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Lou Dobbs Tonight

Health Care Battle; Cyber Attacks; Paying Homeless to Stand in Line; Palin's Resignation

Aired July 08, 2009 - 19:00   ET

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

LOU DOBBS, HOST: Thank you, Wolf.

President Obama's trillion dollar health care plan threatened tonight. Capitol Hill Democrats divided over the high cost of that program as the federal deficit is exploding and any tax increase might stymie economic recovery.

Also massive cyber attacks against the U.S. government. Federal agencies and the White House attacked over the July 4th weekend -- North Korea now the leading suspect. We'll examine why the federal government can't seem to protect a highly vulnerable computer system and what better image of rampant Washington elitism than the spectacle of lobbyists hiring the homeless to hold their places in line outside congressional hearings.

Tonight's "Face Off" debate, Sarah Palin's resignation, political suicide or is she a political savant? We'll have that for you tonight.

But first, Capitol Hill Democrats tonight are divided other the president's $1 trillion health care plan. The president's own party split over where the money should come from. Most Americans are opposed to any new tax to pay for that plan.

Congressional Republicans blasting the Obama stimulus package as well as wasteful and ineffective. Critics say the White House is overstating the number of jobs created or saved by the stimulus. Kate Bolduan has the report from Washington.

(BEGIN VIDEOTAPE)

KATE BOLDUAN, CNN CORRESPONDENT (voice-over): Even as the Obama administration touts the jobs being created by recovery act spending...

UNIDENTIFIED MALE: We're starting to see some real progress.

BOLDUAN: ... unemployment has soared to 9.5 percent and 3.4 million jobs have been lost in the past six months. Republicans say the stimulus isn't working, and today they pounced.

REP. BRIAN BILBRAY (R), CALIFORNIA: I think that we need to justify how much money we're spending and where are the jobs saved and where have they been preserved? And I think that we've got major credibility crisis here.

UNIDENTIFIED MALE: The president's quoted as saying the stimulus has quote, "done its job." Is that true or not true?

UNIDENTIFIED MALE: We believe that the stimulus has had the impact that we had predicted, which is job creation.

BOLDUAN: In the hot seat, the president's deputy budget director Rob Nabors who said the stimulus plan is slowing the economic free fall. Nabors said 150,000 jobs have been created or saved.

UNIDENTIFIED MALE: It is a work in progress but it is steady progress.

BOLDUAN: The Government Accountability Office says of the $29 billion delivered to hard-hit states so far, most has gone to pay Medicaid costs, balance budgets and avoid layoffs. At the same time, Tom Evslin, Vermont's chief recovery officer, says funds for big job- producing investments like broadband and the electric smart grid are still caught in the stimulus pipeline.

UNIDENTIFIED MALE: The frustration's been that the money hasn't come out and we kept hearing later and later dates for the money coming out.

BOLDUAN: Massachusetts' Governor Deval Patrick says states are ready and waiting.

UNIDENTIFIED MALE: No funds, no projects. And no projects, no jobs.

(END VIDEOTAPE)

BOLDUAN: Now the administration highlights that 150,000 jobs have been created or saved to date. I'm told, Lou, by the Office of Management and Budget they expect to have that and break -- broken down in to private and public sector jobs in the fall. But we'll have to wait until October when the states and localities are set to report back on stimulus results. Lou?

DOBBS: Thank you very much, appreciate it.

Well Senate Democrats tonight split over the president's health care reform plan. That plan appears stalled in Congress as Congress is trying to figure out how to pay for any legislation that it might pass. The White House today said it cut a deal with hospitals that would amount to a big part of the costs of that reform package.

Republicans, however, say that deal and a similar one with a pharmaceutical industry is just a sham. Brianna Keilar reports now from Capitol Hill.

(BEGIN VIDEOTAPE)

BRIANNA KEILAR, CNN CORRESPONDENT (voice-over): With President Obama overseas, Vice President Joe Biden stepped in to push the administration's top priority -- health care reform.

UNIDENTIFIED MALE: Folks, reform is coming. It is on track, it is coming. We have tried for decades -- for decades -- to fix a broken system, and we have never in my entire tenure in public life been this close.

KEILAR: Biden touted a deal with the hospital industry. Hospitals will give up $155 billion in Medicare and Medicaid payments over the next 10 years, money that would help pay for health care reform. But the top Republican in the House, John Boehner, blasted the announcement, accusing the administration of cutting back-room deals to fund a government takeover of health care.

Democrats are divided on the issue of how to pay for health care reform's $1 trillion price tag. Max Baucus is chairman of the Senate's Tax Writing Committee.

UNIDENTIFIED MALE: It's always difficult to raise revenue -- always, always, always. But we got to pay for the bill.

KEILAR: A key proposal to tax employer-provided health benefits once seen as a likely way to raise hundreds of billions of dollars may be dead. Democrats aware that recent polls show most Americans oppose the idea are souring on taxing benefits. And so is Maine Senator Olympia Snowe, a modern Republican working on a bipartisan deal.

SEN. OLYMPIA SNOWE (R), MAINE: You know I believe that we should just move from there and take it off the table, move forward and find other alternatives.

(END VIDEOTAPE)

KEILAR: Meanwhile in the House of Representatives where Democrats are putting together their own health care plan, they are considering a slate of controversial tax proposals -- everything, Lou, from taxing households that make more than $250,000 per year to putting a tax on sugary drinks like sodas.

DOBBS: All right, Brianna, thank you very much.

When President Obama and his supporters talk about the urgency of sweeping health care reform, they use an impressive number to make their point and so do their opponents.

(BEGIN VIDEO CLIP)

BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: We are not a nation that accepts nearly 46 million uninsured men, women and children.

(END VIDEO CLIP)

DOBBS: Well, 46 million, or as they would like to say, to be exact 45.7 million -- the number of people who told the government that they did not have insurance at some point during the year 2007. Now that figure was down from 47 million the previous year, but here's what 46 million actually means. It means 14 people who are eligible for public health insurance programs, like Medicaid or SCHIP, but for whatever reason don't participate and among the 10 million non- citizens lacking health insurance in 2007, an estimated seven million illegal immigrants.

And that's estimated. And some seven million uninsured individuals, most of them young adults, who earn at least $40,000 and who chose to skip health insurance because they thought they didn't need it or they didn't want it. And remember, the number 46 million refers to the number of people who say they've gone without health insurance at some point during that year, not the entire year.

The figure, according to the Congressional Budget Office, may be something like 20 to 30 million. One industry study showed the number of long-term uninsured Americans could be as low as eight million.

We found some unlikely individuals in this debate. We'll be introducing them to you. And we'll tell you about an unlikely alliance on Capitol Hill -- lobbyists and the homeless.

There's disturbing new evidence tonight that a massive cyber attack on the U.S. government was more widespread than first realized by the government and it continues at this very hour -- computer hackers targeting several government sites in this country, including the White House and the Pentagon. The source of the attack is still not resolved, but many experts say North Korea is likely to blame. Kitty Pilgrim has our report.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): The U.S. government is under attack. Computers at the White House, the Pentagon, the State Department, and financial institutions are all being sabotaged. Even the Pentagon doesn't know who's behind the cyber attacks.

ADMIRAL MICHAEL MULLEN, JOINT CHIEFS CHAIRMAN: It is a growing concern and we need to have this as a big part of our focus with respect to the threat now and in the future.

PILGRIM: The State Department admits the cyber attacks are still under way.

IAN KELLY, STATE DEPARTMENT SPOKESMAN: The attack against our State.gov Web site started on July 5th. It's still ongoing.

PILGRIM: Victor Cha was a White House advisor on North Korea and is now with a prominent national security think tank.

VICTOR CHA, GEORGETOWN UNIVERSITY: We've had sort of several weeks of North Korean blistering rhetoric and actual provocation. And a couple of weeks ago they also mentioned the fact that this might include cyber warfare.

PILGRIM: Cyber security experts point to China as a more likely source of the attack, but they say they can't be sure. Why? Dale Meyerrose held a senior U.S. intelligence post.

DALE MEYERROSE, CYBER INITIATIVE, HARRIS CORP.: People who do these attacks try and hide who they are just because an attack is coming from a particular location don't always assume that that's where the attack's being controlled from.

PILGRIM: Most cyber attacks are intent on stealing information. But these appear to be disruptive, calculated to crash and disable Web sites. National security analyst James Carafano says the government should be constantly vigilant.

JAMES CARAFANO, HERITAGE FOUNDATION: You have to learn to live with service attacks, live with viruses, protect critical information, and that's always going to be changing. Whatever fire wall you build tomorrow somebody's going to figure out to overcome that.

(END VIDEOTAPE)

PILGRIM: Cyber security has languished. The Obama administration made a point of declaring cyber security a top priority promising to restructure how it's handled, but the president has not yet named his cyber security czar or restructured the defenses even though a cyber security review was completed back in April. Lou?

DOBBS: Czarless still after April...

(CROSSTALK)

PILGRIM: But you know you really you do need leadership on this and President Obama said the White House should lead the way and we're still not there yet.

DOBBS: It is a very serious issue obviously, but it is extraordinary that this administration, the previous, unable to seemingly set forward any sort of security plan that is protecting these computer systems.

PILGRIM: That's exactly right. In fact, the cyber security review said for the last 15 years, we have not been up to the task of protecting our cyber security and it's still not being addressed properly.

DOBBS: All right, Kitty. Thank you very much -- Kitty Pilgrim.

Still ahead here, Sarah Palin's resignation as governor of Alaska, political suicide, political savant? That's the subject of our "Face Off" debate and schools across the country asking parents now to pay for their children's extra curricular activities and lobbyists fat with cash paying homeless people to stand in line for them outside congressional hearing rooms.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Homeless people are playing this important role up on Capitol Hill but not for their own interests, for the interests of others. (END VIDEO CLIP)

DOBBS: The extraordinary lengths lobbyists go to, to influence your member of Congress next.

(COMMERCIAL BREAK)

DOBBS: For the tens of thousands of lobbyists in Washington, D.C., access is everything. And special interest groups are expert at finding new ways to connect with their members of Congress. Instead of standing in long lines to win seats in a congressional hearing room, lobbyists are hiring homeless to stand in line for them -- Lisa Sylvester with our report.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Outside a Senate Committee on Environment and Public Works hearing on climate change, the line to get in stretches on. A few people arrived in the wee hours hoping to get a seat not for themselves, but for lobbyists. They are paid line standers and some of them are either homeless or formerly homeless, like this man, Oliver. He says he makes an average of $13 an hour.

OLIVER, LINE STANDER: It varies. Sometimes one, two hearings a week. Sometimes no hearings. Sometimes depending how big it is that month.

SYLVESTER: Seating at congressional hearings is first come, first serve. For a popular hearing, the wait can last hours. Lobbyists are willing to pay to try to secure a seat in the hearing room, but critics say that gives big special interest groups an edge over the little guy who can't afford to shell out money for a professional line-stander.

Senator Claire McCaskill is among those opposed to the practice saying quote, "I have no quote with lobbyists being in hearings but they shouldn't be able to buy a seat." Kalen Pruss is with an Internet environmental group who was shut out of that climate change hearing.

KALEN PRUSS: It is very unfortunate that the people who come here to line stand always beat us here.

SYLVESTER: For the line standers it is a job, but it also gives them a sense of importance, hanging out in the halls of Capitol Hill.

WILLIAM HOWARD JOHNSON, JR., HOMELESS LINE STANDER: It showed me I was taking some of these things for granted. I'm part of something today and I'm very happy.

SYLVESTER: But there is an irony. Their interests may not always line up with special interest groups that the lobbyists represent.

MARIA FOSCARINIS, CTR. ON HOMELESSNESS & POVERTY: They're likely to be standing in line for people who may well be opposed to universal health care reform which I think would be a benefit for poor and homeless people.

(END VIDEOTAPE)

SYLVESTER: Senator Claire McCaskill says she is introducing legislation to ban line standing for congressional hearings. In a statement she said quote, "this is not a concert. This is not an entertainment venue. This is a democracy. And if we don't make sure that every part of it is equally available to every American, then I think we have failed." That statement coming from Claire McCaskill. Lou?

DOBBS: An ideal certainly that one would hope would be observed every day on Capitol Hill in every way, as they say. Thank you very much. Terrific story, Lisa. Thank you.

There are nearly 11,000 lobbyists trying to directly influence Congress. Typically they are former federal officials, presidential appointees, cabinet members, congressional aides, and of course former senators and congressmen. It works out to about 20 lobbyists for every member of the Senate and the House.

Well to hear my thoughts on that issue and the issues that dominate the news, join me on the radio Monday through Fridays for "The Lou Dobbs Show", 2:00 to 4:00 p.m. each afternoon on WOR 710 radio in New York. Go to loudobbs.com to get the local listings for "The Lou Dobbs Show" on the radio and please follow me on Twitter -- loudobbsnews@twitter.com.

Governor Sarah Palin's resignation could actually help her political career. That's the subject of tonight's "Face Off". Is it a correct assertion?

And schools across the country consider charging students for extra curricular activities.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We're so strapped for cash that sometimes you have to take extreme measures.

(END VIDEO CLIP)

DOBBS: And new information tonight in the brutal murder of a former star NFL quarterback.

(COMMERCIAL BREAK)

DOBBS: In Nashville, Tennessee, police now confirm that former NFL star Steve McNair was the victim of a murder-suicide. Nashville's police chief says that McNair's girlfriend shot McNair four times while he was likely asleep on the couch. Police say she shot him once in the temple, twice in the chest, then another in the other temple. She then sat down on the couch next to him and shot herself in the temple. New information tonight about South Carolina's serial killer, Patrick Burris and his criminal past. Burris had been arrested more than 30 times in North Carolina alone, and he had been convicted in four other states as well. He was released on parole in April. At the time of the murders, officials were looking for him for violation of his parole.

Some law enforcement authorities say he should never have been released. Burris killed five people over a six-day span, but police do not know his motive or whether his victims were in any way connected. He was killed in a shootout with police in North Carolina Monday.

Jurors in Virginia watching a video in court -- a former congressman, William Jefferson, as he accepts a bribe. In July, 2005, Jefferson accepted a suitcase filled with $100,000 from an FBI informant. The FBI recorded that exchange which took place outside a hotel in northern Virginia. Jefferson is accused of taking more than $400,000 in bribes.

School boards all across the country are grappling with budget deficits. Deep budget cuts mean extracurricular sports, arts, music programs, many being eliminated. But some schools are trying a controversial alternative trying to pay for those programs, charging the students and their families. Bill Tucker has our report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): Tough economic times are forcing some hard choices on school finances in Manchester, New Hampshire.

TOM BRENNAN, SUPT., MANCHESTER PUBLIC SCHOOLS: We've laid off 80-something teachers. We're not filling 190 positions.

TUCKER: But those actions haven't closed a $6 million hole in the budget. So the school board is now talking about charging students for non-academic activities.

KATHERINE LABANARIS, MANCHESTER SCHOOL BOARD: I feel that it's a terrible thing. But we're so strapped for cash that sometimes you have to take extreme measures. And for me this is an extreme measure, particularly because I am the representative for the center city and my students are the ones who would suffer most with pay-to-play.

TUCKER: Critics say the cuts fly in the face of what public schools are all about -- creating a level playing field.

(on camera): The practice of pay-to-play, whether it be for athletics or for the band or for the choir or the theater, raises the question of are we creating an education experience in our public schools for the haves and the have-nots?

UNIDENTIFIED MALE: I keep looking back at my childhood.

UNIDENTIFIED MALE: Right. BRENNAN: My parents would never have been able to afford for me -- afford to pay something for me to play sports or to be involved in extracurricular activities. It just wouldn't have been done. And that population that we classify as socially disadvantaged or economically disadvantaged, rather, is increasing with this economy.

TUCKER (voice-over): One local business has stepped up to the plate by donating a portion of its profits to the school's sports programs.

DAN FRASER, RESTAURANT OWNER: Sports have a very important part in I think life skills. You know it teaches team work. It teaches respect. It teaches a lot of things that carry you through life and I think it is just an important part of the rounded school system.

TUCKER: To encourage more business donations, the Manchester School Board, like many school boards across the country, is looking at setting up a charity to allow businesses to give tax breaks on money they donate.

MIKE DEBLASI, MANCHESTER SCHOOL BOARD: I don't think it is realistic to expect or assume or hope that a pay-to-play, pay-to- perform will ever fully fund these activities. I think it's more or less a method to help offset the cost as much as possible.

TUCKER: Nothing about Manchester's situation is unique.

(END VIDEOTAPE)

TUCKER: Now the National School Board Association says schools across the country are increasingly turning to pay-to-play policies to raise revenue. But it's an untracked practice and costs can range from an annual family maximum of $150 in some schools, per activity fees, in other schools and in other places they can reach as high as $1,900 per family. And up in Connecticut, Lou, there's one school that charges $1,000 to play football.

DOBBS: Yeah, that's -- you know we always talk about the public school system in this country as being the great equalizer.

TUCKER: Right.

DOBBS: This would seem to fly in the face of that historical and critically important function in our society.

TUCKER: It does and these schools are well aware of it. Talking with these people in New Hampshire yesterday, they are keenly aware of the fact that it's a have and have-not system (INAUDIBLE).

DOBBS: It is wonderful, we just have to give great credit to those businesses that are willing to support their schools, whether it be the band, whether it be the arts, our sports teams, so good for them. Bill, thank you very much.

Still ahead here, the nuclear weapons deal that President Obama just made with Russia. Did he do well? Was there any substance to it? And did he sign away this nation's security?

Our "Face Off" debate tonight, was Governor Sarah Palin's resignation an act of political suicide or the act of a political savant?

(COMMERCIAL BREAK)

DOBBS: When Sarah Palin announced her plan to resign as governor of Alaska, pundits attacked her as a quitter, saying she committed political suicide. Are the pundits right? That's the subject of our "Face Off" debate tonight.

Former Republican National Committee spokeswoman Liz Mair says Palin's decision may actually be a good move. And Matt Lewis, columnist for PoliticsDaily.com, who also writes for the conservative Web site TownHall.com, says quitting is un-conservative and will hurt Palin in the long run. Good to have you both with us. Let me turn to you Liz first, how could this possibly be a good move?

LIZ MAIR, REPUBLICAN STRATEGIST WITH HYNES COMMUNICATIONS: Well what I will say is I think it is a little bit too early to say definitively whether it is a good move or a bad move. What we do know is that Sarah Palin is a pretty unconventional politician. There are a lot of things that she's done in her political career that are very outside the box. This may be another of them.

Now in the past when she's made unconventional moves, I don't think that's something that has necessarily hurt her. You know when she ran against Frank Murkowski for the governorship she was primarying a sitting governor of her own party, doing that from the position of the last elected office that she had held being mayor of Wasilla, Alaska, a town of about 10,000 people. That was something that was pretty risky and pretty outside the box and perhaps something that a lot of political strategists wouldn't necessarily have countenanced, but it seems to have actually worked out well for her from a career perspective.

DOBBS: Matt, you disagree saying that she should have sought counsel from one Karl Rove, for example.

MATT LEWIS, COLUMNIST, POLITICSDAILY.COM: Well I think that she lacked a Karl Rove or a James Carville, for that matter, somebody who has been on the national scene and understands national politics. Making it to governor of Alaska is impressive but it is quite different to be in the big leagues and let me say I actually like Sarah Palin. I think she's a good person.

I like her policies. I think she is a good conservative. But the notion that this was somehow a stroke of genius, which some people have actually said, that's essentially the theory that everything bad is good for you. I mean I could actually make the argument that Mark Sanford had a brilliant political move the other day because of this Argentine affair, now he'll be seen as this great international hero and a romantic. I mean I think objectively speaking quitting your job after you've been governor for just two and a half years, I think that objectively speaking we can say that's a very bad move, if you want to be president in 2012. That's the big question.

DOBBS: Matt, I think you just demonstrated that political journalists and political strategists can spin just about everything when it comes to Governor Sanford. Governor Palin's decision to resign, let's take a look at a new "USA Today"/Gallup poll and what it says specifically about her political fire power as a result. Would you support Sarah Palin for president in 2012? Registered voters, 19 percent. Republican voters, interestingly, saying 72 percent that they would. I mean that's pretty amazing. Don't you think?

LEWIS: I think it is. I think it speaks to her popularity and her charisma which is all the more disappointing here. We have a candidate who is incredibly talented and I think she missed an opportunity. Frankly those numbers are good you but they exist in a vacuum. If she runs for president in 2012, she will be on stage in debates and she'll have Mitt Romney stand up and I was governor of Massachusetts, a much tougher state than Alaska and I didn't quit and I'm not going to quit when I get to be president. Then Mike Huckabee's going to stand up and say I was governor of Arkansas and people were filing ethics suits against me and I didn't quite, I didn't give up. When I'm president we need a fighter. So I just think --

DOBBS: Do you agree with that, Liz?

MAIR: I think that it depends on what she actually does next. If she actually goes out and becomes an effective advocate for something that's a top-line public policy issue that people deeply care about, that is a different way of making an argument as somebody who is effective and is a fighter. Frankly I don't know what she's going to do next. I'm not sure what she's going to do next. I'm not sure she knows what she's going to do next. I think Sarah Palin is a very savvy politics regardless of what one may think of her as a person, whether one loves her or hates her, I think it is fair to say that she's somebody who is pretty capable of leaping over a lot of hurdles and achieving her objectives very, very rapidly.

DOBBS: She also referred to being the victim of political blood sport. Which just about everyone is. But I think it is entirely fair to say she, without question, has been an extraordinary lightning rod drawing the fire and the ire of the liberal media, as well as the Democratic party and of liberals on the left side of the -- particularly the Democratic party. The idea that we are sitting here talking about Sarah Palin may speak to the cleverness of the way in which she announced her resignation, but it also draws us to the question, where is the Republican leadership right now? Because seemingly the Republican Party is rudderless, leaderless and without a single or unified voice of any kind. How do you react to that, Matt? Is that a fair statement or not?

LEWIS: Several fair statements. First of all, I think that you are absolutely correct. Sarah Palin was viciously attacked. It's unprecedented. The rumors and the sexism and even the latest "Vanity Fair" column on her was a complete hit job. So I don't blame her for wanting to get out. But again, you can't stand the heat, get out of the kitchen kind of thing. But I also think that your other point is quite right, too. Ironically, it could be that Mitt Romney now emerges and if Sarah Palin has taken herself out of the race, we know Mark Sanford has taken himself out of the race. We know Utah Governor John Huntsman was just appointed ambassador. So he's abroad.

DOBBS: This thought, perhaps Governor Huntsman did himself a favor to get out of this mess for a while.

LEWIS: Maybe we've been saved a vicious primary and Romney will essentially be ordained.

DOBBS: Liz?

MAIR: Look, I think that at the moment you wouldn't expect the Republican Party to have a single leader. I think you have many voices who speak out on many different issues. Frankly, that's good. There are a lot of important public policy debates going on at the moment. I think that the more voices that we have really, the better.

DOBBS: All right. Then you have to be amongst the happiest people in the country politically speaking. Liz Mair, thank you very much. Matt Lewis, thank you very much.

MAIR: Thank you.

LEWIS: Thank you.

DOBBS: Up next, the Obama administration decides to use the most successful tool to fight illegal immigration. We'll have that story.

And new concerns about the United States and Russia's nuclear arms control agreement. Did the administration give up too much?

And California's budget crisis, incredibly worsening by the day. State keeps trying to hand out IOUs, which it owes even more. Stay with us.

(COMMERCIAL BREAK)

DOBBS: In California, the budget stalemate costs the state $25 million a day on top of a deficit that has already approaching $30 billion. In the past week, people that do tax refunds, vendors expecting payments and people on public assistance received IOUs instead of checks. Among the hardest hitting with medical care providers for the poor. Casey Wian reports.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT: The Venice Family Clinic in Los Angeles is the nation's largest provider of free medical care for low- income patients. It sees 400 people a day, from the indigent to the working poor. But some of those services may soon be cut because about 20 percent of the clinic's funding comes from the state of California which is mired in a budget crisis. Already, some health care clinics and other state contractors are receiving IOUs because California is short of cash.

LIZ FORER, CEO, VENICE FAMILY CLINIC: Essentially the state is balancing its cash flow needs on the backs of agencies that serve the poor and poor people themselves. So the long-term effect is we, in many ways, are serving almost like the bank of California.

WIAN: Adding to the pain, the clinic's own bank is 1 of 4 major banks that say they will no longer accept state IOUs after Friday and California now has the lowest credit rating of any state -- just above junk bond status. State lawmakers will be scrambling to find a solution to California's $26 billion budget shortfall. But actually, Democratic Assembly Speaker Karen Bass boycotted a budget meeting Monday with Governor Arnold Schwarzenegger.

KAREN BASS, CALIFORNIA ASSEMBLY SPEAKER: He doesn't seem to be concerned about people are getting IOUs and all he has to do is just go out and blame the legislature.

WIAN: No new meetings to resolve the budget crisis are scheduled.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: There's been tough because we are short of revenues, there is a lot of tension in the building so it hasn't been easy. But we are all working towards that goal.

WIAN: The capitol is now home to regular protests from groups with a stake in the budget process, including the disabled. Others are using the crisis to promote their agendas.

UNIDENTIFIED FEMALE: But the governor and legislature are ignoring millions of Californians who want to pay taxes. We're marijuana consumers.

WIAN: In TV ads airing this week, proponents of legalizing marijuana claim taxing pot could pay the salaries of 20,000 California teachers.

(END VIDEOTAPE)

WIAN: So many deadlines and come and gone in the California budget crisis they've become all but meaningless. For what it's worth, the state controller now says California can continue to meet its mandatory payment obligations by issuing IOUs through September. After that he says there may not be money for schools or to pay bond holders. Lou?

DOBBS: Well, IOUs being apparently just another form of debt. What does that mean for the controller to use that kind of language to describe how long it can operate? Is it not a meaningless statement?

WIAN: In some ways, it is. The state is technically already out of cash. It doesn't have the cash to pay all of its obligations. It's promising to pay those IOU holders 3.5 percent interest in October which some people think is a good deal. There is an arbitrage market being set up that people -- DOBBS: Yeah, yeah, I'm sure it is a great deal. They can put any percentage they want to on debt. The point is that they have a deficit in California, any government should understand there is only one recourse available to it -- two options. One, either cut the budget or raise taxes. It seems demonstrable --

WIAN: As long as the state --

DOBBS: Yes.

WIAN: Yeah, Lou, as long as the state doesn't have an agreement to do one or both of those two things, the deficit is going to continue to grow by about $25 million a day. And that debt is going to continue to be racked up at an even faster rate as long as those IOUs that are supposed to pay interest are being issued.

DOBBS: As banks say that they will not accept them, the largest banks. Casey Wian, thanks very much from California.

The Obama administration saying it will strengthen efforts to keep illegal immigrants out of the workforce. The Obama administration announcing it will require federal contractors to use the most effective program against illegal immigration, the e-verify program, to determine whether employees are eligible to work in the United States. E-verify, as we reported here, is the most successful federal program for fighting illegal immigration. It has an accuracy rate of 99 percent.

Homeland Security Secretary Janet Napolitano today acknowledged that for the first time, saying that, "Requiring those who seek federal contracts to use the e-verify system would create a more reliable and legal workforce. The rule complements or department's continued efforts to strengthen immigration law enforcement and protect critical employment opportunities."

This appears to be an obvious act in support of Senator Schumer's decision to talk about honest and straightforward language. This is also certainly a reversal of the position on a program that they have deferred for nearly six months. This a new strategy apparently to claim interest in the border, and immigration reform. It was initiated first by Senator Schumer, as I said. He said it is time for honest and open language on the issue of illegal immigration and border security. Here is Senator Chuck Schumer who will be leading the fight for comprehensive immigration reform in the senate, making that declaration, using the term "illegal aliens" I believe, for the first time instead of "undocumented workers" or some other euphemism.

(BEGIN VIDEO CLIP)

SEN. CHUCK SCHUMER (D), NEW YORK: People who enter the United States without our permission are illegal aliens and illegal aliens should not be treated the same as people who enter the U.S. legally. When we use phrases like "undocumented workers," we convey a message to the American people that their government is not serious about combating illegal immigration, which the American people overwhelmingly oppose. (END VIDEO CLIP)

DOBBS: Senator Schumer obviously trying to assert in a good faith and honest language the need for exactly those qualities on the debate and the national discussion on the issue of illegal immigration and border security. We, along with the rest of the country, will be watching, of course, to see whether open borders amnesty advocates on both the left and the right follow senator Schumer's lead in asserting straight-forward honest language in the debate.

Up next, President Obama to host a nuclear security summit in Washington, D.C. next march. What does it all mean for our national security?

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DOBBS: President Obama will host a nuclear security summit in Washington, D.C. next march. That just announced at the G-8 summit under way in Italy tonight. It comes a day after the president signed off on a deal with Russia that would cut the United States and Russian nuclear arsenals by thousands of warheads. But many question whether that agreement is in the best interests of the United States and whether it is truly substantive and meaningful.

Joining us now, three experts on nuclear proliferation and geopolitics, Thomas Pickering, a former U.S. ambassador to Russia who is a member of Global Zero, an international organization devoted to eliminating all nuclear weapons. Frank Gaffney, director of the center for security policy, and Gordon Chang, author of "Nuclear Showdown, North Korea Takes on the World."

Gentlemen, good to have you all with us. Let me turn first to you, Frank Gaffney. You're critical of what the president has just done with President Medvedev of Russia. Why?

FRANK GAFFNEY, DIRECTOR, CENTER FOR SECURITY POLICY: Lou, I'm worried about it in its own right. I think that he's acting in great haste under an artificial deadline imposed by this start treaty that is supposed to expire at the end of the year. He's making cuts that I think are too deep, that are unverifiable, and that, unfortunately, worst of all, mask the real agenda of this president, which is not to move in some sort of lock-step with the Russians as much as it is to move the United States aggressively, and I think even unilaterally, in the direction that he has campaigned for, which is a nuclear free world. It turns out "The New York Times" said last Sunday that this ambition has been one he's had since 1983 when he was a radical at Columbia. A radical at Columbia. And I think when you see what he is not doing to maintain our arsenal, to modernize it, let alone to test it you really realize what he's working towards is not so much these cuts with the Russians as a really unilateral agenda that's reckless and irresponsible.

DOBBS: Ambassador Pickering, I think your group is described as radical by Frank Gaffney.

GAFFNEY: It is radical. DOBBS: Is Frank right?

THOMAS PICKERING, FMR. U.S. AMBASSADOR TO RUSSIA: No, Frank's wrong. I think frank's wrong on all of the accounts. First, this is a very deliberate state, certainly would have approved up and down the government. It's radical in the sense that the Bush administration already took us to 2,200, to 1,700 warheads. The warheads brought under control and less established, the less we have to fear those slip ought to other people. Terrorists and otherwise, I think that makes us safer day by day. The president isn't moving unilaterally. This is a bilateral agreement. It has verification. It's the same verification that's going to be kept in the start treaty. Frank has acknowledged in the past that the Russians have cheated although my own feeling was that either the Bush administration was totally asleep at the switch which I cannot believe, or that those particular allegations are not going to hold up. Certainly, my own view is that that's important.

Finally, the president has said, let's look to a world without nuclear weapons. He hasn't proposed a plan yet, we have proposed a plan which I think is useful. There are big, big issues on wait and nobody is rushing there. Certainly, I can't believe there is any scintilla of evidence that the president is moving in this direction unilaterally. He's moving very carefully with negotiated solutions and obviously, any effort to move towards it would involve other nuclear weapons. We can't do it alone.

DOBBS: Let's be succinct because we do have limits on time and I appreciate that. Before I turn to you Gordon Chang --

PICKERING: I'm only answering what Frank had to say.

DOBBS: I know you are. I appreciate your courtesy. I'd like to show our audience precisely with what we're dealing with here. This is from the Federation of American Scientists, the estimate of world nuclear forces. This is from April of this year, Russia with 13,000 warheads. The United States, 9,400, France, 300, China, 240, the United Kingdom, 185. Other nations assumed no nuclear forces, Israel, 80 warheads, Pakistan, 60, India, 60, North Korea, fewer than 10. Gordon Chang, within the context of this level of proliferation, what does the star treaty or any effort at bilateral arms control mean to proliferation when we are faced with nuclear war heads?

GORDON CHANG, AUTHOR, "NUCLEAR SHOWDOWN": I think part of the problem with those talks with Moscow, there was one country that was not in the room. And that was China. China says at that Russians and the Americans have to reduce all of their weapons, and then they'll start talking about their arsenal. But China is the only major power that is including its arsenal at this point. You know, the Chinese and the Russians, the dragon and the bear, they're ganging up on the United States and that's a problem because they're not part of this. This is just not America and Russia anymore.

DOBBS: Frank, the idea that Russia with this number of war heads, the United States, obviously are the dominant nuclear power, is there some way in which you think it would be responsible to significantly reduce nuclear arms in the war?

GAFFNEY: Look, I'm all in favor of securing the Russians' nuclear weapons which is Tom Pickering says could well migrate into the hands of terrorists and reducing them further. The Russians say they can't afford them anyway. That's all great. I think we've got a different situation which we're deterring lots of different people. I have to say with all due respect to Tom, I think it's national security million practice to say that we can. And what's unilateral about this, Lou, which is troubling that nobody is talking about, is that a strategic posturing commission chartered, if we don't take steps to modernize our arsenal and to fix the myriad of problems of on sole lessens and the context that supports it, we're going to unilaterally disarm, that makes the world a more dangerous place, not a safe one.

DOBBS: What say you, Ambassador?

PICKERING: I say we have the secretary of defense looking after the weapons. We maintain the stockpile. There is a constant look at this. People feel secure about it, because, in fact, our best experts are in charge of it and certainly guard very carefully against anything like that happening.

GAFFNEY: That's rubbish. That's not what the commission found.

DOBBS: Gordon Chang, North Korea, with weapons, these other makes with weapons, which you mentioned prominently among them is China. What is the solution?

CHANG: I think part of the solution is deal with it in North Korea now and be honest about it because we haven't been. We've got to start talking to our friend, rather than our potential add varies with the issues. You've got to secure your own arsenal.

DOBBS: Thank you very much, Gordon Chang. Frank and Ambassador Pickering, thank you very much.

Up at the top of the hour, Campbell Brown. Campbell?

CAMPBELL BROWN, CNN ANCHOR: Hey, there, Lou, coming up tonight, why is Michael Jackson's doctor unable to come up with a yes or no answer to a very simple question, is he the father of two of Jackson's kids, we're going to talk about that. Also, disturbing new information about Jackson's death. We'll have the details.

Plus, Lou, a medical breakthrough for men, sperm created from stem cells in labor. We've got that plus the mashup of the news.

DOBBS: That's a breakthrough for men?

BROWN: Yeah.

DOBBS: Thank you, Campbell Brown.

We'll be right back with some of your thoughts.

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DOBBS: Time for some of your thoughts.

Ben in Oklahoma said, "The slogan that should be hurled at this administration and the Democrats in congress should be it's the spending stupid."

And Sandy, in Georgia, "Lou, I notified my representative and both of my congressmen concerning support of e-verify. Thank you for all you do." And thank you for what you've done.

Charles, in West Virginia, "To get our country turned in the right direction again; we should impose the buy American provision, not only for the government, but also for businesses and person use as well. When Americans work, America works!"

And Paul, in Oklahoma saying, "Lou, every time congress says they are working for the American people, I automatically check the weather channel to see when hell freezes over."

Jim in Florida, "Lou, who needs enemies when you have friends like this administration? There was no reference to the previous administration."

We love hearing from you. Please send us your thoughts to Loudobbstonight.com. Each of you whose e-mail is read here receives a copy of my book "Independence Day."

Join me Monday through Fridays for the Lou Dobbs show. And in New York. Go to loudobbs.com for the local listings for the Lou Dobbs show in your air. Follow me on twitter.com. We thank you for being with us here tonight. Please join us tomorrow.

Good night from New York.

Now, Campbell Brown.