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Lou Dobbs This Week

U.S. Military Brass Claims Confidence on Iraq; Drug War Money Going to Drug Cartels? Companies Hiring Illegal Workers Face Increased Fines and Sanctions; U.S-Mexico Agreement to Fight Drug Cartels; DEA Report Says Borders a Terrorist Threat; Uptick in President Bush's Poll Numbers

Aired August 12, 2007 - 18:00   ET


KITTY PILGRIM, HOST: Tonight, an astonishing threat by Communist China against this country, as tensions over China's unfair trade policies escalate.
And the United Stastes may give Mexico hundreds of millions of dollars to fight Mexican drug cartels. But members of Congress say some of that money could end up in the hands of those Mexican drug cartels.

All of that and much more, straight ahead tonight.

ANNOUNCER: This is LOU DOBBS THIS WEEK -- news, debate and opinion -- for Sunday, August 12. Here now, sitting in for Lou Dobbs, Kitty Pilgrim.

PILGRIM: Good evening, everybody. President Bush says Iran will face consequences if Tehran continues helping insurgents to kill our troops in Iraq. But the president did not say what those consequences might be.

The president's declaration came after a top commander said Iranian bombs were responsible for one-third of all U.S. combat deaths in Iraq last month. Ed Henry reports from the White House.


ED HENRY, CNN WHITE HOUSE CORRESPONDENT (voice-over): President Bush issued new threats against Iranian President Mahmoud Ahmadinejad.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There will be consequences for people transporting, delivering EFPs, highly- sophisticated IEDs, that kill Americans in Iraq.


HENRY: And he insisted Iraqi Prime Minister Nouri al Maliki has made gains toward political reconciliation.


BUSH: My own perspective is, is that they have made some progress, but not enough.


HENRY: But Maliki, a Shi'ite leader, is in Tehran right now, making nice with Ahmadinejad and others in the overwhelmingly Shi'ite Iran, making it harder for Sunnis in Iraq to find common ground with the prime minister.

Mr. Bush tried to make light of the controversy, insisting world leaders usually come out of meetings smiling for appearances sake.


BUSH: You see, you don't want the picture to be kind of, you know, duking it out. Okay. Put up your dukes. It's an old boxing expression.


HENRY: The president declared he's on the same page with Maliki, who also visited Iran last fall.


BUSH: If the signal is that Iran is constructive, I will have to have a heart-to-heart with my friend the prime minister, because I don't believe they are constructive.


HENRY: After some August down time in Kennebunkport and Crawford, the president is facing a showdown with Democrats over whether to withdraw U.S. troops from Iraq. A press conference before heading out the door enabled Mr. Bush to lay out what he believes is at stake in September.


BUSH: There's a lot of work to be done, and the fundamental question facing America is, is it worth it? Does it matter whether or not we stay long enough for a ally in this war against radicals and extremists to emerge? And my answer is, it does matter.


HENRY (On camera): This is the second time this week alone that Mr. Bush has had to warn a key ally not to be hoodwinked by Iran. First, it was Afghan President Hamid Karzai. Now it's Maliki. This shows that from Iraq to Afghanistan, Iran is trying to expand its influence big time.

Ed Henry, CNN, the White House.


PILGRIM: Joining me now to discuss the progress of the war in Iraq, its political impact on this country and some other top political issues is Pentagon correspondent Barbara Starr in Washington, White House correspondent Elaine Quijano, who is with President Bush in Kennebunkport, Maine, and our senior political analyst, Bill Schneider, who is following the presidential candidates at the Iowa State Fair in Des Moines, Iowa. Thank you all for taking the time to join this discussion.

Barbara, I would really like to start with you, because of the war in Iraq. Some very noted Brookings scholars this week wrote an op-ed saying that the war in Iraq, the progress being made in Iraq is substantial, due to the surge. And they're suggesting that Congress continue to sustain troop levels. What kind of an impact did this somewhat of an about face from these two scholars cause in Washington?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, there is some progress in Iraq, Kitty, in the security situation. Top commanders acknowledge it. They talk about it. They are beginning now to take these Washington analysts, if you will, over to Iraq and show it to them, because they believe that these are the kinds of people who write articles, appear on TV and can begin to substantially influence American public opinion.

But on the other side of the ledger sheet, there is almost no political progress and top commanders also know that this security situation will be very short-lived, unless there is progress on the political side.

PILGRIM: Barbara, many of the commanders in the field in Iraq have been asking for more time, not to prematurely dismiss the success of the operation that's underway. Do you think that this gives more clout to their words in Washington?

STARR: Oh, indeed it does. If they've got something positive to show, such as the security progress out in al Anbar province in the west, where they've been working with tribal leaders, that can only help them with Congress.

But the clock is ticking. General David Petraeus comes to Washington next month to brief Congress, to brief the president. But the underlying facts are not changing. The U.S. military does not have enough troops on hand to keep the surge going past this coming spring of '08. That's when they will have to make some very tough decisions.

PILGRIM: Bill Schneider, I'd like to bring you in on the political side of this. We're seeing a bit of an uptick in President Bush's approval ratings and the question is how do you -- do you approve of how President Bush is handling his job as president? Of course, Iraq is in that. And we're seeing now 36 percent. It was 32 percent in June, and so an uptick.

However, in April it was 36, in January it was 34. So it is sort of muddling around in the mid-30s. But do you believe that this latest on Iraq is helping, or what do you think is helping the president? BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: What's helping the president is the campaign -- 15 months before the election, there's a full-fledged campaign going on. That's what's going on here at the Iowa State Fair. They got politicians roaming all over the place.

Now, what's happening is, the Republicans are defending the president, the Democrats are attacking him and attacking his policies in Iraq, and that's leading a lot of Republicans to come to the president's defense. That's the campaign effect. Well, what we're seeing in the polls is, though, those small gains that President Bush is making in the polls are coming entirely from his fellow Republicans. That's the campaign effect.

PILGRIM: All right.

And let me turn to Elaine Quijano. Do you believe, Elaine, that we're at a turning point here on this whole Iraq discussion, in terms of how it plays out at the White House?

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, it's certainly hard to say at this point. Obviously, September 15th, when General Petraeus and Ambassador Crocker give their report on the -- their assessment of the surge, that will be a pivotal point, cedrtainly.

But the White House was, in fact, given a boost by that Brookings -- by that op-ed, rather, by the Brookings scholars. The vice president pointing to that as an example, the vice president saying look, don't believe my word for it that there is some progress being made as a result of the surge. Look at these two people who have criticized the administration in the past. They have gone over themselves. They have seen it for themselves and they say that there are indications that the military is making progress.

However, as Barbara pointed out, on the political side, it is a much different story. The administration continues to emphasize, not political progress at the top levels in Baghdad, but instead, sort of a grassroots effort by local Iraqis, turning against al Qaeda, particularly in that volatile -- what was the volatile al Anbar province. The administration is looking to that to say that there is some indication that political progess is moving forward.

But of course, the big question will be in September, when the Iraqi politicians are back. Will they be able to make some true progress at reconciliation?

PILGRIM: Elaine, I just wanted to bring up one more thing with you -- and we're almost out of time -- but it's one of the big domestic issues, and it may factor into these poll numbers. Homeland Security Secretary Michael Chertoff placed the blame on Congress for failing to pass the comprehensive immigration reform. Let's listen to what he said, and get your reaction.


SECRETARY MICHAEL CHERTOFF, HOMELAND SECURITY DEPARTMENT: We're obviously disappointed in the fact, as is the president, that Congress has not chosen to act on our comprehensive solution. Our hope is that the key elements of the Senate bill will see the light of day at some point. But until Congress chooses to act, we're going to be taking something energetic steps of our own.


PILGRIM: Now Elaine, this is clearly an effort to put the impetus back on Congress, to say, Congress, it's really in their ballpark. Do you believe that this helps the president, to have this statement?

QUIJANO: Well, what the president is really trying to do here is to essentially try and make amends with conservatives. Of course, he lost against conservatives, members of his own party, when it comes to the issue of immigration, who did not see eye to eye for his, quote, comprehensive plan.

Instead, what you have now is the administration saying, look, we are serious about enforcing the existing immigration laws that are already on the books. This is how we will do it. But now the rest is up to Congress. The White House clearly trying to not give up the fight, essentially saying, we understand the comprehensive strategy didn't work, but here's what we would like to do and here's what we want Congress to do as well.


PILGRIM: Thanks very much. Elaine Quijano, Barbara Starr and Bill Schneider. Thank you all very much for joining us.

Still to come, the primary election season could begin earlier than ever, and three top political analysts will join us to discuss it.

Also, Communist China, threatening to cripple our economy: we'll have a special report.

And rising concern that U.S. taxpayer dollars could end up in the hands of Mexican drug cartels.

Stay with us.


PILGRIM: Communist China's trade surplus continues to soar amid growing pressure on China to stop unfair trade practices. Now China's trade surplus is more than $136 billion so far this year. Chinese exports for the month of July increased almost 35 percent. The United States reported a trade deficit of $232.5 billion with China last year.

Now for the past several years on this broadcast, we've been reporting on the threat to American economic stability from China's ownership of massive amounts of U.S. debt. Now Beijing is responding to the increasing pressure to become a fair trading partner by threatening to cripple the U.S. economy.

As Christine Romans reports, communist China is hinting it has the power to trigger a dollar crash.


CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): The president, with his top economic advisers at the Treasury Department, playing up the U.S. economy, even as his treasury secretary played down a monetary threat from communist China, that threat, to dump U.S. Treasuries. Keep up the pressure on China to reform and a party official in the China Daily writes: "The Chinese central bank will be forced to sell U.S. dollars which might lead to a mass depreciation of the U.S. dollar."

The U.K. Telegraph notes another leader recently called U.S. reserves a "bargaining chip," dollar sales their "nuclear option."

ALAN TONELSON, U.S. BUSINESS AND INDUSTRY COUNCIL: The Chinese do hold very significant leverage over the U.S. economy because they hold so much U.S. debt. And by holding that U.S. debt, they subsidize American consumption and help keep our living standards artificially high. At the same time, China desperately needs the United States to serve as the market for its manufactured goods.

ROMANS: China holds $1.3 trillion worth of reserves, $407 billion in Treasuries. Dumping them would be devastating to the U.S. economy, slamming the dollar and driving up interest rates.

The treasury secretary, just back from meetings with Chinese officials, called reports of the threat "absurd." But what is worrying is there's no way to know how far China would go.

ANDREW BUSCH, BMO CAPITAL MARKETS: We are not talking with a rational capitalist society per se. I mean, this is a unique hybrid. So we are not quite sure how decisions are being made. Could they go in and do something like this? It's possible.

ROMANS: Making good on its threat, trade experts say, would hurt both countries.


ROMANS: Many say the Chinese are clearly trying to counter a rising pressure from Congress that China needs to reform. In the wake of product recalls and imported food scares, it's a reminder that the Chinese do have enormous leverage over the U.S. economy -- Kitty.

PILGRIM: Christine, this rhetoric out of China came from some academics who normally don't speak about policy officially. What's the interpretation on that?

ROMANS: The interpretation is the PRC, the People's Republic of China, the communist party think tanks are starting to put out the message there, a reminder that, hey, wait a second, we do have the ammunition available to us if we wanted to trigger some kind of dollar sales, selling of U.S. assets, selling of U.S. Treasuries. It would be very bad for the United States. We should be raising that possibility so that maybe Congress won't try to get us to change our own currencies.

So people are thinking that it's a proxy without the actual Chinese government saying it's a proxy for what they're thinking there.

PILGRIM: It's certainly not thought up independently in their own offices.

ROMANS: Exactly.

PILGRIM: Definitely. Thanks very much, Christine Romans.

And communist China is using a number of unfair trade practices to increasingly dominate what was once American industry. Chinese exporters commonly target a specific industry and then flood the market with cheap subsidized products. But those predatory trade tactics are rarely challenged by the U.S. government.


PILGRIM (voice-over): Steel pipe is used in housing, plumbing, fencing and a variety of construction. But Chinese steel pipe imports have jumped 900 percent in the last four years, driving many U.S. producers out of business.

TOM CONWAY, UNITED STEELWORKERS: The magnitude of the pipe that they had shipped in here just literally gutted our piping industry. No one here seems to be willing to try and make a real effort to put a stop to this. We file the trade cases continually. People need to pay attention to what's going on in the growth of China and its ability to grow these exports.

PILGRIM: The United Steelworkers have joined one of the largest anti-dumping cases ever against the Chinese, saying Chinese are undercutting prices by as much as 80 percent. The Chinese have also used such tactics to target the U.S. garlic industry, which has lost 50 percent of the market to Chinese producers. It is priced about 30 percent below what it costs U.S. producers to grow.

Nearly half of the canned mushroom industry is now Chinese products. There are fewer than five producers left in the United States. Chinese have dominated about a quarter of the honey market since 2001, often avoiding duties on its shipments of honey to the United States, sometimes by falsifying the paper work, to read "product of Mongolia," which has no domestic honey production.

MICHAEL COURSEY, KELLEY DRYE COLLIER SHANNON: It is a fraud that is on the scale that's breathtaking. It's taking the government an extremely long time to figure out what to do about it. Ninety-three percent of dumping duties are not being collected.

PILGRIM: Chinese exporters use a variety of tactics, mislabeling cases on what is inside or faking paperwork to read the crates had been sent from another country such at Vietnam or Thailand.


PILGRIM: The United Steelworkers Union says hundreds of jobs have been lost in the last three years because of Chinese imports. And those job losses, despite the fact that demand for steel pipe is booming. They charge the Bush administration has not used its trade authority to demand accountability from the Chinese government.

Well, there is a new recall of dangerous exports from communist China. Hundreds of thousands of defective tires are being recalled because they lack an important safety feature. A New Jersey-based tire importer, Foreign Tire Sales, is taking 255,000 tires off of the market.

Now federal officials originally ordered a recall of about half a million tires. The tires were bought between 2004 and 2006. Other Chinese products that have been recalled include pet food, toys, and toothpaste.

Just ahead, Senator Byron Dorgan, author of "Take This Job & Ship It," on what he calls the myth of free trade.

And illegal competition, how businesses that play by the rules are being outdone by companies that hire illegal aliens. We'll have a special report.


PILGRIM: Earlier this week Lou spoke with Senator Byron Dorgan about outsourcing and its devastating impact on this country.


LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Joining me now, Senator Byron Dorgan, author of the best- selling book, "Take This Job & Ship It."

Senator, tell us, you wrote this book to sound the alarm. Have you been successful?

SEN. BYRON DORGAN (D), NORTH DAKOTA: Well, you know, it's not over. This is a big fight. We still have companies that are shipping jobs overseas. In fact it's interesting, Lou, the same companies that ship American jobs overseas in search of cheap labor are the very companies that are advocating in Congress, you've got to have an immigration bill that has guest workers.

DOBBS: Right.

DORGAN: Because they not only want to get rid of American jobs in search of cheap labor; they want to bring cheap labor through the backdoor. I mean, that's their motive.

DOBBS: Well, in "Take This Job & Ship It" in which you focus on outsourcing, the impact of trade policies that you fought -- free trade policies that you fought throughout your career in the Senate, we see some sign in this Democratic Congress that the sense is awakening, you have not renewed the president's so-called fast-track authority, which really, unconstitutional in my opinion, is taken away, ceded by the Congress.

Is it going to stay that way or are you going to ultimately give it to him?

DORGAN: Well, no, I think that's the good news. I mean, we have a new group of freshman senators that campaigned on these issues of fair trade and this president is not going to get what is called fast- track trade authority, so they can go negotiate another bad agreement behind closed doors, then bring it to the Congress and say, OK, here it is, take it or leave it, no amendments. I mean, that doesn't make any sense.

All of these trade amendments, I think, have been failures. They have undermined American workers. They have put downward pressure on the middle class. And so, you know, we need to start over and stop all the chanting about free trade and start insisting on fair trade.

DOBBS: Fair trade and the fact that the American worker today, as you say, victimized by a government that -- 31 consecutive years of trade deficits. Is the American worker going to be restored?

Because you know there are a whole host of economists now saying, you know, we ought to just have free labor. It doesn't matter. Let them migrate across borders. It's good for business and global competitiveness. And all those people like you, Senator Dorgan, you guys are just protectionists.

How do you respond?

DORGAN: Well, xenophobic isolationist stooges, they say. You just can't see over the horizon. How I respond is just look at the facts. Downward pressure on workers in this country, giant trade deficits, shipping jobs overseas, look, this is a failure.

And what we built over the last century we had better start protecting. And the word "protect" ought not be building walls around our country, but it ought to be standing up for the middle class and standing up for good jobs.

DOBBS: Amen. Senator Byron Dorgan, thank you very much for being here.

DORGAN: Thanks, Lou.

DOBBS: Author of the book "Take This Job & Ship It." It's now available in paperback. Senator Dorgan, good to have you with us.

DORGAN: Good to be here.


PILGRIM: Coming up, why some businesses are fighting to survive simply because they are playing by the rules and not hiring illegal aliens. We'll have a special report.

And some members of Congress want to resurrect the so-called comprehensive immigration reform bill with some changes. Those stories and much more when we return.


TONY HARRIS, CNN ANCHOR: Hello, everyone. I'm Tony Harris live at the CNN headquarters in Atlanta with a look at what's happening right "Now in the News."

They're holding out hope in Huntington, Utah, as worries grow about the air quality in the collapsed Crandall Canyon Mine where six miners have been trapped since Monday. Kara Finnstrom joins us live with the very latest.

And, Kara, officials, have to fix a lens on that camera and get it back down into that eight-and-a-half-inch borehole.

KARA FINNSTROM, CNN CORRESPONDENT: They've been working on that and we haven't heard any word yet on where they are in that process. But these latest developments today must just be agonizing and confounding for these families who have been waiting six days now for word about their loved ones.

What we learned today is that there is survivable space down there. This camera saw a five-and-a-half-foot open space with drinkable water on the ground where these miners, if they survived the initial collapse, if there is oxygen down there to breathe, could reasonably, possibly, be alive.

But at the same time as they got this news, what they heard is they tried to make contact with these miners again, is that the rescuers could neither see them nor hear them. Today when they finished drilling this large hole the first thing they did was they actually started banging on that -- what they call a drill steel that goes all the way down there.

Now the miners have been trained. They know it's almost second nature to them when they hear that, they're supposed to take two pieces of metal that they can find and start banging back. But when they did this, they heard nothing. The rescuers heard nothing.

Then they actually were told -- started talking through to a microphone, started yelling, thinking maybe that these miners would hear and respond to a human voice. Again, they heard nothing. And we did talk to one of the engineers about -- well, we heard from them during the press conference about what it was like to hear that silence.


MIKE GLASSON, ENGINEER, MURRAY ENERGY CORP.: The first test that we did when we got to the bottom of the first hole, and of course we were very hopeful and, frankly, disappointed that we did not have a response. But we'll continue to do this, you know, on these drill holes and continue to hope for responses.


FINNSTROM: The other important piece of all of this is the oxygen down there. The oxygen levels, that first initial drill hole that they drilled down, the air sample suggested that the oxygen levels are only at about 7 percent. That is not enough to sustain life.

We have not gotten any air samples read yet from the second drill hole. It's only 130 feet away, but this is supposed to be exactly where they believe these miners were last. So it will be interesting to find that out, Tony. And at the same time we're waiting to hear the results of this -- lowering down this other camera.

It could take a while before we get the results back. They'll be talking with the families first and then we understand that they will be sharing some of the pictures with us.

HARRIS: And, Kara, how is the work going to dig out that horizontal passageway that would ultimately be used to bring the miners out?

FINNSTROM: That's continuing. Bob Murray, the operator of the mine, said today that this is too slow of a process for him. They are continuing to bring out those tons of coal and debris and dirt.

But the last estimate that we got, and this is what we were saying yesterday, is that it's still four or five days away. It could change. They say things could change down there. They could get down there and there could be an opening and it could be easier than they are anticipating.

But at this point, again, the last estimate, four or five days away from that.

HARRIS: CNN's Kara Finnstrom keeping an eye on the situation, developments out of Huntington, Utah. Kara, appreciate it, thank you.

Grief on display today at funerals for three murdered college students in Newark, New Jersey. Dashon Harvey, Iofemi Hightower, and Terrance Aeriel were eulogized as warm, strong, vibrant friends. Three people are in custody in their killings and police are looking for a fourth.

President Bush playing host to French President Nicolas Sarkozy in Kennebunkport, Maine, today. The two leaders admit that they don't agree on everything but their cordial meeting and private talks today may help thaw what has been a chilly relationship between the U.S. and France.

A big day in store for the crew of the Shuttle Endeavour. Tomorrow, astronauts will use a robotic arm to get a closer look at a troubling three-inch gash on the shuttle's heat shield. Now right now live pictures. Astronauts are wrapping up their first space walk -- OK, not live pictures, on tape now. Earlier today they installed a new beam to the International Space Station.

We will bring you the latest developments on the trapped miners plus today's other top stories at the top of the hour. I'm Tony Harris. Now back to LOU DOBBS THIS WEEK.

PILGRIM: The architects much of the failed grand bargain on comprehensive immigration reform are backing away from plans to give amnesty to millions of illegal aliens, at least for now. Instead, some Republican senators have introduced new legislation.

As Lisa Sylvester reports, the emphasis in the new legislation appears to be on border security.


LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Senator Arlen Specter wants to try to reintroduce the failed comprehensive immigration approach with a few minor changes. But that idea is hitting a flat note among lawmakers.

Instead, a new effort that focuses exclusively on border security is gaining momentum.

CHERI JACOBUS, REPUBLICAN STRATEGIST: Members of Congress heard from folks back home on the immigration bill and, you know, they had to finally listen. So I think now what they're trying to do is fashion a package that will actually pass muster with more of the American people.

SYLVESTER: Senators John McCain, Lindsey Graham and Jon Kyl, who are among the architects of the failed Senate bill, have now reversed course. They're teaming up with more conservative members of their party, like Senator Jeff Sessions, to introduce legislation that toughens border security without a guest worker or amnesty program.

The bill would create a mandatory electronic employment verification system, implement an entry and exit system for all U.S. borders, and complete the border fence.

Graham, who is up for re-elected, is betting this new bill will help revive his sagging campaign.

SEN. LINDSEY GRAHAM, (R), SOUTH CAROLINA: There are some things we can do in six months. There are some things we can do next week. There are some things it's going to take a decade. Let's start doing those things -- securing that border we need to do now.

SYLVESTER: GOP members who have been leading opponents of illegal immigration hope the legislation will at least force their colleagues on the record on border security.

JOHN KEELY, CENTER FOR IMMIGRATION STUDIES: If you support securing our borders, if you have gotten the message from the American people that, you know what, Americans by the hundreds of millions are dubious about Washington's seriousness of getting secure our borders. Here's a test vote. SYLVESTER: But time and the legislative calendar are running out and Majority Leader Harry Reid is reluctant to revisit the immigration issue this year.


SYLVESTER: The outcry from the public led to the defeat of the Senate immigration bill. Senator Jeff Sessions' office hopes the public will speak out again this time in favor of this new border security only bill. The goal is to put enough pressure on the Democratic leadership to force them to carve out time in the legislative calendar -- Kitty?

KITTY PILGRIM, CNN GUEST HOST: Thanks very much, Lisa Sylvester.

Well, the Bush administration this week says it will use existing rules to reduce the number of illegal aliens in the workforce. Homeland Security Secretary Michael Chertoff said companies that hire illegal alien workers will face increased fines and sanctions. And that would be good news for companies that obey the law when hiring workers.

As Bill Tucker reports, those companies find themselves at a competitive disadvantage.


BILL TUCKER, CNN NEWS CORRESPONDENT (voice-over): Terry Funderburk is the owner of this roofing business. He's been doing it for 20 years.

But this year he says his business has fallen 90 percent. His frustration intensified when an article ran in "The State" newspaper on June 27th in Columbia, South Carolina, in which a roofing competitor admitted to hiring illegal aliens.

Less than a month later, Funderburk staged a one-man protest on the street outside this home where he alleges his competitor hired illegal aliens to do a job for less than half of what he bid.

TERRY FUNDERBURK, CUSTOM COPPER: I can't compete with people that make $10, $12 less than what I pay my people. I'll be out of business in the next couple of months probably because of it.

TUCKER: He was handcuffed and ticketed for disorderly conduct. And his son captured these images from across the street.

Twenty-two hours later, Funderburk was released from jail. No action was ever taken against the competitor. Funderburk feels abandoned by the political system.

FUNDERBURK: They don't care. They don't care about me. I look at myself in the eyes of the politicians and the local leaders as like a second-class American citizen. TUCKER: Funderburk says out of the past four weeks he's only worked two and that means the guys who work for him haven't worked either.

Matt Reindl understands exactly what Funderburk is going through. He owns a cabinetry business and has testified before congressional committees asking how he can be expected to compete with business.

MATT REINDL, STYLECRAFT INTERIORS: Hire people illegally, not pay worker's comp, not pay social security, not pay the health benefits. And it has driven the price of my product down considerably. Now I have to make a decision whether I can continue to pay health benefits for my legal people that are here.

TUCKER: Examples that suggest working standards are not being raised, but steadily eroded.


TUCKER: Reindl estimates the companies who do not pay the various insurances he does enjoy a 29 percent advantage over him. It's hard to compete when you're looking at a competitor with a 29 percent advantage over you to start with -- Kitty.

PILGRIM: The amount of frustration they must feel trying to do business under these conditions. Thanks very much, Bill Tucker.

Just ahead, outrage over a plan to give Mexico hundreds of millions of taxpayer dollars to fight drug cartels.

Also, disturbing a new report says radical Isalmists are entering the country from Mexico often undetected. Congressman Ed Royce will share his thoughts.


PILGRIM: The Bush administration is nearing an historic agreement with Mexico. And that agreement will provide hundreds of millions of taxpayer dollars to help fight drug cartels in Mexico.

But as Casey Wian reports, some U.S. lawmakers are worried that money could end up in the wrong hands.


CASEY WIAN, CNN NEWS CORRESPONDENT (voice-over): Talks between the United States and Mexico on a deal to provide hundreds of millions of dollars in money and equipment for President Philippe Calderon's war on drugs cartel are now pretty well advanced, a senior State Department official tells CNN.

SEAN MCCORMACK, STATE DEPARTMENT SPOKESMAN: President Calderon has taken a brave and firm stance in fighting these drug cartels and we want to talk to him about how we can support that effort and that's really the focus of the ongoing discussions.

We're engaging Congress on this, briefing them, updating them on where we stand on those discussions.

WIAN: However, an adviser to U.S. Senator Patrick Leahy says lawmakers are not being given enough details. They're worried any cash, technology, or weapons the U.S. sends to Mexico could wind up in the hands of the very same narco traffickers both governments are trying to fight.

Mexican law enforcement from local cops to federal troops are routinely infiltrated by drug cartels.

MAUREEN MEYER, WASHINGTON OFFICE ON LATIN AMERICA: If the package is focused on encouraging Mexico to do structure reforms, police reform, tackling corruption, looking at issues of accountability, those seem very positively viewed, I think, from both parties.

WIAN: Contentious issues remain. Mexico wants the U.S. to control illegal drug use and weapons trafficking. And any hinted of intervention by the U.S. military would likely draw fierce opposition.

So far, Calderon's battle against drug cartels is at best a draw. Few drug kingpins have been caught while nearly 1,300 have been executed by the drug cartel this year. That's despite the deployment of 24,000 Mexican federal troops to fight drug traffickers.

(on camera): Presidents Bush and Calderon will meet in Canada at a NAFTA summit in less than two weeks. They're expected to discuss the joint effort to battle drug cartels at that time.

Casey Wian, CNN, Los Angeles.


PILGRIM: Disturbing new evidence tonight that this country's lax immigration policy is putting our national security at risk.


LOU DOBBS, CNN HOST: Disturbing news that our broken borders are potentially a terrorist threat, a DEA report, in fact, showing radical Isalmists in this country linking up with Mexican drug cartels, the cartels we reported on earlier in this broadcast. Those radical Isalmists are entering the United States posing as Hispanics.

Joining me now with more on this story, Congressman Ed Royce, the ranking member of the House Foreign Affairs Subcommittee on Terrorism and Nonproliferation.

This news emerging from the "Washington Times," finally gaining access to this DEA report. Your reaction, Congressman?

REP. ED ROYCE, (R), CALIFORNIA: Well, Lou, this backs up some of the reporting and testimony we heard from local law enforcement down in Texas in Laredo, Texas, about the difficulties they were seeing locally there. And now the report spells out how people are going to the county court and changing their name, changing their identity from an Arabic background to an Hispanic one as well as the concerns about these links with the cartels.

DOBBS: You held hearings on the Subcommittee on Nonproliferation, Terrorism, Foreign Affairs. How does what you're learning today differ from the results of that hearing?

ROYCE: Well, I don't think it differs from what we learned in the hearings and we've heard in the past our FBI Director Mueller say there was this phenomenon of people changing their identities, who were coming from the Middle East from Arabic to Spanish, but it shouldn't surprise us that much. We remember Khalid Shaikh Mohammed as well as al Zawahiri talked about launching attacks on the soft underbelly of the United States by coming through our borders, our porous borders.

And given that reality, don't you think, Lou, it's time that this government asks why we haven't secured those borders? Don't you think it's time when the border patrol tells us we have yet to secure our borders? Why isn't that fence -- that Fence Security Act that we passed in Congress that we funded last year when the Republicans still had control, why has that not being built right now or being finished right now on that border?

DOBBS: Well, let's explore that. We are documenting from two separate government agencies, from the hearings that you held, your subcommittee of this threat. But whether -- this says -- this demonstrates that it's real, that it has happened, and the idea that this administration -- I have to ask you this, sir, as a Republican, part of the leadership, one of the leading members of Congress, the 109th Congress, now the 110th Congress under Democratic control. Why has this Congress, the Republican Party and the Democratic Party not demanded that this president enforce border security?

ROYCE: Well, I think that's the thing most upsetting to me because, in a way, when we passed that Secure Fence Act we provided the billion plus to continue building that fence. We provided the authorization to do that. And now we watch as the Democratic Party tries to prevent the funding and as we watch as the president doesn't, with all haste, proceed as if our national security is at risk.

Lou, our national security is at risk. The 9/11 Commission is right about that.

DOBBS: As you know, I like to be fair and balanced when it comes to critical judgment being applied to partisans in this. The fact is the Republican secretary of the Department of Homeland Security has refused to move ahead with that fence, has played every game imaginable to avoid securing that border, and has been nothing more than a political functionary in support of this administration rather than a man taking seriously his obligations to the safety and welfare of the American people. Do you disagree with that assessment?

ROYCE: Will you, I think this is why it's so important that we remind the American public of what Khalid Shaikh Mohammed and what al Zarqawi and others have said about hitting this country. The American public needs to get behind an effort to get that border fence built quickly and to revise our immigration laws and to enforce those laws. The heat -- when they feel the heat, they'll see the light and it's up to the American public to apply that heat right now.

DOBBS: Congressman Royce is telling it as it is. Contact your Congressman. Contact your Senator.

By the way, everybody has to be tremendously relieved that given the issues facing this nation the Republicans in the Senate, in particular, joining to resurrect comprehensive immigration reform, as they like to call it, the disaster of a piece of legislation. And now they're going to reform the reform legislation they say. Your reaction?

ROYCE: Well, we defeated it once. The American public defeated that, Lou.

DOBBS: Yes, they did.

ROYCE: And with a little help from the broadcast community that got the information out. We need to get the information out again, kill the bad bill and go forward with application of the laws already on the books. That will require the American public being as outspoken as you are on this issue. I hope they'll follow suit. Thank you.

DOBBS: Congressman Ed Royce, we thank you as always for being here. We appreciate seeing you.

ROYCE: Thanks, Lou.


PILGRIM: Coming up, the primary push. Why some states are holding their presidential primaries earlier than ever. I'll be joined by three of the country's best political minds. Stay with us.


PILGRIM: Joining me now with more on the uptick of President Bush's poll numbers and other political stories, we're joined by Errol Lewis, with the "New York Daily News," Diana West with the "Washington Times" and syndicated columnist Miguel Perez. And thank you all for being here.

Let's start with the economy because this week everyone watched the markets with great trepidation. President Bush got on the TV and said --expressed enormous confidence in the economy. He talked about low unemployment and increased income. Now how much do you believe that this was a market talk-up or do you believe that the fundamentals of this economy are good?

Let's start with you, Miguel. You're the farthest away in Miami.

MIGUEL PEREZ, SYNDICATED COLUMNIST: The fundamentals, I think, are good. The president has the economy to count on. The war in Iraq isn't going that well for him, so he needs to promote something else. But the economy is in good shape. And I think that that's why the presidential candidates are not really making a big issue out of it. PILGRIM: You know, we have a poll August 6 to 8 rating economic conditions, 56 percent of those polled said that the conditions were good and 43 percent said poor.

Diana, what do you think about what's going on in the markets and in the economy?

DIANA WEST, "WASHINGTON TIMES": Well, again, I think things are strong. I think that we always have to watch these swings with some concern although when you actually look at the percentage of the market that has actually swung, it's not that much to really get concerned about.

ERROL LOUIS, "NEW YORK DAILY NEWS": Well, it's been rainy up here and I hate to rain on the parade but I think there is a disaster in the making. When we talk about this meltdown, there are hundreds of thousands of Americans who are on the verge of losing their homes. They're being hit with fees, with foreclosure notices. When we watch company after company and some of the hedge funds as well taking huge hits because they've invested in what are called deteriorating assets.

Well, behind each of those deteriorating assets is a family in a house that has fallen behind on their payments. I've interviewed some much these folks in New York. New York City is being hit in some areas as well, and it's just not a pretty picture. When somebody's got a home that they refinanced and the rates suddenly resets and there's a senior citizen, for example, who just can't make his or her payments, they're going to lose a family home. That's a disaster. And we're only at the front end of it. It's going to get worse before it gets better.

PILGRIM: It's worth keeping an eye on both of markets and as you point out the underlying economic conditions for most Americans which turns into a political issue at some point.

Let's -- moving on to politics, a poll August 6 to 8, how is President Bush handling his job as president? Thirty six approve, 61 percent disapproved but that is a small up tick in President Bush's approval rating.

Miguel, we're getting a little bit of a bounce for President Bush, not much to write home about. What's your assessment of that?

PEREZ: Well, there are the Republicans giving him the bounce according to the polls. It's not the Democrats or the Independence. If anybody is going to support him, it has to be his base.

His base is behind him because we're getting more positive news out of Iraq. They are beginning to believe that the surge is working or at least some Republicans are. I don't know if that's really the truth.

I think it all depends on what happens in September. On September 15th when they supposedly delivered this report on the surge and what effect it has had, then we'll see whether the Republicans are going to stick with the president or whether they're really going to try to bail out because, again, it may hurt them in the presidential election.

PILGRIM: Diana, I'll bring up the Iraq poll, a recent "USA Today"-Gallup poll. Increasing support of the White House Iraq strategy, we're seeing 31 percent. Is the surge making the situation better? Thirty one percent -- that's up from 22 percent from a month ago. We are seeing an up tick in the assessment of Iraq from the American public. And this, of course, is playing into President Bush's numbers. What's your thoughts?

WEST: Well, I might borrow some of Errol's rain here. Again, the headlines on the surge are more positive. The actions that are being taken are producing some results within the context much of the surge.

But I'm afraid that the actual strategy has remained unchanged and, again, our military capabilities are not the predictor of success in Iraq because that still falls to the hands of the Iraqi parliament and the Iraqi leader, who this week was in Iran signing all kinds of cozy and delicious deals with the Iranian crazy man leader.

So the surge may be working as I am not surprised really to know that our military is able to do its job, but the strategy has not improved. And I don't think those numbers will hold.

PILGRIM: Let me just play for you a comment that President Bush had about Iran's continued meddling in Iraq this week.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: One of the main reasons that I asked Ambassador Crocker to meet with Iranians inside Iraq was to send the message that there will be consequences for people transporting, delivering EFPs, highly sophisticated IEDs, that kill Americans in Iraq.


PILGRIM: The Iran component is in this equation. Any thoughts, Errol?

LOUIS: It goes right back to what Diana was saying. The U.S. has won every engagement of any meaningful size in Iraq since we set troops on the ground. That's not the issue. That's not how you win or resolve this problem. It's a very thorny diplomatic situation where you've got Sunnis and Shiites and hundreds of years of animosity. And you've got weapons and you've got diplomatic efforts that really have to get stepped up. It wasn't that long ago that this administration was scoffing at the idea of talking with Iran.

So we've got a strange situation where at the same time as we're winning on the ground, the diplomatic situation, the political situation has never been worse really.

PILGRIM: Well, we will continue this discussion in just a moment. We're going to take a quick break and come right back. Stay with us. (COMMERCIAL BREAK)

PILGRIM: We're back with our panel, Errol Louis, Diana West and Miguel Perez.

Let's go into the political discussions now. The campaign season is in full swing. It's the middle of August and already we're having an event a day on the campaign trail.

Let's look at the registered Republicans' choice for nominee. This is a poll taken August 6 through 8th -- Giuliani at 29 percent, Fred Thompson is in this, 22 percent, McCain at 16 percent, Romney at 12 percent.

Miguel, I'll turn to you first. The Republican lineup is not getting quite as much ink as the Democrats at this point. But what's your assessment?

PEREZ: I'm just very surprised by Mr. Thompson. He keeps moving up. He doesn't make up his mind. I think it's time for him to let us know what he's going to do with this country.

PILGRIM: Diana, this is really funny to have shadow candidates who haven't declared. Does that mean there's too much media hype about the campaign because it's not real yet?

WEST: Well, probably. But I think it has something to do with people still looking for someone in the Republican Party that they can label as a true conservative. And people still hold out this hope that Fred Thompson is that man, and we don't know yet.

PILGRIM: And Diana points out the fact that it may be still wide open. What do you think, Errol?

LOUIS: It's clearly wide open. We have a frontrunner, Mayor Giuliani, who is at 29 percent. It means 70 percent don't want him or haven't decided who they want. And what that means, also, it's very unusual. The GOP normally coalesces around a candidate fairly early in the process, and we're less than six months away from the first primaries and there doesn't seem to be any clear consensus. In fact, some other polls show that a very large number of Republicans are dissatisfied with the entire field. So they're picking none of the above.

PILGRIM: All right. Let's go to the Democratic field. And we've been seeing a lot of events, a lot of comments, some skirmishes. I don't know what it works out into in terms of policy but it certainly has been highly entertaining -- Clinton 44 percent, Obama 24 percent, Edwards 16 percent, and Richardson 5 percent.

Miguel, thoughts on the week's activity?

PEREZ: Well, you know, there hasn't been much change in several weeks now. The fluctuation is very small. I find it impressive only that Richardson has managed to move into like fourth place now. But Hillary has it. It's hers to lose. WEST: At this point I'm still waiting. Once Americans really accept that moment when they realize Hillary Clinton will be the Democratic nominee, that we get to that emperor's new clothes moment and wonder what has she accomplished in her life that is her record to run on for president. And that will be when things get very interesting and the race may change.

PILGRIM: Well, this is -- these are my thoughts on it. That in terms of concrete policy platforms, we're seeing not so much of substance yet. It's all been personalities so far, Errol?

LOUIS: That's right. You can only get in trouble by being too specific at this point. In fact, there's no particular reason to be too specific.

I would point out, by the way, if you're going to talk about Clinton's accomplishments, her husband was denigrated by the then- sitting president of the United States as the governor of a small failed state. And, of course, we know what happened in that race back in 1992.

WEST: But he was a governor.

LOUIS: She's been a Senator for, you know, six years now. She's done what Senators can do. You don't really have a lot of executive opportunities.

PILGRIM: It seems like it's going to take off like a roller coaster, though, fairly soon, because these primaries keep moving up -- Florida's up to January 29th, South Carolina, January 13th. Iowa intend to be first so that has to put it -- we're going to be in campaign full swing by September.

Miguel, do you think that this gives it a good campaign year to start this early?

PEREZ: It's not a good idea to start this early and it's not a good idea for us to -- it's unfair to the rest of us who don't live in the states for them to have -- their vote has a lot more power. Their primary vote has a lot more power than mine. I live in New Jersey. You know, so I think that the -- what's happening here with all this reshuffling proves that what we need is a national primary date.

PILGRIM: National primary day to be discussed next week. I'm sorry we have to cut it off but I'm sure we'll be discussing it.

Errol Louis, Diana West, Miguel Perez, thanks very much.

And thank you for joining us. Please join us tomorrow. For all of us here, thanks for watching. Enjoy your weekend. Good night, from New York.

"This Week at War" starts right now with Tom Foreman.