Clinic, treatment is free to people who need it, patient volume was up 20 percent last year. Cleveland is a microcosm of what is going on across the nation, the substantial loss of manufacturing jobs and modest growth in service jobs without benefits.
GAIL BROMLEY, THE CLEVELAND FREE CLINIC: The majority of people are about 100 percent above the poverty level. But what's pretty remarkable is when you talk to patients, they can be working one, two and three jobs and yet they still can't afford healthcare or healthcare insurance.
PILGRIM: Congressman Dennis Kucinich of Ohio says medical expenses are the number one concern for Americans and a leading cause of bankruptcy.
REP. DENNIS KUCINICH (D), OHIO: There is no family in this country that can be so assured of their income level that they can be sure that one illness will not wipe them out financially.
PILGRIM: Over at the Cleveland Clinic, feelings are equally strong about having the world's best medicine available to all U.S. citizens.
COSGROVE: We have to decide what we want as a nation. I think it's very important that we have a dialogue and the country understands A, what we want; B, how much it's going to cost to do that.
(END VIDEOTAPE)
PILGRIM: This country has the highest medical standards in the world. That's something that every American should be able to enjoy, and what's needed is the political will to change the system -- Lou.
DOBBS: Kitty, thank you very much. Kitty Pilgrim, live tonight from Cleveland.
Back now with our panelists. Let me turn to you first, if I can, Hank. The idea that we have such a distorted healthcare system, a president with an opportunity to take leadership here, why isn't the Democratic Party -- it's been unsuccessful in doing so -- the Republican Party. What opportunities exist for the president?
SHEINKOPF: The president, if he were smart and were worried about the future of that party going to the 2006 mid-terms would say something strong about healthcare and the fact it ought to be provided for every American.
He can't do that. He's the captive of an established party that has never had that in their sights. And the Democrats, frankly, are waiting for him to flop. Why? So they can hopefully win the Congress back. So you won't see much action this year, I don't think.
DOBBS: Ed, are you concerned about that lack of inaction?
ROLLINS: I'm very concerned because you are going to see budget cuts in a few weeks that are going to cut more benefits away from the doctors who are providing the healthcare, and you're paying for those high-tech things, but you're not paying for physicians who can do ordinary examinations and that's what helps prevent long-term health problems.
DOBBS: John, the situation in this country is that benefits are continuing to erode, corporate America is cutting back, and employees when they have jobs are going to be paying more of their medical care.
And there is a philosophical ideological view that they should be, in some quarters. But the same time, there is no planned proposal, idea or innovation as to how to provide for those 46 million Americans.
FUND: Oh, yes, there are. Over half our healthcare budget is provided by government. They drive the problems in the private sector that leads to all that medical innovation. They also mandate all of the restrictions that mean you can't provide cheap, reasonable insurance policies for people.
Ninety percent of the healthcare costs in this country are paid by somebody else other than the person getting the service. That drives up costs. We have seen costs fall in every other aspect in our economy except healthcare and education.
DOBBS: What's the solution? What is the solution? What is this president's solution? What is the Republican Party's solution? FUND: It's not the kind of nationalized healthcare system that Canada's Supreme Court just ruled last year kills people. It's more free markets, more choice, more entrepreneurship and getting the government out of the idea of micromanaging the private healthcare market.
DOBBS: The free market ambitions that you just expressed and the enthusiasm that you have for them is not working in any other area in terms ...
FUND: Have you looked at health savings accounts?
DOBBS: Excuse me, John, just let me ...
FUND: I can give you a list of 15 companies that helped cut their costs using health savings accounts.
DOBBS: Let me finish. That commitment to free trade, free markets is basically right now leading to an external trade debt of four trillion, it is leading to irresponsible consequences. The middle class, the working man or woman in this country, is paying for that consequence.
And the benefits are going to, if I may say, decidedly, the wrong people. We're going to let you have the final word when we come back on that issue. You'll have one of the final words.
FUND: Promises, promises.
DOBBS: Middle class jobs continue to disappear as working men and women are watching corporate America outsource their jobs by the hundreds of thousands to cheap foreign labor markets.
And so-called free-trade agreements are endangering almost every manufacturing and technology business in this country, and the livelihoods of all those who work in those fields. Lisa Sylvester reports from North Carolina.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Hertford, North Carolina, a river town of 2,000 people known for the baseball player Jim Catfish Hunter and cotton. In 1993, 500 people worked in the shirt factories.
Those were the days people remembered fondly, when it wasn't hard to make ends meet. Carl Terranova, the owner of the Apricot Textile Company paid his employees well above minimum wage.
CARL TERRANOVA, APRICOT, INC.: You'd have people making four to $500 a week. And they were making money, I was making money, so we were all happy.
SYLVESTER: But then the North American Free Trade Agreement, or NAFTA, passed.
TERRANOVA: Ross Perot, the great sucking sound? He was exactly correct.
SYLVESTER: The company's dollar value before NAFTA was about a million and half dollars a month. Thirty days after NAFTA took effect, Apricot's revenue trickled to less than a million dollars a year.
Terranova managed to find a new niche over and over again -- football jerseys and specialty wear for chefs. For more than a decade, the Terranova's tried to hold on, not just for themselves but because they knew the loss of jobs would ripple throughout the community.
BOBBY DARDEN, HERTFORD COUNTY MANAGER: In North Carolina the last 10 plus years, there's been a big decline in the number of manufacturing jobs, a lot of plant closings, and that's really hurt a lot of the county economies, especially rural county economies.
SYLVESTER (on camera): In 1993, North Carolina had just over 265,000 textile and apparel jobs. Then the North American Free Trade Agreement passed, and since then the state has lost more than 65 percent of those jobs.
(voice-over): The jobs shipped to Mexico, El Salvador, Honduras, Vietnam, and China.
MAYOR SID ELEY, HERTFORD, NORTH CAROLINA: I hate to get it to a point that we're so dependent on foreign trade and everything being made outside of the country. We need to make it here, and our people need to realize that we need to buy American.
TERRANOVA: When the niche markets leave also, there's a time when you just say, I've had enough.
SYLVESTER: Carl Terranova took over the textile business from his father, who had in turn inherited it from his father. But after suffering two heart attacks in recent years, Terranova had to let go.
TERRANOVA: It's terrible, telling everyone they have no more -- they don't have a job anymore. Not that the people weren't aware or couldn't intuit it, but rather having to say good-bye to everyone, you feel as if you failed, you know, not only on a financial level but on a personal level. It's very difficult.
(END VIDEOTAPE)
SYLVESTER: Carl Terranova and his lovely wife, Kathy (ph), they worry not so much about themselves -- he's going to go into general contracting. Their main concern is what is going to happen to their former employees, people who are in their 40s and 50s and cutting and sewing is all they know? Will they be able to make transitions into new jobs?
And this is a theme that President Bush will pick up on tonight when he talks about competitiveness and how the U.S. can best position itself to compete against countries like China and India. And I'm here in Kannapolis, North Carolina, right outside the Pillowtex plant, which is in the process of being demolished. When this textile plant closed its doors, it was the largest mass layoff in state history. We will sit down with some of those former Pillowtex workers and watch the State of the Union speech and get their reaction tonight -- Lou.
DOBBS: Thank you very much. Lisa Sylvester from Kannapolis, North Carolina.
Still ahead here, the state of our nation's schools. American high school students dropping out at an alarming rate. Our special report is next.
And "Red Far Rising," shipping containers arriving from China full, leaving the United States empty. How this country's failed and phony free trade policies have affected American workers and our future. That story is next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: President Bush tonight is expected to tout the No Child Left Behind program that has shown modest success, not as much as its proponents and advocates had hoped but not as little as its critics and opponents would have had you believe. There is no question we are failing an entire generation of students, however. We are denying them the opportunity for a quality public education, which has been a birthright of Americans for generations.
But there are reasons to hope. There is a growing movement in this country to hire quality teachers and pay those teachers what they deserve. Bill Tucker reports from Denver.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice-over): Denver's on the cutting edge of an evolution in education. Last November, city voters approved a dramatic change in the way teacher's pay is structured, offering bonuses for improvement in classroom performance and incentive pay for teaching in the city's under-performing schools. Already, it's having an impact.
KRISTIN WATERS, PRINCIPAL, BRUCE RANDOLPH MS: We've seen already teachers recognizing that if a student is not in class and is missing the work or is missing a test, how important it is to follow up with that student.
TAYLOR BETZ, MATH TEACHER: It's made me think a little bit differently, like a kid misses a test. That actually counts as a zero in my scores. What it does is make me go, I need to be on top of this.
TUCKER: Both Waters and Betz agreed last August to work in one of the city's poorest performing middle schools. The city of Denver sees teacher pay as one tool to achieving the goals of No child Left Behind. And while, the administration can rightly claim credit for rising test scores nationally. Within the education community, there is an ongoing debate about the law.
WILLIAM MOLONEY, COLORADO COMM. OF EDUCATION: I prefer the word flawed, I even sometimes attach the adjective deeply flawed, but failed, never, never.
TUCKER: Under NCLB, for example, a high performing school is hex-expected to show the same improvement rates as a failing school.
TONY LEWIS, DONNELL-KAY FOUNDATION: The intent of No Child Left Behind is a good start. But what we aren't measuring and what we aren't really addressing is the incredible dropout problem that we have in our high schools. One out of three kids in Colorado doesn't graduate high school.
TUCKER: Colorado is not the exception. Its statistics are very much in line with national statistics. Only 68 percent of kids in high school graduate. In the eyes of some educators. In the eyes of educators that may be because we're in danger of losing a bigger focus.
CINDY STEVENSON, SUPT., JEFFERSON COUNTY, CO: I'd like to see a vision and an image that's more than test scores. Test scores are important, you can ask my staff, I hound them constantly, I want high test scores. But I also want children who can think, create, have imagination and have a great sense of hope in their future.
TUCKER: Stevenson has 85,000 kids she's responsible for and some of the highest performing high schools in the state.
(END VIDEOTAPE)
TUCKER: In his speech tonight, the president is expected to call for a renewed focus on testing in high schools. Lou, this is not the first time he's done so. Perhaps this time he means it.
DOBBS: Thank you very much, Bill Tucker, reporting from Denver, Colorado.
I'm joined again by our panel tonight. John Fund, your thoughts.
FUND: Not only is Denver doing the right thing, I was just in Milwaukee where they've had school choice for 15 years. That competition has forced the public school system to improve. The dropout rate has fallen by a third, test scores are up in 13 out of 15 categories.
We allow school choice in other aspects of our education. The G.I. Bill and the Pell Grants can go to any school, public or private university, but we don't allow the choice we have in universities which make our universities the best in the world in our K through 12 system.
That's because the teacher unions block all progress because the system works for adults not the children.
DOBBS: Hank Sheinkopf, your thoughts. SHEINKOPF: I'm no expert on education, but I am expert on politics. No Child Left Behind has not performed in the way it might have. We need stronger leadership in education because the real issue is who is going to wind up going to those colleges.
DOBBS: To what degree is the NEA, the teacher's union, to what degree are they part of the problem? To what degree are they part of the solution?
SHEINKOPF: I don't think they're used enough to be part of the solution. I don't think teachers in schools -- I've worked for educators' unions -- want kids who don't graduate or don't perform well. They have to be involved in this thing.
DOBBS: Ed Rollins, school choice in Milwaukee and it's worked in some places and hasn't in others, but why in the world do we have to force kids to make a choice? Why in the heck don't we take control of public education in this country.
ROLLINS: There are very few MAJOR urban cities in America that you can send your kids to who are going to get a good education, not that extraordinary child, you have to pay teachers more and demand more of the teachers. It's basics, reading, writing, and arithmetic, pay a great teacher.
DOBBS: We'll be back with these gentlemen and a great deal more as this hour continues. Coming up at the top of the hour here on CNN, our special edition of THE SITUATION ROOM with Wolf Blitzer and Paula Zahn. Wolf and Paula live with a preview for us.
WOLF BLITZER, CNN ANCHOR: Thanks you very much. This is a huge night in Washington and potentially for the American people. We're covering it from every angle in THE SITUATION ROOM. Our live State of the Union countdown begins right at the top of the hour.
PAULA ZAHN, CNN ANCHOR: Wolf and I will be here for the next two hours, shortly after the president's speech as well. We will be listening to every word of his speech tonight, checking the facts and seeing how his speech squares with reality and some of the promises he's made in the past.
BLITZER: Some presidential addresses are more memorable, not always for the right reasons. We'll take a look back at the State of the Union moments none of us can forget, it's all coming up in THE SITUATION ROOM.
DOBBS: Wolf, Paula, it may be my age I'm trying to think of those memorable moments. I'm sure you will help us out.
ZAHN: We'll help jog your memory.
DOBBS: I appreciate it, Paula. We'll be watching the president and both of you throughout the evening.
A reminder to vote in our poll, do you expect to hear President Bush tonight say anything approaching these words: The middle-class is the foundation of American society. Cast your vote at loudobbs.com. We'll have the results in a few minutes.
Coming up, "Red Star Rising." Our exploding trade deficit with China growing even larger, threatening even more American jobs. We'll have that special report from one part of America greatly affected by those record trade deficits, next.
Stay with us.
(COMMERCIAL BREAK)
DOBBS: Most Americans are concerned about our dependence upon foreign oil, at least now that gasoline prices and heating oil prices have threatened to break our budgets, the budgets of nearly every working man and woman in this country.
But few of our elected officials recognize that this nation's dependency goes well beyond foreign oil. We cannot even clothe ourselves, 96 percent of our clothing is imported, 70 percent of our technology is imported, another example of the so-called free trade economy. And yes, we are dependent upon the rest of the world for the capital to buy all of those imports and to sustain this dependent economy. Katherine Barrett reports from Seattle, Washington.
(BEGIN VIDEOTAPE)
KATHARINE BARRETT, CNN CORRESPONDENT (voice-over): The towering containers tell the tale, over 200,000 forty-footers full of Chinese goods unloaded here last year. Outbound to China? Less than one- fifth that much merchandise. At least three-quarters of the containers from China return empty.
The Pacific Northwest does sell the Chinese software, paper, and apple. And few American exports are as freighted with patriotic pride as Boeing airplanes. China is one of Boeing's biggest customers, ordering 146 planes last year, almost $19 billion worth. But union leaders say those sales come at a price.
MARK BLONDIN, INTERNATIONAL ASSOC. OF MACHINISTS: Whether it be an airbus sale or a Boeing sale, there's also an announcement that China gets a significant work package, whether it's a tail cone sections for that aircraft, stabilizers, leading edges. These are major components that we used to do, that we could be doing, that we no longer have jobs to do.
BARRETT: More than one in three Boeing planes world-wide now has major parts made in China.
BLONDIN: They make it difficult when we're competing against a country that does not have basic rights, such as the ability to organize and form a union.
BARRETT: Boeing's rank and file workers seem nearly resigned.
STEVE SMITH, BOEING EMPLOYEE: Well somebody's going to sell the Chinese commercial aircraft. And if it's up to me, I'd rather have it be us than airbus. DAVE EWING, BOEING EMPLOYEE: I don't like it because we've got people here that need the jobs, just as bad or worse.
DEAN CHINN, BOEING EMPLOYEE: I don't know, I wish it wasn't that way, but you know, that's just the way it is.
BARRETT: A congressional commission charting U.S./China trade relations reports it's far worse for other industries. Since 1989, the U.S. economy has dumped more than one and a half million jobs because of dislocations caused by the U.S./China trade gap. And year after year, that deficit marches higher.
CAROLYN BARTHOLOMEW, U.S. CHINA COMMISSION: It's accelerating. Our trade deficit with China, $200 billion for 2005 is a 25 percent increase over the previous year. It's not that things are stabilizing, the trend lines are heading all in the wrong direction.
BARRETT: Some blame China's undervalued currency and export- aimed growth. Others cite Americans own debt spending on imported goods and poor public support for education, industrial policy or research.
(END VIDEOTAPE)
BARRETT: Carolyn Bartholomew sums up the state of the union in U.S./China trade as dismal. She says big business can't be expected to simply walk away from China, but U.S. policymakers should use the tools at their disposal, world trade rules and U.S. market access to address the imbalance. And Lou, one final irony here: many of the large orange cargo-loading cranes like the ones you see behind me here at the port of Seattle are made, guess where? China.
DOBBS: Katharine Barrett, I was afraid you would say that. Thank you very much.
BARRETT: I thought you might.
DOBBS: Katharine Barrett, reporting from Seattle, thank you. Still ahead here, the results of our poll and much more from our panel. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Now the results of our poll tonight, 95 percent of you say you do not expect to hear President Bush tonight say anything approaching these words, "The middle class is the foundation of American society." Five percent of you are hopeful.
Back now with our distinguished panelists. Hank, the president has an opportunity to deal with a lot of challenges. There's much more that's right with this country than wrong. But all that's right is threatened by that which is wrong. What should he do?
SHEINKOPF: The president ought to stop engaging in symbolic politics. Understand that Americans have spent three generations now watching the work of political consultants and spin-meisters do their job.
And talk about real, honest-to-goodness bottom line issues: how we're going to feed the people of this country, how we're going to get people in the heartland back to work, how we're going to make sure our children have an education that leads them to a better life and how we're going to restore pride in the workmanship that was historically American. Those are real things.
DOBBS: John Fund?
FUND: I would remind your unemployment rate is 4.9 percent. There's a lot that is right in this economy.
DOBBS: Those are the words I used myself.
FUND: Exactly. And I don't think we want to blot out everything that is going well. What we do face is an entitlement crisis. If we don't do anything about Social Security, Medicare and Medicaid, by 2020, they will consume 20 percent of our gross domestic product. That is currently the size of our entire federal budget. That is a looming problem that we have to address.
DOBBS: But I think it's worth noting, that this president, this compassionate conservative president whom you support?
FUND: Is spending a lot of money.
DOBBS: Spending a lot of money...
FUND: Too much.
DOBBS: ... Has created deficits of extraordinary proportions and his growing government, which in your support for this president, was supposed to be constrained.
FUND: No, I support freedom. Revenues are up 22 percent the last two years, the problem is the spending is catching up with that.
ROLLINS: The problem, John, it's all about statistics. The president will give a speech that he worked on for two months, there's no plans or policy to implement any of it. The Congress came in yesterday, they're going out tomorrow. They're going to spend half the year out either campaigning or basically running around the world.
We need to settle on these problems. I'm telling you that I could take your show tonight as a political strategist and create a populist movement that would give pox on both of their houses and that's going to grow and that's going to be nightmare for all of them.
FUND: That's where we are headed.
ROLLINS: That's coming.
FUND: Both parties are in trouble, I'll agree.
DOBBS: And with that agreement, let me say, in this case, it's both Houses that created the pox's that's upon their house. We've just taken note of it here tonight. And gentlemen, we thank you very much for being with us.
Thank you for being with us tonight. Please join us here tomorrow for another special edition of our broadcast. We'll have much more on the state of our union, including reaction to the president's speech to be heard from all around the country. For all of us here, thanks for watching. Good night from New York.
CNN's prime-time coverage of the State of the Union Address begins right now with Wolf Blitzer and Paula Zahn.
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