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Lou Dobbs This Week

Campaign News; Declining Industrial Base; Outsourcing National Defense

Aired March 22, 2008 - 19:00   ET


LOU DOBBS, HOST: Tonight: Senator Obama tries to shift the campaign agenda away from the outrage over his controversial former pastor. We'll have complete coverage.
And: Rising concerns about our declining industrial base and the outsourcing of our national security. We'll have that special report: War on the Middle Class.

All of that and much more: Straight ahead here tonight.

ANNOUNCER: This is LOU DOBBS THIS WEEK: News, debate, and opinion.

Here now: Lou Dobbs.

DOBBS: Good evening, everybody.

Senator Obama tonight is struggling to limit the political damage from his controversial former pastor, Reverend Jeremiah Wright. Senator Obama delivered a major speech on race and that he criticized Wright and said race is an issue that America can't afford to ignore.

But now, Obama is refusing to disown his former pastor and creating even more problems for himself. Wright frequently accused our government of racism and declared the 9/11 attacks to be retaliation for American foreign policy.

Bill Schneider has our report. Bill?

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: It's been a week of ups and downs for Barack Obama. Last weekend, tapes of inflammatory anti- American statements by Obama's pastor surfaced, a man who has been Obama's family friend and spiritual advisor for nearly 20 years.

The immediate impact: Polls of Democrats showed negative opinion of Obama, rising, and Hillary Clinton, gaining support. Obama was in trouble. He had not run on racial issues but now he felt compelled to address them, personally and politically.

On Tuesday, he gave a speech repudiating his pastor's views calling them incendiary and inexcusable. Though he refused to denounce Reverend Wright personally, saying, that is not all I know of the man. The speech drew praise for its eloquence and balanced assessment of race relations.

But Obama also drew criticism for poor judgment. Why did it take so long to distance himself from Reverend Wright? Early evidence indicates that Obama recovered some of his support from Democrats after the speech. He was helped by two other developments.

He got the endorsement of former Democratic presidential candidate Bill Richardson, the country's only Latino governor and a former Clinton cabinet member. Richardson said Obama's speech on race relations inspired his endorsement.

The news also came out that Obama's passport records were improperly accessed by State Department contractors. In fact, Hillary Clinton's and John McCain's passport files had also been violated. The new controversy changed the subject, at least temporarily.

So, where does the Democratic race stand? It's just about tied between Clinton and Obama in national polls.

Clinton has a double-digit lead in the next primary here in Pennsylvania where she has the support of the Democratic governor and the mayors of Philadelphia and Pittsburgh. But she still trails Obama in pledged delegates and popular votes. Even if Clinton wins Pennsylvania, the contest will go on for every voter and every delegate, possibly right up to the Democratic convention in August.


DOBBS: Thank you, Bill. Bill Schneider reporting.

The latest polls show Senator Clinton now has a commanding lead over Senator Obama in the critical primary state of Pennsylvania, that primary to be held on April 22nd. A CNN Poll of Polls showing Senator Clinton now has 52 percent in Pennsylvania compared to Obama's 39 percent.

And: Rising indignation among Democrats over the refusal of both Michigan and Florida to redo their primaries. Party bosses in both states effectively killing efforts to hold revotes, disenfranchising hundreds of thousands of people. It is a major setback for Senator Clinton who says the failure to hold revotes is un-American.

Candy Crowley has our report.


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): The campaign action this day is the inaction in Michigan, where a plan to hold a primary do-over was left for dead. Michigan now looks like Florida, which also stalemated in its efforts to put on a second primary. It's a double barreled blow in camp Clinton and she has raised the stakes.

SEN. HILLARY CLINTON, (D) PRESIDENTIAL CANDIDATE: I do not see how two of our largest and most significant states can be disenfranchised and left out of the process of picking our nominee without raising serious questions about the legitimacy of that nominee.

CROWLEY: As the Michigan plan fell apart, the Obama camp touted a press release by supporter and Senator Chris Dodd. He suggested the best outcome would be "an arrangement where the delegates are apportioned fairly between Senators Obama and Clinton," which is to say, divide the delegates in half.

"Fair," Obama told Larry King because the first primary cannot stand.

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: Yes, we were told it wasn't going to count and so we didn't campaign there, in fact my name wasn't on the ballot in Michigan. But I think it's important to make sure that the people of Michigan, the people of Florida, that their delegates are seated.

CROWLEY: Since seating Michigan delegates in accordance with the first primary results was a no go, she has focused on the redo, and blames him for the death spiral.

CLINTON: I do not understand what Senator Obama is afraid of.

CROWLEY: A revote would advantage her, but he says the argument is about fairness in part because it bars people who may have voted Republican in the first primary because they knew a Democratic contest wouldn't count.

No revote means she loses her best chance to overtake his leads in the pledged delegates and the popular vote. But she says it's about disenfranchisement.

In the end, it may mean Michigan will end with no input at all.

GOV. JENNIFER GRANHOLM, (D) MICHIGAN: I would like to see us resolve this. I think the fairest way to resolve it is by having a vote. I think it would bring a huge amount of excitement to Michigan. Our issues would be raised on a national level.

CROWLEY: And it could well mean the Democratic National Committee will see a big fight at the summer convention in Denver.

Candy Crowley, CNN, Beckley, West Virginia.


DOBBS: Just when we thought it couldn't get any worse, the Obama and Clinton campaigns have refused to even begin negotiations on a compromise over the Florida primary. Two state senators there proposed a compromise that would allow members of the Florida delegation to be seated but the Clinton and Obama campaigns refuse to consider the new proposals.

The economy replacing the war in Iraq is a top issue of this campaign, but more and more voters are linking the two issues. A vast majority of voters now say spending on the war is hurting our economy, not helping it. Our economy is maybe in recession. Middle class Americans are definitely losing their jobs. Many of them are losing their homes.

Christine Romans has our report. (BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): War can be an economic machine, using vast amounts of steel, concrete and lumber to build operating bases, to say nothing of aircraft, vehicles and ammunition. But has something changed?

Five years after the Iraq war began, seven out of 10 Americans associate the war with economic weakness. Since 9/11, there have been historically low interest rates, tax cuts, incredible housing market wealth, and hundreds of billions of dollars in defense spending.

Yet ...

ALAN TONELSON, U.S. BUSINESS & INDUSTRIAL COUN.: Even though we have had this record economic stimulus, we have had nothing close to record economic growth. And that should tell us that the nation's engines of genuine wealth creation have been weakening, not growing stronger over time.

ROMANS: Tonelson points to another factor, the defense budget as a percentage of the economy is falling because of growing liabilities for entitlements like Medicare and Social Security. Defense spending was 1/3 of the economy in World War II but shrunk to around 4 percent of gross domestic product by 2007.

Economist Lakshman Achuthan says a housing market meltdown and high oil prices are simply overwhelming any economic boost from defense spending. And, he says, the economy has changed.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INST.: Nowadays, all that money isn't spent here. Just like every other multinational in this world, the U.S. military is outsourcing and looking for the cheapest source of material for its effort and that's not always in the U.S.

ROMANS: The Air Force, for example, recently awarded a $35 billion contract for aerial refueling tankers to the European parent of Airbus and U.S. partner Northrop Grumman. Much of that plane will be built overseas but assembled in the U.S.


ROMANS: The secretary of the Air Force recently testified to a long list of defense products paid for by taxpayers that made by foreign companies. That said, statistics are hard to come by for how much of our defense spending stays in the domestic economy, how much goes to innovation here or to research and development. Lou.

DOBBS: And when the United States government doesn't want to research issues like that, there has to be a reason. Thanks very much, Christine Romans.

Still ahead: The federal government says it's cracking down on abuse of visas by corporate elites, really? We'll have a little news for them.

And: Governor Schwarzenegger imposing drastic budget cuts to deal with a huge deficit in California. That story is coming up.

And: A victory for common sense and against political correctness: A battle over "English only" sign at a Philadelphia steakhouse. The proud owner of that steakhouse, Joe Vento is among our guests here next.


DOBBS: Governor Schwarzenegger of California cutting 20,000 jobs on that state's public school system. Schwarzenegger went into office promising to fix the state's struggling economy. But that state now faces a deficit of more than $14 billion, partly because of the high cost of illegal immigration.

Casey Wian has our report.


CASEY WIAN, CNN CORRESPONDENT (voice-over): School districts throughout California are laying off teachers and other staff, increasing class sizes and even closing schools. All because the state's budget faces 10 percent across the board spending cuts.

Governor Arnold Schwarzenegger's budget reform effort designed to eliminate the need for a future cuts by establishing the rainy fund will slash about $5 million from state education spending this year and next.

GOV. ARNOLD SCHWARZENEGGER, (R) CALIFORNIA: I think it is terrible that we have to make cuts in education, it's terrible that we have to make cuts in higher education because those kids deserve better. And the education community deserves that there's stability then. And this is why it's so important that we fix our broken budget system.

WIAN: Already 20,000 teachers and other employees have received termination notices, and that doesn't even count the Los Angeles Unified School District, by far the state's largest. Teachers and parents are furious.

STEPHANIE SLIWINSKY, HIGH SCHOOL TEACHER: I do lack seniority, but that does not mean that I am disposable or replaceable.

MICHELLE TURNER, PARENT: Our children need a chance, and they have the right to be educated, and not to be used as a pawn in a game of governmental politics.

WIAN: Schwarzenegger is crisscrossing the state trying to sell his plan to business leaders and lawmakers. Some are not buying it.

DON PERATA, CALIFORNIA STATE SENATOR: We are handing out pink slips when we are also asking to hand out visas to bring workers in from a foreign country because our kids cannot do the job because they have not had the benefit of an adequate education. What the hell kind of sense does that make?

WIAN: Schwarzenegger says it makes sense because establishing a budget reserve now will prevent the crisis from escalating. He emphasizes that law enforcement, healthcare and all state programs will share the pain.

(on camera): But for a state that ranks 47th nationally in education spending adjusted for cost of living, $5 billion in cuts will be especially painful.

Casey Wian, CNN, Los Angeles.


DOBBS: Corporate America rushing to hire workers not from the United States, of course, but from overseas. The deadline for H-1B visa applications is just a week away. Companies are competing for 65,000 of those visas. The program has been ripe with abuse, but this year, the government says it will try to curb that abuse.

Louise Schiavone has our report.


LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): Bad news for companies trying to beat the government's worker visa lottery system. The old tricks won't fly. Duplicate applications from one company for the same person for the same job, no matter how much money that company has paid in application fees will be denied.

It's a step in the right direction says a U.S. technology workers group that charges that many businesses use the H-1B visa mostly to import cheaper foreign workers.

KIM BERRY, PROGRAMMERS GUILD: The economy is slowing down. Anything having to do with the mortgage or lending sector is laying off workers. Citibank has laid off a lot of workers including computer programmers. This is the wrong time to be bringing in more workers.

SCHIAVONE: In 2007, U.S. immigration fielded 120,000 applications for 65,000 slots. The winners determined by a computerized random draw. Last year alone, 500 duplicate applications were filed to increase the chance of winning. Now, duplicates will be rejected and the $320 filing fee won't be return. At the same time, reform efforts are underway in Congress.

SEN. CHARLES GRASSLEY, (R) IOWA: We ought to make sure that we have reform of H-1Bs so any company that wants to look at H-1Bs first has to show that they made a good faith effort to hire American workers.

SCHIAVONE: In addition to the 65,000 H1-B visas currently offered, 20,000 additional visas are available for foreign-born students with U.S. graduate degrees.

But a spokesman from Microsoft tells LOU DOBBS TONIGHT that's not enough, quote, "Microsoft has about 4,000 core technical positions that it cannot fill, either with American or with foreign talent. Other high tech companies like Oracle, Intel, Google for example face the same kinds of talent shortage." End quote. Microsoft says it does submit duplicate visa applications.

(on camera): The application process for the coming year opens April 1st and lasts five business days. With all the fees combined for a company of 26 employees or more, the total cost per candidate application is more than $2,000.

Louise Schiavone for CNN, Washington.


DOBBS: Up next: A victory for common sense and the American spirit. We'll talk with a steakhouse owner about his "English only" battle in Philadelphia.

And: Outsourcing our national defense. A leading congressman is fighting to stop the outsourcing of our jobs and national security. Congressman Duncan Hunter joins us.

Stay with us. We'll be right back.


DOBBS: Well, a major legal victory for the owner of a famous cheese steak shop in Philadelphia. The city of Philadelphia finally ruling that Joe Vento did not discriminate when he posted "English only" signs in his shop. It took two years for the city of Philadelphia to figure that up.

By the way, that sign: "Please speak English when ordering." Mr. Vento posted those signs and Mr. Vento says he never refused service to anyone because they couldn't speak English.

He joins me live now from Geno's cheese steak shop in Philadelphia. Sir, it's good to have you with us, congratulations on the victory.

JOE VENTO, GENO'S STEAKS: Thank you, Lou. It's an honor to be on your show.

DOBBS: Well, it's great to have you, it's a battle for common sense in local government, I guess. How in the world if you never had a complaint, if you never had a problem with a customer, how did this end up being a big deal in the city of Philadelphia going to the Human Relations Commission?

VENTO: Well, like I said earlier, I put that sign up in October of '05, possibly even sooner than that, but I can document that. And it was a political statement that I was making. And this was like I said in October of '05. May of '06, for some reason Washington started to debate speaking English and immigration.

All of a sudden a local councilman who's been a regular customer here decided my sign was offensive. He went to the city council -

DOBBS: Who's that councilman -- Jim Kinney? Councilman Jim Kinney?

VENTO: Yes, that's right.

DOBBS: And so he took it to the government, huh?

VENTO: Right. He ran like a little wimp over there.

DOBBS: Did he talk to you about it? Did he complain to you?

VENTO: No, he has never talked, never, never ever.

DOBBS: How long have you guys known each other?

VENTO: We practically grew up together in the same neighborhoods. He was a regular customer here at the time. My question was: Why in nine months that it was up it didn't bother anybody including Mr. Kinney?

But like I said, when they had the immigration problem and discussion in Washington, he decided, I guess, to bring up some points and for what reason, I don't know because we were talking about illegals here. So, I don't know what they could possibly do for it.

But anyway, he came after me and I was told through council people to take the sign down. And said no, the sign is not coming down.

DOBBS: They thought they're going to roll over you, didn't they, Joe?

VENTO: Oh, yes, that's what they thought. They might have crossed the wrong person. This is one guy, you don't tell me what to do. I put my money where my mouth was, the sign stays.

And they got kind of shocked; they were not used to having somebody say no, especially what they say it's not politically correct. And especially since I know, I didn't put it up here to discourage people from coming here. Because the biggest concern that they said for discrimination was, Joey, you're discriminating against non-speaking English people.

Excuse me, if you don't speak English, you can't read the sign. So, what does that sign say. And if you do speak -- I mean, it's a no- brainer and if you do speak English, how is that offensive? What I'll (ph) understood, you still have to be able to speak English to become a citizen.

DOBBS: Joe, wait a minute, you're making way too much sense. You know, the city government of Philadelphia is going to have to stay away from you. You make too much sense, there's too much common sense and you got too much guts, you're not rolling over for politically correct memby-pigmies (ph) like councilman you were talking about.

VENTO: Right. I only add, they interview the councilman, from what I understand, he says even though I was vindicated, he still thinks it's a black mark on the city. Could you imagine that?

I would like to ask Mr. Kinney, how about the murder rate? Do you think that might possibly a little black mark on Philadelphia? How about the muggings, the rapings, the burglaries? Give me a break here. DOBBS: Not for a precious genius like Councilman Kinney, obviously. Joe Vento, we want to say congratulations, we thank you very much for being was. You're our kind of guy. You are this country's kind of guy and, you know, I hope you have just nothing but great success, all best wishes.

VENTO: Thank you very much. God bless America.

DOBBS: Coming up next: Outsourcing our defense and our national security.

Also ahead: The Second Amendment under fire. The Supreme Court is to decide whether the Second Amendment is operative.

And: Race is dominating the race for the White House. I'll be talking with three of the brightest political minds about that and a great deal more.

Stay with us.


DOBBS: The U.S. Air Force awarded a $35 billion contract to the European consortium that builds Airbus instead of Boeing. Congressman Duncan Hunter is working to overturn the contract and to strengthen by American regulations to stop the outsourcing of jobs and the offshoring, if you will, of national security.

Congressman Hunter joins me. He is the ranking Republican on the Armed Services Committee from San Diego.

Congressman, are you going to be successful, do you think, this effort to review and overturn this contract is going to be successful?

REP. DUNCAN HUNTER, (R) CALIFORNIA: Lou, I think we will be. You know, this is a provision that I put in the bill a couple of years ago, that the White House objected to violently, and that was the legislation that I put in on the House side. It passed the House Defense Bill that said that foreign companies which were government- subsidized which describes Airbus well, because it is subsidized by those European countries can't have a piece of American defense contracts.

But in this contract, I think it's important for Americans to know that we're looking at the impact of about 100,000 jobs being created in Europe with American taxpayer dollars. That's a massive economic stimulus program for Europe.

DOBBS: OK, now we learned that. But what in the world have you people in Congress been doing, what in the world has this Republican administration been doing to outsource the president's helicopter to an offshore general contractor, the light attack helicopters, and now, this tanker aircraft?

This isn't an accident as they say. I'm starting to see a pattern here, congressman. HUNTER: Well, Lou, what can you can ask me what I have been doing, is that I've been -- I'd put in over the last two years before this tanker deal was ever consummated, a provision that would block Airbus for having a chance to compete on the tanker.

DOBBS: Yes, congressman, let me be clear. I wasn't talking about what you're doing. When you chaired the House Armed Services Committee, you were at the forefront of this fight. But I don't understand how your party and this Democratically-led Congress, this president, how anybody can sleep at night doing this?

HUNTER: Listen, I think, it's a massive mistake because of one thing that you never should outsource, first, from my perspective, you don't outsource anything if you don't have to. But the one thing you should never outsource is national security.

DOBBS: You'll never make it in Corporate America, congressman.

HUNTER: Well, let me tell you, this is important, Lou, because, you know, the aerospace industry in this country is an important part of what we call the arsenal democracy. That's our ability to project American airpower around the world in times of crises and if we give away big pieces of it, it's not going to be here when we need it.

DOBBS: Well, let me ask you. What is the president of the United States, what is his administration is saying to Congressman Duncan Hunter, the ranking Republican on this committee?

HUNTER: Well, we'll get that when we send my provision to this bill, when it goes up to the Senate, in conference, the president's people will issue a statement. And I hope at this point, they'd been pretty well-bludgeoned by thousands of messages from the American people saying don't give those 100,000 jobs to Europe. If so, they won't object to it, we'll get this provision through.

DOBBS: So, tell me how these geniuses in the United States Air Force, at the Pentagon, the Department of Defense and this administration managed to put for Northrop Grumman into competition with Boeing. You know, to put American contractors in competition with one another and then turn it over to Airbus against whom we have a charge in the World Trade Organization for subsidizing that business?

REP. DUNCAN HUNTER (R), ARMED SERVICES COMMITTEE: Yes, it's an old pattern, Lou, and what you do, if you're an American company, you partner up with a European company and you -- just as they did on several other aircraft and you go in as so-called partners where there's going to be some jobs created in America, but thousands and thousands of jobs created offshore all with American dollars, all with American taxpayers' money.

DOBBS: Does this White House ever call up any one of you republicans on Capitol Hill and say is this too stupid, too irresponsible, even for this administration?

HUNTER: Lou, I would say this, there's not a lot of us that believe in buy American on the American defense with defense contracts. I'm one of them. Every provision that's been put in the bill over the last three or four years with respect to forcing buy American provisions has been put in because I put it in. The administration has not ...

DOBBS: That really wasn't the question I asked. Do any of those dumb so-and-sos ever call you and say have they gone too far?

HUNTER: No. The answer is everybody's drank the Kool-Aide on free trade except for a few folks, Lou. And that's a tragedy for our country and the defense industrial base.

DOBBS: Absolutely. Congressman Hunter, you're fighting a very lonely battle there on Capitol Hill. We thank you very much, Duncan Hunter, thank you.


DOBBS: Up next the Supreme Court hearing arguments on a case that will affect our right to carry a gun. We'll have that report and another twist on the race for the democratic presidential nomination. We'll be talking with three of the nations very best political analysts. Stay with us.


DOBBS: The Supreme Court this week hearing a case that will influence our constitutional right to own and carry a gun. That issue whether Washington, D.C.'s ban on handguns violates our second amendment. Alan Gura is the attorney for Washington residents suing over that ban. Gura has said that Washington, D.C. doesn't trust the people to defend themselves. John Payton, director of council and president of the NAACP Legal Defense Fund who doesn't accept Guerra's argument.


JOHN PAYTON, PRES., NAACP LEGAL DEFENSE FUND: The reason we filed the brief, the NAACP Legal Defense Fund is that the violation violence that comes from guns just proportionately affects African-Americans in African-American communities especially in the inner cities. And Washington D.C. is a prime example. And we filed a brief to make sure that the people through their government can take adequate measures to try to deal with issues that come out of gun violence. So you can't say that the government doesn't trust the people, the government is elected by the people and has clearly been endorsed in trying to make measures, adequate measures to deal with, really at times, you know, horrible violence that comes from guns.

DOBBS: Allan, how do you respond to that?

ALAN GURA, PLAINTIFF'S ATTORNEY: Well, the bill of rights exists to protect people from the government when it overreaches. Of course, the government should be able to regulate guns in the public safety interest. However, totally banning all guns, all handguns, all functional firearms from the home and preventing people from using them in defense inside their homes goes way too far. We're not against all gun laws but certainly a complete prohibition should be coming off the table. It's not allowed.

DOBBS: John, I want to put up a full screen here if we may on gun- related homicides in 1976, and obviously the argument is that since the ban took effect in 1976, the District of Columbia has seen homicides rise over to the point that last year the number of homicide was 143. What is your response to those who put forward those statistics on handgun violence and specifically homicide?

PAYTON: Actually the data is quite different than that. I take gross data. When the law was first enacted, the first studies indicated that in fact, comparing the surrounding jurisdictions that had no gun control. There was a net loss of violence as a result of handguns in the district. That has changed because in fact, these are fluid borders and guns come back and forth across the borders. But guns aren't the only method that you try to deal with. There's other things that have to happen. I don't think anybody believes that having more guns is the answer to gun violence in the District of Columbia.

DOBBS: This also raises the question, Alan, when you look at the same data, from the Supreme Court justices look at the same data and Justice Stevens raised that question, the proper positioning of crime rates in Washington, D.C. relative to the ban on handguns. How do you expect them to -- what do you expect them to conclude?

GURA: Well, if they were to look at the data and the studies that have been conducted, the only conclusion is that the law has been a complete failure. 15 years after the law went into effect, D.C. had seen its murder rate triple. The violence crime rate and the murder rate have both skyrocketed since the gun ban went into effect. And it's only been in recent years that they have almost approached those levels that were pre-banned. Washington remains an outrageously dangerous city compared to other cities where people are allowed to defend themselves in their own homes with guns.

PAYTON: Actually, what you see is that.

DOBBS: You get the last word, John.

PAYTON: As surrounding jurisdictions have also been put into effect, some moderate measures of gun control, it's had a very positive affect on what's happened in the District of Columbia. This is about dealing with violence that comes from guns and having reasonable regulations to try to control guns and therefore the violence that comes from guns.

DOBBS: And one would hope that we would be devoting just as much effort to all of the societal issues that also influence the violence.

PAYTON: Absolutely.

DOBBS: Of all kinds. Alan Gura, we thank you for your time. John Payton, thank you, sir.

GURA: Thank you.

DOBBS: Like you all, we are looking forward to the Supreme Court's d determination.


DOBBS: Thank you.


DOBBS: Still ahead, will Senator Obama's refusal to distance himself from his controversial former pastor cost him the democratic nomination along with his comments on race? That story is next.


DOBBS: Joining me now are three of best political analysts in the country. Here in New York, democratic strategist and "Lou Dobbs Tonight" contributor, Hank Sheinkopf, "New York Daily News" columnist Errol Louis, also "Lou Dobbs Tonight" contributor and in Washington, D.C., Diana West, columnist for "The Washington Times." Diana is the author of "The Death of the Grown-up."

Let me turn first to you Diana west there in Washington. What in the world is going on at the State Department where everyone is seemingly rifling through personal files of candidates?

DIANA WEST, COLUMNIST, "THE WASHINGTON TIME": Yes, well this is something that periodically happens. It just made me think immediately back to when people were trying to figure out rifling through documents where Bill Clinton had gone in his travels. It's political dirty tricks, these things happen and I'm glad that the State Department safeguards caught it.

DOBBS: Did they do enough there in your judgment yet, Errol?

ERROL LOUIS, COLUMNIST, "NEW YORK DAILY TIMES": Oh, no. Not hardly. The fact that you can get into these personal files -- and keep in mind this includes who's close to you, where you've been for basically your whole life, in your travels abroad, your social security number, you're not supposed to be able to just idly sort of catch this stuff. And the State Department at least early on gave absolutely no indication that they had any kind of real security around this. Because these are outside contractors that they themselves brought in and paid with tax dollars.

You know, it's not a system that lends itself to any comfort for anybody. If they can do that to some of the most important people in the country right now, what does that say about what could happen to the rest of us?

DOBBS: Outsourcing those jobs, and to point a fact, what do you think? Is this --

HANK SHEINKOPF, DEMOCRATIC STRATEGIST: Well, if you outsource jobs, Lou, as you know, you have people that have no commitment to doing that work, who have no allegiance to the agency in which they work. That's the problem. DOBBS: Well, speaking of outsourcing, a firestorm in Washington right now over that U.S. Air Force tanker contract, outsourcing not only national security but American jobs and apparently this administration thinks that's just honky dory as did most of Congress.

SHEINKOPF: Absolutely wrong. Absolutely anti-American. It violates our basic sense of what we're supposed to do. We're outsourcing some of our military needs, we're outsourcing our security needs to people and corporations who have no conscience and do not think about the red, white and blue. It's about time we stop that business.

LOUIS: You know, ironically, the republicans in Congress are basically imploding. They've almost raised the white flag of surrender. There are 29 members, republican members of the House who are not going to run for re-election this time, including almost of their leadership. Their campaign congressional committee has about five million compared to 38 million that the democrats have. They're scrambling, they're reeling, their new leadership are in their 40s. A lot of these guys are just barely our of their freshmen terms. So, they're trying to get reorganized on a lot of different things. Whether or not this issue makes it on to their agenda or not, maybe it would help them get on the path to recovery. But I think everybody's kind of ducking and waiting for the electoral bloodbath that is going to happen this fall.

DOBBS: Well, the bloodbath is under way in the presidential campaign and Hank, whether it is Obama or whether it is Clinton or McCain, whether we're talking about fumbles of speech, whether we're talking about Al Qaeda or the extremists or the Sunni or the Shia, in the case of Senator McCain and Jordan, or whether it is Senator Obama with what all the liberals in the national media seem to think is a brilliant speech and all the conservatives in the national media tend to think of it as pure evasion is, what is going on in this campaign?

SHEINKOPF: To the Obama speech, I draw it down the middle, good for a primary, and disaster for a general election. Different argument. What is going on? No one is doing anything but paying attention to polls, watching the horserace, looking for things that make the news without any thought behind them and the end result is we have candidates acting in the same way, what's new?

LOUIS: This might be, I think the most depressing month of this all too long presidential campaign season because precisely there are no contests that are going on. And that's when you get the bloggers and the talkers and the pundits and the press sort of spinning things around looking for something everyday. I mean, there was over 2,000 members of the press credentials for Iowa. Now, a lot of them are still on the payroll, still looking for something to talk about every single day whether there's any news or not and rather than sort of do something a little more reflective, maybe delve into some issues or god forbid, go out and talk to some voters, what they're all doing is talking to and about one another. You know, it's the worst possible environment I think from the point of view of the voters and I can't wait until Pennsylvania, North Carolina, Indiana where the voters will also get us all back on track with what really matters.

DOBBS: Diana.

WEST: I'm not sure I call it depressing. I think it's been quite fascinating and I think in the terms of Senator Obama, it's really been the first time where this notion of his judgment and his character have actually come under scrutiny and very interesting analysis on the left and the right. I mean, this has been a very fascinating week. I don't find it depressing so much as more illuminating and actually helping voters make decisions and understand the candidates better.

DOBSS: All right, we're going to be back with our panel in just one moment. We'll decide whether or not it's depressing, fascinating, illuminating or just politics as usual on the presidential campaign trail. Stay with us.


DOBBS: We're back with Diana West, Errol Louis and Hank Sheinkopf. Hank, Senator Obama had his worst week of this campaign without question. Some suggest it may have been a determinate week if for his fate. What's your reaction to all that is unfolding over the issues of race, and particularly in the context of Senator Obama, his challenge to America and the statements that he's uttered since then?

SHEINKOPF: Well, he got saved by being the front line of the passport information scandal, which will create tremendous, I think, sympathy for him and his --

DOBBS: Why him?

SHEINKOPF: Why him? Because he was the first they mentioned and that's why. And people see it as an attack on a black man. That maybe reasonable.

WEST: Hillary Clinton has been mentioned as well.

DOBBS: As well as Senator McCain.

SHEINKOPF: Here's the problem. The dynamic of American politics how you win elections has not changed. You're still going to win Catholics, Catholic white men in the Midwest come November. Guess what? This kind of speech doesn't help because all it does is create division that's a problem. Good for the primary, bad for the general election.

DOBBS: All right. And the reason for that is?

SHEINKOPF: When you start attacking America or do not take the patriotic argument as the thing that leads you into the White House, it is very difficult to convince people who still believe in patriotism that in fact you're more like them than not. That's problem one.

DOBBS: Do you see that as less of a difficulty in the democratic primary? SHEINKOPF: I see the democrats as being more not less patriotic but more willing to give him slack. In a general election, it will change dramatically.

DOBBS: Errol.

WEST: I'm not sure it's not a matter of not taking a patriotic line. I think one of the more interesting comments to come out of this whole affair came from Victor Davis Hansen, a historian who noted that in growing up, going to prep school, going to Ivy League colleges, going into democratic identity politics, sort of the liberal wing of the democratic party. Both Senator Obama and his wife whose comments suddenly make more sense, you know, perceived anti-American comments, it's almost as if they were surprised that such comments coming out of Reverend Wright's mouth would create the firestorm that it did because in these sorts of generally leftist circles, it's not that outrageous to be anti-American and I think that's where he's losing his connection with the people of the country.

LOUIS: You know, I don't know if I would call it leftist circles but if you do look at the political scene in Chicago, I mean, this is the home base of Louis Farrakhan. I mean, he's part of you - you know, this is where Jesse Jackson comes out of. For somebody like Obama to come as - from Hawaii, from Harvard and from Columbia University to try and make a start of it in politics, he went to one of the biggest churches on the south side which happens to be Jeremiah Wright's church and he began to build a base there. I mean, looking at it strictly in local terms that's what you do.

This is the same congressional district that for, I guess about a decade or more, elected a guy named Gus Savage, who was, I mean, just, horrible, horrible rhetoric, divisive rhetoric. This is the sort of the (stu) in which he sort of found his way into politics and I think he was a little taken aback because in Chicago, much of what goes on with the Jeremiah Wright and Louis Farrakhan and Gus Savage, you know, maybe it's not politics as usual, but it certainly moves the debate into a place that most Americans don't recognize as acceptable politics.

DOBBS: And these are without questions treacherous shoals that a young politician named Barack Obama had to navigate. Let's listen to what else was said this week. This by Senator Obama responding to a question about his grandmother, his white grandmother on Philadelphia talk radio.


VOICE OF SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: The point I was making was not that my grandmother Harper's any racial animosity, she doesn't, but she is a typical white person who, you know, if she sees somebody on the street that she doesn't know, you know, there's a reaction that's been bred into our experiences that don't go away. And that sometimes come out in the wrong way. And that's just the nature of race in our society. We have to break through it.

(END VIDEO CLIP) DOBBS: Got to break through a lot of things. In that one paragraph, Senator Obama, said the typical white person, said it's the nature of race and we have to break through it. And for the life of me, and I have studied this pretty diligently, I can't figure out what the heck the man was trying to say.

SHEINKOPF: Neither can he and that's the problem. There are those who will say I thought it was good that he was so honest. And then there are the more practical people like some of us in our profession will say, Barack, why did you have to stem yourself in public? That's what he did. He told people essentially that their basic fears are not to be trusted, that there can be no dialogue about how they feel but how he feels is most important. You can't do that. It doesn't work.

WEST: I think it also shows kind of a tone deafness, to oppose racial or a nonracial reality of grandmothers of all races being confronted by fears of black men who commit crime in disproportionate numbers in these urban areas, I can think of my own grandmother in this category, seeing that as somehow an expression of racial animosity. And so I think he's losing the whole connection with people of all races in making such a statement.

LOUIS: You know, my advice to him unsolicited to his campaign staff would be to do what they had originally planned for him to be doing at this point in the campaign, which is put him on a plane and send him overseas and let him get both a little rest as well as shore up some of his foreign policy credentials. Meet with some leaders, get a feel for something and get out of this spotlight. I mean, he initiated something he didn't anticipate he would ever do which is to start this very difficult conversation on race, and now since he's started it, he's the one everybody - they're going to parse every word that he said. I didn't, I wasn't, I didn't think if you listen to that quote, the radio host didn't stop him, didn't pounce on that, wasn't offended. It was said in the context of, you know, you're just trying to make conversation and trying to convey a point.

DOBBS: Errol, we're buddies, when a man says a typical white person, whether you're white, black, Asian, Hispanic, whatever, you just stepped into language that does not belong in the mouth of a man who's sophisticated, who's challenging America on the issue of race and who is showing in that one sentence alone an immaturity and a failure to think out his emotions and his thoughts on race itself. I think what we're looking at is a man who's very conflicted within himself.

LOUIS: Look, I mean, first of all, that's certainly true, conflicted. Because if you know, one commentator said it's as if he's saying that all white people in America are racist.

DOBBS: I didn't think that.

LOUIS: But which would be crazy because as a bi-racial person, he would be at least half referring to himself. I do think that because he put this on the table, he's raised the bar. In a race where everyone else keep raising the bar for him, he decided to go out and raise the bar for himself. And that is a strategic decision that I think he may regret.

SHEINKOPF: He's got a problem. No one minds being racist, Lou. They mind being found out. Now, you have told people that in fact, you need to be found out. That's the way it is.

DOBBS: That's so cynical. That's horrible.

SHEINKOPF: Just say it is. It's just the way it is.

DOBBS: I don't believe that. We're buddies too, I can't let you go.

SHEINKOPF: Now people have found out about themselves and they're going to take it out on him. And that's what I'm telling. That's practical politics.

DOBBS: This is a little too artful for me because I don't believe anyone in this country, I can't say anyone, but I would say 99 point whatever percent of people in this country are not racist, they don't want to be racist. You know, they want to be better people. This is the great thing about what, in my opinion Senator Obama challenged in the moment he put himself he had to take on the issue of race given the Jeremiah Wright, but the fact is that we're now in a conversation about, I don't think any television show, any magazine, any newspaper, any blog or whatever should back away from this now. I think we should be examining it. We have got an opportunity. It may not be Barack Obama's opportunity, it may not be Senator Clinton's or Senator McCain's, but it's our opportunity and frankly I say the held with all three candidates. Let's take our opportunity and let the chips fall where they may for the politicians. Diana.

WEST: What I see is in a way he actually did not take on the matter of Jeremiah Wright and tried to take it out of the context and put it into a larger debate on race and that isn't working.

DOBBS: I think that may have been what he did but the fact is I don't mind it because in real terms for all the rest of us because we got an opportunity to move forward here in our national dialogue which too often is quiescent and too many of us abstractly removed from the issue when we needed to be confronted, whether it be in terms of economic opportunity, educational opportunity or basic old individual rights here in America.

LOUIS: He started the conversation, it would be a mistake if he just thinks he just needs to moderate it too.

DOBBS: Yes. That's well put.

WEST: And I wish we could go back to color blindness as a goal.

DOBBS: You know, whatever it is. I just want, you know, the country to work and it works only when it works for all of us.

Diana West, thank you very much. Errol Louis, thank you, sir. Hank Sheinkopf, thank you, sir.

And we will, I want to say, without any reservation whatsoever, thank you for joining us and join us here tomorrow. For all of us, thanks for watching. Enjoy your weekend. Good night from New York.