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Lou Dobbs Tonight

Bush Rebuked; Troop Buildup Backlash; Iran's Role in Iraq

Aired February 13, 2007 - 18:00   ET


LOU DOBBS, HOST: House Democrats today sending a clear message to President Bush: More troops in Iraq is a mistake.
We'll have a report on the historic debate on the floor of the House.

And one of the nation's biggest banks, amazingly, has decided to offer credit cards to illegal aliens. It's not national security. Hey, it's just business.


REP. ED ROYCE (R), CALIFORNIA: This helps anyone who wants to establish a false identity to have the opportunity to do this.


DOBBS: And one of my guests tonight says I'm flat wrong when it comes to the war and this country's middle class. He says I'm a neo- populist and I don't know what I'm talking about.

We'll have a little discussion and I'll explain to him what an independent populist really is.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate, and opinion for Tuesday, February 13th.

Live in New York, Lou Dobbs.

DOBBS: Good evening, everybody.

Nearly four years since the start of the war in Iraq, a historic move by House Democrats to publicly debate the conduct of the war and to slam the president's plan to send more troops to Iraq.

And is the U.S. military in Baghdad on the same page as the Pentagon over charges that Iran is behind the killing of our troops in Iraq? Tonight, it does not appear so.

Andrea Koppel reports tonight on the bitter face-off between Democrats, Republicans, and ultimately the president over the conduct of the war in Iraq.

Bill Schneider tonight reports on the public's demand that Congress and the president quit talking about Iraq and actually do something. Jamie McIntyre tonight reporting from the Pentagon on new evidence that military commanders in Baghdad are not in agreement with their bosses at the Pentagon.

We begin on Capitol Hill with Andrea Koppel -- Andrea.

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: Lou, if there were any doubt a new party is running the show up here on Capitol Hill, this week's 36-hour debate on Iraq should put that to rest. And even though it is a mostly symbolic resolution that's expected to pass on Friday, Democrats say it is a first step towards changing U.S. policy in Iraq.


KOPPEL (voice over): At issue, whether to support a Democratic resolution opposing a decision by President Bush to send more troops to Iraq.

REP. TOM LANTOS (D), CALIFORNIA: The administration has yet to learn that you cannot unscramble an omelet. Instead, it is trying to add to the mix another 21,500 men and women who deserve better than that.

REP. ROY BLUNT (R), MISSOURI: It's hard to imagine a group less capable of making tactical decisions about specific troop deployments than 535 members of Congress

KOPPEL: The Democrats' strategy in kicking off this first day of debate, to put the party's military veterans front and center, in hopes of insulating themselves against Republican accusations Democrats don't support the troops.

Pennsylvania freshman Patrick Murphy served in Iraq until 2004.

REP. PATRICK MURPHY (D), PENNSYLVANIA: Walking in my own combat boots, I saw first hand this administration's failed policy in Iraq.

KOPPEL: Republican Duncan Hunter said the Democrats' resolution sends the wrong message.

REP. DUNCAN HUNTER (R), CALIFORNIA: And I think it's going to be received by friend and foe alike as the first sound of retreat in the world battle against extremists and terrorists.

KOPPEL: Republican leaders, meanwhile, are marshaling resources to highlight their own message.

UNIDENTIFIED MALE: Can you hold one sec?

KOPPEL: Not far from the House floor in a conference room, Republican's staff are manning the phones. A rapid reaction team of sorts glued to TVs monitoring every word the Democrats say. Ready to pounce.

REP. ADAM PUTNAM (R), FLORIDA: We want to make sure there's accountability.

KOPPEL: Florida's Adam Putnam is overseeing the effort. The goal?

PUTNAM: Not letting any of the exaggerations or the outrageous statements go unchecked.


KOPPEL: Now, what that means is that over the next several days Republicans will be cranking out lots of these press releases, seizing on what they say Democrats are saying, untruths or factual inaccuracies on the floor. And what they're doing is very quickly responding, putting out what they say is the truth, disputing what those members are saying while giving their Republican members ammunition to immediately respond -- Lou.

DOBBS: Thank you very much.

Andrea Koppel from Capitol Hill.

New polls show most Americans oppose the so-called surge of troops in Iraq and they're frustrated not only with President Bush, but this Congress as well. They want Congress to do more than talk. They want it to vote against that troop increase.

Bill Schneider reports.


WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice over): What's the most important problem facing the country? Nearly a third of Americans say Iraq in the CBS News poll. No other issue is in double digits. That's the main reason why President Bush's job approval rating remains low, 32 percent.

What about Congress? Just as low, 32 percent.

The public is as frustrated with Congress as it is with President Bush. What do they want Congress to do? Vote against a troop increase? Yes, by two to one in last month's CNN poll.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: I have legislation to cap the number of American troops.

SCHNEIDER: Fifty-seven percent favor limiting the number of U.S. troops serving in Iraq.

SEN. BARACK OBAMA (D), ILLINOIS: This plan would not only place a cap on the number of troops in Iraq and stop the escalation, more importantly, it would begin a phased redeployment of U.S. forces with the goal of removing all U.S. combat forces from Iraq by March 31, 2008.

SCHNEIDER: Sixty-three percent want Congress to set a timetable for withdrawal of all U.S. troops from Iraq by the end of next year. John Edwards is calling on Congress to block funding for an escalation of the war. While only eight percent in the CBS News poll want Congress to block all funding for the war, an additional 45 percent want Congress to block funding for more troops.

The House of Representatives is debating a non-binding resolution. The Senate can't even do that. Sixty-three percent of Americans say they are bothered by the Senate's failure to hold a debate. Those who are bothered blame Republicans more than Democrats by better than two to one.


SCHNEIDER: The people elected a Democratic Congress to stand up to President Bush on the war. The people are waiting and they're getting frustrated -- Lou.

DOBBS: Well, I think frustration is a mild term for what must be felt on Capitol Hill right now. It is the Republican minority, however, in the Senate that did block the debate. But it is also the Democratic leadership in the Senate, Bill Schneider, that was unable to move ahead with that debate. And it does have a majority. Not enough to invoke cloture, but certainly enough to do so.

Is this a failure of leadership on the part of the Democrats in your judgment?

SCHNEIDER: It was a straight party vote, just about. I think only two Republicans voted with the Democrats.

Look, on a straight party vote, the Democrats do have a majority. But they don't have a big enough majority. I think it's the failure of the rules of the Senate to create a super majority in this case, because, look, only one-third of the Senate was up for re-election last year. So only a certain amount of change is engineered into this system.

DOBBS: Bill Schneider, thank you very much, from Washington.

Iraq will close more than a thousand miles of its borders with Syria and Iran trying to curb violence in Baghdad. Those borders will be closed for 72 hours. It's part of a joint U.S.-Iraqi plan. Borders with Iran will only be partially reopened, however.

The security plan announced during another day of violence in the Iraqi capital. A suicide bomber blew up a truck loaded with explosives and killed 18 people and wounded at least 40 others.

The U.S. charge that weapons from Iran are being sent to Iraq on the orders of the highest levels of the Iranian government is being met with widespread skepticism tonight, mostly because of the way the U.S. military has presented the evidence and the fact that the defense secretary and his top commanders were left out of the process.

Jamie McIntyre reports from the Pentagon.


JAMIE MCINTYRE, CNN SR. PENTAGON CORRESPONDENT (voice over): The briefing in Baghdad was supposed to make a convincing case that these weapons with Iranian markings were sent to Iraq, in the words of anonymous military briefers, on orders from the highest levels of Iranian government. But the problem is none of the senior leadership of the Pentagon was kept in the loop. One by one over the past few days they all professed ignorance of the evidence to back up the charge that so-called explosively-formed penetrators were directly linked to the Iranian government.

Defense Secretary Robert Gates Friday in Spain...

ROBERT GATES, DEFENSE SECRETARY: I'm just frankly not specifically certain myself of the -- of the details.

MCINTYRE: Joint Chiefs chairman General Peter Pace Monday in Australia...

GEN. PETER PACE, JOINT CHIEFS CHAIRMAN: But I would not say based on what I know that the Iranian government clearly knows who (ph) is complicit.

MCINTYRE: And Tuesday, the brand-new top commander for the Persian Gulf region, Admiral William Fallon, told CNN's Kyra Phillips in an exclusive interview he hadn't seen the evidence either.

ADM. WILLIAM FALLON, U.S. CENTRAL COMMANDER: Kyra, I have no idea who may be actually with hands on in this stuff.

MCINTYRE: At the White House, spokesman Tony Snow was pushed to explain why if the case was so clear the Joint Chiefs chairman was waffling.

TONY SNOW, WHITE HOUSE PRESS SECRETARY: There are Iranians in Iraq. There's no question about that, correct?


SNOW: All right. So where's the credibility program in terms of -- are you saying...

HENRY: In terms of the Iranian government being behind it. That's not -- nobody's disputing whether it's manufactured in Iran. You keep changing what my question is.

SNOW: No. No, I'm trying to clarify your question because I think this is...

HENRY: I don't need clarifying. I'm trying to tell you -- I know what my question is. And basically, he's saying that he doesn't see evidence that the Iranian government clearly is behind it.

That's my -- I've asked that three or four times. You haven't answered that. You're saying the Iranian government is behind it. SNOW: OK. Let me put it this way -- I'll say it one more time. The Quds force is part of the Iranian's government. The Quds force is behind it, is associated with it.


SNOW: All right?

Thank you.

MCINTYRE: The Quds force is a wing of Iran's Revolutionary Guard, which the U.S. says is acting as a surrogate for Iran's supreme leader, Ayatollah Khamenei.


MCINTYRE: Now, Lou, some Pentagon officials are privately complaining that the Sunday briefing in Baghdad was badly mishandled and that the use of anonymous, low-level military officials to level such a serious charge undercut U.S. credibility. In an effort at damage control, they're going to put out the chief military spokesman who's going to again lay out the case, but this time, Lou, on the record.

DOBBS: Jamie, I think that it would be understandable if there were some considerable confusion about what is precisely what is happening here on the part of everyone who have been -- who has been watching these developments over the last number of days. For the better part of a year, the United States government has been saying Iran is providing aid and material to the insurgency. There is no dispute of that.

Secondly, to hear the White House press secretary fence, in this case with our correspondent, Ed Henry, over the issue of whether or not the government is complicit or not complicit, speaks to the issue of how effective is our intelligence today, let alone five years ago.

So what is going on?

MCINTYRE: Well, it would appear, Lou, that they simply don't have that smoking gun. They do have a lot of evidence. And as you said, no question Iranian weapons are being found in Iraq.

The question is, how are they getting there, who sent them there, and do they in fact go back to the highest levels of government? A lot of suspicion that that's the case. But they don't have the proof, or at least they haven't produced it yet.

You know, there's an old adage in intelligence -- tell me what you think, tell me what you know, and make darn sure you make clear which is which. In this case, they seemed to have confused the two.

DOBBS: And not for the first time.

Jamie, thank you very much.

Jamie McIntyre from the Pentagon.

The former number three man at the Central Intelligence Agency today was indicted for fraud. Kyle Foggo, former executive director of the CIA, was charged in the same corruption investigation that sent former congressman Randy Cunningham to prison. Also indicted on the same charges, California defense contractor Brent Wilkes. Wilkes is also charged under a separate indictment with conspiracy to bribe Cunningham in return for government contracts.

Vice President Dick Cheney will not be called as a defense witness in the CIA-White House leak trial of Lewis "Scooter" Libby. Libby's attorney informed the judge they have released the vice president as a potential witness.

It had been widely speculated that Vice President Cheney would testify on behalf of his former chief of staff. Libby also will not testify in this trial on his own behalf.

Libby stands accused of lying to investigators trying to determine who leaked the identity of CIA analyst Valerie Plame to reporters. That leak ultimately was determined to be Richard Armitage.

North Korea today agreed to dismantle its nuclear weapons program following the latest round of disarmament talks. President Bush praised the agreement. He said, "These talks represent the best opportunity to use diplomacy to address North Korea's nuclear program."

Under the terms of the deal, as we understand them at this point, North Korea will receive energy aid of about $250 million. But making certain that North Korea buys (ph) the deal could prove difficult. North Korean state media today reporting the agreement called for only a temporary suspension of the country's nuclear facilities.

Coming up next here, new developments in the case of imprisoned Border Patrol agents Ramos and Compean as trial transcripts are finally made public.

We'll have that report.

An unbelievable policy decision as a major U.S. bank has decided to make credit cards available to illegal aliens. A brand-new -- a brand-new market for Bank of America.

We'll have that report.

And once again a state government selling off something that doesn't belong to it. It belongs to taxpayers. Illinois planning to take bids on its lottery system.

We'll have that special report and a great deal more straight ahead here tonight.

Stay with us.


DOBBS: Tonight, an amazing development in banking directly benefiting illegal aliens in this country. Bank of America is now issuing its credit cards to people with no Social Security number, who have broken the law, and who are in this country illegally. To Bank of America, apparently, they are simply a new market.

Kitty Pilgrim reports.


KITTY PILGRIM, CNN CORRESPONDENT (voice over): Bank of America has a new target market for credit cards, people without Social Security numbers. Translation, illegal aliens.

Bank of America today says the program has nothing to do with illegal aliens and defends the program, saying it's only a pilot program in 51 banks, saying, "This initiative lets customers build a solid credit history with a leading bank." But the bank only requires a taxpayer identification number, something many illegal aliens have, something the IRS Web site says should not be used as identification.

STEVEN CAMAROTA, CENTER FOR IMMIGRATION STUDIES: Well, there's no question that the intent of this new policy is to give credit cards to illegal aliens. They're hoping to tap a new market. They're hoping to make some money. So anyone who suggests otherwise is just silly.

PILGRIM: The worry is the program aides and abets any illegal alien to stay in the country, establish credit, and put down roots.

ROYCE: This has given very serious concerns to people in the intelligence community about the ability of people, not just in Mexico, but around the world to forge documents and to be in the country illegally. And many of them could do things other than just work, such as move money illegally on behalf of terrorist organizations

PILGRIM: The Department of Homeland Security today said, "We are not privy to all of the details of the program. We will be looking at it very carefully." And added, "It facilitates the risk of identity theft," and said money laundering through the program could be "entirely possible."

Bank of America, when questioned about the identity theft and other security issues, responded that this program was compliant with the Patriot Act and other sufficient protections were in place.


PILGRIM: Now, the bank outright defends the program, saying it's not an immigration question, it's about providing services to the local community. And the bank's spokeswoman says she was surprised and disappointed about the strong negative reaction they have been seeing about this plan, saying it's been blown out of proportion -- Lou. DOBBS: Well, is she just some kind of idiot? Why would she expect there not to be a reaction to providing services from the Bank of America to people who do not have Social Security cards, who are in this country illegally? What kind of -- what kind of moron would expect any kind of reaction other than that?

PILGRIM: They're clearly in denial. And the reaction that we got was extreme. People are quite upset about this security implications of this.

DOBBS: Kitty, thank you very much.

We want you to know that we invited the CEO of the Bank of America, Kenneth Lewis, to join us on this broadcast to explain the outrageous policy that his bank has decided to follow and its really silly and outrageous statement in defense of its approach. I wanted to tell him the statement saying the bank isn't marketing to illegal aliens is fundamentally, absolutely and unequivocally a lie, and that perhaps he would like to talk to the people representing the bank who uttered such lies.

Maybe Bank of America should take its own advice here. After all, its slogan is "Higher standards."

And Ken Lewis, you're welcome here any time to talk about it.

Tonight, new developments in the outrageous miscarriage of justice of two imprisoned former Texas Border Patrol agents. Ignacio Ramos and Jose Compean have been in jail for nearly four weeks. The two were convicted of shooting and wounding an illegal alien Mexican drug smuggler given immunity by the U.S. Justice Department. Tonight the government finally released long-awaited, long-overdue trial transcripts.

Casey Wian is in Los Angeles with the latest on the new explosive evidence in this incredibly, just bizarre case -- Casey.

CASEY WIAN, CNN CORRESPONDENT: Yes, it sure is bizarre, Lou.

The nearly 3,000 pages of transcripts in the Ramos and Compean case show that even before the trial started, several key rulings went against the Border Patrol agents. For example, defense attorneys wanted to be able to talk about how dangerous the border region is where the agents encountered the illegal alien drug smuggler. It's an area, of course, with a well-documented history of violent confrontations between drug cartels and law enforcement.

But prosecutors objected to that. And the judge agreed. She ordered defense attorneys to refrain from any mention of what she called the alleged dangerousness of the border between the United States and Mexico.

Another passage shows just how eager prosecutors were to grant immunity to Mexican drug smuggler Oscar Aldrete-Davila and throw the book at the Border Patrol agents. Assistant U.S. attorney Debra Kanof said to the judge, "... we basically had to beg him. He didn't want to come and talk to us about this. And so we basically gave him blanket immunity for any drug or immigration crime that he might have been committing on that day."

Agent Compean's defense attorney pointed out how the government could have sought up to 40 years in prison for the drug smuggler. And an attorney for Agent Ramos said the drug smuggler "could be prosecuted for possession of some 700 pounds of marijuana, for smuggling it into the country, for illegally entering the United States. All of these actions are actions which the government apparently has chosen to forgive in order to obtain his testimony against these defendants, the agents."

In fact, prosecutors sought to prevent defense attorneys from even disclosing that Aldrete-Davila was transporting 750 pounds of marijuana when he encountered the Border Patrol agents. The judge did allow those facts into evidence, but only on a limited basis -- Lou.

DOBBS: This is -- this is outrageous. This administration, this Justice Department, the U.S. attorney in El Paso, the western district of Texas, Johnny Sutton, have a lot of explaining to do. Because also clear here is that that drug smuggler, Aldrete-Davila, was, in point in fact -- he had already confessed to drug possession and smuggling six days before he was ultimately given limited use immunity.

And the fact is that the U.S. Justice Department and the person of the attorney general's office did not ask that -- that drug smuggler one question about the drug cartel behind it, the safe houses, the transportation routes, the vehicles or the systems, the distribution of that -- of those drugs. I mean, it is remarkable.

WIAN: It really is, Lou. And there's some more new evidence that came out today that we can talk about, and that's regarding the lies that were told by the Office of Inspector General that were disclosed last week to several members of Congress looking into this case.

They now say, according to notes from members of Congress, this investigation, according to the testimony from the -- not testimony, but according to the statements of the Office of the Inspector General, they say that this investigation began with the Mexican consulate contacting the U.S. government, which contradicts the sworn testimony in this case that the investigation began when a Border Patrol agent in Arizona who had family in Mexico, family of the drug smuggler, was contacted by that drug smuggler.

So there are new questions regarding this case seemingly emerging every day -- Lou.

DOBBS: So one of the -- one of the concerns that we had as we began reporting on this case, Casey, is that the Bush administration has been its want throughout, was playing a political game here in concert with the government of Mexico and the dominant drug cartels on the northern -- the northern Mexican border area below El Paso.

WIAN: That's right. And if this -- if these statements by this Office of Inspector General investigators to these members of Congress are true, it would add credence to that theory. Now, of course we know they have now admittedly lied during that...

DOBBS: On a host of other -- on separate areas.

WIAN: So we don't know who's telling the truth at this point -- Lou.

DOBBS: We do know one thing -- that the United States government is lying and has a lot of explaining to do in this case without, without any qualification whatsoever. And the idea that a federal judge sitting in El Paso Texas, and a prosecutor sitting in El Paso, Texas, absolutely aware that that is one of the most violent zones along the border with Mexico, a very violent border, the judge would refer to it as alleged violence?

WIAN: Yes. She called it -- I believe her words were the "alleged dangerousness of the U.S.-Mexico border." I guess everything we've been doing for the past several years just hasn't registered -- Lou.

DOBBS: Yes. And I'm sure it comes as some shock also to Americans north of that border and to Mexican citizens living south of that border that it's alleged to be dangerous. And I suppose also to the U.S. ambassador to Mexico, who has put out travel warnings to all Americans in the region.

It is just -- all you can do is shake your head. And to what is at best a miscarriage of justice. At worst, something that we will be working very hard to prove.

Thank you very much, Casey Wian.


DOBBS: Coming up next here, war on the middle class. I've been telling you about the problems that anguish our middle class families all over this country. Well, my next guest says that's -- well, he doesn't say it exactly this way, but I think he would use the word, perhaps, hogwash. And he says I'm something called a neo-populist.

Well, I'm going to straighten him out as he straightens me out. We'll see how it all works.

And ahead, the war within, this country's addiction to drugs and the people who are being devastated by it, the millions of Americans abusing illegal and legal drugs in this country.

And you won't believe for what's for sale in this country. Critics saying state governments have simply decided to go too far selling prize taxpayer assets.

We'll have all of that and a lot more as we continue here.

Stay with us.

(COMMERCIAL BREAK) DOBBS: The days of the taxpayer-owned, state-owned lottery may be ending in some parts of this country. That's because some states are so strapped for cash, they're actually thinking about selling their lotteries.

Lisa Sylvester now reports on this latest taxpayer asset up for sale.


LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Illinois's hottest ticket may be the lottery itself. State officials are moving to put the Illinois lottery on the auction block.

Under the proposal, private investors would buy the rights to operate and collect the profits of the lottery for 30 to 75 years. The state would get a lump sum of as much as $10 billion.

JOHN FILAN, COO, STATE OF ILLINOIS: We think this is in the state's best interest. And that's why a lot of governments are moving in that direction, is to focus and do what you do best and don't try to do too many things and let the private industry world, who's in this business, operate this on our behalf.

SYLVESTER: Sixty percent of the money Illinois would rake in would be used for future school funding, the remaining amount for current education projects.

This new lottery mania is spreading. Indiana, Texas, Michigan and New Jersey are all considering proposals to sell off their state lotteries.

It's part of a larger trend where states have either sold or are considering selling off taxpayer assets from the Chicago Skyway, the Indiana toll road, to the Midway Airport.

Opponents call these proposals extremely short-sighted.

REP. PETER DEFAZIO, (D) OREGON: We used to have tax and spend government. Now we have sell and spend. What does the next generation do for revenue?

SYLVESTER: Selling off the lottery system raises other concerns. State governments have marketing and online restrictions and other limits, including bans on sales next to check cashing stores and welfare offices.

RACHEL VOLBERG, GEMINI RESEARCH: If there's a private operator, there might not be those same controls that would be in place. There might not be that ethic of protecting consumers.

SYLVESTER: It may be a jackpot for private companies. But some gaming researchers are not sure if it's a windfall for consumers.


SYLVESTER (on camera): Now, these proposals have to be approved by their respective state lawmakers. And there is opposition there.

An interesting twist on this story: Texas Governor Rick Perry's 23 year-old son has a new job. He's employed by a financial consulting firm that's working with the state on the possible sale of the state lottery there. The Texas Governor's Office says that's just a coincidence, no link between his son's hiring and Governor Perry's lottery sell-off plan -- Lou.

DOBBS: What kind of -- what in the world are these state governments thinking about? Selling roads, throughways, selling bridges, selling lotteries. It is -- it's unbelievable.

SYLVESTER: Critics will point to -- and they say that what these states are going after is the quick, easy money. And even thought these states promise to put it in a fund that will not be touched, again, there's concern that we're spending now and that future generations, when you're talking 10, 15, 25 years, even 90 or 75, 90 years, they're not going to have that money in the future, Lou.

DOBBS: Anyone putting up with this kind of nonsense, frankly they deserve what they get. This is just outrageous.

Lisa, thank you very much. Lisa Sylvester from Washington.

Time now for some of your thoughts.

Curtis in Illinois said, "In some countries if you speak out against the country's leaders you get sent to jail or executed. It seems to me we have it, we just get ignored. Keep the faith, Lou. Someday someone will here us."

I hope you're right.

And Rosemary in Arkansas: "I thought the Democrats promised a non-partisan Congress. Why are hey not then signing the bill for the two Border Patrol agents?"

Good question.

And Don in New York: "Dear Lou, the other evening I believe I heard you report that not one Democrat in Congress has signed the petition demanding a pardon for the Border Patrol Agents Compean and Ramos. As a registered Democrat, I'm appalled. If this isn't a bipartisan issue, I don't what is. Freeing these men isn't a political issue. It's about justice, unless that too has become political like everything else in this country."

Send us your thoughts to More of your thoughts upcoming here. Each of you whose e-mail is read here receives a copy of my book "War on the Middle Class".

Tonight more on the war within, this country's war against what is pervasive drug abuse. The problem is deadly. It is costly. And the numbers are staggering by any measure.

Christine Romans has the report. (BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): Almost 25 million people in this country are substance abusers, yet only three million get treatment. Joseph Califano runs the National Center on Addiction and Substance Abuse.

JOSEPH CALIFANO, NTL. CTR. ON ADDICTION AND SUBSTANCE ABUSE: We Americans are four percent of the world's population. We consume two- thirds of the world's illegal drugs. Drug abuse in this country and substance abuse in this country is unquestionably our biggest health problem. Addiction and substance abuse are our no. 1 disease.

ROMANS: The top drug of choice? 25.5 million people, aged 12 and older, used marijuana in the past year.

The fastest growing category? Prescription drugs. Last year 6.4 million used them to get high.

Abuse of alcohol, even more widespread. Some 40 percent of college students engage in dangerous binge drinking.

Drug offenses are the fastest-growing category of crime. Drug offenders are the largest group of inmates in our federal prisons. It costs $3 billion a year to house them. That's at the federal level. States pay $17 million a day to incarcerate drug criminals.

But that's a fraction of the billion spent over the past 30 years on the government's war on drugs.

SANHO TREE, INST. FOR POLICY STUDIES: If you add in state and local spending, it's close to $35 to $40 billion a year. And, yes, drugs are more easily available than ever before. They're of higher purity and of lower price. So, those three indicators tell us that the drug war is absolutely failing.

ROMANS: And then there are human costs. Almost 20,000 people died from accidental drug overdoses in 2004, second to only fatal car crashes. And on our roads each year, an estimated two million drive under the influence. Drunk drivers, killing 17,000.


ROMANS (on camera): Government data show overall drug use down over the past few years. But there are some very disturbing trends here. Club drugs like ecstasy are still very popular with teenagers. Prescription drug abuse is exploding. And an alarming new twist: teens are using cough and cold medicines now to get high -- Lou.

DOBBS: And when we permit John Walters, the drug czar to point out that drug use is declining -- it's declining at the margin. It is not by any means a victory in the war on drugs.

Think about that number that you just reported that Joseph Califano used. Four percent of the population -- of the world's population lives in this country and we consume two-thirds of the world's illegal drugs. I mean, that's just extraordinary.

ROMANS: It's a horrific statistic.

DOBBS: I appreciate it, Christine Romans. We're going to continue to focus on this country's war on drugs, so-called, and this nation's dependency and its addictions that are killing so many of our young people and ruining so many lives.

It's time now for our poll. We thought we would ask, do you believe only a nation bent on its own destruction would continue to permit its population to consume two-thirds of the world's illegal drugs?

Yes or no. We would like to hear. Cast your vote at We'll have the results upcoming.

Up next, my next guest says there's no war on the middle class. In fact, the average American family is healthier than ever. Jonathan Cowan from a group called the Third Way will be my guest here.

And three of the country's best talkers will join me, as well. We'll be talking about the race for the White House, the war in Iraq and much more. Three very good radio talk show hosts.

Stay with us.


DOBBS: My next guest doesn't believe there's a war on our middle class. In fact, he says things have never been better for the average American family. Jonathan Cowan is president of the Third Way. And his group has just issued a new report entitled "The New Rules Economy".

Jonathan Cowan joins us tonight from Washington, D.C.

Jonathan, good to have you here.


DOBBS: Now, let's start out with something here. Your report says, quote, "We perceive the middle class is struggling" -- if we could show that -- "We perceive the middle class is struggling to get ahead, not, as the neopopulists argue, struggling to get by."


COWAN: Let me say a couple of things, Lou. First of all, we share your passion for the middle class and you are...

DOBBS: Excellent.

COWAN: ... an incredible fighter. And we share that.

Our report found three things. First, that middle class anxiety is real and serious and profound, but that the neopopulists -- and we'll come back to that -- but that the neopopulists often mis- diagnose the causes and the cures, but that conservatives, in fact, ignore middle class anxiety and think the market will take care of itself.

Second thing we found was that to do the right policies, to design the right policies for the middle class, you've got to understand the real state of the middle class.

And lastly, as the title of the report indicates, the rules for success in the middle class have changed. And government, who we blame, government has failed to adapt.

DOBBS: Well, we agree on a couple of things. I agree that this government is out of its cotton-picking head. Let's go to the issue, however, of the middle class just as a neopopulist.

Am I a neopopulist, by the way, in your judgment?

COWAN: Well, you know, I don't know for sure if you are. You'll have to judge that for yourself. But let me tell you...

DOBBS: Let me help you out, then, because I really want you to understand who I am.


DOBBS: I'm an independent politically. I'm a populist because I just really can't stand the way the elitists in this country right now are treating all of the rest of America.

And when you say that things are getting better -- let's go to a couple of other things. You said that family incomes at all levels except the very poor have risen slowly but steadily. The chart from your report -- and I just show this -- the chart from your report shows over a 25-year period that incomes from married couple households have risen 22 percent.

You and I could agree that's less -- that's less than a percent of increase for every year. We won't go into the impact...

COWAN: No, no, actually...


COWAN: No, actually we can't agree on that. That's in constant dollars, which means it's actually increased about five percent or more every year over that time, which -- I'm not saying it's sensational...

DOBBS: Whoa, whoa, whoa. We want to keep it in constant dollars, as we would for anything.

COWAN: Correct, so...

DOBBS: So we don't want to reverse. COWAN: ... but -- look, let me come to the main point here, which is to address your point. There are some myths about the state of the middle class. Let me give you two.


COWAN: Many on the left say the middle class is making $46,000 a year. That's the median income for the middle class...

DOBBS: They just say that because that's what Census Bureau reports.

COWAN: Well, but, actually, if you look at working middle class who are couples, people prime-aged earners, 25 to age 59, their median income for couples who are working is $80,000.

Let me give you...

DOBBS: Before you wear me out with this...


DOBBS: ... OK?

Let's just get to a couple of things.


DOBBS: You and I agree that most people in this country -- and I'm talking about individual income at median level -- are making less than $35,000 a year?

COWAN: No. I...

DOBBS: Well, then you and I are going to have a problem because that's exactly a fact.

Can you and I agree right now as a percentage of national income, Jonathan, that wage earners have not ever had a lower share of the national income and that corporate America has never had a greater share of the national income?

COWAN: So -- let me answer your question. So, yes, corporate America...

DOBBS: Do we agree on that?

COWAN: ... corporate America's share of the national income is up very high. It's also very cyclical. And if you look....

DOBBS: Yes, it is.

COWAN: ... back in 2001....

DOBBS: Jonathan, Jonathan, Jonathan, Jonathan.

You know that what I've just said to you is true.

So let's look at something else. Wages are increasing for working men and women in this country at half the rate they normally do in a recovery from 2000 to 2006.

COWAN: Right. But, Lou...

DOBBS: Please, let me finish the sentence and then you can say what you want.


DOBBS: And corporate America's profits are increasing at double the historic rate in that five to six-year period following a recession. Can we agree on that?

COWAN: Yes, but -- Lou, can I answer?

DOBBS: Sure. Fire at will.

COWAN: Look, we can go back and forth on the statistics. And I don't want to debate you on specific statistics. There's no question we agree you that the middle class has a lot of anxiety. And that's real. But the question is what...

DOBBS: Well, What I'm arguing here, Jonathan, is that there's a reason for that doggone anxiety.

COWAN: Right. And here's what I think the reason is. And you and I may disagree on this. We think the reason is not evil corporations or capitalism. We think the reason is that the rules for success have changed and government's failed to adapt.

Let me give you an example. In the old rules, if you had a high school diploma, that was good enough to be solidly in the middle class.

DOBBS: Right.

COWAN: Today, you need a college diploma. And yet 40 percent of the people who go to college actually don't finish. Those are dropout rates of an urban high school.

Let me give you another example.

DOBBS: OK, OK, OK. I got your point.


DOBBS: Got to have a college degree.

There's just a problem with that. Most people in this country are not going to have college degrees. And I don't see anything in the Constitution or anything else, any document in this country, that argues anything but equality of opportunity -- equality of educational opportunity and equality of rights. And we have a responsibility in this country -- Do we not? -- to provide for equality of life for our middle class? The middle class is where the American Dream resides.

COWAN: We agree -- we agree -- you and I agree 100 percent on that...

DOBBS: What's the policy adjustment that we need to make, in your view?

COWAN: ... the -- globalization is the great challenge of our time. And making it work for Americans is the challenge we have to meet. We don't believe that we should be telling Americans they have to be afraid of change. We should give them the tools to cope with it.

So, for instance...

DOBBS: Yes, Jonathan, I appreciate it.

We're out of time.


DOBBS: But when you say Americans are afraid of change, you know, Americans are afraid of getting screwed. And that's what's -- that's one of the areas where we're getting separated.

But we're going to bring you back because we want to talk about this report some more and I hope you come back later this week.

COWAN: We would love it.

DOBBS: Jonathan Cowan and the group is the Third Way.

Thank you, sir.

Coming up, three of the nation's leading radio talk show hosts tell us what they're talking about with their listeners.

Stay with us.


DOBBS: Coming up, THE SITUATION ROOM with Wolf Blitzer. Wolf, what are you working on?

WOLF BLITZER, CNN ANCHOR: Thanks very much, Lou. We're working on a developing story. A powerful and radical anti-American cleric, a deadly thorn in the side of U.S. troops in Iraq. Now, there are reports coming into THE SITUATION ROOM that the Shiite leader Muqtada al-Sadr has fled to Iran. We're going to have the very latest on this developing story.

Also, historic and divisive debate in the House of Representatives over a resolution opposing more troops for Iraq. We'll talk about it with Indiana Republican Congressman Mike Pence. He's backing President Bush and sponsoring an alternative bill that opposes cutting off funds for U.S. troops.

And Democratic presidential candidate Senator Chris Dodd says the White House has virtually no credibility when it comes to intelligence on Iran. We'll talk about his sharp criticism in a one-on-one interview. All that, Lou, coming right up here in THE SITUATION ROOM.

DOBBS: Thank you very much, Wolf.

From WGN in Chicago, I am joined by Steve Cochran. From KLAV in Las Vegas, Doug Basham. And joining me here in our New York studios, WABC's John Gambling. Good to have you all here.

Let me turn to you, Steve, first. The idea that the United States has no credibility on these Iranian mortar tailfins and other ordnance that they're providing. What is your reaction?

STEVE COCHRAN, WGN IN CHICAGO: Well, part of the reason we have no credibility is because of the idiotic arguments that continue to go on in Washington. This nonbinding resolution debate is just a colossal waste of time. It's an outrage. It's a bigger waste of time than a Paris Hilton film festival.

They need to focus. They need to talk about alternative plans. They need to do something that matters.

Oh, what a risky position they're taking. They're against the war and they support the troops. Well, bravo. Well done, men.

DOBBS: Doug Basham, your reaction?

DOUG BASHAM, KLAV IN LAS VEGAS: Lou, quite frankly, I find it difficult to understand why anybody would listen to anything that this Bush administration says at this point, especially when it comes to the issue of a Muslim country that supposedly presents a threat to the United States.

I think what we have here are two elements in play. The Bush administration refuses to take responsibility for their failures in Iraq. They're looking for a scapegoat. Iran's an easy target.

Second of all, we have a Bush administration that, quite frankly, wants to attack Iran. And anybody who doesn't believe that in their heart of hearts probably still believes they didn't want to talk Iraq.

DOBBS: What is the Democratic leadership in Congress want to do, responding to Steve Cochran's point?

BASHAM: Regarding the nonbinding resolution, you know, Steve can say that it's worthless and useless. You know, to a certain extent, I agree. As a progressive, I would like to see more. But I think it's important in the context that it's the first time in six years anybody's really stood up to the Bush administration.

I would also ask if it's so unimportant and insignificant, why are Republicans fighting so hard to block it.

DOBBS: John Gambling...


DOBBS: I'm sorry. Go ahead, Steve.

COCHRAN: But both sides are guilty. Both sides are guilty. This is a huge political football. And shame on all of them for playing politics with it.

Look, the bottom line is the house is on fire, the house is Iraq. You either put out the fire or you let it burn. But spending all this time, wasting time in Congress, debating this is just shameful.

DOBBS: John Gambling, I promise it's your turn.

JOHN GAMBLING, WABC IN NEW YORK: Well, I agree that it is shameful. It's show business. It's politics as usual. It's what Washington has degenerated into. It is all for show. It's to follow the polls. And that's why you're seeing Republicans jump off on this as well.

DOBBS: Let me ask you, today, B of A, John, they're out peddling credit cards to illegal aliens, saying everything's hunky-dory and saying it's a service to the community, quote/unquote.

GAMBLING: Well, as you read in "The Wall Street Journal" article this morning, one of the spokesmen for the Bank of America said that this is a business plan to grow the bank in the Hispanic community. That's all they care about. That's all they want to do. Now, if you and I wanted to go open up an account and get a credit card at the Bank of America, we would have to show 15 pieces of identification before they give it to us.

DOBBS: Doug.

BASHAM: Lou, I didn't need any other reason to have a beef with Bank of America. I have been angry with them ever since I've heard that their name -- their company's name appeared on a memo that didn't want to advertise on progressive talk radio. So yes, chalk me up...

DOBBS: Steve.

COCHRAN: Well, yeah, and their ATM fees are too high.

DOBBS: I hate it when these progressives get commercials, don't you, Steve?

COCHRAN: Yes, I have never seen that before, either.

DOBBS: Your reaction, Steve, to the B of A thing?

COCHRAN: Well, the B of A thing is just as outrageous too as what we were talking about earlier, and what you had on the show earlier. How about taking all this time on the floor of the House and arguing about these two agents that could be murdered at anytime in jail that shouldn't be in jail, that you rightfully spent all this time with? Or maybe figuring out what that big fence we're going to put up on the border is going to look like and how we're going to pay for it. Issues that really matter to the people in this country.

DOBBS: Issues that matter. Among those issues, obviously, is illegal immigration. The fact that this administration is behaving the way it is, in conducting itself, is to me -- it's just inexplicable.

GAMBLING: It's inexplicable and it is terribly disappointing to the conservatives of America and others that think that immigration is a top priority. The Bush administration has failed to lead on this. There is no one showing any indication that there is any leadership, either now or coming, in the presidential race. It's going to be very interesting to see if anybody picks up this banner and waves it.

DOBBS: What do you think, Doug, the idea of selling off these lotteries, the state governments doing it? They are trying to sell highways and roads and lotteries.

BASHAM: Lou, I'm just getting a signal that we have, like, six seconds left, so I don't really have enough time to answer, but next time we will get more into it.

DOBBS: Okay, Doug, we are going to take that cue. I love it...

GAMBLING: When the guests are cuing the host.


DOBBS: All our producers here, Doug, appreciate it, because they need a little help sometimes with me.

We'll be right back.

UNIDENTIFIED MALE: As you know, Lou, I would have kept talking.

DOBBS: We'll be right back with the results of our poll. Stay with us.


DOBBS: I was bad and took us over time. I want to thank Steve Cochran from Chicago. And I want to thank Doug Basham from Las Vegas. And here in New York, John Gambling. Thank you, gentlemen. Appreciate it.

GAMBLING: You bet, Lou.

COCHRAN: Thank you, Lou.

DOBBS: And quickly, give you the results of our poll: 89 percent of you say only a nation bent on its own destruction would continue to permit its population to consume two-thirds of the world's illegal drugs. Time now for some of your thoughts. Jamie in Michigan said -- "The war on terror, the war on poverty, the war on drugs. Give me a break. The only war this administration is winning is the war on the middle class."

And Linda in Pennsylvania -- "We're bombarded hourly with ads for prescription drugs. Seems there's a pill for everything. So why are we surprised that young and old think drugs are the solution to everything?"

We love to hear from you. Send us your thoughts to We thank you for being with us tonight. Please join us here tomorrow. For all of us, thanks for watching. Good night from New York. "THE SITUATION ROOM" begins now with Wolf Blitzer -- Wolf.